Technicalities should not defeat justice

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The Supreme Court has stated that procedural defects and irregularities, which can be cured, should not stand in the way of justice, in a case of cheque bouncing. In this case, Haryana State Coop Supply and Marketing vs Jayam Textiles, the federation supplied cotton bales to the company. The four cheques in payment for the purchase bounced for want of sufficient funds. The federation filed a complaint under the Negotiable Instruments Act.

The magistrate dismissed it on the ground that the federation had not produced the authorisation of its board of directors to the official who filed the complaint. The federation appealed to the Madras High Court, but it dismissed the appeal again on the ground that the person who filed the complaint had no proper power of attorney. On appeal, the Supreme Court held that the courts below were wrong for insisting on technicalities. It remitted the case to the trial court where the federation can show the authorisation which it had failed to do earlier. Commenting on the technicalities relied upon by the courts below, the Supreme Court stated that "procedure, a hand maiden of law, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use."

DRT to hear ex-management

The Supreme Court has directed the Debt Recovery Tribunal to hear the ex-management of a company apart from its official liquidator before passing its final order in a Securitisation Act (Sarfaesi) case. In this case, Bharat Steel Tubes Ltd vs Official Liquidator, the company was ordered to be wound up by the Delhi High Court pursuant to the recommendations of the Board for Industrial and Financial Reconstruction (BIFR). The company moved the Supreme Court against it and the court ordered status quo regarding its assets.

The creditor bank meanwhile invoked the Securitisation Act seeking to sell the assets of the company. This led to complex litigation. One important question was whether the ex-management should be heard by the tribunal. The tribunal held that in view of the winding up order, only the official liquidator was entitled to represent the company and the former management could not be heard. The Supreme Court ordered otherwise, observing that in the facts of the case, preventing the ex-management from placing appropriate material before the tribunal regarding the claim of the creditor bank "may eventually lead to denial of an opportunity to the ex-management to place such facts as they deem appropriate to resist the claim of the bank."

Cash collection at sweet shop

The Supreme Court has dismissed the appeal of M/s Nathu Ram, sweetmeat sellers, against the Delhi High Court judgment that confirmed the assessment of sales tax and penalty imposed on the firm by revenue authorities. On two random visits to the business premises in Delhi and examination of books of accounts of relevant years, the assessing officer had found substantial discrepancies between the cash inflow and the book of accounts.

Taking the average of the two days, the department multiplied it for the whole year to arrive at an estimate. Then 10 per cent was added towards normal growth of business.

The firm argued that sale proceeds vary on each day and the sample of two days could not be taken as standard and normal for calculating the tax for the whole year.

Moreover, it was not given an opportunity to explain the discrepancies as it received no notice before taking action by the revenue authorities.

The Supreme Court rejected all these contentions and stated that the assessing officer had rightly concluded that the total possible sale was much higher than claimed by the firm. "Once it is found that with some oblique motive, effort was made to show lesser sale proceeds than the actual, the orders imposing penalty cannot be questioned," the judgment said.

Sanction to try in corruption case

In a case under the Prevention of Corruption Act, criminal proceedings cannot be stopped mid-course on the ground that the sanction of higher authority was not proper, the Supreme Court stated last week in the case, state of Bihar vs Rajmangal Ram. The Patna High Court had held that in the two cases under the Act, it was the law department of the state and not by the parent department to which the accused persons belonged which granted sanction to prosecute.

The accused challenged only the validity of the sanction. The high court allowed it. Reversing the judgment and allowing the proceedings to go on, the Supreme Court stated that "any error, omission or irregularity in the grant of sanction will not affect any finding, sentence or order passed by a competent court unless in the opinion of the court a failure of justice has been occasioned."

Fishing vessel can't cross state borders

A fishing vessel registered in Andhra Pradesh, which sank in Odisha coastal waters, was not entitled to compensation from the insurers as the policy covered only losses suffered in the Andhra coastal waters. The Supreme Court thus dismissed the appeal of the vessel owner, Kokkilagadda Subba Rao against United India Assurance Co, which had repudiated the claim.

The company appointed one surveyor who found the boat sank in the Andhra coast. It appointed another who reported that it sank off Odisha coast. The owner claimed compensation in the consumer commission which accepted the insurance company's argument that the boat violated the policy terms by going to the Odisha waters. The Supreme Court upheld that view.

Insurer to pay for worker's death

When the ownership of a motor vehicle is transferred during the validity of the insurance, the new owner would be covered by the policy, the Supreme Court has held in the judgment, Mallamma vs National Insurance Company.

It set aside the judgment of the Karnataka High Court exonerating the insurance company from the liability to pay compensation to the legal representatives of a driver who died in an accident in the course of employment with the new owner of the vehicle.

The insurance company argued that it was not aware of the transfer of ownership and therefore it was not liable to pay. The Supreme Court rejected the defence pointing out that the Commissioner of Workmen's Compensation had found that on the basis of documents, the stand was false. The court upheld the compensation of Rs 3.67 lakh to be paid by the insurance company.