Credit bank allowed to write off loans

LEGAL DIGEST

The Supreme Court has dismissed a petition against the permission granted by the Reserve Bank of India to Development Credit Bank Ltd for writing off debts amounting to Rs 120 crore.

Dismissing an appeal by a shareholder, Salim Akbarali, the court said normally, debts should not be allowed to become non-performing assets, but one cannot lose sight of the realities of the situation.

The judgment observed, "Having regard to the nature of the banking business, it is possible that the bank may commit an error of judgment in advancing funds to a particular party or industry. It may be that on account of other factors beyond its control, or even beyond the control of the borrowers, it may become difficult or even impossible to recover the loan in accordance with the schedule of repayment, or to recover at all. These are risks inherent in the banking business."

"One cannot, however, jump to the conclusion that only because some of the debts have become bad, there is lack of proper management of the bank or that the conduct of the bank is dishonest or mala fide. In a given case, there may be evidence of such mismanagement or dishonest conduct, but in the absence of any such accusation, one cannot draw an adverse inference against the bank," the court added.

Commissioner's plea in excise case rejected

The Supreme Court has dismissed an appeal of the Commissioner of Central Excise against a judgment of the Customs, Excise & Gold (Control) Appellate Tribunal in a case against Bell Granito Ceramica Ltd.

The company manufactured ceramic tiles, polished and unpolished. The revenue authorities classified its polished tiles as glazed tiles, which bear a duty of 30 per cent instead of 25 per cent. The company opposed this. The commissioner imposed a penalty and ordered confiscation of the company's assets.

The company moved the tribunal, which accepted its contention. The revenue authorities appealed to the Supreme Court. The court explained the meaning of glazed tiles from dictionaries and technical documents.

There is a difference between glazing and polishing. Glazing involves coating of melted glass. In this case, the tiles were mechanically polished. Mere polishing does not mean glazing, the court said, upholding the tribunal's view.

Wage Act not for detective services

Detective services are not covered by the Minimum Wages Act, the Supreme Court held in the case, Lingegowd Detective & Security Chamber Ltd versus Mysore Kirloskar Ltd. Mysore Kirloskar engaged the security agency, against which the authorities took action for violating the Act.

The agency argued that security establishments are not covered by the Act. This was accepted by a single-judge Bench of the Karnataka High Court.

However, on appeal, a Division Bench of the high court held that employing workers without paying them minimum wages was "forced labour," which was banned by the Constitution. Since the agency was employed by Mysore Kirloskar, the latter was covered by the Act, the Bench said.

On appeal, the Supreme Court set aside the Division Bench's judgment and upheld the view of the single judge. It further ordered that Mysore Kirloskar must pay the agency according to the Minimum Wages Act within six weeks.