Apex court dismisses SMS Pharma's appeal

LEGAL DIGEST

The Supreme Court on Tuesday dismissed the appeal of SMS Pharmaceuticals Ltd in the case of dishonoured cheques issued by M/s Direct Finance and Investment Ltd, New Delhi. SMS Pharmaceuticals had accused one of the directors of Direct Finance for issuing a cheque of more than Rs 2 crore.

The director later resigned from her post. Dismissing the appeal, the Supreme Court said, "The liability of a director must be determined on the date on which the offence is committed." Merely because a director was a party to a resolution for taking a loan would not infer that she was actively associated with the management of the affairs of the company.

There might be a large number of directors but some of them might not associate themselves in the management of day-to-day affairs of the company and they would not be responsible for the conduct of the business of the company.

"Section 141 of the Negotiable Instruments Act does not say that a director of a company shall automatically be vicariously liable for the commission of an offence on behalf of the company," the judgement clarified.

"What is necessary is that sufficient averments should be made to show that the person who is sought to be proceeded against on the premise of his being vicariously liable for the commission of an offence by the company must be in charge and shall also be responsible to the company for the conduct of business."

Transfer of shares in Poddar Projects Ltd

The appeal of Peerless General Finance & Investment Co Ltd against a Calcutta High Court judgement regarding the transfer of shares in Poddar Projects Ltd was disposed of by the Supreme Court last week as the company had complied with the directions of the Company Law Board. Certain shares of Peerless were being held by Poddar Udyog Ltd.

Under a scheme of arrangement sanctioned by the high court, a part of the business division of Poddar Udyog Ltd was transferred to Poddar Projects Ltd. The latter sold the shares to Vijaya Finance Corporation Ltd and lodged the shares with Peerless for registration, which was refused.

Therefore the Poddar companies moved the Company Law Board. The board directed Peerless to register the original shares in favour of Poddar Projects. Peerless therefore moved the high court arguing that till such time as the shares were not registered in favour of Poddar Projects, the same could not be registered in the name of the subsequent transferee. The high court rejected the contention.

However, in the meantime, the company registered the original shares in the name of Poddar Projects Ltd. Therefore, the Supreme Court did not consider the legal questions raised in the appeal. One of the questions thus left unanswered is: Whether, for registration of transfer of shares effected under a scheme of arrangement or compromise or amalgamation sanctioned by a court under Sections 391 and 394 of the Companies Act, it is necessary to execute a further instrument of transfer as contemplated by Section 108?

TN stone crushing units: Madras HC to review cases

The Supreme Court has asked the Madras High Court to reconsider cases of stone crushing units operating in the neighbourhood of villages in the Kanchipuram district of Tamil Nadu.

According to them, such units can function within 300 metres of habitation, whereas the high court had taken the view that they should be further away. Since the factual position was not assessed by the high court, it was asked to make factual evaluation of the disputed point.

SC on second schedule to Motor Vehicles Act

The Supreme Court has again pointed out that the second schedule to the Motor Vehicles Act suffered from many defects. This schedule is meant to calculate the compensation in road accident deaths.

However, it was a poor guide only and could not be used as a ready reckoner, the court said, while partly allowing the appeal of New India Assurance Company in a compensation case, and modifying the order of the Uttaranchal High Court.

The high court had awarded Rs 8 lakh to the widow and dependents of a person who died in a road accident. The victim was 33 years old and his income was multiplied by 17 working years to arrive at the figure. The insurance company appealed to the Supreme Court, which held that the multiplier was too high. The court reduced the multiplier from 17 to 13 working years, and the amount was reduced with interest to Rs 4.7 lakh.

Hindustan Lever case: SC not to interfere

The Supreme Court has refused to interfere with the proceedings in an Andhra Pradesh court, which is hearing a complaint alleging manufacturing and selling of spurious and misbranded cosmetics by Hindustan Lever Ltd. The court dismissed a petition filed by the cosmetic major seeking a stay on the trial court's proceedings.

The Drug Inspector, Hyderabad, in its complaint filed before the Metropolitan Magistrate, had stated that while Pears Pure & Gentle Toilet Soap and Pears Pure & Gentle Bathing Bar differed in their formulations, they appeared similar in design and packaging and had the same maximum retail price.

The inspector had seized the stock of Pears bathing bars from the stocks of Excel India Pvt Ltd, agents of Hindustan Lever, on the charges of violating Drugs and Cosmetics Act, 1940, and Drugs and Cosmetics Rules, 1945. He had alleged that Hindustan Lever had failed to mention anything about the inconspicuous labelling of the bathing bar and thus was liable for non-compliance of the labelling requirement that misled the consumers.

Besides, the packaging date mentioned on the labels was November 2003, though the product was found in October 2003, thus amounting to misbranding of the cosmetics, it said, adding, the bathing bar and the toilet soap resembled each other and hence was a spurious cosmetic.

Refuting the allegations, Hindustan Lever in its petition said that Pears Pure & Gentle Bathing Bar could not be termed as an imitation of Pears Pure & Gentle Toilet Soap and there was not even the remotest possibility of the consumer being misled about the nature of the products. It further said the products were not available at the same time as the production of toilet soap was stopped much before the introduction of the bathing bar.

Delhi HC notice to Airtel, COAI

The Delhi High Court has issued notices to Bharti Airtel, the Cellular Operators Association of India (COAI) and two private banks on an application seeking vacation of its interim order staying the state consumer commission verdict that had imposed a fine of Rs 75 lakh on them for unsolicited calls and small and medium enterprises (SMEs).

The court also issued notices to ICICI Bank and American Express Bank on the application and fixed March 28 as the next date of hearing. The Delhi State Consumer Commission had imposed the penalty for causing "immense nuisance" by making unsolicited communications.

Plea against Delhi HC decision rejected

The Supreme Court has dismissed an appeal against the judgement of the Delhi High Court appointing Justice (Retd) CL Chowdhary as the sole arbitrator in a dispute between the partners of Controls & Matchless Industries.