The Supreme Court has set aside the judgment of the Karnataka high Court and ruled that while an inquiry into the financial status of a sick firm is pending, a civil court cannot order it to pay dues to its debtors. In this case, Bhoruka Textiles Ltd vs Kashmiri Rice Industries, the civil court had asked the sick firm, Bhoruka, to pay dues to Kashmiri Rice for the rice supplied. Bhoruka had not paid the dues as it was declared a sick firm and an enquiry by the BIFR was going on.
The civil court nevertheless ordered it to pay the debts. It appealed to the high court, which also directed it to make the payments. The firm appealed to the Supreme Court. It allowed the appeal stating that a plain reading of the Sick Industries Act would clearly show that a suit is barred when an enquiry under Section 16 of the Act was pending.
Accident policy different from third party risk under MV Act
The Supreme Court has overruled the order of the National Consumer Commission which had ordered payment of Rs 1 lakh to the widow of a motor cyclist who was killed in a road accident. In this judgment, National Insurance Company vs J Maheswramma, the consumer courts had held the insurance company liable. The company argued that the deceased person had no valid driving licence. But it did not prove it in the consumer court. On appeal by the insurance company, the Supreme Court held that the insurer's liability to show that the licence was not proper lay only in the case of third party risks. In this case, it was not third party risk under the Motor Vehicles Act, but an accident policy. It was a contract different from the Motor Vehicles Act. In such a case, it was the duty of the person claiming compensation to prove that there was no violation of the terms of the insurance contract. The case was remitted to the National Consumer Commission.
Default sentence for dishonour of cheque valid
In a case of dishonour of cheque for want of sufficient fund in the bank, the court can order the drawer to pay compensation to the payee and also order imprisonment in case it is not paid. This ruling came in the judgment, Vijayan vs Sadanandan, in which the former was convicted under Section 138 of the Negotiable Instruments Act and sentenced to undergo imprisonment for one year and to pay Rs 8. 25 lakh as compensation.
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If the compensation was not paid, the convict would undergo imprisonment for six months more. This order was upheld by the Kerala high court. The convict appealed to the Supreme Court, arguing that imprisonment for default of payment was against the provisions of the Criminal Procedure Code. The Supreme Court rejected the contention and held that the court has the power under Section 357(3) of the code to add a default sentence.
Back wages after two decades
In a labour dispute lasting two decades, the Supreme Court awarded one-third of the back wages to four dismissed employees in the judgement, Tirupati Jute Industries Ltd vs State of West Bengal. They were dismissed in 1990 for indiscipline, but the government referred the issue to the industrial tribunal. It found that they were not given a chance to defend themselves and therefore ordered the employer to reinstate them with full back wages.
The company appealed against this. The Supreme Court noted that there was no need to examine such an old dispute, especially when the employees have retired long ago and could not be reinstated. The court therefore asked the company to pay the workers one-third of the back wages.