Dud cheques in revival mode

The Supreme Court last week ruled that cases of bounced cheque are independent of the revival bid of a sick company. Proceedings in bounced cheque cases under the Negotiable Instruments Act will continue even if there is a scheme to revive the sick company. The revival attempt under the Companies Act will not affect prosecution of charges under Section 138 of the Act. The charges cannot be compounded as in other cases under the Criminal Procedure Code (CrPC), the court stated in a large batch of appeals titled JIK Industries Ltd vs Amarlal. The Supreme Court dismissed appeals of the companies against the Bombay high court judgment which rejected their argument. The charges cannot be compounded as provided under Section 320 of the CrPC without the consent of the secured and unsecured creditors. Though Section 147 of the Negotiable Instruments Act provides for compounding, it does not provide for a special procedure. In its absence, the procedure under the CrPC should be followed. Therefore the consent of the creditors is essential, the court said.

No VAT on Hotel Ashoka duty-free shops
The Supreme Court last week set aside the assessment of VAT under the Karnataka Value Added Tax Act, on the sale of liquor and other imported goods at Bangalore International Airport by Hotel Ashoka, run by the India Tourism Development Corporation. At these duty free shops, the hotel sells several articles including liquor to foreigners and also to Indians, who are going abroad or coming to India by air. The hotel argued that though liquor, cigarettes, perfumes and food articles were sold at the duty free shops , no tax was payable by it as the goods which had been sold at the duty free shops were sold directly to the passengers and even the delivery of goods at the duty free shops was made before importing the goods or before the goods had crossed the customs frontiers of India. The revenue authorities argued that the sale would not be subject to tax under the Act only if it occasions in the course of import. But transactions of sale, as in this case had not taken place in the course of import and, therefore, they would not be exempted under the Central Sales Act, the tax authorities argued. The Supreme Court rejected the argument and allowed the appeal of the hotel.

Rule on compensation payment
In motor vehicles accident compensation claims, the entire amount may be disbursed to the claimant if he or she is literate. It is not necessary to deposit it in a bank for the safety of the dependents as some tribunals do, the Supreme Court stated in the case, A V Padma vs R Venugopal. The tribunals often ask the insurance companies to deposit the compensation amount in long-term fixed deposits in the bank so that the money is not wasted and minors and women are not rendered penniless. But this should not be taken as a rigid rule. Such orders are useful to safeguard the interests of minors, illiterate persons and widows, but if the claimant is capable of handling the money, the entire compensation should be given to him or her.

Arbitration appeal dismissed
The Supreme Court last week dismissed the appeal of Yograj Infras Ltd against the ruling of the Madhya Pradesh high court in its dispute with Ssang Yong Engineering & Construction Co. The National Highway Authority of India (NHAI) awarded a Rs 750 crore contract for a road project to Ssang. It also entered into an agreement with Yograj for supply of adequate manpower, material, machinery and all other resources, including finance. In case of disputes, arbitration was to be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules. Disputes did arise, the contract was terminated and Yograj alleged fraud by Ssong. However, the high court quashed the criminal complaint. Yograj moved the Supreme Court seeking injunction against invoking bank guarantee, but its appeal was dismissed in view of the facts of the case.