From electricity theft to trademark battle, here're the key court orders

Defaulter’s pre-deposit is not secured asset

The debt recovery tribunal or a high court often asks a defaulting borrower to make pre-deposit with it to show its bona fides in returning the loan. But the creditor cannot claim that amount arguing that it is a secured asset. The deposit is not towards the satisfaction of the debt and is free from the claims under the Securitisation (SARFAESI) Act. The Supreme Court clarified this point last week in its judgment in Kut Energy Ltd vs Punjab National Bank. A consortium of nationalised banks had granted loans to the company for a hydro-electric project in Himachal Pradesh. The company defaulted and the banks proposed e-auction of assets. The company moved the debt recovery tribunal, which denied a stay. Then it moved the Himachal Pradesh High Court. It allowed the company to pre-deposit Rs 140 crore before deciding the matter. The banks claimed that amount as a secured asset. The high court allowed the banks to get the amount for adjustment towards loan liability. The company appealed to the Supreme Court against the order. Setting aside the high court order, the apex court explained that the deposit was neither a ‘secured asset’ nor a ‘secured debt’ and the company was entitled to refund of the amount.

Bank can reject cheque for repayment

A bank need not accept cheques/drafts in repayment of a loan if it decides to do so, the Supreme Court observed last week in its judgment, Shakeena vs Bank of India. In this case, the borrower defaulted on repayment of a loan and the bank invoked the Securitisation Act to sell the mortgaged property. This was challenged by the borrower in the debt recovery tribunal and later in the Madras High Court. The borrower was given several options and opportunities to pay the amount before the sale of the property was registered. In one last-ditch effort, the borrower offered cheques for the loan amount, which were rejected by the bank maintaining that they were not a valid tender.  The Supreme Court rejected the appeal of the borrower on several counts and asserted that the bank could not be faulted for rejecting the cheques.

Presumption in bounced cheque

The Supreme Court last week reiterated that once a cheque is issued by the drawer, there is a presumption under Section 139 of the Negotiable Instruments Act in favour of the holder. It is presumed that the cheque received was for the discharge of a debt or other liability. The person complaining of a bounced cheque must first prove the circumstances under which the cheque was issued in his favour and that it was issued in discharge of a legally enforceable debt. After that, the burden shifts to the accused person to rebut the presumption, showing that there is no debt or liability. In this case, Shree Dhaneswari Traders vs Sanjay Jain, the accused was not able to rebut the statutory presumption. However, the trial court and the Bombay High Court rejected the complaint. Setting aside the high court judgment, the Supreme Court convicted the drawer of the cheques and imposed a penalty of Rs 2.90 lakh, plus Rs 50,000 as compensation.

Double whammy in electricity theft

Under the Electricity Act,  criminal proceedings for theft of power can go on simultaneously with civil proceedings for recovery of a loss due to “unauthorised use of energy”. The Supreme Court ruled so last week in its judgment in West Bengal State Electricity Distribution Co Ltd vs M/s. Orion Metal Ltd.  In this case, the electricity authorities found that there was tampering of the meter. It invoked Section 126(1) for provisional assessment of unmetered consumption and assessed the loss to the tune of Rs 13 crore. A criminal complaint was also lodged with police alleging theft of electricity under Section 135. The company moved the Calcutta High Court against the parallel proceedings. It quashed the assessment as both proceedings cannot go simultaneously. The state distribution company appealed to the Supreme Court. It set aside the high court judgment, observing that while Section 126 dealt with ascertainment of loss and recovery, Section 135 dealt with the offence of theft. The special court can deal with both aspects and convict the offender, the judgment clarified.

Trademark battle over an alphabet

In this day and age, it is common to use the letters "i" and "e" as prefixes in trademarks relating to goods and services, denoting some kind of association or suggestion relating to the internet or electronics. Therefore, no entity can claim right over such a letter as it is a descriptive mark, the Bombay High Court remarked last week while dismissing a suit by one insurance company against another. The product involved was a term insurance policy offered under the mark "Aegon Life iTerm Plus" on the one hand and a similar product with the mark "Aviva i-Term Smart" on the other. The latter offered its product through its website www.avivaindia.com and the other one offered it through its website www.aegonlife.com. Both products were recognised by online policy aggregators, such as myinsuranceclub.com, policybazaar.com, bankbazaar.com and easypolicy.com. Aegon moved the court alleging that the rival was “passing off” its product with the prefix “i”, confusing the consumers and causing losses to it. The high court rejected the contention that it had an exclusive right to the mark as it is descriptive. Moreover, the court remarked that to seek exclusive rights in a descriptive trademark, the claimant must prove that its trademark has acquired overwhelming goodwill and reputation in the mind of the public.  It was not done in this case.

Supervisor not ‘workman’ in labour law

The Allahabad High Court, settling two different lines of rulings in the labour courts, ruled in its judgment in Duncans Industries vs  State of UP that supervisors/deputy superintendents are not “workmen” under the UP Industrial Disputes Act. The Kanpur industrial tribunal had held that they were workmen. The appeal against that ruling moved by the company was allowed. On the other hand, the Kanpur labour court had held that those employees were not workmen. That stand was upheld by the high court.  The dispute started in 1978 when the retirement age of the employees was raised to 60. The supervisory staff protested their exclusion arguing they should get the benefit of higher retirement age as they were workmen. The state government accepted the contention of the supervisory staff. The dispute travelled to different courts in four decades and ended with the high court judgment.