SICA PREVAILS OVER COMPANIES ACT
The Supreme Court (“SC”)
stated last week that different situations might arise when a sick company is
before both the company court for winding up and before the Board for
Industrial and Financial Reconstruction (“BIFR”) for its revival, “but
whatever be the situation, whenever a reference is made to the BIFR under the
Sick Industries Act (“SICA”), the provisions of the latter would come into play and
they would prevail over the provisions of the Companies Act and proceedings under
the Companies Act must give way to proceedings under the Sick Industries Act.”
The court reiterated this view after going through the case law on this issue
in its judgment in the Case, Madura Coats Ltd vs Modi Rubber Ltd.
Madura Coats moved the Allahabad High Court for winding up Modi Rubber as its
dues were not paid.
The company court appointed an
official liquidator, against which Modi appealed to the high court. Meanwhile, Modi
also moved the BIFR and a rehabilitation package was approved. The high court
stayed the company court proceedings. This situation raised the question which law
would prevail and the Supreme Court upheld the high court view. The judgment
noted that since Madura Coats has already participated in the BIFR proceedings,
nothing survived in this case. “Strictly speaking, we have merely undertaken an
academic exercise,” the three judges observed in this 14-year-old litigation
which is still continuing.
INSURANCE CLAIM EVEN AFTER ASSIGNMENT
Even if a firm assigns its
rights regarding insurance to another firm, it still retained its right to sue
the insurer, unless it is specifically barred, the APEX Court declared last
week its judgment, United India Insurance vs Leisure Wear Exports Ltd.
In this case, the Ludhiana
garment factory exported INR 2 crore worth of goods in 320 cardboard boxes to Moscow
firm Magna Overseas via Mumbai port. The consignment was transported from
Odessa in Ukraine by road to Moscow. On arrival, several cartons were missing.
Since the cargo was insured under the Open Marine Policy, the shortage was
reported to United India. When the insurer rejected the claim, the Ludhiana firm
moved the Punjab state consumer commission, which ordered the insurer to pay
compensation. On appeal, the National
Commission upheld order.
In the appeal before the
Supreme Court, the insurer argued that since the exporter had assigned his
rights to the Moscow firm, the Ludhiana firm had no locus to move the consumer
forums. The court rejected the argument citing Section 17 of the Marine
Insurance Act. The judgment doubted any assignment at all. Even if there was an
assignment, the exporter was “legally entitled to retain, enjoy and exercise
all those rights, which are available to it under the contract of insurance,
despite making assignment of their policy.” Section 17 of the Act in terms
permitted the insured to make assignment of their insurance policy in favour of
an assignee and at the same time allowed the insured even after making an assignment
to retain all those rights which are available to them under the contract of
insurance with the Insurer, the judgment explained while dismissing the appeal
of United India.
TIME LIMIT STARTS FROM FIRST DEFAULT
The Supreme Court had last
week dismissed the appeal of Sundaram Finance Ltd against the
Kerala High Court judgment which stated that its suit against a defaulting
borrower, Noorjehan Beevi, was beyond the time limit of three years.
In this case, a woman bought a
vehicle on hire purchase from the financing firm in 1984 but defaulted after a
year. The company took over the vehicle and sold it, though there was no term
in the contract empowering the company to sell it. However, the amount
recovered was not sufficient to clear the loan and the company sued the woman
for the balance. She argued that the suit was filed beyond the limitation
period. The company argued that the time started from the sale of the vehicle.
The woman contended that the time should be counted from the first default. The
trial court, the high court and now the Supreme Court agreed with her.
MD ABSOLVED FROM POLLUTION CHARGE
The Madhya Pradesh High Court
has quashed proceedings initiated by the Bhind magistrate against the managing
director of Cadbury India for exuding untreated effluents from its factory
there. The high court ruled that Manu Anand, MD, was not in charge of the day
to day affairs, as argued by the MP pollution control board. It was the factory
manager who was in charge, and prosecuting the MD was unlawful. The judgment
cited Section 47 of the Water Pollution Act which stated that the person who is
in charge of and responsible to the company for the conduct of the business of
the company, as well as company, shall be deemed to be guilty of the offence.
Moreover, proceedings cannot be initiated against a person if he is able to
establish that the offence was committed without his knowledge or that the same
was committed despite the said person exercising due diligence to prevent the
offence.
The judgment derived its
reasons from decisions under the Negotiable Instruments Act dealing with
bouncing cheques.
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