Business Standard

SC: No overkill in cheque bounce cases

M J Antony 

Once the amount in a dishonoured cheque is paid with interest and compensation, the payee cannot insist on criminal prosecution of the directors of a firm who issued the cheque. The object of Section 138 of the Negotiable Instruments Act, which makes issuing of cheques without sufficient balance in the account an offence, is meant to "inculcate faith in the efficacy of banking operations and credibility of transactions. It is not meant only to punish the guilty," the Supreme Court has stated in the judgment, Lafarge Aggregates & Concrete India Ltd vs Sukarsh Azad.

In this case, directors of a construction company issued a cheque to Lafarge, but it was dishonoured by the bank leading to a criminal complaint before the magistrate. The directors moved the high court and offered to pay the amount with interest. The high court, therefore, quashed the complaint. Lafarge was not satisfied with that and appealed to the Supreme Court for prosecution of the directors.

The court dismissed the appeal observing that the directors were willing to pay double the amount. It stated that Lafarge did not appear before the high court without sufficient reason, leading to an ex parte order quashing the complaint. Moreover, it approached the Supreme Court after a long lapse of time. Under these circumstances, "if the amount offered including interest and compensation was not acceptable to Lafarge, it is their choice," the judgment said, "but that would not allow them to prosecute the directors in pursuance of the complaint."

Bank fraud not a civil dispute

The Supreme Court last week set aside the judgment of the Madras High Court and ordered prosecution of former directors of a bank who were accused of fraud. Five persons who were managers of various firms were charge-sheeted for siphoning of large amounts from Tamil Nadu Mercantile Bank, one accused person alone presenting 1,278 cheques in sham transactions, with the help of five managers of the bank itself.

They moved the high court to quash the charges and the court allowed it. The high court felt that the transactions were basically of a civil nature and the bank could go to the debt recovery tribunal to recover the lost money. The Supreme Court stated that it was not merely breach of contractual terms, but smacked of criminality.

Club canteen must get municipal licence

The catering department of a club in Mumbai must take licence to run it, even if it does not make profit and the entry is only to its members, the Supreme Court stated last week in the judgment of Brihanmumbai Mahanagarpalika vs Willingdon Sports Club. The Bombay High Court had earlier struck down the demand notices sent to the club, holding that it was not an 'eating house' open to public.

However, the Supreme Court overruled it, observing that the definition of eating house should be given a wider meaning. Though sport is the main activity of the club, supply of food is an integral part of such activity. The judgment explained: "Many join the club in the name of availing sporting facilities only for the purpose of spending their time in leisure and for enjoying the facilities provided by the catering department." Even though profit is not the motto of the club, it certainly gained by the catering facilities, the court added.

Insurer to pay double compensation

The Supreme Court has enhanced the compensation for an advocate who suffered 70 per cent disability of his body and loss of earning in a road accident and awarded Rs 12.87 lakh as compensation. The motor vehicles accident claims that the tribunal had granted him Rs 8.87 lakh.

The insurance company appealed to the Karnataka High Court, which lowered it to Rs 6.17 lakh drastically reducing the compensation under the head 'loss of income due to disability'. The disabled man appealed to the Supreme Court in the case, N Manjegowda vs United Insurance Co Ltd. It doubled the damages given by the high court.

Garment exporters lose plea

The Delhi High Court last week dismissed writ petitions of a large number of garment exporters who had challenged show cause notices issued to them by the Apparel Export Promotion Council for not fulfiling their quota under a 1999 Exim policy of allotment of entitlements. Under the policy, export of garments and knit-wears to certain countries such as the USA, Canada and the European Union known as Quota Countries could be undertaken only on the basis of quota allotted to the exporters by the council.

The exporters also gave undertakings to fulfil the quota allotted to them. If there was large under-utilisation of the quota the council could forfeit their bank guarantees. When show cause notices were issued to some defaulting exporters in certain years, they challenged it in the high court. Dismissing their petitions, the court stated in the judgment, Birdy Fashions Ltd vs Union of India, that "imposing penalty on the defaulting exporters in terms of the undertaking given by them to the council sub-serves a valid public interest. In the absence of such penalty, there may be further shortfall in the quota utilisation as there would be no pressure on the exporters to achieve the desired target."

Doctors are not mere 'workmen'

Medical profession is a noble profession dedicated to the service of society and therefore doctors cannot be classified as 'workmen' entitled to invoke the Industrial Disputes Act, the Supreme Court ruled last week while dismissing the appeal of the ESIC Medical Officers' Association. The industrial tribunal had held that ESI doctors were 'skilled' workmen. On appeal moved by the ESI Corporation, the Delhi High Court declared that they were not workmen. The association moved the Supreme Court which explained that the medical profession is not a mere occupation that earns wages. It requires extensive study, training and mastery of subject, like law or teaching.

No short-cut to high court

When a law provides for an appeal against an order of a subordinate authority, an aggrieved person must take that route and should not approach a high court by way of a writ petition, the Delhi High Court ruled last week in a batch of cases, led by G K Granites vs Tata Hitachi Construction Machinery Ltd. The disputes date back to the days of the Monopolies and Restrictive Trade Practices (MRTP) Commission, whose functions were conferred on the new Competition Commission of India (CCI). While the MRTP law did not provide for an appeal, the CCI provides for an appeal to its appellate body. Therefore, the high court stated, citing Supreme Court judgments, that the appeals should go to the Competition Appellate Tribunal first, and then to the Supreme Court.

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First Published: Sun, November 24 2013. 21:35 IST