The question if a director of a company can be asked to deposit security before resigning has been referred to the Company Law Board by the Supreme Court (SC) last week in the case, Pranab Kumar Pal vs LTZ Investment (P) Ltd. The director and the company in this case were jointly and severally asked to deposit Rs 2.85 crore as security in the CLB. The director was accused of diversion of “corporate opportunity”.
The CLB order directed, the director should be restrained from resigning. He appealed to the Delhi high court. It allowed him to resign, but imposed the condition of depositing the security. He appealed to the SC, arguing that the condition was “completely antithetical to the freedom of employment of an individual enshrined in Section 27 of the Contract Act in that it purports to fetter the same by the imposition of conditions such as the provision of security.” The SC remitted the case to the CLB to decide the issues, including imposition of the conditions.
GM acquitted for bounced cheque
The SC last week set aside the conviction of the general manager of JK Utility division of JK Synthetics Ltd for issuing cheques which were dishonoured by Bank of Rajasthan. The courts below, including the Madhya Pradesh high court, had affirmed his conviction under Section 138 of the Negotiable Instruments Act.
On appeal, Ramrajsingh vs State of MP, he argued that he was not in charge and responsible for the conduct of the business of the company and therefore, under Section 141 of the same Act, he could not be held liable for the offence. The finance manager who handed over the cheques is absconding. The SC set aside the conviction, accepting the contention of the GM that he was not vicariously liable for the offence.
Computing accident relief
The SAC held in the case, Raghuvir Singh vs Hari Singh Malviya, that while calculating the compensation for the loss of income due to the death of a person in a motor vehicle accident, the dearness allowance and house rent allowance drawn by him should be taken into account.
The motor accident claims tribunal took into account only the basic pay for computing the compensation under Section 166 of the Motor Vehicles Act. It was approved by the Madhya Pradesh high court. The Supreme Court set aside those rulings and stated that "Dearness allowance, in our opinion, should form part of income. House rent allowance is paid for the benefit of family members and not for the employee alone.”
Contract labour in IOC canteens
The SC set aside the ruling of the Bombay high court in the dispute between Indian Oil Corporation and the canteen workers’ union of Mumbai, Sarva Shramik Sangh, and asked the Centre to reconsider the question of referring the issues to the industrial tribunal. The workers demanded their absorption in the company though they were employed by a contractor.
They asserted the contractor was placed in between so that they could be denied employment benefits. When the Bombay high court asked the government to refer the dispute to the tribunal, the government asserted they were not employees of the PSU and therefore the issue could not be referred to the tribunal. The union appealed to the SC, which stated the question was whether they were employees, and that should be decided by the tribunal and not by the government.
HC to hear arbitration appeals
The SC has dismissed the appeal of Shin-Etsu Chemical Co Ltd in its dispute with Vindhya Telelinks Ltd and stated the foreign company could move the Madhya Pradesh high court for international arbitration. The district judge in Rewa had rejected the foreign company’s plea for referring the dispute to arbitration under Section 45 of the Arbitration and Conciliation Act.
The company directly approached the SC in appeal. The Indian company opposed the appeal, arguing the foreign company could not approach the SC, bypassing the high court. This argument was accepted by the SC. It emphasised that no one had a right to appeal to the apex court.
Power tariff dispute to tribunal
In the dispute between DLF Power Ltd and Central Coalfields, the SC has asked the parties to approach the appellate tribunal for electricity in New Delhi again to determine the tariff. In 2007 the court had directed M/s Ernst & Young to determine the actual capital cost for Rajrappa and Giddi plants based on the formula in the power purchase agreement between CCL and DLF. It had also directed that the copy of the report of the cost accounts be given to the parties and to the Jharkhand State Electricity Regulatory Commission.
CCL’s complaint is that the report was made only on the basis of the documents submitted by DLF. Accepting the complaint, the court stated that as the process of evaluation involved in fixing the tariff is complex, the tribunal shall hear CCL view on tariff if it raises the issue before it.
