<b>Brief case:</b> Sarfaesi rule clarified to speed up auction

A weekly selection of key court orders

The Supreme Court has clarified the procedure to be followed by a secured creditor while pursuing its rights under the Security Interest (Enforcement) Rules against a defaulting borrower and his guarantors. While quashing the judgment of the Andhra Pradesh High Court in the case, Canara Bank vs Amarender, it stated that it is permissible to simultaneously issue notice to the borrower about the intention to sell mortgaged property and issue a public notice in newspapers about the proposed auction. The high court had held a separate notice with a gap of 30 days was required and simultaneous notice to the borrower and notice of public e-auction was against the rules passed under the Sarfaesi Act. The Supreme Court stated there was no need to wait for 30 days to sell the secured asset.

 
Low compensation for road death
 
The Supreme Court last week expressed its "shock and surprise" at the low compensation granted by the Motor Accident Claims  Tribunal and the Andhra Pradesh High Court after applying wrong principles in a road death. The person died at 52. The tribunal calculated compensation assuming six years as his earning age, which was raised to eight by the high court. Revising the estimate to 11 years in its judgment, Bogireddi vs Mani Muthupandi, the apex court criticised the courts below for ignoring the principles laid down by it for computing compensation.  While the high court had granted Rs 15,000 to the widow for loss of consortium (help, affection and sexual relation), the Supreme Court raised the amount to Rs 1 lakh. The calculation of damages for 'future prospects' (promotions, increments etc.) has differed among different benches of the court and was referred to a larger bench three years ago. A large number of cases dealing with loss of future prospects are awaiting the final decision. When the new bench decides the question, all these claimants have to approach the court again for recalculation of the total compensation. Currently, the awards are interim and do not take into consideration claims for loss of future prospects.

 

Charitable trust cannot invoke consumer law
 
A trust is not a person according to the Consumer Protection Act and therefore it cannot file a complaint before consumer forums, the Supreme Court ruled last week in the case, Pratibha Pratisthan vs Canara Bank. The charitable trust registered under the Bombay Charitable Trust Act had appealed against the order of the National Consumer Disputes Redressal Commission. Upholding the view of the national body, the Supreme Court explained the trust did not fall in the definition of "complainant", "consumer" or "person". A person, for purposes of consumer law means (i) a firm whether registered or not; (ii) a Hindu undivided family; (iii) a cooperative society; (iv) every other association of persons whether registered or not.

 
RBI need not hear workers 
 
When the Reserve Bank of India (RBI) asks a finance company to stop a particular kind of business, its employees have no right to be heard for fear of loss of jobs. They can send a written representation but the RBI Act does not provide for an oral hearing, said the Calcutta High Court while rejecting the writ petitions of Peerless General Finance Co and its employees' union. RBI had directed Peerless to transit from "Residuary Non-Banking Company" (RNBC) business. They challenged the directions on several grounds, which were all rejected by the high court. One of the arguments was that the workers were not given an opportunity of being heard. The judgment noted that their grievances had been taken up by MPs and written representations were considered by RBI. They have no right to oral hearing. "Moreover, RBI was trying to address a larger malaise in the society vis-à-vis the RNBC business. Taking such wider perspective, RBI had issued the direction, which has not been demonstrated to be inimical to any cause of the workers of any company. Furthermore, the interest of the society at large supersedes the interest of the individual worker or for that matter of the company or a group of workers." RBI has not ordered closure of the company, but only one branch of business. Workers can be absorbed in other activities of the company, the high court said.

 
ITC suit on packet design dismissed
 
The Calcutta High Court last week dismissed the appeal of ITC Ltd, manufacturer of 'Classic' cigarettes, challenging the decision of the Controller of Patents & Designs, who had dismissed its plea to cancel the registration of packet designs of Philip Morris products. Invoking the provisions of the Designs Act, ITC had argued that the designs of the rival cigarette packs were not new or original and slight variations from the existing designs would not qualify for registration under the Act. Moreover, the designs had been published in foreign journals, ITC contended. Rejecting the contentions, the court emphasised the "test of novelty is in the eye of the judge who must place the two designs side by side and see whether the one for which novelty is claimed is in fact new. It is a matter of first impression." The controller had applied the eye test and found that the features were different. He is an expert in these matters and the court would not ordinarily interfere in his decision unless he had applied wrong principles. The court also noted that ITC came to the court six years late.

 
Land-losers get higher compensation
 
The Bombay High Court has ordered the Maharashtra government to pay compensation, provide water supply and irrigation facilities to a large number of families who were uprooted by the Nira Deoghar irrigation project. Their land was acquired for a meagre sum in 1996 and 65 per cent of it was demanded back for their rehabilitation. However, the high court noted in its judgment in Genba Laxman vs State that "quite insensitive to the trauma of such uprootment from ancestral lands and houses, the state failed to provide any rehabilitation measures. In particular, the lands allotted in Satara district were barren and lacked irrigation facilities". The government contended it had no obligation to provide alternative land. It further argued that it was exercising sovereign functions and therefore immune from demand for compensation. The court accepted the contention of the displaced persons that the state had violated not only the terms of the Maharashtra Project Affected Persons Rehabilitation Act but also their fundamental right to life. In a lengthy judgment, the court asserted the power of courts to order compensation when fundamental rights are violated by the state and raised the rate of compensation.