The Supreme Court last week set aside the injunction granted by the Allahabad high court in favour of Ishan Systems Ltd in a debt recovery case. Without notice to the creditor companies, Optiemus Infracom Ltd and Phoenix Arc Ltd, the high court passed restraining orders against the auction purchaser of the property of Ishan Systems. The latter company had challenged the auction in the debt recovery tribunal and the appellate tribunal without success. On appeal, the high court passed orders without hearing the creditor companies whose interests were affected. They appealed to the Supreme Court. It quashed the high court order with strong remarks against it. The judgment stated that "the practice adopted by the Allahabad high court is not only arbitrary but also contrary to the concept of the principles of natural justice. We hope that in future, this kind of order will be avoided in the interest of justice."
No leniency in economic crimes The Supreme Court has stated that "the courts cannot take a lenient view in awarding sentence on the ground of sympathy or delay, particularly, if it relates to distribution of essential commodities under government scheme intended to benefit the public at large." The court said so while dismissing the appeal of Sadhupati Nageswara Rao who was convicted in Andhra Pradesh for breach of trust while handling distribution of rice at free of cost under the "Food For Work Scheme".
Creditor can reject BIFR options
The Delhi high court last week declared that under the Sick Industrial Companies Act, an unsecured creditor has the option not to accept the scaled-down value of its dues and wait till the scheme of rehabilitation of the sick company has worked itself out with an option to recover its debt after such rehabilitation. In this case, Continental Carbon India Ltd vs Modi Rubber Ltd, the latter company was declared sick in 2006 and IDBI was appointed the operating agency to examine the viability of reviving the sick company. It gave three options to the creditors. However, Continental Carbon did not agree to the option of scaled-down value. The appellate tribunal AAFIR rejected its contention stating that in view of the three options given to the unsecured creditors, the revival scheme cannot be stalled. Therefore, the company appealed to the high court. Allowing the appeal, the court clarified that Continental was not bound to choose one of the options in the scheme approved by BIFR.
DPCO notifications set aside
The Karnataka high court last week quashed two notifications issued under the Drug Price Control Order by the National Pharmaceutical Pricing Authority in 2003. A small scale drug firm, Ishaan Labs Ltd, had challenged the notifications. It argued that the fixation of the price of its medicine Glipzide was without reference to the norms for calculating packing material costs and it wanted revision of norms for calculating process loss, conversion costs and packing charges. The high court noted that some of the issues have already been decided by some other high courts, like the Allahabad high court in the Cipla case. However, appeals from those cases are pending before the Supreme Court. The high court also noted that the Supreme Court has not decided the questions raised in those appeals regarding the pricing and therefore, the high court could decide the present issue. The high court judgment asserted that judicial review can be exercised in fixation of prices of medicines and to check arbitrariness. While allowing the writ petition, the court allowed the authorities to issue fresh notifications keeping in view its observations.
Where to file bad cheque case
The Bombay high court has dismissed three writ petitions moved by HDFC Bank Ltd in a case involving bounced cheques. A firm in Ahmedabad, New Tech Forge and Foundry Ltd, had issued cheques in Ahmedabad in favour of Centurion Bank, which later amalgamated with HDFC Bank. The latter bank presented the cheques in Mumbai. When they were dishonoured by partners of the firm, HDFC Bank filed cases against the firm under Section 138 of the Negotiable Instruments Act in Mumbai criminal court. It rejected the complaint stating that it had no territorial jurisdiction. The bank moved the high court arguing that its registered office is in Mumbai, the cheques were deposited in Mumbai, and the demand notice was dispatched from Mumbai, and therefore the Metropolitan Magistrate, Mumbai, had jurisdiction. The high court rejected this contention stating that the jurisdiction could not be decided "at the whims of the bank forgetting the basic facts." The credit facility was extended to the firm by Centurion Bank at Ahmadabad, the cheques were dishonoured there, the cheques were also drawn on the bank there. Therefore, HDFC Bank was expected to move a court at Ahmadabad, the high court said.