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The law disregards trifles

INSURANCE BANKING COMPANY CONSUMER GENERAL

Subros

topical index

company

conduct of board meetings through video conferencing

compounding of offence

banking

sarfeisi act

loss of confidence in employee - termination of service

mortgage and usufructuary Mortgage

insurance

no licence

registration not renewed

delay in lodging claim

pendency of criminal case

general

builder entitled to forfeit the earnest money in default

auction purchaser – “ As is where is basis”

cheque bouncing

liability of Directors

at par cheque


Subros

The PUNJAB AND HARYANA HIGH

COURT in the case of MUKESH

KHOSLA v. AMANDEEP KAUR has held

that where the licence is found to be fake,

the State is under obligation to file com-

plaint or register an FIR .The court has

further held that where during the proceed-

ings that the driver has more than one

licence, the Tribunal will take immediate

notice of the same and recommend to the

concerned police authorities to register FIR.

After appointment engaging of a driver, the

owner shall seek

information

be fake in MACT proceedings, even if the

driver is acquitted in the criminal trial under

Section 279, 304 IPC, the State is under

obligation to file complaint or register an

FIR, under appropriate Sections (Sections

420, 467, 468, 471 IPC, etc.), for prosecut-

ing such driver.

3. Where the driving licence of the driver is

found to be fake in the MACT proceedings,

the Tribunal is required to forward a copy

of the judgment to the police for initiating

criminal pro-

ceedings against

under the RTI

Act/or any

other provision

available imme-

diately regard-

ing the

genuineness of

the driving

Where the licence is found to be fake, the State

is under obligation to file complaint or register

an FIR. Where driver has more than one

licence, the Tribunal will take immediate

notice of the same and recommend to

concerned police authorities to register FIR.

the driver.

4. The particu-

lars of such a

driver would

be circulated to

the

registration

authorities as

far as possible

licence from the office of issuing authority

within thirty days from the date such ap-

pointment / engagement. Following direc-

tions issued.

Held, that following remedial measures to

overcome such situations are being sug-

gested:-

1. The Union of India should create a

mechanism where the licences issued

throughout the country shall be verifiable

by all the State authorities. This could be in

the form of a software which is accessible

by the State Authorities as well as the Cen-

tral Government.

2. In the cases, where the licence is found to

or a system (agency) should be created to

put the name of all such black-listed drivers.

5. Where it comes to the notice of the

Tribunal during the proceedings that the

driver has more than one licence, the Tribu-

nal will take immediate notice of the same

and recommend to the concerned police

authorities to register FIR under relevant

sections against such driver. In such a situa-

tion also, the name of such a driver should

be put in the software, as suggested above,

for verification.

6. After appointment/engaging of a driver,

the owner shall seek information under the

RTI Act/or any other provision available

INSURANCE

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immediately regarding the genuineness of

the driving licence from the office of issuing

authority within thirty days from the date

such appointment/engagement.

7. In case, the employer is illiterate or does

not understand, read or write the language

used in the licence, such an employer shall

get the licence verified from the instructor

of an approved driving school wherever the

driver is shown to be resident of one State/

place and that address is mentioned in the

application for grant of Driving Licence or

through con-

cerned

Further held, that the question which arises

for determination is that whether the appel-

lant-owner had taken reasonable care to find

out as to whether the driving licence pro-

duced by the driver was a genuine one. In

order to discharge his onus, the appellant

produced the Manager of the appellant-

owner. He stated that he along with Mukesh

Khosla, the appellant/owner, had seen the

driving licence of Balwinder Singh, which

carried signatures and seal of the office of

District Transport Officer. Only thereafter,

they had engaged

Suvidha Cen-

tre. The Li-

censing Au-

thority of the

other State/

place, if feels

fit to issue

driving licence

However witness appears to have been deliberately introduced as a

witness and there is nothing on record to show that this witness

was in the employment of the appellant-owner at the relevant time

Appellant chose not to step into the witness box, thereby not only

giving up his own valuable right to contend that he verified the

authenticity of the DL of the offending driver but also deprived the

insurer of his right to cross-examine him - Recovery rights given.

Balwinder

Singh as

driver. How-

ever, the

Manager

appears to

have been

deliberately to such person who is domicile of another

State, it must record reasons to issue driv-

ing licence contrary to the spirit of act by

holding that such applicant falls under the

provisions of law to be issued Driving

Licence by that authority. This process for

verification of the Driving Licence of

driver can be further simplified if the sug-

gested software can have a public window/

interface, wherein, private citizens can log

into the software and by entering the details

of the driving licence, can get a printed

verification report regarding the authentic-

ity of the Driving licence.

INSURANCE

introduced as a witness and there is nothing

on record to show that this witness was in

the employment of the appellant-owner at

the relevant time. Thus, evidence brought

on record by the appellant is insufficient

and not credible to prove that he had ob-

served due care and caution before engag-

ing the driver. Thus, insurer has been rightly

awarded recovery rights against the insured.

Furthermore appellant, has chosen not to

step into the witness box, thereby giving up

his own valuable right to contend that he

verified the authenticity of the DL of the

offending driver but also deprived the

insurer of his right to cross-examine him.

