Not all partenrs liable for dishonour of cheque

LEGAL DIGEST

The Supreme Court held last week that all partners in a firm could not be liable for the offence of issuing a cheque, which was dishonoured. Section 138 of the Negotiable Instruments Act makes dishonour of a cheque an offence punishable with imprisonment or fine or both. Section 141 relates to offences by a company or partnership.

The Supreme Court, while quashing the judgment of the Gujarat High Court in the Monaben Shah vs State of Gujarat case, said: "Section 141 does not make all partners liable for the offence. The criminal liability has been fastened on those who, at the time of the commission of the offence, was in charge of and was responsible to the firm for the conduct of the business of the firm.

"There may be sleeping partners who are not required to take any part in the business of the firm; they may be ladies and others who may not know anything about the business of the firm. The primary responsibility is on the complainant to make necessary averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every partner knows about the transaction."

In this case, the accused were women partners in the firm. The magistrate had originally discharged them. But the sessions court and the high court held that they were also liable for the offence as they were partners. The Supreme Court held that this view was not right.

Closed unit need not pay closure compensation

The Supreme Court held in the Gordon Woodroffe vs Labour Court case that a company, which closed for genuine reasons, was bound to give the displaced labour amounts which were legally due but need not pay anything ex gratia or absorb them in sister companies.

The principle was laid down in the appeal of Gordon Woodroffe, which closed its trading agency arm in Chennai because of losses. The workers demanded alternative employment in the company's sister companies and closure compensation in addition to what was laid down in the law.

The Tamil Nadu government referred the dispute to the labour court. It asked the company to pay ex gratia in addition to the compensation under the Industrial Disputes Act. This was approved by the Madras High Court.

The company appealed to the Supreme Court. It set aside the high court judgment and ruled that the courts below had no authority to order the company to pay additional amounts by way of ex gratia other than what was provided under law.

"The principle of social justice cannot be invoked, contrary to the statute, as the legislature would have already taken note of it while fixing the compensation payable," the judgment said.

SC scraps circular on excise duty exemption

The Supreme Court last week struck down a central government circular dated October 19, 2000 under which certain excise duty exemptions earlier granted to 100 per cent export-oriented units were withdrawn by issuing a "clarification".

A large number of such units had earlier challenged the circular before the Punjab and Haryana High Court. Their writ petitions were dismissed. They appealed against the high court judgment as well as the view held by the Central Board of Excise and Customs.

A two-judge Bench of the apex court allowed their plea in the Nahar Industrial Enterprises Ltd vs Union of India case. The circular, now held invalid, purported to clarify that additional excise duty under the Additional Duties of Excise [Textiles and Textile Articles] Act would also be leviable on yarns manufactured by 100 per cent export-oriented units from indigenous raw materials and cleared into the Domestic Tariff Area in addition to the basic excise duty payable under the Central Excise Act.

These export-oriented units were engaged in the manufacture of cotton yarn out of indigenous raw materials attracting basic duty and additional duty under the Additional Excise Act.

On the basis of notifications issued from time to time, especially the one in 1991, exemptions were granted to such units. But in later years, the notifications went against them, and ultimately, the board issued the "clarification" in 2000, which has now been quashed. The Supreme Court ruled that the 1991 notification will still apply to these units.

Common boundaries do not make two firms one

Two factories may have a common owner, a common balance sheet, and a common wall, but still these factors would not make the factories one unit, the Supreme Court said in the Rollatainers Ltd vs Commissioner of Central Excise case, while overruling the view held by the Customs, Excise and Gold (Control) Appellate Tribunal.

The company had claimed certain concessions for the two factories, one making paper board and the other speciality paper. The department issued showcause notices to the factories for availing the concession by each of them. It demanded Rs 50 lakh as duty and Rs 5 lakh as penalty. The company moved the tribunal in vain. But the Supreme Court decided in its favour.

"Simply because both the factories are in the same premises that does not lead to the inference that both the factories are one and the same. In the present case, it is apparent that there is no commonality of purpose, both the factories have separate entrance, the end product is different, they are separately registered with the excise department, the staff is separate, the management is separate. Both are separate establishments run by separate managers though at the apex level it is maintained by the company. Simply because both the factories may have common boundaries that will not make it one factory," the court said.