SC: No overkill in cheque bounce cases

http://www.business-standard.com/article/opinion/sc-no-overkill-in-cheque-bounce-cases-113112500012_1.html

Once the amount in a dishonoured cheque is paid with interest and compensation, the payee cannot insist on criminal prosecution of the directors of a firm who issued the cheque. 

The object of Section 138 of the Negotiable Instruments Act, which makes issuing of cheques without sufficient balance in the account an offence, is meant to "inculcate faith in the efficacy of banking operations and credibility of transactions. It is not meant only to punish the guilty," the Supreme Court has stated in the judgment, Lafarge Aggregates & Concrete India Ltd vs Sukarsh Azad.

In this case, directors of a construction company issued a cheque to Lafarge, but it was dishonoured by the bank leading to a criminal complaint before the magistrate. The directors moved the high court and offered to pay the amount with interest. The high court, therefore, quashed the complaint. Lafarge was not satisfied with that and appealed to the Supreme Court for prosecution of the directors.

The court dismissed the appeal observing that the directors were willing to pay double the amount. It stated that Lafarge did not appear before the high court without sufficient reason, leading to an ex parte order quashing the complaint. Moreover, it approached the Supreme Court after a long lapse of time. Under these circumstances, "if the amount offered including interest and compensation was not acceptable to Lafarge, it is their choice," the judgment said, "but that would not allow them to prosecute the directors in pursuance of the complaint."

Cheque bounce offence likely to go

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/cheque-bounce-offence-likely-to-go/articleshow/20420176.cms

The government will soon bring an amendment in the Negotiable Instruments (NI) Act that will restrict banks from dragging a person to court for an offence like cheque bounce. All such cases, after the changes are affected, will have to be decided only through arbitration , conciliation or settlement by Lok Adalats.

It is estimated that more than 30% of all the pending cases in courts across the country are either related to cheque bounce or traffic challans. The proposed amendment has been recently suggested by an inter-ministerial group (IMG), which was set up last year to make suggestions for necessary policy and legislative changes to deal with a large number of cases pending in various courts.

The law ministry is working closely with the finance and surface transport ministries to make suitable changes in the law and cases falling under both categories (cheque bounce and traffic challans) will be ineligible to be taken to courts unless some other criminal intent is alleged. The changes in the NI Act will make it compulsory for the disputing parties to resolve the matter through alternative dispute resolution mechanism. Amendments in the Motor Vehicles Act are suggested for cases related to traffic challans.

"The use of alternative dispute resolution mechanism on the lines of Section 89 of the Code of Civil Procedure , through arbitration; conciliation; judicial settlement including settlement through Lok Adalat of mediation may be made compulsory in cheque bounce cases by making suitable amendments in the negotiable instruments act," the IMG recommendation said.

The IMG report, being implemented by the finance ministry, said a summary procedure for dealing with cheque bounce cases as a schedule of procedure may be codified, and developed by the department of financial services. The same may suitably be incorporated in the Negotiable Instruments Act, it added. The existing rules for court fees do not take into account the amount involved in the cheque or volume of complaint cases. "The court fee may be made Ad-valorem to act as a deterrent for indiscreet and vexatious complaints ," the IMG has said. Provision may also be made for defaulting party to bear the cost of litigation in cheque bounce cases, it added. 

‘Pay and recover’ is the norm in case of third-party liability on insurer

http://www.thehindubusinessline.com/industry-and-economy/banking/pay-and-recover-is-the-norm-in-case-of-thirdparty-liability-on-insurer/article4386551.ece

It is an established principle of third-party insurance that the insurance company will have to honour the claim of the road accident victim even if the insured was remiss in not honouring the terms of the insurance contract.

Thereafter, it can proceed against the insured for violating the terms of the contract and seek reimbursement of what it had paid to the victim.

In National Insurance Company Ltd vs. Dhas and Others, the Madurai Bench of the Madras High Court reiterated the principle of ‘pay and recover’ while directing the appellant to pay up the Rs 2,12,000 ordered to be paid by the Motor Vehicles Tribunal to the family of a road accident victim.

The insured had licence for light motor vehicle but drove a two-wheeler for which he did not have a licence, and killed the victim involuntarily.

The court pointed out that the right of the victim and his family (third party) is statutory, whereas the rights of the parties — the insurer and insured — are contractual.

They are free to enforce their contractual rights but before that the insurer must honour the third parties’ statutory rights.

The third party’s agony should not be compounded by embroiling him in the contractual matters between the two.

Canara Bank to pay Rs 25K for debiting excess amount from a/c

http://www.indianexpress.com/news/canara-bank-to-pay-rs-25k-for-debiting-excess-amount-from-ac/1054526/0

Canara Bank has been directed by a consumer forum here to pay Rs 25,000 as compensation to one of its ex-employees for debiting excess amount from his account towards interest of a housing loan taken by him.