Subros

CONDUCT OF

BOARD MEETINGS

VIDEO CONFERENCING

Sandeep Suri

Advocate, Partner Subros and Associates

COMPANY LAW

CONDUCT OF BOARD

MEETINGS THROUGH

VIDEO

CONFERENCING

The advent of technology

has been given its due

recognition under the

provisions of COMPA-

NIES ACT, 2013. SEC-

TION 173 subsection (1)

requires Every company

ing of the Board of Direc-

tors within thirty days of

the date of its incorpora-

tion and thereafter hold a

minimum number of four

meetings of its Board of

Directors every year in

such a manner that not

more than one hundred

and twenty days shall

intervene between two

consecutive meetings of

the Board. Though the

word meeting is not been

defined under the act in

the normal sense of the

word it normally refer to

conference of persons for

the same would be sugges-

tive of that the board of

directors of the company

would assemble at a place

for the specific purposes

of discussing the transac-

tion of business in respect

of the fears of the com-

pany parent, requiring

there physical presence

thereof. That clause (3) the

same would remove from

its ambit any chance meet-

ing or any other meeting

or assembly of the board

of directors of the com-

pany as the same is re-

quired to be called by

giving not less than 7 days

notice in writing (subject

to the proviso mentioned

therein). However subsec-

COMPANY

tion (2) of section 173

provides

173 (2) The participation of

directors in a meeting of the Board

may be either in person or through

video conferencing or other audio

visual means, as may be

prescribed, which are capable of

recording and recognising the

participation of the directors and

of recording and storing the

proceedings of such meetings

along with date and time:

Provided that the Central Gov-

ernment may, by notification,

specify such matters which shall

not be dealt with in a meeting

through video conferencing or

other audio visual means.

The same is required to be

read with particular refer-

ence to clause (c) and

clause (f) of sub rule (3) of

Rule 3, of the Companies

(Meetings of Board and its

Powers) Rules, 2014 ,

which provides that a

meeting of the directors of

the company may be

carried out in terms of

subsection (2) of section

173 through video

Subros

conferencing or other

audiovisual means, pro-

vided the compliance is

made by the director with

respect of the following

requirements:

173(3). Meetings of Board

through video conferencing or

other audio visual means.- A

company shall comply with the

following procedure, for conven-

ing and conducting the Board

meetings through video

conferencing or other audio visual

means.

(1) ......

(2) The Chairperson of the

meeting and the company secre-

tary, if any, shall take due and

(a) to safeguard the integrity of

the meeting by ensuring sufficient

security and identification proce-

dures;

(b) to ensure availability of

proper video conferencing or

other audio visual equipment or

facilities for providing transmis-

sion of the communications for

effective participation of the

directors and other authorised

participants at the Board meeting;

(c) to record proceedings and

prepare the minutes of the

meeting;

(d) to store for safekeeping and

marking the tape recording(s) or

other electronic recording mecha-

nism as part of the records of the

company at least before the time

of completion of audit of that

particular year.

(e) to ensure that no person other

than the concerned director are

attending or have access to the

proceedings of the meeting

through video conferencing mode

or other audio visual means; and

(f) ......

The notice of the meeting

shall be sent to all the

directors in accordance

with the provisions of sub-

section (3) of section 173

of the Act. The notice

required to provide for an

option being made avail-

able for the purposes of

carrying out the meeting

through video

conferencing mode or

other audiovisual means.

A director intending to

participate through video

conferencing or audio

visual means shall commu-

nicate his intention to the

Chairperson or the com-

pany secretary of the

company and shall give

prior intimation to that

effect sufficiently in ad-

vance. The term - Suffi-

COMPANY

ciently in Advance - has

not been defined anywhere

in the Act or the Rules and

hence is dependant on each

company.

Such option is required to

be exercised by the con-

cerned director at the

beginning of the calendar

year as has been provided

in clause (e) of rule 3

thereof (e ) The director,

who desire, to participate

may intimate his intention

of participation through

the electronic mode at the

beginning of the calendar

year and such declaration

shall be valid for one

calendar year. (f) In the

absence of any intimation

under clause (c), it shall be

assumed that the director

shall attend the meeting in

person. It is to be noted

that the reference is to

CALENDAR YEAR and

not to the FINANCIAL

YEAR. Procedure re-

quired to be followed:

That the procedure re-

quired to be followed

where assistance of

video conferencing or

other audio means has

been taken requires that a

roll call shall be taken by

the Chairperson and where

Subros

every director participat-

ing through video


audio visual means shall

state, for the record, his

name, location from where

he is participating, confir-

mation that he has received

the agenda and all the

relevant material for the

meeting and that apart

from the concerned direc-

tor no one other is attend-

ing or having access to the

proceedings of the meet-

ing at the location from

which he is carrying out

the said meeting . That

subsequent to the roll call,

the Chairperson or the

Company Secretary shall

inform the Board about

the names of persons other

than the directors who are

present for the said meet-

ing at the request or with

the permission of the

Chairperson and confirm

that the required quorum

is complete. The statutory

registers which are re-

quired to be placed in the

Board meeting as per the

provisions of the Act shall

be placed at the scheduled

venue of the meeting and

where such registers are

required to be signed by

the directors, the same

shall be deemed to have

been signed by the direc-

tors participating through

electronic mode, if they

have given their consent to

this effect and it is so

recorded in the minutes of

the meeting. However, not

all matters have been

permitted to be conducted

in a meeting through video


audio visual means. Spe-

cific matters relating to the

approval of the annual

financial statements, the

and Audit Committee

Meetings for consideration

of accounts; or approval

of the matter relating to

amalgamation, merger,

demerger, acquisition and

takeover can not be con-

ducted through video

conferencing. The same

cannot be considered as a

suo motu option available

to the company to carry

out at its discretion a

board meeting at its own

discretion unless and until

all the directors desire to

participate in the meeting

through videoconferencing

or audiovisual means.

