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Court clarifies on bounced cheques
April, 14th 2007
A criminal complaint against a proprietary concern which issued a bounced cheque is different from a similar complaint against a company or partnership, the Supreme Court ruled last week, in the case Raghu Lakshminarayanan vs M/s Fine Tubes. 
 
In the case of a company or firm, the directors and those who were in charge of the affairs of the establishment could be hauled up for the offence under Section 138 of the Negotiable Instruments Act. But a proprietory concern is only a business name in which the proprietor carries on the business. A case against a proprietory concern is therefore against the proprietor of the business. 
 
In the case of Raghu Lakshminarayanan vs M/s Fine Tubes, the complaint was lodged against the concern and its top managers. The Chief Metropolitan Magistrate and the Delhi High Court gave the go-ahead for prosecuting the managers. One of the managers appealed to the Supreme Court. The apex court set aside the high court order and quashed the complaint against the accused as he was not a director or person in charge of the unit but only an employee. 
 
SC speaks for related firms 
 
The Customs authorities cannot presume that there is undervaluation of goods just because two companies are related to each other, ruled the Supreme Court in the case, Commissioner of Customs, Mumbai vs Clariant (India) Ltd. 
 
In this case, there were three agreements for imports, two for seeds and one for technical collaboration. Clariant imported raw materials from Sandoz Quinn, a subsidiary of Sandoz (India). This was under a technical collaboration between the two companies. 
 
The agreement provided for import of capital goods, raw materials and transfer of know-how and technical assistance for upgrade of the Clariants manufacturing plant in India. The Customs department called upon Clariant to produce invoices. The company contended that the import was on principal-to-principal basis and the department should not include the technical know-how charges to assessable value of raw material. 
 
Though the companies were related, the relationship did not influence the value of the capital goods, it was argued. The Customs Excise Gold Appellate Tribunal (CEGAT) held that the only issue was valuation of the capital goods and the addition of Deutsche Mark 5,00,000 to the cost of raw materials was wrong. The Customs department appealed to the Supreme Court, which remanded the matter for fresh consideration in accordance with the Customs Valuation Rules, 1988, in view of the fact that the companies were related to each other. 
 
Co-op banks cant go to debt tribunals 
 
The Supreme Court held last week that co-operative banks cannot move the fast-track debt recovery tribunals. "The provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) by invoking the doctrine of incorporation are not applicable to the recovery of dues by the co-operatives from their members," the court ruled in the case, Greater Bombay Coop Bank Ltd vs United Yarn Tex Pvt Ltd. 
 
The judgment explained that the banks established under the Co-operative Societies Acts of Andhra Pradesh and Maharashtra did not fall within the meaning of "banking company", as defined in Sections 5(c) of the Banking Regulation Act and thus could not take recourse to the debt recovery tribunals. 
 
They have to go to the machinery set up by the co-operative laws. In this case, the recovery officer had issued a demand notice asking the company to repay, failing which it would attach and sell its property to effect recovery. The Bombay High Court, on a petition filed by the company, had restrained the department from proceeding with the recovery and asked it to approach the tribunal. 
 
Zuari wins plea against Customs 
 
Zuari Industries Ltd won its appeal against the Commissioner of Customs when the Supreme Court set aside the Customs Excise Gold Appellate Tribunal (CEGAT) ruling against Zuari, in a case related to a captive power plant for its fertiliser unit in Goa. The company had obtained registration of all their imports required for expansion of the project under the provisions of the Project Import Regulations, 1986. It claimed Customs duty exemption for goods required for the fertiliser plant. 
 
The Ministry of Chemicals had also issued "essentiality certificate" for the company. However, the authorities did not grant the exemption claimed for the power plant on the ground that the fertiliser project and the power plant were distinct projects. The fertiliser project can work even without the captive power plant, and the latter was a separate project by itself. The CEGAT upheld this view. 
 
However, the Supreme Court set aside that that once the ministry has given the essentiality certificate, the revenue authorities could not reject the company's claim for duty exemption. It accepted the contention of the company that the captive power plant was an essential item for the expansion of the fertiliser plant in view of the frequent power cuts. 
 
SBI appeal rejected in debt recovery case 
 
The Supreme Court has dismissed the appeal of State Bank of India in a case where the bank tried to enforce a compromise in a debt recovery case. The bank had filed a recovery petition in the Debt Recovery Tribunal claiming Rs 15 lakh from Vijay Kumar. 
 
Though the decree was passed by the tribunal, the matter was taken to the Lok Adalat where a compromise was arrived at. Even after that the debtor could not stick to the payment schedule. The bank then demanded the full amount before the compromise. 
 
The debtor moved the Punjab and Haryana High Court, which found that the grounds for the default were genuine. It asked the bank not to act according to the compromise but allowed it to charge an interest for the default period at the rate of 10.4 per cent. The Supreme Court upheld the high court order. 
 
Arbitration clause binding for parties 
 
Once a party to a dispute agrees to the arbitration clause in the agreement, it cannot wriggle out of it arguing that the arbitrator thus appointed would not be impartial or objective. Both parties must go by the arbitration agreement, the Supreme Court emphasised in the judgment, Ace Pipeline Contracts (P) Ltd vs Bharat Petroleum Corporation Ltd. Ace had moved the Delhi High Court invoking the Arbitration and Conciliation Act for appointment of a retired Supreme Court judge to adjudicate the claims between it and the petroleum corporation. 
 
The court dismissed its petition because according to the terms of the agreement, the arbitrator would be appointed by the director (marketing) of the petroleum corporation. 
 
It also said that no objection could be made to the appointment on the ground that the arbitrator was an officer of the corporation or that he had dealt with the subject of the contract or that he had expressed his views on the dispute in the course of his duties. The high court ruled that in view of the terms of the arbitration, the Arbitration Act could not be invoked. This view was upheld by the Supreme Court, while dismissing the appeal of Ace. 
 
Oriental Insurance not to pay accident victim 
 
The Supreme Court freed Oriental Insurance Co Ltd from the liability of paying compensation for the motor vehicle accident death of a manager of a company, interpreting the provisions of the Motor Vehicles Act. The manager was provided with a car by the company, Apace Savings & Mutual Benefits (India) Ltd. 
 
He was using the car for company purposes when the car hit a tree. He died in the accident. His widow and daughter claimed Rs 15 lakh as compensation. The Motor Accident Claims Tribunal, Nainital, awarded Rs 7.2 lakh for the company to pay, not the insurer. On appeal, the high court held that the insurance company was liable to pay the compensation and it could recover the amount from the owner. 
 
Therefore, the insurance company moved the Supreme Court. It held that the insurance company was not liable to pay as he was not covered by the policy whether he is treated as the owner of the vehicle or as an employee. He did not come under the Workmen's Compensation Act either, being a manager.
 
 
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