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SC addresses issues on bounced cheques

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M J Antony
The Supreme Court decided on two important questions relating to bounced cheques last week. Resolving the apparent conflict in views between high courts and different benches of the Supreme Court, a larger bench of the apex court laid down that (i) a complaint about a bounced cheque can be filed by a power of attorney holder, and (ii) the power of attorney holder can depose and verify on oath before the court in order to prove the contents of the complaint if he had witnessed the transaction as an agent of the payee/holder in due course or possesses due knowledge regarding the transactions.
 
The court was deciding two appeals against the judgments of the Bombay and Andhra Pradesh high courts. The Mumbai case, A C Narayanan vs State of Maharashtra, started when a firm launched a scheme of investment and collected amounts from various persons in the form of loans. It, then, issued post-dated cheques in the managing director's personal capacity. The cheques were dishonoured leading to criminal complaint under the Negotiable Instruments Act.

The complaint was filed by a person on behalf of several others. The MD moved courts for quashing the complaint, but without success. The Andhra case was similar. The main issue was whether a power of attorney holder could file a complaint. The Supreme Court said yes, and referred all such cases back to the courts where they came from to decide on them, according to the facts in each case.

The second issue settled in the judgment, Escorts Ltd vs Rama Mukherjee, was whether the court within whose jurisdiction the bounced cheque was presented had jurisdiction to entertain the complaint. The court stated that a complaint could be filed in any of the jurisdictions where transactions took place, including the place of issue and the place of dishonour.

Modvat condition relaxed

The Supreme Court has rejected the stand of the revenue authorities that a firm, which claims Modvat credit must verify from the authority concerned that the manufacturer of the inputs had paid excise duty or not. Dismissing the appeal of the Commissioner of Central Excise, the court upheld the defence of Kay Kay Industries of Punjab and several other assessee companies from all over the country. The stand of the revenue authorities was that during the Modvat verification, it was found that the suppliers of inputs had not discharged full duty liability for the period covered by the invoices.

Since the duty had not been paid by the manufacturer of inputs, the assessees cannot claim Modvat credit. The authorities maintained that it was obligatory on the part of the assessees to take all reasonable steps to ensure that the manufacturer of inputs paid excise duty on the inputs used in the manufacture of their final product as required under Rule 57A(6) of the Central Excise Rules. That view did not find favour with the high courts and excise tribunals. On the revenue authorities' appeal, the Supreme Court stated that Rule 57A (6) and the relevant notification only required the manufacturer of final products to take "reasonable care" that the inputs acquired by him are goods on which the duty has been paid.

"The proviso requires 'reasonable care' and not verification from the department whether the duty stands paid by the manufacturer-seller," the judgement explained and added: "To require the firm to find out from the departmental authorities about the payment of excise duty on the inputs used in the final product …would be travelling beyond the notification, and in a way, transgressing the same. This would be practically impossible and would lead to transactions getting delayed."


Status of staff after hiving off

The Supreme Court last week set aside the order of the Jharkand high court in a labour dispute involving Tata Steel, Lafarge India Ltd and nearly 80 employees whose status was in dispute. When Tata Steel hived off its cement division and sold it to Lafarge India Ltd in 1999, these employees were also transferred to the new employer.

According to the agreement between the two companies, Lafarge would take over the company personnel in terms of the Industrial Disputes Act without interruption in service, with terms not less favourable than before. It was also provided that the buying company would be liable to pay to the employees in the event of their retrenchment, compensation on the basis that services have been continued and have not been interrupted by the transfer of business.

Fresh letters of appointment were issued by Lafarge following this agreement. The employees complained later that they were not told about the terms and they wanted to go back to the original employer. They complained to the labour commissioner. Tata maintained that they were no longer its employees. Since conciliation talks failed, the government referred the dispute for adjudication. Tata moved the high court which ruled that it was an industrial dispute and it should be adjudicated as such. On appeal, the Supreme Court stated that the government's terms of reference was wrongly worded, as it assumed that the employees were of Tata Steel, when the latter company was disputing it. Since the high court had acted on wrong assumptions, the court set aside its judgment. But the government was asked to make a fresh reference with correct terms.

Interest sought from wrong party

The Supreme Court has set aside the Karnataka high court order directing the state Khadi & Village Industries Board to pay interest on the loan taken by a borrower from Punjab National Bank on the recommendation of the board. An organisation, Shevasakhti Gramodyoga Sangh, took loan from the bank with an agreement that if the repayment was made without default, the board will pay the interest on the loan.

This was in tune with a state government scheme of subsidy. The borrower, Sangh, in fact defaulted and the bank sued both the Sangh and the board. The courts asked the board to pay interest according to the agreement. It moved the Supreme Court. It held that since the borrower had defaulted in repayment, the board was not liable to pay interest. The role of the board was not as a guarantor.

UP power corp loses appeal

The Supreme Court last week dismissed the appeal of UP Power Corporation Ltd against the order of the Appellate Tribunal for Electricity and permitted capitalisation of Rs 4.521 crore over the approved cost of Rs 925 crore for the completion of Feroz Gandhi Unchahar Thermal Power Station Stage-I. Public sector NTPC had taken over the project from the state electricity board in 1992, as it had been grossly delayed since 1986.

Therefore, an additional expenditure was incurred, and a revised tariff structure was sought and approved. The tribunal held that as the project was left incomplete, NTPC required additional capital. Therefore, the additional capital was well within the approved cost of the project. Both the Central Electricity Regulatory Commission and the Appellate Tribunal rejected the contention of the corporation that the additional capital expenditure incurred by it could not be taken into consideration for tariff fixation without the same having been approved by the Central Electricity Authority. The court rejected this contention.

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First Published: Sep 22 2013 | 9:27 PM IST

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