----

COMPANY

The same

cannot be consid-

ered as a suo motu

option available to

the company to

carry out at its dis-

cretion a board

meeting at its own

discretion unless

and until all the

directors desire to

participate in the

meeting through

videoconferencing

or audiovisual

means.

Subros

SARFAESI

ACT, 2002

SUPREME COURT

Banking / Securitisation /

Sale / Private treaty

Securitization and Recon-

struction of Financial Assets

and Enforcement of Security

Interest Act, 2002 (54 of

2002) Section 13 - Sale -

There were no terms settled

in writing between the

parties that the sale can be

affected by Private treaty -

Borrowers were not even

called to the joint meeting

by the Bank - Therefore,

there was a clear violation of

the aforesaid Rules

rendering the sale illegal.

asset provides maximum

benefit to the borrower by

the sale of such asset. There-

fore, the secured creditors are

expected to take bonafide

measures to ensure that there

is maximum yield from such

secured assets for the bor-

rower. Sale is null and void

being in violation of the

provision of Section 13 of

the SARFAESI Act, 2002

and Rules 8 and 9 of the

Rules, 2002.

Security Interest (Enforce-

ment) Rules 2002, Rule 8(5),

8(6), 9(2)

Held, that it must be empha-

sized that generally proceed-

ings under the SARFAESI

Act, 2002 against the bor-

rowers are initiated only

when the borrower is in dire

straits - The provisions of

the SARFAESI Act, 2002

and the Rules, 2002 have

been enacted to ensure that

the secured asset is not sold

for a song. It is expected

that all the banks and

financial institutions which

resort to the extreme

measures under the

SARFAESI Act, 2002 for

sale of the secured assets to

ensure, that such sale of the

BANKING

SUPREME COURT OF

INDIA

J. RAJIV

SUBRAMANIYAN

Versus

M/S PANDIYAS

Reported as reported as

(2014-4)176 PLR 809 (SC)

SARFAESI

Subros

BANKING

SARFAESIACT, 2002 (54 of 2002)

Powers of Lok Adalat

SARFAESI

Subros

2014-4 PLR 201

PUNJAB AND HARYANA HIGH COURT

M/S IAA HOSPITAL PVT. LTD.

Versus

AUTHORIZED OFFICER, UCO BANK

(i) SARFAESI Act, 2002 Section 13(4)(a),

13(4)(b) - Notice issued is violative of the

mandatory provisions of the SARFAESI

Act as there has been no proper valuation

and the sale notice did not provide for the

minimum 30 days period and no proper

inventory has been prepared and the assets

have been sold and the property at

Jalandhar has also been sold without show-

ing when the possession was taken and for

what value - Consequently, the order -

Whereby a seal of approval had been

granted to the sale certificates issued in

favour of respondents No.2 to 4 are also

quashed - The said respondents-auction

purchasers shall surrender the possession of

the property to the authorized officer of the

bank within a period of two months from

today.

(ii) SARFAESI Act, 2002 Section 3(3-A) -

Notice - Petitioner objected to the notice -

Bank allowed to sell a particular property -

No action was thereafter taken to decide the

objections or reject the representations

whereas the bank had already

put the petitioners in the list of willful

defaulters on 13.06.2011 and thus, violated

the provisions of Section 13(3-A) of the

SARFAESI Act by not taking a call on the

objection.

(iii) SARFAESI Act, 2002 - Securitization

Rules, Rule 5 , 8(5) - Further the provisions

of Rule 5 pertaining to fixation of valuation

of movable and secured assets in consulta-

tion with the secured creditor for realization

of the dues of the secured creditor were

apparently missing in the present case -

Before effecting sale of the immovable

property, the authorized officer was to

obtain valuation of the property from an

approved valuer and in consultation with

the secured creditor, fix the reserve price of

the property and sell the whole or in part of

such immovable secured asset by any of the

following methods prescribed which in-

cluded inviting tenders from the public.

(iv) SARFAESI Act, 2002- Secured credi-

tor has been conferred right to enforce their

security interest without the intervention of

the Court or Tribunal cannot be blatantly

violated - Plea of alternative remedy is not

an absolute bar for this Court to entertain a

writ petition under Articles 226/227 of the

Constitution of India, more particularly

when there exists numerous violations of

the statutory provisions

SARFAESI ACT, 2002 (54 of 2002)

BANKING SARFAESI

Subros

NATIONAL CONSUMER DISPUTES

REDRESSAL COMMISSION NEW DELHI

Ishwar Singh V. ICICI Lombard

30th January, 2015

Insurance claim was repudiated as at time of

accident, the vehicle was being driven by a

person not holding an effective and valid

driving license and also the vehicle was

carrying passengers in excess of the sanc-

tioned seating capacity.

Forum Allowed claim 75% : Forums

conclusion that subject vehicle at the time

of accident was carrying 2 passengers in

addition to the driver in violation of the

rules which amounted to violation of terms

and conditions of the policy. Question of

validity of driving license not gone into.

Relying upon the case of Amalendu Sahoo V. Oriental Insurance Company allowed claim on non -standard basis (75%).

No appeal by Insurance Company: State

commission on appeal of Insured dis-

missed complaint: Complainant ap-

proached State Commission Haryana for

enhancement, which, however, taking note

that at the time of accident subject vehicle

was being driven by a driver not having a

valid driving license to drive a commercial

vehicle, set aside the order of the Forum

and dismissed the complaint.

