Dishonoured cheques

LEGAL DIGEST

Dismissing seven appeals against the orders of the Karnataka High Court, the Supreme Court has directed the drawers of dishonoured cheques to stand trial under the Negotiable Instruments Act.

They had issued cheques which were rejected for want of sufficient funds. The payees issued notices to them, but all of them returned with notes like "party not in town, arrival not known".

When the payees filed criminal complaints, the drawers wanted the high court to quash the charges. But the high court refused to do so. Upholding the high court stand, the Supreme Court said that if the drawers "manipulated" to get a wrong endorsement on the registered letter, the payee would be left without any remedy. This would be against the spirit of Section 138 of the Act.

The judgement remarked that if failure to serve notice was a valid excuse for the drawer, "it would be very easy for an unscrupulous and dishonest drawer of a cheque to make himself scarce for some time after issuing the cheque so that the notice can never be served upon him and consequently he can never be prosecuted."

The judgement, however, noted that the factual background also should be taken into account by the court while deciding each case.

Holograms on liquor bottles

The Supreme Court has dismissed a number of appeals moved by the Uttar Pradesh government against the judgement of the Allahabad High Court striking down the levy of excise duty on seven distilleries.

The excise commissioner had issued a circular providing that every distillery would receive holograms from his office and they should be affixed to the products of the distilleries.

A further circular was issued clarifying that damaged or wasted holograms verified by the authorised committee would not be charged the duty. The dispute started when the committee visited the distilleries and prepared a report that the serial numbers of the holograms did not tally with the wasted/damaged holograms.

The commissioner directed the distilleries to pay the duty. The distilleries moved the high court, which struck down the commissioner's order. It said that the circulars were illegal. The state government appealed to the Supreme Court. Upholding the high court decision, it said that the circulars imposing the levy had no statutory backing and it was not justified in law.

Unsecured creditors

The Supreme Court has ruled that the unsecured creditors of Baranagore Jute Factory, which was in financial straits for nearly two decades, were entitled to payment from the fund presently lying with the registrar of Calcutta high court.

The registrar was directed to effect the payment immediately. The Supreme Court further stated that though the company was in the winding up process at one time, now it is a running concern and therefore the workers could not claim protection of their wages and dues under Section 529-A of the Companies Act.

The provision applies only when the company is wound up and the official liquidator has taken over the assets of the company.

The Supreme Court therefore dismissed the petition of the Bengal Chatkal Mazdoor Union, observing that "it is fair and proper that the funds created should be utilised only for the purpose of unsecured creditors and not workers' dues and other dues."