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M J Antony: Company name in bounced cheque

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The Supreme Court has ruled that an authorized signatory of a company cannot be prosecuted for issuing a dishonoured cheque without the company itself being arraigned as an accused person. The issue involving Section 138 and 141 of the Negotiable Instruments Act had divided a bench of two judges earlier and it was referred to a three-judge bench. The same issue of interpretation arose in the case of Section 85 of the Information Technology Act, 2000 which is identical to Section 141 of the Negotiable Instruments Act, dealing with those responsible for an offence, like directors of a company. It says that when a company commits an offence, “every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.” In both cases, the concerned companies were not made accused, which was wrong. The first case was Aneeta Hada vs M/s Godfather Travels & Tours Ltd. The second one was Ebay vs State. Both the appeals by the executives were allowed, clarifying the law on this point.

Developer covered by consumer law
The Supreme Court last week dismissed the appeal of a land development firm, Narne Constructions, against the ruling of the Bombay high court and stated that the Consumer Protection Act shall be applicable to it as it was providing a service to consumers. The firm promoted ventures for development of lands into house-sites. Many persons responded and joined as members on payment of fees. When they complained of deficiency in service, the firm denied that it was providing a service as defined in the Act nor were the members ‘consumers’. The high court and the Supreme Court rejected this argument, based on precedents, especially the 1994 judgment in the case of Lucknow Developmenet Authority.

Arbitral tribunal members named
The Supreme Court has appointed Justice N. K. Sodhi, former Chief Justice of the Karnataka High Court, as an arbitrator and Justice B. P. Singh, former Supreme Court judge, as the Chairman of the arbitral tribunal to decide the disputes between Q'Max Solutions Inc vs M/S Geopetrol International Inc. Q’Max had appointed its arbitrator, but the opposite parties had not named anyone. Therefore, the court exercised its power to name the other arbitrator and the chairman. NTPC, which was also arraigned as a respondent, had argued that it was not part of the contract and therefore it should be exempted from the process. The court asked them to raise the issue before the arbitral tribunal.

Relief for radio stations
The Delhi high court last week stated that radio stations, restaurants and others playing music with licence from the copyright owners do not require separate authorisation from the lyricists or composers. The dispute in the case, Indian Performing Right Society Ltd vs CRI Events Ltd was: what happens to the copyright in an underlying work (literary and musical works) when the derivative work (sound recording) is exploited? Does he who obtains permission from the copyright owner of the derivative work to broadcast by way of communicating to the public said derivative work, additionally requires a similar permission from the owner of the underlying works i.e. the literary and musical works? The high court answered no.

Insurance for foreign travellers
The Delhi high court last week quashed the order of the Insurance Regulatory and Development Authority which had ruled that Radiant Overseas Ltd, which insured passengers to Ukraine and Belarus, had no authority to do insurance business. IRDA maintained that the private firm had no licence from it. No person can function as an agent or broker for an insurance company unless it holds a valid licence. The firm moved the high court arguing that the certificate of medi-claim being issued it had no effect in the territory of India and was active only in the territory of Ukraine or Belarus. The provisions of IRDA Act were not applicable to the foreign insurance companies and that the activity undertaken by the firm was not governed by the IRDA Act. Allowing the appeal, the court stated that it was unfair to subject Indian passengers to pay three times the insurance charges at the arrival of the foreign airport, with all accompanying uncertainties. “It amounts to an arbitrary, unreasonable restriction, interference with travel to the said countries,” the judgment said. Since there is a vacuum in law in this field, the court stated that the government may frame appropriate regulations if found necessary.

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