Important Court Decisions

Gift of property need not be handed over-Business Standard

Income Tax Appellate Tribunal

M J Antony  

July 27, 2014

The Supreme Court has resolved an apparent conflict of views in its earlier judgments regarding the validity of gifts and stated that a gift of property would not be invalid if the possession is retained by the donor. "There is no provision in law that ownership in property cannot be gifted without transfer of possession of such property," the judgment said and added that possession of the gifted property is not essential for validity of a gift. In this case, Renikuntla Rajamma vs K Sawranamma, the donor retained the right to use the property during her lifetime. She also received rents. It was contended that since she retained the use of property the gift was invalid. Inasmuch as the gift deed failed to transfer title, possession and the right to deal with the property in absolute terms in favour of the donee the same was no gift in the eyes of law, it was contended. Rejecting the argument, the Supreme Court discussed Sections 122 and 123 of the Transfer of Property Act and stated that the retention of benefit did not affect the transfer of ownership in favour of the donee by the donor.

Bounced cheque penalty quashed
In a dispute between a property dealer and his driver over a bounced cheque, the Supreme Court last week set aside the order the Karnataka High Court which imposed a fine of Rs 8.5 lakh on the master. The property dealer issued a cheque of Rs 5 lakh to his driver to buy the latter's land. But the driver reneged from the sale agreement. Therefore, the master issued stop payment instructions to the bank. The driver filed a criminal complaint under Section 138 of the Negotiable Instruments Act against his master. He alleged that there was no sale agreement and he had given his master a hand loan of Rs 1.75 lakh four years earlier. Though this version of the driver was disbelieved by the trial court, the high court found substance in it and punished the master. The businessman appealed to the Supreme Court and alleged that the driver, whom he paid Rs 2,500 as monthly salary, had cooked up a story that he had given a hand loan. The Supreme Court examined the evidence and acquitted the property dealer in its judgment, Ramadas vs Krishnand.

54-year-old litigation closed
The Supreme Court last week closed a 54-year-old litigation over a piece of land in Kolkata on which a hospital had come up. The land had been changing hands along with litigation over its ownership, and with the coming into force of the Urban Land Ceiling Act, the West Bengal government also claimed ownership and handed over the land to the hospital. However, the high court ruled that the land was not surplus land and it could not be taken over. Meanwhile the hospital had already been running. Therefore, the owner could get only compensation, utilisation charge, interest and cost of litigation for the whole period. The Supreme Court, while deciding the case, Somnath Chakraborty vs Appollo Gleneagles Hospitals Ltd, directed the latter to deposit Rs 420 lakh in the court, so that it could be paid to the owner on showing the title deeds.

VRS does not bar pension
The Supreme Court has ruled that employees of public sector State Bank of Patiala who accepted a voluntary retirement scheme are entitled to pension if they had worked for 20 years. Similar cases from other public sector banks also have been quoted in the judgment to assert the right of the retiring staff. In this case, State Bank of Patiala vs Pritam Singh, the bank challenged several orders of the high court which had ordered payment of pension. The apex court dismissed all of them citing the pension regulations for public sector banks.

FCI petition on arbitration rejected
The Delhi High Court has dismissed a writ petition moved by Food Corporation of India, seeking a direction that it should not be charged enhanced fee demanded by Indian Council of Arbitration. The high court stated that "issues as to what amounts the Indian Council of Arbitration can charge can be decided in an appropriate proceedings, but definitely not by means of a writ petition." The court noted that there were 325 arbitration proceedings between the corporation and millers and most of these have been completed.

Board snubbed on daily wage issue
The Gujarat High Court has dismissed the appeal of the state Water Supply & Sewage Board and criticised it for violating its own policy for regularising workers kept on temporary basis for five to 15 years. In 1988, the government had passed a resolution to regularise workers in service. In 1994, it decided not to take temporary workers. But the board continued to take such workers and kept them for many years on daily wages. They moved the high court. The court held that the grouping of daily wagers on the basis of cut-off date of 30.11.1994 to deny benefits of Government Resolution dated 17.10.1988 were "illegal and arbitrary." On one hand, the board issued circular that no daily wagers shall be appointed from 30.11.1994 and "still the very board appointed hundreds of daily wagers in gross violation of their own policy and after passage of more than 15 years terming the action of appointing these daily wagers as illegal cannot be accepted and needs to be rejected. The board cannot punish others for their own wrongdoings," the judgment said.