Repudiaton letter: Validity of the driving

license was not given as a reason for

repudiating the claim in the repudiation

letter : Contended that State Commission

has committed a grave error in looking into

the validity of the DL when the validity of

the DL was not given as a reason for repu-

INSURANCE

diating the claim in the repudiation letter.

NCDRDC did not find merit in this con-

tention because repudiation letter by itself

is not a sine qua non of the dispute between

the parties and as plea was taken in the

written statement filed in response to the

complaint, in the written statement, the

State Commission was justified in looking

into the validity of the driving license and it

cannot be said to have been acted beyond

the scope of the pleadings.

State Commission has not exceeded its

jurisdiction in dismissing the complaint

though the opposite party had not filed

appeal and had accepted the order of the

District Forum: Relying on Order XLI

Rule 33 CPC, NC held that there is wide

power to the Appellate Court to do com-

plete justice between the parties. Provision

enables the appellate Court to pass such

order as ought to have been passed under

the circumstances notwithstanding that the

party in whose favour the order is sought to

be exercised has not filed any appeal. State

Commission having noticed that driver of

the subject vehicle was not holding valid

driving license came to the conclusion that

it is a case of violation of terms and condi-

tions of the insurance policy and dismissed

the complaint. The order is in consonance

with the powers of the Appellate Court ,

and cannot be faulted.

Repudiation - Ground not men-

tioned in the repudiation letter -

Can be taken in defense

CONSUMER

Subros

Temporary registration not renewed - Insurance company not liable

Motor Vehicles Act, 1988 (59 of 1988) Section 39, 43 - Damage to vehicle -Temporary

registration was granted in respect of the vehicle in question, which had expired on

11.1.2006 and the alleged accident took place on 2.2.2006 when the vehicle was without any

registration - Nothing has been brought on record by the appellant to show that before or

after 11.1.2006, when the period of temporary registration expired, the appellant, owner of

the vehicle either applied for permanent registration as contemplated under Section 39 of

the Act or made any application for extension of period as temporary registration on the

ground of some special reasons - Using a vehicle on the public road without any registration

is not only an offence punishable under Section 192 of the Motor Vehicles Act but also a

fundamental breach of the terms and conditions of policy contract - Consumer Protection

Act, 1986.

SUPREME COURT OF INDIA / NARINDER SINGH Versus NEW INDIA ASSURANCE COMPANY LTD. / Civil Appeal No.8463 of 2014 / reported as (2014-4)176 PLR 824 (SC)

Delay in lodging claim - Company Liable

Insurance -Delay in lodging claim Theft of car - Delay in lodging claim with Insurance

Company of 54 days - Instructions dated 20.09.2011, issued by Insurance Regulatory and

Development Authority to all the insurance companies - As per the said instructions, this

condition should not prevent the settlement of genuine claims particularly when there is

delay in giving intimation or in submission of documents due to unavoidable circum-

stances - The companies were advised that they must not repudiate such claims on the

ground of delay, especially when the police has been promptly informed in this regard.

reported as (2014-4)176 PLR 861 PUNJAB AND HARYANA

Pendency of Criminal Case is no ground to hold Negligence of Driver

Criminal case pending - Shall not tantamount to negligence Motor Vehicles Act, 1988 (59 of

1988) Section 166 - Negligence - Fact of facing trial as an accused in relation to the

accident in the criminal case, would not ipso facto establish any negligence on the part of

driver. reported as (2014-4)176 PLR 736 PUNJAB AND HARYANA

INSURANCE CONSUMER

Subros

7th January 2015

National Consumer Disputes Redressal Commission (NCDRC)

The Commisison has reiterated that a builder is entitled to forfeit the installments

amounts paid where the allottee defaults in making the payment of the remaining

instalments.

The Honble Commission was pleased to set aside the orders of the lower courts wherein

DLF Southern Towns Pvt. Ltd. was ordered to refund the earnest amount. Complain-

ant had applied for allotment of apartment in the project of DLF for Rs.40,00,000/-

and paid Rs.4,00,000/- towards first installment. Builder had promised to hand over

possession by the end of 2009, however the construction was delayed. The complainant

did not pay the subsequent installments even though DLF started construction, and

complainant expressed his willingness to remit the defaulted installments. However, DLF

demanded additional amount of Rs.1,70,000/-, and put the complainant to notice that

otherwise they will forfeit amount of first installment of Rs.4,00,000/-.

Complaint was filed seeking delivery of the flat after receiving balance amount or to

refund the deposited amount. Builder had submitted that it agreed to deliver posses-

sion of flat within 36 months, but complainant failed to return the signed agreement

and did not pay subsequent installments in spite of repeated demands. District forum

allowed complaint with refund. Appeal was also dismissed of the builder.

The National Commission observed that as complainant had failed to perform terms

and conditions of the agreement in spite of repeated reminders, DLF was well within

its rights to forfeit amount of earnest money. It was held that it becomes clear that as

complainant has not paid any subsequent installments and committed default in making

payments of installments and also committed default in returning back duly signed agree-

ment, OP (DLF) had every right to forfeit amount of earnest money deposited by com-

plainant and learned District forum committed error in allowing complaint and learned

State Commission further committed error in dismissing appeal.

