Director of sister co convicted for issuing dishonoured cheque
The Supreme Court ruled last week that if a cheque is issued by a director of a company towards any liability or debt incurred by a sister company, the drawer of the cheque is liable under Section 138 of the Negotiable Instruments Act. In this case, Anil Sachar vs Shree Nath Spinners Ltd, a director was common to two companies. He issued four cheques in consideration of goods supplied to one company. They were dishonoured by the bank. The payee filed a complaint. The director said that he issued cheque of the company which did not buy the goods. The trial court and the Punjab & Haryana high court accepted this plea. The payee appealed to the Supreme Court. It convicted the director and set aside the high court judgment. The Supreme Court stated that the companies were sister concerns and though they are separate legal entities, they had common directors. They also had an understanding in trade regarding payment. When a cheque is issued, it could be presumed that it was issued to discharge a liability, as stated in Section 139 of the Act.
Arbitrator cannot order payment of interest
When an arbitration agreement excludes award of interest, the arbitrator cannot impose it on a party, the Supreme Court held in the case, Union of India vs Krafters Engineering & Leasing Ltd. It set aside the ruling of the Bombay high court which held the opposite view in a case under the old Arbitration Act 1940. While the old Act was silent on this aspect, the court pointed out that the new Arbitration and Conciliation Act 1996 has a specific provision with regard to award of interest by the arbitrator.
Criterion for calculating loss in road death
When an unmarried young man, who is the bread winner of the family, dies in a road accident, the calculation of compensation should be related to the average age of the parents, and not that of the deceased, the Supreme Court stated in the case, National Insurance Co Ltd vs Shyam Singh. In this case, the parents of the youth killed in the accident moved the motor accident claims tribunal for compensation. It awarded '1.72 lakh, considering the old age of the parents. The parents appealed to the Madhya Pradesh high court. It took into consideration the long life expectation of the youth who was 19 when he died and raise the compensation to '3.39 lakh. The insurance company appealed to the Supreme Court. It ruled that the high court was wrong in taking into consideration of the age of the youth. The correct principle is to consider the years of dependency of the parents on the bread winner.
SC dismisses appeal of commissioner of Customs, Kolkata
The Supreme Court has dismissed the appeal of the commissioner of Customs, Kolkata, and ruled that butyl acrylate monomer used in leather industry is an adhesive entitled to customs benefits. In this case, Commissioner vs G C Jain, M/s Sanghvi Overseas imported 14 consignments of the product and cleared them against advance licences, availing of exemption from duty. But later consignments were not cleared on the ground that the product was not adhesive and not entitled to exemption. The Supreme Court relied on the Encyclopaedia of Chemical Technology, among other things, to conclude that the product was a coating binder or adhesive.
Insurer to pay for prawn crop loss
The National Consumer Commission has directed United India Insurance Company to pay compensation to Isnar Aqua Farma and another shrimp cultivator on Andhra coast for the severe loss of harvest due to a disease. The insurance company had insured the crop after due examination. However, there was total loss of crop despite all care. In the case of one farmer, the total weight of the dead prawns as 50585 Kgs, average body weight as 17.78 gms and total value as '94,97,952. The cause of death was noted as “White Spot Disease”. The Marine Products Export Development Authority had confirmed the losses. The insurance company resisted the demand arguing that “no insured peril could have resulted in such a sudden and total loss of culture in all the ponds. The only explanation is that the cultures had already been removed from the pond much earlier to the claimed occurrence date.” The national commission described this as “strange logic, which has led to even stranger conclusion.” It asked insurer to pay the compensation without delay.
Reopening of IT assessment quashed
A division bench of the Bombay high court has quashed the reopening of the income tax assessment of Nihilent Technologies Ltd after four years. The software company had shares held by Hatch Investments (Mauritius) Ltd. The shareholding was reduced from 99.85 per cent to 76.63 per cent. The assessment for 2003-04 was completed in 2006 wherein the carried forward loss incurred by the firm in the assessment year 2001-02 was allowed to be set off. Last year the assessment was sought to be reopened on the ground that the shareholding pattern has changed and losses could not be carried forward. The high court rejected this argument.