Business Standard

New employer to pay PF penalty

M J Antony 

The Supreme Court has held that a company which takes over another is liable to pay damages for default in payment of contributions to the provident fund committed by the latter. The damages is punitive in nature and it could be recovered from the transferee employer, the court held in the judgment, Mcleod Russel India vs Regional PF Commissioner, Jalpaiguri. In this case, Saroda Tea Company defaulted in payment of PF contributions. Later it was taken over by Eveready Industries, later named Mcleod Russel. According to the take-over agreement, the Mcleod cleared all PF arrears of the tea company. However, it contested the imposition of penalty for the default of the tea company. It pointed out the agreement in which the damages was the liability of the tea company. The Calcutta High Court rejected the argument. On appeal, the Supreme Court upheld the high court view and underlined that even if there was such an agreement, the liability was that of the new employer. The court asked the company to pay interest on the damages also.

Director can't be tried without company

Prosecution of a director of a company for issuing a cheque which bounces cannot be sustained if the company is not made a party, the Supreme Court has ruled while setting aside the decision of the Delhi High Court in the case, Anil Gupta vs Star India Ltd. In this instance, a cable television distributor issued three cheques to Star India, which bounced. It filed criminal complaints under Section 138 and 141 of the Negotiable Instruments Act to the distributing company and the director. They moved the high court to quash the complaint on the ground of limitation. The high court quashed the complaint against the company but allowed the prosecution of the director, though he had argued that he was only vicariously liable for the default. He moved the Supreme Court. It relied upon earlier decisions and emphasised that proceedings against a director cannot be continued in the absence of the company.

Pre-deposit rule doesn't bar order to pay


The Supreme Court has ruled that the National Consumer Commission can direct a company which appeals against the state commission order to deposit half of the decreed amount as a condition to hear the appeal. The Consumer Protection Act has a similar provision in Section 19. But the Supreme Court clarified that the statutory provision was different from the power of the commission to pass interim order. The statutory provision was a condition precedent to entertain an appeal. The commission can pass interim order on the basis of the merit of the appeal during the proceeding, the court explained. Several companies against whom state commissions had passed awards for deficiency in service and unfair trade practices moved the National Commission to set aside the orders. The National Commission ordered that they must first deposit half the amount decreed by the state commissions. The companies moved the appeals, titled Shreenath Corp vs Consumer Education and Research Society, against the order. The Supreme Court dismissed all of them.

Creditor can stand outside revival plan

The Delhi High Court has ruled that neither the Board for Industrial and Financial Reconstruction (BIFR) nor the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) can compel a bank to join or continue in a recovery scheme for a sick company. A creditor bank can opt out of the scheme and realise outstanding dues from the company according to law, the judgment in the case, Indusind Bank Ltd vs ITI Ltd said. The order of the appellate authority to the bank to continue in the consortium of creditor banks set up to revive the firm was set aside. The company had approached BIFR following which the board set up the consortium. It set up an operating agency headed by State of Bank of India to revive the company, according to the Sick Industrial Companies Act. Indusind Bank was reluctant to join the consortium. But it was compelled by AAFIR by an order. The bank appealed to the Supreme Court arguing that no one can be compelled to enter into a contract without one's consent and that participation in the consortium agreement as a creditor has to be based upon volition and not compulsion. The Supreme Court accepted this contention.

Injunction against trade name

The Bombay High Court has passed an injunction against Twilight Mercantile Ltd in a trade mark petition moved by Medley Pharmaceuticals Ltd alleging violation of trade names of its medicines. Medley is manufacturing medicines with the trade names O2 and OTwo. The other company introduced a medicine with the brand name O2B. On the application of Medley, the court found that the names were bound to be confusing because they were "phonetically, visually and structurally similar." Therefore, Twilight was barred from "exhibiting for sale and advertising pharmaceutical and medicinal preparation under the trade mark O1B and or O1B" PLUS till the issues are finally decided.

Gratuity payment can be stopped

The Calcutta High Court held last week that service regulations of a public sector bank will override the provisions of the Payment of Gratuity Act. The court set aside the decision to the contrary of the controlling authority under the Act in its judgment, United Bank of India vs Pranab Kumar. In this case the chief regional manager for north India was terminated for sanctioning loans violating norms and causing losses to the tune of Rs 26 crore. His services were terminated and gratuity forfeited though the disciplinary proceedings continued. The bank's view was that under the service regulations, the employer would be entitled to forfeit the damage suffered out of the amounts payable towards gratuity. The labour commissioner and the controlling authority under the Act ruled that gratuity cannot be denied as the main Act will prevail over the regulations. They maintained that the statute was a beneficial legislation and therefore, any regulation inconsistent with the object of the Act was not valid. The high court ruled that they were wrong. It explained that according to the 1970 law taking over and establishing the public sector bank, the regulations were specifically framed by the Board of Directors. "It is a special piece of subordinate legislation which because of their very special nature must give pre-eminence and precedence over the general principal or any general provision of law covering the same field. All that the court is required to find that in such a situation, the subordinate legislation is not overreaching or overstepping the principal Act."

First Published: Sun, July 20 2014. 22:31 IST
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