(DLF Southern Towns (P) Ltd. v. Dipu C. Seminlal)

Builder entitled to forfeit the earnest money in default of payment of

instalments

CONSUMER BUILDER

Subros

SUPREME COURT OF INDIA

Banking

Loss of confidence in employee - Termination of service

Service law - Banking sector - Loss of confidence in employee - Termination of service

- When a court is considering whether punishment of - Termination from service -

imposed upon a bank employee is shockingly excessive or disproportionate to the gravity

of the proved misconduct, the loss of confidence in the employee will be an important

and relevant factor - When an unknown person comes to the bank and claims to be the

account-holder of a long inoperative account, and a bank employee, who does not know

such person, instructs his colleague to transfer the account from - dormant-to-opera-

tive- category (contrary to instructions regulating dormant accounts) without any kind

of verification, and accepts the money withdrawal form from such person, gets a token

and collects the amount on behalf of such person for the purpose of handing it over to

such person, he in effect enables such unknown person to withdraw the amount contrary

to the banking procedures; and ultimately, if it transpires that the person who claimed

to be account holder was an imposter, the bank can not be found fault with if it says

that it has lost confidence in the employee concerned - A Bank is justified in contending

that not only employees who are dishonest, but those who are guilty of gross negli-

gence, are not fit to continue in its service. State Bank Of Bikaner & Jaipur vs Nemi

Chand Nalwaya

SUPREME COURT OF INDIA

Mortgage and Usufructuary Mortgage - Definition

Contracting parties should be competent to contract - Minors contract void

Definition of simple mortgage and usufructuary mortgage, wherein simple mortgage

is defined as the mortgage where property is mortgaged without delivering possession

of the mortgaged property to the mortgagee whereas usufructuary mortgage is defined

as the mortgage where the mortgagor delivers possession or expressly or by

implication binds himself to deliver possession of the mortgaged property to the

mortgagee and further authorises him to retain such possession until payment of the

mortgage-money, and to receive the rents and profits accruing from the property or

any part of such rents and profits and to appropriate the same in lieu of interest, or

in payment of the mortgage money, or partly in lieu of interest or partly in payment of

the mortgage money. Mathai Mathai versus Joseph Mary @ Marrykkutty Joseph

BANKING

Subros

COMPOUNDING OF

OFFENCE

Section 162, 220(1),

309, 621A of the Com-

panies Act, 1956

Andhra High Court in

Union Of India v Tech

Mahindra Limited,

Mumbai, decided on

23 June, 2014

Proceedings were initi-

ated against M/s.

Satyam Computer

Services Limited which

was subsequently re-

named as Tech

Mahindra Limited, in

pursuance of the order

of merger dated 11-6-

2013 for violation of

provisions of Section

309 of the Companies

Act, 1956 i.e., failure

of respondent No.1-

company to obtain the

opinion of the Central

Government before

payment of

failure to electronically

upload the attachments

to the Profit and Loss

Account along with the

Directors Report before

the Registrar of Compa-

nies. The accused filed

Company Application

under Section 621A of

the Act for compound-

ing the two offences

before the Company

Law Board. By a com-

mon order, dated

16.12.2011, the Com-

pany Law Board de-

clined to permit the

applicants to com-

pound the offences.

Appeals, were filed and

the High court by a

detailed order passed

on 12.03.2012, re-

manded the cases to

the Company Law

Board for consideration

of the Applications

afresh in accordance

with law as company

was made a victim of

the fraud played by its

Directors and that

following the fraud of a

great magnitude in-

dulged in by the then

Chairman, Managing

Director and other

Directors of the Com-

pany, and that the

Company itself, even

before it was reconsti-

tuted after its taking

over, was not an ac-

cused in the criminal

cases involving the

fraud by its Directors .

After remand, the Com-

pany Law Board passed

a fresh order, allowing

the applications of the

Company and respt

No.2 compounding the

offences by levying the

compounding fees.

Serious Fraud Investi-

gation Office (SFIO)

preferred Company

remunera-

tion to one

of its Direc-

tors as also

for violation

of provi-

sions of

Section

220(1) read

with Section

162 of the

Act, i.e.,

Where a penal provision is made compoundable, ordinarily,

the accused have an option to seek compounding of the

offence rather than contesting the case and inviting a

Judgment on merits. Assuming that the court or the

authority conferred with the power of such composition has

discretion not to compound the offence, such discretion

cannot be exercised arbitrarily. Unless public interest

compels such authority not to accept the request for

composition of an offence, such a request cannot be refused.

COMPANY

Appeals

aggrieved

by the

order of

the Com-

pany Law

Board

com-

pounding

the of-

fences.