The South II District Consumer Disputes Redressal Forum observed that as per the records placed before it, an excess amount of Rs 2,228 was debited from the bank account of the borrower and the amount was refunded by the bank only after filing the complaint.

"The bank checked its system and refunded the said amount on September 17, 2012 after filing of this complaint. We hold it deficient in service.

"We, therefore, direct the bank to pay Rs 20,000 as compensation for harassment... We further direct it to pay a sum of Rs 5,000 as cost of litigation," the bench presided by M C Mehra said.

The complainant, R D Bhargava, an ex-employee of Canara Bank had said in his plea that he had fully repaid the housing loan taken by him but the bank had debited an excess amount of Rs 2,228 from his account towards interest and had also demanded Rs 7,000 as amount overdue.

The bank had refused to issue him a no dues certificate till he paid the amount demanded, Bhargava had alleged.

The bank had been proceeded against ex-parte and its counsel had appeared before the forum at the time of final arguments when it had handed over the excess amount debited from Bhargava's account.

Dishonouring a cancelled draft is no crime

http://www.thehindubusinessline.com/industry-and-economy/banking/dishonouring-a-cancelled-draft-is-no-crime/article4245592.ece

A payee cannot haul a bank under Section 138 of the Negotiable Instruments Act for not honouring a demand draft that is cancelled by the person who got the draft made before being presented to it, held the Delhi High Court in State Bank of Patiala v. Nascent Educational and Development Society. 

A demand draft, unlike a cheque, is issued by a bank for consideration already received and hence cannot possibly be dishonoured on the ground of lack of funds; but a bank cannot be compelled to honour the draft in the face of a cancellation instruction by the person who got it issued from the bank. 

The payee, therefore, has no recourse to the bank including proceeding against it under Section 138 of the Act for criminal liability in such circumstances. However, he can proceed against the debtor under the civil laws.

Court rejects bank's plea for FIR against its customers

http://www.indianexpress.com/news/court-rejects-banks-plea-for-fir-against-its-customers/1031056/

A Punjab National Bank plea to lodge a criminal case against its two customers for allegedly taking out money from a third customer's account through an ATM card, wrongly issued to them, has been dismissed by a Delhi court.

District Judge and Additional Sessions Judge R K Gauba dismissed the PNB plea, made against Metropolitan Magistrate Ankit Singla's order, which too had dismissed it.

In its complaint, the bank had said Sobha Rani Pattnaik and her husband Sudhanshu Bhushan Pattnaik had opened a current account in its Lado Sarai branch in South Delhi on March 26.

It said the couple approached the bank on March 27 for issuance of ATM card in respect of their current account but the bank wrongly issued them the ATM of another customer M/s Shubhadra Store and "they withdrew Rs 10,68,077 from the ATM

account knowing fully well that it did not belong to them as they had only Rs 17,975 in their account."

The bank thus sought registration of the FIR against them for offences of criminal breach of trust and cheating and under other provisions of the Indian Penal Code.

The magistrate, however, had held that basic requirement for the offence of cheating is that there should be prior inducement with dishonest intention.

"In the present case from the complaint there is no fact which can be deduced that accused number 1 (Sobha Rani) and 2 (Sudhanshu) induced the complainant in any manner for delivering them the ATM card of another customer," the magistrate had said.

The magistrate had held that though there was "prima facie misappropriation" by the couple, "the essential element (for the offence of criminal breach of trust) of entrusting property was missing as the bank inadvertently gave the ATM card of another customer to proposed accused."

The sessions court upheld the magistrate's order saying, "the magistrate has declined the prayer for directions to the police to investigate the matter for the reasons that entire evidence is within the reach of the complainant and no custodial interrogation or field investigation is necessary."

The bank has, however, been allowed to lead evidence in support of its complaint under section 200 (examination of complainant) of the CrPC.

Apex Court rules financiers can re-possess vehicles

http://www.thehindubusinessline.com/industry-and-economy/banking/apex-court-rules-financiers-can-repossess-vehicles/article4071268.ece

The Supreme Court has categorically upheld the financiers’ right to re-possess a vehicle in case of default.

CRIMINAL ACTION

Also, in case the vehicle is seized by the financier, no criminal action can be taken against the financier as he is the legal owner, the apex court said in a recent ruling.

The ruling in the Anup Sharma vs Bhola Nath Sharma & other case, will strengthen the hands of asset-financing non-banking financing companies, say industry observers.

“The law can be summarised that in an agreement of hire purchase, the purchaser remains merely a trustee/bailee in behalf of the financier/financial institution and ownership remains with the latter.

