One fire doesn't lead to insolvency

A ship carrying phosphorus from Frankfurt to Mumbai caught fire in 1983. The embers of litigation over insurance died down in the Supreme Court last week after 30 years. The ship was abandoned because the cost of its repairs was higher than the insured value. The purchaser of the goods, Metal Powder Co of Madurai, Tamil Nadu, asked Oriental Insurance Co to pay compensation for non-delivery of the consignment. The insurer repudiated its liability as the ship was abandoned by its owners and according to 'Institute Cargo Clauses', loss due to insolvency was excluded. The Madurai firm sued the insurance company and the trial court ordered payment with interest. The insurer moved the Madras High Court, which held that due to insolvency, the firm was not entitled to the amount. On appeal, the Supreme Court set aside the High Court verdict. It said that the fact that the owner of the ship abandoned it did not mean that it was insolvent. The insurer cannot say that the ship owner has become insolvent due to the abandonment of the ship, without any court decision on bankruptcy. "Insolvency or bankruptcy is certainly not a matter of individual perception and opinion," the judgment said, and remarked that such an argument was apparently put forward by the insurance company merely to invoke the exclusionary clause.

Govt is 'owner' of requisitioned vehicle

The Supreme Court held last week that when a motor vehicle requisitioned by the government for public purpose meets with an accident and kills a person, it is not the registered owner, but the government which is liable to compensate the dependants. In this case, Purnya Kala Devi vs State of Assam, the Gauhati High Court ruled that the registered owner, the insurer or driver or any of them was liable to pay. The widow and four children appealed to the Supreme Court. It held that the definition of 'owner' in the Motor Vehicles Act included a person "in possession of the vehicle either under an agreement of lease, hypothecation or hire purchase". The court emphasised that the intention of the law-makers was that a person who is in "control or possession" of the vehicle should be deemed to be the owner for purpose of compensation.

Cheque in advance payment protected

A cheque issued as advance payment for purchase of goods, if it bounces, cannot be cause for filing criminal case under Section 138 of the Negotiable Instruments Act. In this case, Indus Airways Ltd vs Magnum Aviation Ltd, the airways issued post-dated cheques to the other company as advance payment towards orders for spare parts. Later the deal was cancelled and the payment was stopped. The seller company filed complaint against the airways and a Delhi magistrate issued summons to the purchasers. On appeal, the Delhi High Court ruled against the purchaser ruling that the post-dated cheques were issued against a liability. Quashing the judgment, the Supreme Court stated last week that the cheques were not issued against a liability. "If a cheque is issued as advance payment for purchase of goods and for any reason the order is not carried out either because of its cancellation or otherwise the cheque cannot be said to have been drawn for an existing debt or liability," the judgment clarified.

Refunding dirty money can't buy immunity

Charges of corruption in a bank fraud case cannot be quashed merely because the amount involved has been returned by the offender to the bank in a private settlement. Even if there was a compromise between the two parties, a charge under the Prevention of Corruption Act is a serious matter and must go on, the Supreme Court stated last week in the case, Gopakumar vs CBI. The accused, along with a branch manager of Indian Overseas Bank, had allegedly committed several frauds on the bank. They were charged under the Act. Gopakumar returned the amounts received from the bank through various shady deals in a settlement. Since he was still not discharged from the case, he moved the Kerala High Court. It dismissed his plea. The Supreme Court also dismissed his appeal. It said that the offences are not private in nature and are serious involving corrupt practices. Moreover, though the bank accepted its lost money, it did not exonerate the accused person from criminal liability.

Challenge to foreign award rejected

The Supreme Court has dismissed the appeal of Sakuma Exports Ltd against the ruling of the Bombay High Court which had stated that it has no jurisdiction to interfere in an arbitration award in the dispute with Louis Dreyfus Commodities Suisse S.A. The Indian company, which imports and exports of sugar ordered 2700 mt of Brazilian white sugar from the Swiss firm. Disputes arose, which were referred to an arbitration tribunal constituted by the Refined Sugar Association, London. When the award went against the Indian firm, it challenged it in the High Court. The court stated that it had no jurisdiction under the Arbitration and Conciliation Act. An appeal was moved in the Supreme Court. It pointed out that the terms of the contract clearly referred to the London association for resolution of disputes. "There is no manner of doubt that the parties have not only accepted English law as the law governing the contract but the disputes and the arbitration shall also be governed by the law of England. The seat of arbitration also will be England," the judgment said.

Higher duty on opal glassware

The Supreme Court has held that the glassware manufactured by M/s La Opala R G Ltd, though made of glass, cannot be considered as a 'type of glass' eligible for lower central excise duty under a Jharkhand government notification. The company manufactures glass and glassware made of opal glass in its Madhupur unit. The authorities asked it to pay 4 to 12 per cent tax on its inter-state sales. The company claimed a lower duty according to the notification. As it was rejected the company moved the High Court and got a favourable order. The state appealed to the Supreme Court. Allowing the appeal, the court after referring to various dictionaries to discover the meaning of glass varieties, upheld the demand of the revenue authorities. Glassware is generally ornamental in nature.