Person responsible to be identified at trial

LEGAL DIGEST

The Supreme Court last week held that the question whether a person was in charge of or was responsible for the conduct of the business of a company which committed an offence should be decided at the time of the trial.

The ruling was given in a batch of cases in which cheques issued by the companies bounced for want of sufficient funds. Action was taken against the directors and managers of the companies.

They appealed to the Gujarat High Court and later to the Supreme Court asserting that they were not in charge at the time of the offence under Section 138 of the Negotiable Instruments Act.

Dismissing the appeals (S V Muzumdar vs Gujarat State Fertilizer Co Ltd), the Supreme Court stated that under Section 141, the top executives are deemed to have committed the offence along with the company. It was open to them to prove that during the trial that they were not responsible or negligent.

Cegat ruling on Hero Honda criticised

The Supreme Court has criticised Cegat, Delhi, for deciding a case in favour of Hero Honda Motors Ltd "in a most perfunctory manner, without going into any figures but merely on the statement made by the counsel" (Commissioner of Central Excise vs Hero Honda). Setting aside its order, the Supreme Court asked the tribunal to reconsider the case.

The main issue was whether the receipt of advance from customers and the income accruing from it had gone towards depreciation of the sale price of the bikes. It was found that the main object behind receiving advance from customers was not security but collection of capital.

Therefore, Cegat will examine whether advances received by the company and the interest earned had been used in working capital and whether it had reduced the price of the bikes.

For excise, popular meaning counts

The Supreme Court has allowed the appeal of Dabur India Ltd and set aside the ruling of the excise tribunal in the case about its baby oil, 'Lal Tail'. The tribunal had held that the product was not a medicament as it was available without a doctor's prescription and it was used to nourish baby's skin.

The company argued that the oil was prepared in accordance with instructions mentioned in ayurvedic texts and the drug controller had issued licence for it. It also produced prescriptions written by ayurvedic doctors.

The Supreme Court agreed with the company. In another case involving 'Janam Ghuti', the matter has been remitted for review for inquiry into the process of manufacture and its composition. The Supreme Court asserted that while classifying a product for excise duty, it is not the scientific meaning which was relevant but the popular meaning attached to it. HCL's appeal dismissed

The Supreme Court has dismissed the appeal of Hindustan Copper Ltd (HCL) and upheld the award of the arbitrator in its dispute with Bhagwati Oxygen Ltd. HCL had floated a tender for supply of oxygen for its plant.

The condition was that the bidder must set up the plant near HCL. Bhagwati Oxygen tender was accepted and the plant started supplying gas. Later it complained that it received no payment for the gas supplied. HCL retorted that the oxygen did not meet the required purity standard.

The dispute went to an arbitrator who gave an award in favour of Bhagwati Oxygen. HCL appealed to the Calcutta High Court, which went against Bhagwati Oxygen. The Supreme Court has now reversed the finding of the high court.