The Delhi high court last week ruled that equity shares cannot be considered as liabilities under the Recovery of Debts Due to Banks and Financial Institutions Act. Therefore, a claim to issuance of shares or delivery of shares in place of debt repayment cannot be regarded as an action seeking the recovery of a debt as defined in Section 2(g) of the said Act. This ruling against the order of the debt recovery tribunal in Delhi came in the case, Cochin International Airport Ltd vs Hudco.
The private airport took loans from Hudco with Kerala government’s guarantee, but it could not repay the instalments at one time. It offered equity shares instead. Hudco accepted it. The airport company claimed that it had repaid the amount. There was a dispute over the payment and Hudco demanded 52,000,000 equity shares. When it was denied, Hudco moved the tribunal, which decided in its favour. The airport company moved the high court. It allowed the petition and ruled that the definition of debt did not include equity share.
Companies have no right to automatic renewal of contract
The Delhi high court last week dismissed the petition of MMS Steel & Power Ltd against Oil & Natural Gas Commission and imposed cost of Rs 1 lakh for abuse of process of law. MMS sought an extension of the contract for supply of natural gas for five years more from the expiry of its earlier five-year period. Both parties disputed the date of expiry of the earlier contract. ONGC also contended that none has an automatic right to get extension of contract.
Moreover, gas supply and prices are fixed according to government policy. The judgement stated that the petition was filed in June this year and “it is clearly an abuse of the process of law whereby the fresh tendering process has been stalled for approximately six months causing huge losses to ONGC and that too for a valuable national asset.”
Delhi HC allows banks’ appeals on NRE accounts
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The Delhi high court has allowed the writ petitions of Bank of America and Standard & Chartered Bank against the show cause notices issued to them by the Enforcement Directorate in regard to deposits in foreign currency made by power of attorney holders of Non-Resident Indians in whose names the Non-Resident External (NRE) Accounts stood.
The question that arose was whether, even for the period prior to 31.07.1995, such deposits in foreign currency needed to be made, necessarily, by the Non-Resident Indian account holder, in person? The high court said no in answer to this problem. It explained that prior to 31.07.1995 there was no requirement that the deposits in NRE accounts could not be made by persons other than the NRE accounts holders themselves. For the subsequent period, it is not in dispute that such deposits could be made only by the account holder himself, in person.
Consumer commission raps insurance company
The National Consumer Commission has directed United India Assurance Co Ltd to pay compensation to Hadimba International Ltd, manufacturer and exporter of leather goods. A large stock of imported leather kept in Chennai was damaged in rain and floods. When the company demanded the amount insured, the insurance company was slow to reply. The surveyor kept on asking irrelevant information and data already in his possession.
When the claim was rejected, the company moved the national consumer commission. The commission observed that apart from the conduct of the surveyor, “the policy itself was vague”. For example, the schedule did not clearly state the break-up of the insured sum in respect of each of the items. “How the sum assured or the premium to be paid was arrived at is thus a mystery,” the judgment while allowing the claim.
Bank of India guilty of ‘deficiency in service’
The National Consumer Commission has held Bank of India guilty of deficiency in service in issuing ‘stockinvests’ to applicants in a public issue beyond the limit prescribed by the Reserve Bank of India. In a batch of appeals against the order of the Maharashtra state consumer commission, K R Srinivasan vs Bank of India, the national commission partly allowed the pleas of the share applicants. According to the complaint, a Mumbai branch of Bank of India issued stockinvests to them exceeding Rs 50,000 in disregard of the RBI instructions.
Therefore their share applications were rejected by the company. So they moved the state commission alleging heavy loss of capital gains due to the rejection caused by the negligence of the bank. They argued that firstly, the bank failed to inform them of the RBI rules, and secondly, it even issued the documents against the rules. The state commission dismissed their complaints. However, the national commission accepted their contention and held the bank accountable on both counts for the loss due to ‘deficiency in service’ according to the Consumer Protection Act.