Thus, in case the vehicle is seized by the financier, no criminal action can be taken against him as he is re-possessing the goods owned by him,” the two-judge bench of B. S. Chauhan and Fakir Mohammad said in an order dated October 30.

Reacting to this ruling, Raman Aggarwal, Director, Finance Industry Development Council (FIDC), said it has cleared the confusion around “re-possession.”

It would go a long way in improving the recovery scenario for asset financing NBFCs,

Aggarwal said earlier there was negativity around repossession in the light of mis-interpretation of various judgments.

The court orders never questioned the right of financiers’ to re-possess, but they wanted the malpractices (in repossession) to be checked, he said.

In September 2009, FIDC, a self-regulatory organisation for asset financing NBFCs in India, had come out with a handbook on ‘Repossession,’ which contained all the do’s and don’ts of repossession.

Law of limitation will not apply when court decrees an amount as debt

http://www.thehindubusinessline.com/opinion/columns/s-murlidharan/law-of-limitation-will-not-apply-when-court-decrees-an-amount-as-debt/article4009998.ece

When bank guarantees are enforced and the bank pays up, the amount thus payable to the bank becomes a debt to which the law of limitation applies. But when the firm disputes the amount payable to the bank and such dispute is finally resolved in favour of the bank, the amount payable not only becomes a debt but in addition is not subject to the law of limitation.

C.S. COMPANY CASE

This was the verdict of Kerala High Court in C. S. Company vs Punjab and Sind Bank. The petitioner was a partnership firm at whose request the respondent-bank had furnished two guarantees for Rs 1 lakh and Rs 19 lakh in 1983 to Kerala State Electricity Board.

On enforcement of the guarantees by the electricity board, the bank demanded payment of the guarantee amount with interest from the petitioner. The matter got embroiled in litigation with the trial court holding in favour of the bank, but the High Court reversed the trial court verdict leading to appeal before the Supreme Court which ruled in favour of the bank.

The firm continued to persist with its delaying tactics and prevarications when the bank sought to read the riot act to it, invoking the Securitisation Act of 2002 to seize the firm’s properties to realise its dues.

NOT AN NPA

First the firm raised the bogey of the amount not having been declared an NPA (non-performing asset) when the amount decreed by the apex court was not paid.

The Kerala High Court, however, was not amused and held that the amount decreed by the apex court indeed was a debt within the meaning of the Securitisation Act and it was not necessary to declare the amount as NPA after every court proceeding.

That the amount was declared an NPA in 1987 was good enough for the purposes of the Securitisation Act.

The petitioner wanted to wriggle out of his liability on another ground — that between 1983 when the guarantee was extended and 2012 much had happened and the law of limitation of 12 years had caught up with the bank. The High Court pointed out that the law of limitation did not apply to amounts decreed by courts.

Standard Chartered Bank to pay Rs 2.97L for deficient service

http://www.thehindubusinessline.com/industry-and-economy/banking/standard-chartered-bank-to-pay-rs-297l-for-deficient-service/article4002192.ece

The State Consumer Commission has dismissed a Standard Chartered Bank’s plea against a district forum order to it to pay Rs 2.97 lakh to a loanee for seizing her car for non-payment of a meagre sum of Rs 30,000 and selling it despite subsequent payment of all dues by her.

The vehicle was sold after the loanee refused to take it back as its crucial parts had allegedly been removed, rendering the vehicle to a non-working condition.

The Delhi State Consumer Commission observed the woman’s willingness to pay the remaining loan amount of Rs 30,000 showed she was keen to take the car back and there must have been some compelling reason for her for not doing so.

“It appears that statement of respondent (loanee) that the vehicle was not in a condition for taking possession needs to be accepted. It is evident that on one hand the appellant bank (Standard Chartered) is entering into an arrangement to return the car on payment of Rs 30,000 and on the other hand its officers allowed parts of the car to be removed which is a case of negligence and serious deficiency-in-service.

“We are of considered opinion that a case of deficiency in service is made out beyond doubt and to serve the ends of justice it would not be proper to interfere with the order of the district forum. The appeal is accordingly dismissed,” the bench presided by Justice Barkat Ali Zaidi said.

In her complaint to the district forum, Delhi resident Sunita Verma had alleged that her car, a Maruti Omni, bought in August 2001 on a loan from the bank was taken away by it on default of payment and despite her paying the remaining amount the vehicle was sold.

While admitting that Sunita Verma had paid the remaining Rs 30,000 to it, the Standard Chartered had alleged that the car was sold after she refused to take possession of it.

The district forum, however, had held the bank guilty of rendering deficient service and had directed it to refund her Rs 2.37 lakh she had paid to clear her loan and also another sum of Rs 60,000 as compensation and litigation cost.