Cancer charity wins tax case
The Income Tax Appellate Tribunal in Mumbai has quashed the order of the revenue authorities cancelling the registration of the Cancer Aid and Research Foundation for alleged violation of its aims and objects. The main object of the foundation was to provide monetary, medical and other assistance to poor people suffering from cancer. The authorities took action against the organisation on the ground that it had bought a BMW car costing Rs 32 lakh for a trustee, and it offered for commercial sale land allotted to it in Ratnagiri for a cancer hospital. The tribunal rejected these and other objections. The luxury car was bought for the trust though the dealer named the trustee as owner in the invoice. The land was offered for sale because the hospital could not be completed as there were not enough donors. These objections raised by the revenue authorities were rejected and the tribunal asserted that the registration should not be cancelled.

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Important Decisions Of Court

Gratuity payment can be stopped

The Calcutta High Court held last week that service regulations of a public sector bank will override the provisions of the Payment of Gratuity Act. The court set aside the decision to the contrary of the controlling authority under the Act in its judgment, United Bank of India vs Pranab Kumar. In this case the chief regional manager for north India was terminated for sanctioning loans violating norms and causing losses to the tune of Rs 26 crore. His services were terminated and gratuity forfeited though the disciplinary proceedings continued. 

The bank's view was that under the service regulations, the employer would be entitled to forfeit the damage suffered out of the amounts payable towards gratuity. 

The labour commissioner and the controlling authority under the Act ruled that gratuity cannot be denied as the main Act will prevail over the regulations. They maintained that the statute was a beneficial legislation and therefore, any regulation inconsistent with the object of the Act was not valid. 

The high court ruled that they were wrong. It explained that according to the 1970 law taking over and establishing the public sector bank, the regulations were specifically framed by the Board of Directors. "It is a special piece of subordinate legislation which because of their very special nature must give pre-eminence and precedence over the general principal or any general provision of law covering the same field. All that the court is required to find that in such a situation, the subordinate legislation is not overreaching or overstepping the principal Act."

New employer to pay PF penalty-Business Standard-21st July 2014

M J Antony  

July 20, 2014

The Supreme Court has held that a company which takes over another is liable to pay damages for default in payment of contributions to the provident fund committed by the latter. The damages is punitive in nature and it could be recovered from the transferee employer, the court held in the judgment, Mcleod Russel India vs Regional PF Commissioner, Jalpaiguri. In this case, Saroda Tea Company defaulted in payment of PF contributions. Later it was taken over by Eveready Industries, later named Mcleod Russel. According to the take-over agreement, the Mcleod cleared all PF arrears of the tea company. However, it contested the imposition of penalty for the default of the tea company. It pointed out the agreement in which the damages was the liability of the tea company. The Calcutta High Court rejected the argument. On appeal, the Supreme Court upheld the high court view and underlined that even if there was such an agreement, the liability was that of the new employer. The court asked the company to pay interest on the damages also.

Director can't be tried without company 

Prosecution of a director of a company for issuing a cheque which bounces cannot be sustained if the company is not made a party, the Supreme Court has ruled while setting aside the decision of the Delhi High Court in the case, Anil Gupta vs Star India Ltd. In this instance, a cable television distributor issued three cheques to Star India, which bounced. It filed criminal complaints underSection 138 and 141 of the Negotiable Instruments Act to the distributing company and the director. They moved the high court to quash the complaint on the ground of limitation. The high court quashed the complaint against the company but allowed the prosecution of the director, though he had argued that he was only vicariously liable for the default. He moved the Supreme Court. It relied upon earlier decisions and emphasised that proceedings against a director cannot be continued in the absence of the company.

