MJ Antony: One party can't pledge joint fixed deposit

LEGAL DIGEST

The Supreme Court has ruled that a fixed deposit jointly owned with an 'either or survivor' clause could not be pledged by one of the account holders with a bank.

The bank cannot adjust the amount of fixed deposit against such a pledge without the authority of the other account holder.

In this case, a couple made a joint fixed deposit. The husband stood guarantee for a business venture. When it could not repay the loan, the Punjab National Bank attempted to recover the money from the properties of the creditors and guarantors.

The wife then moved the district consumer forum against the bank. The bank contended that the fixed deposit was on the basis of 'either or survivor' and, therefore, the husband was entitled to pledge it.

The district forum ruled that the bank was deficient in service as it had accepted the pledge without informing the wife, the joint holder of the account. It ordered the bank to pay half the amount with interest at the rate of 17 per cent and compensation for mental agony. The Supreme Court upheld its finding.

Court refers excise dispute to tribunal

The Supreme Court remitted a central excise dispute raised by Escorts Ltd for the second time to the Customs, Excise and Gold (Control) Appellate Tribunal (Cegat) for reconsideration. The authorities alleged there was a short levy of Rs 38 lakh. Escorts' explanations were rejected by the authorities and Cegat.

According to Cegat, the issue involved was one of determination of the value of goods captively consumed by the company, under the Valuation Rules.

It took note of the fact that there was 2 per cent direct sale in the spare market and 98 per cent captive consumption. Cegat then applied the principle laid down by the Supreme Court in the Ashok Leyland case of 2002 and dismissed the company's appeal.

When it moved the Supreme Court, it said certain aspects of the 2002 judgement were not considered by Cegat. Therefore, it remanded the dispute to Cegat for fresh consideration of the facts and the applicability of the Ashok Leyland case.

Notice sent by post as good as served

The Supreme Court ruled last week that in the case of bounced cheques, if a notice was sent by post to the correct address, it would deemed to have been properly served on the drawer of the cheque.

In this case, the notice was served within 15 days of the bouncing of the cheque. It was returned with an endorsement: "doors found locked". The drawer of the cheque defended herself from criminal liability and argued that the notice was not served on her.

The question arose whether the notice had been served properly. The magistrate ruled that notice was not served as mere sending of the notice could not be considered valid according to the requirements of Section 138 of the Negotiable Instruments Act.

On appeal, the high court held that non-service of the notice was not a ground for rejecting the complaint at the threshold itself. This view was upheld by the Supreme Court in the V Raja Kumari vs P Subbarama Naidu case.

It remarked that if the opposite course was approved, "a trickster cheque drawer would get the premium to avoid receiving the notice by different strategies and could escape from the legal consequences of Section 138 of the Act".

Eagle's plea against octroi dismissed

The Supreme Court has dismissed the appeal of Eagle Flask Industries Ltd challenging a judgement of the Bombay High Court on the levy of octroi by Telegaon municipality. The octroi was levied under the Maharashtra Industrial Townships Act.

The dispute was over correct classification of the goods. The company claimed it had paid octroi on plastic powder, plastic components and glass refills under protest and wanted refund.

The municipality declined to refund the amount. The company moved the high court, without success. The Supreme Court, while dismissing its appeal, accepted the classification of goods by the municipality.