The Supreme Court has settled differences among various high courts and declared that the chief judicial magistrate (CJM) is competent to assist the secured creditor to take possession of the asset in case of default under the Securitisation (Sarfaesi) Act. The court had to give a decisive ruling as the high courts of Bombay, Calcutta, Madras, Madhya Pradesh, and Uttarakhand had interpreted the law to mean that only the chief metropolitan magistrate (CMM) in metropolitan areas and the district magistrate (DM) in non-metropolitan areas are competent to deal with such a request. The high courts of Kerala, Karnataka, Allahabad and Andhra Pradesh had taken a contrary view of the same provision, Section 14, to mean that it did not debar the CJM in non-metropolitan areas to exercise the power. The borrowers contended that a literal interpretation of Section 14 must be preferred. In that case, the secured creditor can seek assistance “only” of the CMM in metropolitan areas and the DM in non-metropolitan areas. Banks and creditors argued that the provision must be interpreted with the object of the law in view, that is to recover loan without procedural delays. The court ruled in the judgment, Indian Bank vs D Visalakshi, that the Bombay group of high courts were wrong, and the Kerala batch was right.
Curbs on reopening arbitration award
An application challenging an arbitration award is dealt with in a summary procedure and it would not ordinarily require anything beyond the record that was before the arbitrator. Cross-examination of persons or filing affidavits should not be allowed unless necessary, the Supreme Court stated in its judgment, Canara Nidhi vs M Shashikala. In this case, a loan was not returned according to the terms of the contract, which led to arbitration. The award was against the borrower. She moved the district court urging that there was a need to file more affidavits and cross-examine witnesses. The judge dismissed the petition. The Karnataka High Court, however, asked the district judge to “recast” the issues and allow cross-examination. The lender appealed successfully to the Supreme Court, which observed that it was only in exceptional cases that additional evidence was allowed. The high court’s order amounted to “retrial” on the merits of the issues decided by the arbitrator.
Cheque bounce case stuck for two decades
A procedural tangle has delayed for two decades the trial in a case of bounced cheques. Vani Agro Enterprises issued four cheques in 1999, all of which bounced. The payee sent one notice to the firm under the Negotiable Instruments Act. The firm contended that all four cases should be consolidated and heard together. This led to interim orders. Even evidence has not been recorded yet. The firm invoked the Criminal Procedure Code to argue that since one notice has been issued, four separate trials should not take place; only one is permissible. The Supreme Court stated the only relief that can be granted to the firm is that the magistrate should fix all the four cases on one date so that it is convenient to both parties to attend the hearing on one date.
Award quashed due to long delay
The Madras High Court has set aside an arbitral award because of a long delay in its delivery. “In the absence of any explanation or reason for the delay in passing the award, such delay is a violation of the public policy of India. It cannot be sustained in the eye of law in view of the delay alone,” the judgment underlined in the case, K Dhanasekar vs Southern Railway. The arbitration started in 2008 and concluded in 2011. The award was passed in 2014. Given the delay, the contractor moved the high court to set aside the award. Allowing the petition, the court stated that the huge gap between the last date of hearing and the date of the award tended to fade the memory of the arbitrators regarding the contentions. The delay should also be explained in the award. The court appointed new arbitrators who will give the award in three months.
Tendu leaves traders lose claim on income tax
A division Bench of the Bombay High Court has dismissed the writ petition of Gondia Beedi Leaves Contractors Association claiming exemption from collection of income tax at source from the seller, namely, the Forest Department of Maharashtra. The members of the association are contractors of tendu leaves, a forest produce, generally used to make bidis. The exemption is granted under Section 206C of the Income Tax Act. Earlier, the traders had enjoyed the benefit of exemption. But in January 1996, the department of revenue, Government of India, changed the rule. It clarified that the operations carried out by tendu leaves traders did not change the nature and character of the leaves and those were performed only to maintain the leaves in a saleable and marketable condition. Further, such operations did not result in any change in the product and, therefore, merely drying, a sprinkling of water, bundling of the Tendu leaves, etc, could not be equated with “processing”. Thus the exemption was withdrawn, leading to the traders’ petition. They argued that the processed tendu leaves that are sold are actually utilised for manufacture of bidis, a distinct product which comes into existence, and hence qualify for the exemption. The high court dismissed the challenge, stating that there was no processing involved at the hands of the traders. It is an integrated process of manufacture or producing bidis from the processed tendu leaves, which qualifies for exemption.
Remarried woman gets share in death claim
The Patna High Court last week ruled that a remarried woman would be entitled to get the death claim of life insurance, along with her former mother-in-law, in equal measure. In this case, Khushboo Gupta vs LIC, her husband had taken a policy before his marriage with her and the nominee was his mother. The husband died and Khushboo married again. The mother-in-law contended that the whole amount belonged to her due to nomination. Khushboo contended that according to Hindu succession law, she was entitled to half the amount despite her remarriage. The nomination was subject to succession. A nominee can only receive the amount, but it should be distributed among legal heirs. This view was accepted by the high court, citing judgments of the Supreme Court and other high courts. The judgment further stated that re-marriage of a widow is not a ground for divesting the estate inherited by her from her husband.
via From loan recovery to income tax claim, here’re the key court orders | Business Standard Column
aniltikotekar4sme.com 