Pre-deposit rule doesn't bar order to pay 

The Supreme Court has ruled that the National Consumer Commission can direct a company which appeals against the state commission order to deposit half of the decreed amount as a condition to hear the appeal. The Consumer Protection Act has a similar provision in Section 19. But the Supreme Court clarified that the statutory provision was different from the power of the commission to pass interim order. The statutory provision was a condition precedent to entertain an appeal. The commission can pass interim order on the basis of the merit of the appeal during the proceeding, the court explained. Several companies against whom state commissions had passed awards for deficiency in service and unfair trade practices moved the National Commission to set aside the orders. The National Commission ordered that they must first deposit half the amount decreed by the state commissions. The companies moved the appeals, titled Shreenath Corp vs Consumer Education and Research Society, against the order. The Supreme Court dismissed all of them.

Creditor can stand outside revival plan 

The Delhi High Court has ruled that neither the Board for Industrial and Financial Reconstruction (BIFR) nor the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) can compel a bank to join or continue in a recovery scheme for a sick company. A creditor bank can opt out of the scheme and realise outstanding dues from the company according to law, the judgment in the case, Indusind Bank Ltd vs ITI Ltd said. The order of the appellate authority to the bank to continue in the consortium of creditor banks set up to revive the firm was set aside. The company had approached BIFR following which the board set up the consortium. It set up an operating agency headed by State of Bank of India to revive the company, according to the Sick Industrial Companies Act. Indusind Bank was reluctant to join the consortium. But it was compelled by AAFIR by an order. The bank appealed to the Supreme Court arguing that no one can be compelled to enter into a contract without one's consent and that participation in the consortium agreement as a creditor has to be based upon volition and not compulsion. The Supreme Court accepted this contention.

Injunction against trade name 

The Bombay High Court has passed an injunction against Twilight Mercantile Ltd in a trade mark petition moved by Medley Pharmaceuticals Ltd alleging violation of trade names of its medicines. Medley is manufacturing medicines with the trade names O2 and OTwo. The other company introduced a medicine with the brand name O2B. On the application of Medley, the court found that the names were bound to be confusing because they were "phonetically, visually and structurally similar." Therefore, Twilight was barred from "exhibiting for sale and advertising pharmaceutical and medicinal preparation under the trade mark O1B and or O1B" PLUS till the issues are finally decided.

Link Business Standard

Bank manager arrested on charges of fraud-Business Standard 21.07.2014

A branch manager of public sector bank has been arrested for allegedly swindling about Rs 1.40 crore fixed deposits from some bank customers. 

Acting on a complaint filed by Indian Overseas Bank zonal manager G Kalyanam, a special team of Central Crime Branch officials arrested M Parasuramamurthy, the bank's Adambakkam branch manager yesterday from his residence here, a police release said. 

He was later remanded to judicial custody and has been lodged at the Puzhal prison, the release said. 

Investigations revealed that Parasuramamurthy while working in Rajapalayam branch had swindled several crores of rupees deposited as fixed deposits by A K D Venkataramanraja, who is the attorney of A K D Kumar (both NRIs), it said. 

Parasuramamurthy, who was later elevated to the level of Senior Manager at Rajapalayam main branch, had given fake renewal letters to Venkataramanraja as the deposits matured.

Later, he had withdrawn about Rs 80 lakh deposited by a customer at the Rajapalayam main branch, as Venkataramanaraja wanted to withdraw cash from his fixed deposit account, it said. 

Meanwhile, Parasuramamurthy was transferred to Adambakkam branch as its manager in Chennai and when Venkataramanaraja wanted the maturity amount, he swindled another Rs 61 lakh deposited by another customer in the branch, the release said.

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Car agency booked for aiding in car loan fraud-Times of India 

LUCKNOW: A car agency located at Faizabad Road was booked by police here on Sunday for allegedly aiding in car loan fraud. The police took the action on the report of fraud filed by manager of UCO Bank Indiranagar branch at Ghazipur police station on July 18.

A couple, identified as Dheeraj Pal and Kavita Pal, had approached the bank to get a loan of Rs 4 lakh. The bank issued a pay order in the name of the car agency on the basis of the documents submitted by the couple. When they defaulted in paying EMIs, the bank employee sent reminders to them

through posts. Failing to get any response from them, the bank staff approached the car agency.

