Brief case: For bounced cheques, both jail term & fine

A weekly selection of key court orders

For bounced cheques, both jail term & fine
 
Those who issue cheques which are dishonoured by the bank cannot get away from payment of compensation by undergoing imprisonment. They must still pay compensation to the payee as ordered by the criminal court, according to a new interpretation of the provisions of the Negotiable Instruments Act, the Criminal Procedure Code and the Indian Penal Code. The Supreme Court passed the ruling in the appeal, Kumaran vs State of Kerala. In this case, the cheque bounced and the payee moved the criminal court. It ordered four months in jail and payment of fine. If the fine was not paid, the accused would undergo further imprisonment for one month. The accused person appealed, and the sessions court reduced the sentence to imprisonment for a day in the court. But it retained the one-month jail sentence if compensation was not paid. The accused chose to go to jail for one month for not paying the compensation of Rs2.75 lakh. The payee insisted on the compensation and so moved the court again. The dispute reached the Kerala High Court which ruled that the imprisonment undergone for failing to pay compensation would not wipe out the liability. The accused appealed against it to the Supreme Court. It dismissed his appeal and upheld the high court ruling stating that the liability to pay compensation will extend “until the recovery is completed”.

 
SC settles conflict in TDS decisions
 

The Supreme Court (SC) has settled the divergence of views among high courts as to the liability of a contractor to deduct tax at source for payments made to sub-contractors. It held that the Allahabad High Court was wrong and the Madras High Court, the Calcutta High Court and the Punjab & Haryana High Court were right on the interpretation of Section 40 (a) (ai) on the liability of contractors in the judgment, Palam Gas Service vs CIT. The SC stated the tax deducted at source (TDS) provision was mandatory and was applicable both in the situation of actual payment as well as of the credit of the amount. It covered not only those cases where the amount was payable but also when it was paid. It operated irrespective of the method of accounting followed, cash or mercantile. The intention of the lawmakers was to bring within the fold all such people who were liable to come within the network of taxpayers. The SC dismissed the appeal of the gas agency which did not deduct TDS on payments made to sub-contractors who were appointed as carriers of gas from Indian Oil Corporation.

 
Custody of contraband till trial ends: SC
 
Vehicles used for smuggling teak from reserved forests need not be released till the criminal cases are concluded, the Supreme Court (SC) stated while setting aside a Madhya Pradesh High Court ruling to the contrary in the judgment, Madhya Pradesh vs Kallo Bai. The high court and the court below had ordered release of the vehicles stating that unless the guilt of the accused was proved, vehicles and the forest produce cannot be confiscated. Reversing the ruling, SC stated the forest law gave independent power to forest officials to confiscate the articles even before the guilt was completely established.

 
Retrospective VAT law upheld
 
The Supreme Court has upheld the retrospective operation of the Maharashtra VAT amendment Act, restricting the incentives granted to industries which had invested in backward areas in a policy to disperse industries outside the Mumbai-Thane-Pune belt. The Bombay High Court had dismissed the challenge to the power of the state legislature to pass retrospective legislation under which the exemption was made proportionate to the production, and not total. In the appeal, Eurotex Industries Ltd vs State, the firm argued it did not collect value-added tax (VAT) from customers during the past years assuming it would be exempt. Rejecting the argument, the Supreme Court stated it was always the intention of the state law to grant benefit according to a ratio of the turnover and the amendment was not to bypass inconvenient high court judgments on this question. 

 
Arbitrators must be above suspicion
 
The Delhi High Court last week struck another blow against the practice of public sector undertakings insisting on selecting arbitrators from its panel of names, leaving private players no choice to suggest independent arbitrators. After the 2015 amendment to The Arbitration and Conciliation Act, ensuring independence of arbitrators, this practice was getting adverse judicial attention. In the latest judgment, Afcons Infrastructure Ltd vs Rail Vikas Nigam Ltd (RVNL), there was a dispute over a Rs 212-crore claim by the builder which undertook to raise a viaduct in Kolkata for RVNL. The private company chose a retired Calcutta High Court judge but the rail corporation insisted the arbitrators must be chosen from its panel of five names, all of whom were former rail employees. It insisted that the infrastructure firm had agreed to the term in the contract. The firm countered it would entail an arbitral tribunal of three arbitrators of which at least two were required to be serving officers of RVNL. The high court stated, following a similar decision of the Supreme Court, that this limited choice would shake the confidence in the arbitration process. It disregarded the arbitration clause and allowed Afcons to choose a Supreme Court judge as its nominee.

 
Dealers in flats not ‘consumers’
 
A person who buys residential flats in the name of companies in which he is the director cannot approach the consumer forum because the purchase is for a commercial purpose, the National Consumer Disputes Redressal Commission has stated while dismissing a batch of appeals against the builder. The Rajasthan consumer commission had ruled in favour of such buyers in the case, Ratnesh Industries vs Majestic Properties. The buyers had complained there was delay in the project, entitling them to get compensation for deficiency in service. The builder countered that the delay was due to non-payment of dues by buyers, who were property dealers who indulged in resale. In the appeal, the National Commission stated that even if the purchase was for providing residences for company executives, still it would be commercial purpose. Under the Consumer Protection Act, a person who buys goods or services for commercial purposes is barred from using the law. The state commission had maintained that the question whether the buyer bought the flats for commercial purpose could be decided only after he gets possession and indulges in such activity. The National Commission rejected that view, stating that the buyers in this case did not clarify that the flats were for residential purpose only.