Pre-deposit in cheque to bank guarantee, key court orders of last week | Business Standard News

The Supreme Court ruled last week that an arbitration tribunal can allow an employer to withhold the security deposit of a contractor in one project if his work in another work contract is under scrutiny. The judgment came in the case, State of Gujarat vs Amber Builders, in which the power of the Gujarat Public Works Contract Disputes Arbitration Tribunal was challenged by a contracting firm. This state law makes it compulsory to arbitrate disputes over works contracts. The firm, in this case, had built a road but it was washed away in rain. The government appointed a new contractor to repair it and withheld the deposit of the former. The firm challenged the action of the government in the high court. It allowed the petition, against which the state moved the Supreme Court. The court set aside the high court ruling and clarified that the state law and the central law on arbitration were not in conflict and the tribunal can pass interim orders. The Supreme Court also declared that its earlier ruling in another case was wrong. In that case, the court held that the government had no right to appropriate the deposit amount claimed by the contractor without getting it first adjudicated.

Pre-deposit in cheque cases valid

A stay on the sentence of punishment for issuing a cheque without sufficient balance in the bank account can be subjected to a condition to pay part of the amount, the Supreme Court stated last week in its judgment, Surinder Singh vs Virender. Surinder and another person were partners in an infrastructure firm, along with Virender. Virender retired later. The firm issued 64 cheques to Virender as retirement dues. All of them bounced, leading to 28 complaints before the magistrate. The two partners were convicted and sentenced to two-year imprisonment. They were also asked to pay the full dues. The drawers of the cheque appealed to the sessions judge and sought a stay on the punishment. It was granted on condition that 25 per cent of the compensation was paid. It was not paid and they moved the high court and later the Supreme Court without success. Then there was a second round of litigation; again their appeals were dismissed by the Supreme Court affirming the sentence.

Bank guarantee must be complied with

If the demand to encash the bank guarantee is in terms of the contract, it is not open for a bank to determine whether the invocation was justified. It cannot decide on its own whether there was a fraud, irretrievable injustice or special equities, the Supreme Court stated in its judgment, Standard Chartered Bank vs Heavy Engineering Corporation. The dispute arose with regard to two bank guarantees furnished on behalf of Simon Carves India by the bank in favour of the corporation “as advance against supply of plant and equipment”. Simon failed to supply equipment and the work had to be abandoned causing huge losses. Therefore, the corporation demanded the encashment of the guarantees. When the bank refused, the dispute reached the Calcutta High Court, which allowed the encashment. The bank’s appeal was dismissed by the Supreme Court, which stated in the absence of fraud or irretrievable injustice, “it is not even open for the court to interfere with the encashment of the bank guarantee.”

No-fault liability in road accidents

In case of death because of a collision between two motor vehicles, both sides and their insurers should be made parties to the compensation claim before the tribunal. Otherwise, the damages might be lower. In the judgment of the Supreme Court, Ramkhiladi vs United India Insurance Co last week, the wife of a deceased motorcyclist filed a claim only against the insurer of the vehicle and not the owner of the other bike that collided and caused her husband’s death. The widow invoked Section 163A of the Motor Vehicles Act under which compensation can be claimed without ascertaining the blame on all involved. She did not move against the owner or driver of the bike. The insurer argued that the deceased was not a third party entitled to compensation as he had borrowed the vehicle and according to the policy, he stood in the shoes of the owner. The tribunal gave an award in her favour but the Rajasthan High Court quashed it. On appeal, the Supreme Court granted Rs1 lakh to the woman, who had claimed Rs5 lakh according to the amended law. The court clarified that the amendment raising the amount was made later than the date of the accident.

ONGC appeal against award dismissed

The Bombay High Court has dismissed the appeal of Oil & Natural Gas Corporation challenging the arbitral award against it in its dispute with CGG Services. The public sector company had hired the services of the French company, which specialises in land and marine acquisition of geophysical data worldwide. Disputes arose over payment and the three-member arbitration panel gave its award in favour of the French firm, especially on the hotly contested question of minimum guaranteed work. ONGC appealed to the high court to quash the award, without success. The high court recited the principles for setting aside an award namely, if it is contrary to the fundamental policy of Indian law, or the interest of India, or justice or morality. The judgment emphasised that the tribunal acted fairly and there was no illegality which can be said to go to the root of the matter.

SBI loses mortgaged land titles

The National Consumer Commission has dismissed the appeal of State Bank of India, which had lost title deeds mortgaged with it for granting a loan to a businessman. The bank was told to pay Rs5 lakh for deficiency in service. SBI had offered to give a certified copy of the documents to Amitesh Mazumdar, provide a document admitting the loss of the title deeds, and publish the loss in newspapers. However, the commission pointed out that all these steps would not be enough if the man tries to sell the property. “No one will agree to purchase an immovable property on payment of its prevailing market value if he knows that the original title deed will not be delivered to him by the seller. There will always be an apprehension of the misuse of the deeds by an unscrupulous person by depositing it with a bona fide lender. The compensation may not be sufficient to make up such erosion in the market value of the property,” the judgment explained.

via Pre-deposit in cheque to bank guarantee, key court orders of last week | Business Standard News

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