The bank staff discovered that the car had been sold by the couple to some other person without obtaining NOC from the bank. Sub-inspector NH Khan, is handling the case said that it was to be ascertained if any RTO official was involved in the fraud. He said that owner of the car agency would also be questioned in this connection. The police are trying to trace the couple for making further inquiries, he added.

Link times of India

Pakistan gangs use Indian banks for fraud-Hindustan Times

If an alert from India’s external intelligence agency Research and Analysis Wing (R&AW) is anything to go by, Pakistan-based gangs are running fake lottery rackets through 349 Indian bank accounts.

“Input from R&AW indicates that 349 bank accounts are being used/operated by Indian associates for facilitating Pak-based groups running fake lottery rackets,” an official note accessed by HT said adding that details of 99 users of Indian telephone numbers who are the local collaborators of the Pak groups “are under watch”.

In the country-wide network operated by Indian associates of the Pakistani gangs, at least 133 bank accounts in the State Bank of India, 33 in ICICI bank, 18 in Punjab National Bank and others in Bank of Baroda, Oriental Bank of Commerce, Union Bank of India, Central Bank of India and the United Commercial Bank of India, are being operated by Pak-based gangs. About 139 accounts are of unidentified banks.

“Details of these bank accounts and the telephone numbers are being shared with other intelligence agencies”, a senior government official told HT.

The vast lottery scam came to the notice of the Indian authorities in 2011. But the extent of the misuse of Indian bank accounts came to light in February 2013 when a Pak-operated lottery network was neutralised in Roorkee (Uttarkhand) and the kingpin arrested with 132 ATM cards of various Indian banks and details of 25 bank accounts. Before this, cases of similar arrests had come in from Delhi (January 2012), Jharkhand (June 2012), Gujarat (July 2012) and Punjab (November 2012).

The modus operandi involves a phone call from Pakistan with the information that the would-be victim has won a lottery and to collect the entire amount, a certain amount has to be deposited for collection and processing charges in certain Indian bank accounts. After the amount is deposited, someone withdraws the cash and disappears.

“The amount is then handed over to hawala operators who send it to Pakistan usually routed through Saudi Arabia and UAE. In this entire swindle, Indian operators get about 5% of the proceeds of the crime,” a senior government official tracking the crime told HT.

http://www.hindustantimes.com/india-news/pakistan-gangs-use-indian-banks-for-fraud/article1-1242733.aspx

Calcutta High Court to decide whether Vijay Mallya is a wilful defaulter-DNA

Kingfisher Airlines promoter Vijay Mallya faces another litigation in the Calcutta High Court today (July 21), where the company is battling with United Bank of India for not to be classified as wilful defaulter.

A person declared as a wilful defaulter will lose directorship in companies, and will not be able to borrow from any other bank.

As per the regulations of the Reserve Bank of India (RBI), borrowers should be allowed to meet the grievance redressal committee of the bank before classifying them as wilful defaulter as a natural course of justice. But Mallya wanted to meet the grievance cell with a lawyer that the bank has disallowed. The bank's contention is that it should be a meeting exclusively between the bank and the company, without any outsiders.

The grounded Kingfisher Airlines had moved the Calcutta High Court pleading for a lawyer to be allowed to accompany the company officials while meeting the bank grievance cell. The bank alleged that the company is willfully defaulting loan outstanding of Rs 360 crore. Outside the consortium, the bank gave a Rs 60 crore loan to Kingfisher for pre-delivery payment.

The counsels for Kingfisher submitted a plea for withdrawal of the notice for wilful default by United Bank of India, and they be allowed a personal hearing along with legal representative on the issue.

The United Bank of India was the first to take Kingfisher Airlines to court in 2013 when most other banks were giving a long rope to the company. The bank had filed a winding-up petition against the company for "wilful" defaults. The contention of the bankers was that no concerted action was taken by the company to revive its fortunes.

The consortium of 17 banks, led by State Bank of India (SBI), has an outstanding debt of about Rs 4,022 crore from the carrier. On July 18, the Goa Bench of the Bombay High Court allowed SBI-led lenders to initiate action against Kingfisher Airlines by approaching a magisterial court for permission to take possession of the Kingfisher Villa in Goa. In April 2013, a lower court had issued an injunction restraining lenders from taking possession of the Goa Villa of Kingfisher.