The court was

to hold

tion to hold that the

refusal to

the offences on behalf

of accused in both

these cases causes

grave and

prejudice to their

ests. On th

instead of

public interest, compo

sition of the

would serve

interest as the Com

pany,

tution would be en

couraged to function

with more zeal

efficiency by getting

of the needless crimi

n

deed is unable to ap

preciate

the

needlessly filing these

appeals knowing

that accused have no

complicity in the

leged commission

the scam with

to

ecution has bee

launched. Such con

duct

appellant would

encourage frivolous

vexatious litigation

discourage

The court was

to hold


refusal to


of accused in both

these cases causes

grave and

prejudice to their

ests. On th

instead of


sition of the

would serve

interest as the Com

pany,

tution would be en


with more zeal



nal


preciate

the


appeals knowing


complicity in the

leged commission

the scam with

to which

ecution has bee

launched. Such con

duct

appellant would

encourage frivolous


discourage

The court was

to hold


refusal to


of accused in both

these cases causes

grave and

prejudice to their

ests. On th

instead of


sition of the

would serve

interest as the Com

pany,

tution would be en


with more zeal



prosecution


preciate

appellant


appeals knowing


complicity in the

leged commission

the scam with

which

ecution has bee

launched. Such con

duct on

appellant would

encourage frivolous


discourage

The court was

to hold that


refusal to


of accused in both

these cases causes

grave and

prejudice to their

ests. On th

instead of


sition of the

would serve

interest as the Com

after

tution would be en


with more zeal



prosecution


preciate

appellant


appeals knowing


complicity in the

leged commission

the scam with

which

ecution has bee

launched. Such con

on

appellant would

encourage frivolous


discourage

The court was

that


refusal to


of accused in both

these cases causes

grave and

prejudice to their

ests. On th

instead of


sition of the

would serve

interest as the Com

after

tution would be en


with more zeal



prosecution


the

appellant


appeals knowing


complicity in the

leged commission

the scam with

which separate

ecution has bee

launched. Such con

the

appellant would

encourage frivolous


discourage

The court was

that


refusal to


of accused in both

these cases causes

grave and

prejudice to their

ests. On the contrary,

instead of


sition of the

would serve

interest as the Com

after its

tution would be en


with more zeal



prosecution


the

appellant


appeals knowing


complicity in the

leged commission

the scam with

separate

ecution has bee

launched. Such con

the

appellant would

encourage frivolous


discourage entrepre

The court was pleased


compound


of accused in both

these cases causes

immense

prejudice to their

e contrary,

affecting


sition of the

would serve

interest as the Com

its

tution would be en


with more zeal



prosecution


conduct

appellant herein


appeals knowing


complicity in the

leged commission

the scam with

separate

ecution has bee

launched. Such con

part

appellant would

encourage frivolous


entrepre

pleased


compound


of accused in both

these cases causes

immense

prejudice to their

e contrary,

affecting


offences

interest as the Com

reconsti

tution would be en


with more zeal



prosecution


conduct

herein


appeals knowing


complicity in the

leged commission

the scam with respect

separate

ecution has bee

launched. Such con

part

appellant would

encourage frivolous


entrepre

pleased


compound


of accused in both

these cases causes

immense

prejudice to their inter

e contrary,

affecting


offences

public

interest as the Com

reconsti

tution would be en


with more zeal




conduct

herein


appeals knowing well


complicity in the

leged commission

respect

separate pros

ecution has bee

launched. Such con

of

appellant would only

encourage frivolous


entrepre

pleased


compound


of accused in both

these cases causes

immense

inter

e contrary,

affecting


offences

public

interest as the Com

reconsti

tution would be en


and

efficiency by getting rid



conduct of

herein in


well


al

leged commission of

respect

pros

ecution has bee

launched. Such con

of the

only

encourage frivolous and

and

entrepre-

pleased


compound


of accused in both

these cases causes

immense

inter-

e contrary,

affecting

public interest, compo-

offences

public

interest as the Com-

reconsti-

tution would be en-


and

rid

of the needless crimi-

deed is unable to ap-

of

in


well


al-

of

respect

pros-

ecution has been

launched. Such con-

the

only

and

and

neurs with

approach to

the arduous task of

resuscitating the

credited

such as the co

The court while

with the same held

if accused are con

victed by the

tional

liable to be punished

with fine under Sec

tion

as prescribed therein

and no further.

C.C.No.40

the

to be sentenced to pay

fine under Section

A of the Act, if

alleged offence

proved. This being

undisputed position, I

do

able reason for the

appellant

request of accused

N

neurs with

approach to

the arduous task of

resuscitating the

credited

such as the co

The court while

with the same held

if accused are con

victed by the

tional


with fine under Sec

tion


and no further.

C.C.No.40

the


fine under Section

A of the Act, if

alleged offence

proved. This being


do

able reason for the

appellant

request of accused

Nos.1

neurs with

approach to

the arduous task of

resuscitating the

credited

such as the co

The court while

with the same held

if accused are con

victed by the

tional


with fine under Sec

tion 629


and no further.

C.C.No.40

the accused


fine under Section

A of the Act, if

alleged offence

proved. This being


not

able reason for the

appellant

request of accused

os.1

neurs with

approach to

the arduous task of

resuscitating the

credited

such as the co

The court while

with the same held

if accused are con

victed by the

tional Court,


with fine under Sec

629


and no further.

C.C.No.40

accused


fine under Section

A of the Act, if

alleged offence

proved. This being


not find

able reason for the

appellant

request of accused

os.1 and

COMPANY

neurs with

approach to

the arduous task of

resuscitating the

credited

such as the co

The court while

with the same held

if accused are con

victed by the

Court,


with fine under Sec

629-A


and no further.

C.C.No.40

accused


fine under Section

A of the Act, if

alleged offence

proved. This being


find

able reason for the

appellant

request of accused

and

COMPANY

neurs with

approach to

the arduous task of

resuscitating the

such as the co

The court while

with the same held

if accused are con

victed by the

Court,


with fine under Sec

A


and no further.

C.C.No.400 of

accused


fine under Section

A of the Act, if

alleged offence

proved. This being


find any

able reason for the

to

request of accused

and 4 for

COMPANY

neurs with

approach to undertake

the arduous task of

resuscitating the

companies

such as the company

The court while

with the same held

if accused are con

victed by the jurisdic

Court, they


with fine under Sec

of


and no further.

0 of

accused are


fine under Section

A of the Act, if

alleged offence

proved. This being


any

able reason for the

oppose

request of accused

for

COMPANY

positive

undertake

the arduous task of

resuscitating the

companies

mpany

The court while dealing

with the same held

if accused are con

jurisdic

they


with fine under Sec

the


and no further.

