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Time-bar rule relaxed
July, 17th 2006

The Supreme Court last week relaxed a rule regarding the time limit in cases under the Arbitration and Conciliation Act 1996. The court ruled that if a party filed a suit in a court which had no jurisdiction, under the bona fide belief that it had jurisdiction, the period lost in the proceedings would not be counted for the time-bar under Section 14 of the Limitation Act. 
 
The judgment was passed in State of Goa versus Western Builders and several other appeals. In this case, the courts barred hearing to the Goa government as it was late and had moved the wrong court. 
 
The government also lost in the Bombay High Court, which maintained that under the new arbitration law, it was time-barred from filing a suit. The Supreme Court set aside all such orders and ruled that the benefit of Section 14 was available to parties under the new arbitration law. 
 
State Bank wins indemnity case 
 
The Supreme Court last week set aside a judgment of the Bombay High Court in a case, State Bank of India versus Mula Sahakari Sakhar Kharkhana Ltd. The cooperative sugar factory had a contract with Pentagon Engineering Ltd for setting up a paper factory from bagasse. 
 
The bank furnished a guarantee/indemnity for the deal. When disputes arose, the matter went to the high court, which held that the deed was a bank guarantee and should be honoured as such. 
 
On appeal, the Supreme Court held that it was not an unconditional bank guarantee, but constituted a contract of indemnity. 
 
Sentence quashed in cheque case 
 
The Supreme Court last week set aside a judgment of the Kerala High Court in a case of dishonoured cheque (MS Narayana Menon versus State of Kerala) and quashed the sentence of one-year imprisonment on the drawer. 
 
A member of the Cochin Stock Exchange alleged that the drawer of the cheque used to carry on transactions in shares and one of the cheques bounced because of insufficient funds. The drawer of the cheque maintained that it was given for the purpose of discounting. 
 
He also contended that the broker was in dire financial need and the cheque was furnished as a loan. The trial court stated that the drawer had not discharged the burden of proof under Section 139 of the Negotiable Instruments Act. The high court upheld the view. 
 
However, the Supreme Court stated that while the drawer had discharged his burden of proof, the broker had failed to do so. The sentence was set aside. 
 
Tribunal to decide bonus spat 
 
The Supreme Court last week set aside a judgment of the Andhra Pradesh High Court and asked an industrial tribunal to settle a dispute between AP Foods and more than 200 of its workers. The state government stopped the payment of ex-gratia bonus. 
 
The high court quashed the decision. The government undertaking appealed to the Supreme Court, which said it was an industrial dispute and could not be decided by the high court. The apex court referred the dispute to the tribunal. 

M J Antony

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