The lenders may be allowed to take possession and then sell the villa, depending on the final decision of the district magistrate.

Meanwhile, in another matter, the apex court has held it can allow banks to sell the Kingfisher House in Mumbai and retail the sale proceeds, subject to the final outcome of the ongoing litigation between the airline and lenders.

Supreme Court Permits Publishing Photos Of Loan Defaulters

Name & shame: Banks can publish photos of wilful defaulters, says SC-Financial Express 18th July 2014

In a move that may discourage firms from defaulting on bank loans, the Supreme Court has allowed lenders to publish names and photographs of wilful defaulters in newspapers in the larger public interest. The apex court said that the decision to resort to this measure would be taken by officers of the rank of general managers and above.

By giving the ruling on the matter, a bench headed by justice Fakkir Mohamed Ibrahim Kalifulla upheld the Bombay High Court’s November 2013 order that allowed State Bank of India (SBI) to publish names and photographs of directors and guarantors of Mumbai-based defaulter firm DJ Exim (India) in newspapers on the grounds that Rule 8 framed under the Securitisation Act specifically authorised the banks to publish the names and addresses of wilful defaulters and there is also no legal bar that prohibits them from publishing such information. The SC accepted the bank’s stand that the move does not violate the defaulter’s right to privacy as the same is not absolute. From the bank’s point of view, the duty to maintain secrecy is superseded by a larger public interest as well as by the bank’s own interest under certain circumstances, it held.

In the past, while the Bombay, Madras and Madhya Pradesh HCs had allowed banks to publish the names and photographs of defaulters, the Calcutta and Kerala HCs held such moves as unconstitutional and impermissible in law while ruling on some cases.

In the matter under review, DJ Exim had failed to pay SBI more than Rs 53.18 crore with interest despite repeated requests. The bank in October last year warned the company that if it failed to pay, names and photographs of its directors and guarantors would be published in national newspapers and action would be taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The company moved the high court stating that the SBI letter was highly coercive in nature and no rule permitted banks to publish photos to embarrass the defaulters.

Link Financial Express

United Bank to 'name and shame' wilful defaulters: Deepak Narang

State-owned United Bank of India will soon embark upon process to 'name and shame' its wilful defaulters as part of its effort to recover dues.

"Since the Supreme court has recently permitted banks to name and shame wilful defaulters. Now the bank would initiate process," United Bank of India executive director Deepak Narang told PTI.

As part of this, the bank will publish photographs of defaulters and other details in newspapers and at notice boards of bank branches.

Kolkata-based lender was the first PSU lender to initiate the process of declaring Vijay Mallya and three other directors on the grounded Kingfisher Airlines as wilful defaulter.

However, Kingfisher Airlines approached the Kolkata High Court seeking permission of being represented by a lawyer in the proceedings of the Grievance Redressal Commission of the bank.

Hearing on the matter before the division bench of the Kolkata High Court is scheduled on July 21.

Earlier on July 10, Justice Dipankar Dutta of the High Court rejected Kingfisher Airlines' plea to send an external legal practitioner to appear before the grievance redressal committee.

The bank had served a notice, asking Mallya and three other directors of Kingfisher Airlines to appear before its grievance panel on July 9.

If declared a wilful defaulter, the person would not be able to borrow in future and lose director-level positions in companies.

The bank's exposure to Kingfisher Airlines was around Rs 350 crore as part of consortium lead by State Bank of India. Outside consortium, the bank gave about Rs 60 crore loan for Pre-Delivery Payment.

The consortium of 17 banks, led by SBI, has an outstanding debt of about Rs 4,022 crore from the now-grounded carrier.

As part of the recovery process, banks in February last year decided to sell a portion of the collateral with them, including shares of group companies United Spirits Ltd and Mangalore Chemicals & Fertilizers Ltd, Mallya's Goa villa, Kingfisher House in Mumbai and the Kingfisher brand, which was valued at over Rs 4,000 crore at the time it was pledged.