2009,

are


fine under Section

A of the Act, if

alleged offence

proved. This being


any conceiv

able reason for the

oppose

request of accused

for compo

COMPANY

positive

undertake

the arduous task of

resuscitating the

companies

mpany

dealing

with the same held

even

if accused are con

jurisdic

they


with fine under Sec

the


and no further. ....In

2009,

are liable


fine under Section

A of the Act, if

alleged offence

proved. This being


conceiv

able reason for the

oppose

request of accused

compo

COMPANY

positive

undertake

the arduous task of

dis

companies

mpany

dealing

that

even

if accused are con

jurisdic

are


with fine under Sec

Act


....In

2009,

liable


629

A of the Act, if the

proved. This being the


conceiv

able reason for the

oppose the

request of accused

compo

positive

undertake

the arduous task of

dis-

companies

mpany in

dealing

that

even

if accused are con-

jurisdic-

are


with fine under Sec-

Act


....In

liable


629-

the

is

the


conceiv-

able reason for the

the

request of accused

compo-

positive

undertake

the arduous task of

-

companies

in

dealing

liable


-

the

is

the


-

able reason for the

the

request of accused

sition of the

Where

sion is made

poundable,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

inviting a

on merits.

that the court or

authority

with the power of

such

discretion not to

pound the

such discretion

not be exercised

trarily. Unless

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

fused.

COMPOUND

OF

S. 162, 220(1), 309,

Companies Act,

sition of the

Where

sion is made

poundable,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

inviting a

on merits.

that the court or

authority

with the power of

such

discretion not to

pound the

such discretion

not be exercised

trarily. Unless

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

fused.

COMPOUND

OF

S. 162, 220(1), 309,

Companies Act,

sition of the

Where

sion is made

poundable,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

inviting a

on merits.

that the court or

authority

with the power of

such composition

discretion not to

pound the

such discretion

not be exercised

trarily. Unless

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

fused. .

COMPOUND

OFFENCE

S. 162, 220(1), 309,

Companies Act,

Subros

sition of the

Where a

sion is made

poundable,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

inviting a

on merits.

that the court or

authority

with the power of

composition

discretion not to

pound the

such discretion

not be exercised

trarily. Unless

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

.

COMPOUND

OFFENCE

S. 162, 220(1), 309,

Companies Act,

Subros

sition of the

a penal

sion is made

poundable,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

inviting a

on merits.

that the court or

authority

with the power of

composition

discretion not to

pound the

such discretion

not be exercised

trarily. Unless

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

COMPOUND

OFFENCE

S. 162, 220(1), 309,

Companies Act,

by Sandeep

Subros

sition of the

penal

sion is made

ordinarily,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

Judgment

on merits. Ass

that the court or

conferred

with the power of

composition

discretion not to

pound the

such discretion

not be exercised

trarily. Unless

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

COMPOUND

OFFENCE

S. 162, 220(1), 309,

Companies Act,

by Sandeep

Subros

offences.

penal

sion is made

ordinarily,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

Judgment

Ass

that the court or

conferred

with the power of

composition

discretion not to

offence,

such discretion

not be exercised

trarily. Unless

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

COMPOUND

OFFENCE

S. 162, 220(1), 309,

Companies Act,

by Sandeep

Advocate

Subros

offences.

provi

com

ordinarily,

the accused have

option to seek com

pounding of the

fence rather than

testing the case

Judgment

Assuming

that the court or

conferred

with the power of

composition

discretion not to com

offence,

such discretion

not be exercised arbi

public

interest compels

authority not to

cept the request

composition of

offence, such a

quest cannot be

COMPOUNDIN

OFFENCE

S. 162, 220(1), 309, 621A

1956

by Sandeep

Advocate

Subros

offences.

provi

com

ordinarily,

the accused have

option to seek com

pounding of the of

fence rather than con

and

Judgment

uming

that the court or the

conferred

with the power of

composition has

com

offence,

can

arbi

public

such

authority not to ac

cept the request for

offence, such a re

quest cannot be re

ING

OFFENCE

621A

1956

Suri,

Advocate

Subros

offences.

provi-

com-

ordinarily,

an

option to seek com-

of-

con-

and

Judgment

uming

the

conferred

with the power of

has

com-

offence,

can-

arbi-

public

such

ac-

for

an

re-

re-

G

621A

Suri,

Advocate

offences.

-

-

ordinarily,

an

-

-

-

and

Judgment

uming

the

conferred

with the power of

has

-

offence,

-

-

public

such

-

for

an

-

-

G

621A

Subros

Cheque Bouncing

Liability of Directors

Negotiable Instruments Act, 1881 (26 of 1881) Section 138, 141 - Com-

plaint against all Directors of a company - Who are not signatories in the

cheques - There could be a case where the High Court may feel that filing of

the complaint against all Directors is abuse of the process of court - The

High Court would be justified in such cases in quashing the complaint after

looking into the material furnished by the accused - At that stage there

cannot be a mini trial or a roving inquiry - The material on the face of it

must be convincing or uncontroverted or there must be some totally ac-

ceptable circumstances requiring no trial to establish the innocence of the

Directors -Conclusions.

SUPREME COURT OF

INDIA

GUNMALA SALES PRI-

VATE LTD VERSUS ANU

MEHTA

Held, that there could be a

case where the High Court

may feel that filing of the

complaint against all Direc-

tors is abuse of the process

of court. The High Court

would be justified in such

cases in quashing the com-

plaint after looking into the

material furnished by the

accused. At that stage there

cannot be a mini trial or a

roving inquiry. The material

on the face of it must be

convincing or uncontroverted

or there must be some totally

acceptable circumstances

requiring no trial to establish

the innocence of the Direc-

tor. We may summarize our

conclusions as follows: a)

Once in a complaint filed

under Section 138 read with

Section 141 of the NI Act

the basic averment is made

that the Director was in

charge of and responsible for

the conduct of the business

of the company at the rel-

evant time when the offence

was committed, the Magis-

trate can issue process

against such Director; b) If a

petition is filed under Section

482 of the Code for quashing

of such a complaint by the

Director, the High Court

may, in the facts of a particu-

lar case, on an overall reading

of the complaint, refuse to

quash the complaint because

the complaint contains the

basic averment which is

sufficient to make out a case

against the Director. c) In the

facts of a given case, on an

overall reading of the com-

plaint, the High Court may,

despite the presence of the

basic averment, quash the

complaint because of the

absence of more particulars

about role of the Director in

the complaint. It may do so

having come across some

unimpeachable, uncontro-

vertible evidence which is

COMPANY Cheque Bouncing

Subros

beyond suspicion or doubt or

totally acceptable circum-

stances which may clearly

indicate that the Director

could not have been con-

cerned with the issuance of

cheques and asking him to

stand the trial would be

abuse of the process of the

court. Despite the presence

of basic averment, it may

come to a conclusion that no

case is made out against the

Director. Take for instance a

case of a Director suffering

from a terminal illness who

was bedridden at the relevant

time or a Director who had

resigned long before issuance

of cheques. In such cases, if

the High Court is convinced

that prosecuting such a

Director is merely an arm-

twisting tactics, the High

Court may quash the pro-

ceedings. It bears repetition

to state that to establish such

case unimpeachable, uncon-

trovertible evidence which is

beyond suspicion or doubt or

some totally acceptable

circumstances will have to be

brought to the notice of the

High Court. Such cases may

be few and far between but

the possibility of such a case

being there cannot be ruled

out. In the absence of such

evidence or circumstances,

complaint cannot be

quashed; d) No restriction

can be placed on the High

482 of the Code. The High

Court always uses and must

use this power sparingly and

with great circumspection to

prevent inter alia the abuse

of the process of the Court.

There are no fixed formulae

to be followed by the High

Court in this regard and the

exercise of this power de-

pends upon the facts and

circumstances of each case.

The High Court at that stage

does not conduct a mini trial

or roving inquiry, but, noth-

ing prevents it from taking

unimpeachable evidence or

totally acceptable circum-

stances into account which

may lead it to conclude that

no trial is necessary qua a

particular Director.

reported as (2014-4)176 PLR

736

--------------

“As is

where is

basis”

PUNJAB AND HARYANA

HIGH COURT

ATUL MODI versus STATE

BANK OF INDIA

Auction purchaser – “ As is

where is basis” - Calling

upon the petitioner, an

auction purchaser, to pay all

statutory dues and any other

dues on the property, ex-

penses relating to stamp

duty, Registration Charges,

Conveyance, Lawyers fees

etc. as per the conditions of

the auction notice - Property

is being sold on “As is

where is basis” and “As is

what is basis” - There was

specific condition that all

statutory dues payable and

“other dues” will be paid by

the auction purchaser -

When condition in the

advertisement was specific

that all dues shall be payable

by the auction purchaser -

The duesof the HSIIDC have

“first charge” even in terms

of communication - Cannot

dispute the claim of

enhanced compensation.

(2015-1) PLR 584

COMPANY As is where is

Subros

NEGOTIABLE INSTRUMENTS ACT

The apex court in the case of Dashrath Rupsingh

Rathod v. State of Maharashtra & Anr. (2014) 9 SCC

129 = (2014-4)176 P.L.R. 77 (S.C.) had held on the

point of jurisdiction, qua cheque bouncing cases

under section 138, that only the court where the

account of the person issuing the cheque is situ-

ated shall have jurisdiction in the matter and had

ordered for the return of all complaints to be pre-

sented in the court of competent jurisdiction.

The present case arises out of AT PAR cheques

and the court has been pleased to order that the

complaint shall not be returned in the interim.

Matter referred to another 3 judge bench.

The Hon’ble Apex court in for Special Leave to Appeal (Crl.) No(s). 134-170/2015, arising

out of impugned final judgment and order dated 16/12/2014 passed by the Hon’ble High

Court of Delhi at New Delhi in 37 Crl. M.C. No. 4407/14, 4731/14, 4534/14 to 4568/14, in

case titled M/S GOYAL MG GASES PVT. LTD. v. IND SYNERGY LTD. in terms of its

order dated 13/01/2015 upon hearing the counsel the Court

“ In view of the judgment rendered in Dashrath Rupsingh Rathod vs. State of Maharashtra & Anr. (2014) 9 SCC 129 which is a decision by a Bench of three learned Judges, it appears, the same has not been brought to the notice of the Bench of another three learned Judges in Yogendra Pratap Singh vs. Savitri Pandey & Anr. (2014) 10 SCALE 723. We are, therefore, of the view that the matter should be heard by another Bench of three learned Judges. There shall be interim stay of the impugned order in Crl. M.C. No. 4407/14, 4731/14, 4534/14 to 4568/14. In the meantime, the petitioner may refile the complaint which the Magistrate will keep it on record, though may not proceed with the matter until further orders.”

Negotiable Instruments Act

Dashrath Rupsingh Rathod

Transfer stayed

Matter referred to another 3 judge bench

COMPANY

Subros

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