Person's income tax details can’t be revealed under RTI unless public interest overrides privacy concerns: Supreme Court

http://timesofindia.indiatimes.com/business/india-business/Persons-income-tax-details-cant-be-revealed-under-RTI-unless-public-interest-overrides-privacy-concerns-Supreme-Court/articleshow/16707533.cms

The income tax details of an employee cannot be revealed under RTI as a rule, but an exception could always be made in public interest, the Supreme Court has said.


The court said in a judgment delivered on October 3, 2012, that the income tax details of a person can't be revealed under RTI unless public interest overrides privacy concerns.

Such information is usually personal with no relationship to a person's public activity or public interest, it said. On the other hand, disclosure of such information may cause unwarranted invasion of an individual's privacy, the court said.

Performance of an employee is primarily a matter between him and the employer and is governed by service rules, which falls under "personal information", the court said. 

UCO Bank to pay Rs 25K for raising illegal demand

http://www.financialexpress.com/news/uco-bank-to-pay-rs-25k-for-raising-illegal-demand/1004452/0

UCO Bank has been directed by a consumer forum here to pay Rs 25,000 to one of its customers for "illegally" demanding Rs 14,442 from him on the ground of increase in rate of interest, after he had paid all his loan installments.

The New Delhi District Consumer Disputes Redressal Forum awarded the compensation saying the loan agreement did not provide for increase in rate of interest and that UCO Bank had not produced any evidence to show the enhancement in interest.

"The reading of the clause providing for interest in the (loan) agreement does not provide for any enhancement or any notifications of changed rates. In this case, opposite party (UCO Bank) has failed to produce any evidence of increase of its rate of interest, i.e., since when and for how long... In our view, bank has acted totally illegally in demanding Rs 14,442.

"Opposite party is directed to issue no objection certificate, withdraw charges of Rs 14,442 and also pay Rs 25,000 as compensation for harassment and litigation expenses to complainant (loanee)," said the bench presided by C K Chaturvedi.

The forum's order came on the complaint of Rohini resident Ramnessh Garg, who had said the bank had demanded the amount after he had fully paid all installments.

The bank while admitting that he had paid all the loan installments, had contended in its defence that the amount was demanded from him, as per the clauses of the loan agreement.

ABN AMRO fined 2.6L for car seizure

http://www.financialexpress.com/news/abn-amro-fined-2.6l-for-car-seizure/1000108/

ABN AMRO Bank has been directed by a consumer forum to pay Rs 2.6 lakh to a man for seizing and selling his car, bought on loan from it, without giving him notice after he failed to pay instalments for four months.

The New Delhi District Consumer Disputes Redressal Forum also said the decision of the bank, known as Royal Bank of Scotland in India, to seize the car without issuing notice and then selling it within two days without informing the loanee was a violation of the RBI's directions to banks.

The forum observed complainant Ram Kewal Yadav had not paid installments from September 2005 and the bank had seized the vehicle four months later on December 30, 2005.

"In such a case, further notice was required as per settled law in the Supreme Court. But, sale of vehicle within two days of repossession, without informing complainant is serious deficiency and violation of RBI directions to banks. It denied complainant the opportunity to pay the balance," the bench presided by C K Chaturvedi said.

Yadav in his complaint had said he had obtained a loan of Rs 3,51,000 from the bank in October 2002 to buy a Santro car and the amount was to be repaid in 60 instalments of Rs 7,200 per month.

He had said that after paying around Rs 2.55 lakh till August 2005 he couldn't make further payments due to financial constraints and had requested for more time from the bank. But on December 30, 2005, the bank had repossessed the car by force, Yadav had alleged adding when he approached it to pay the due instalment, he was not allowed to do so and the car was sold on January 2, 2006.

The bank in its reply had said it had issued a number of reminders to Yadav to pay his dues and was within its rights to repossess the vehicle of a defaulter.

Rejecting the bank's contention, the forum said it had not placed on record any reminder issued to Yadav asking him to pay the amount and "awarded (Yadav) compensation of Rs 2.5 lakh, market value of the car after approximately 4 years, and Rs 10,000 as litigation charges."

Bank pulled up for ‘deficient documentation’

http://www.thehindubusinessline.com/industry-and-economy/banking/article3871190.ece

A customer had availed himself of a home loan of Rs 22 lakh under a festival offer with concessional fixed interest rate of 7.50 per cent.

The loan agreement was executed on August 30, 2005. In November 2011, the bank issued a demand notice asking the borrower to pay additional interest.

This was on the ground that, according to the bank’s internal guidelines, the interest rate on home loans sanctioned was to be reset every three years.

Accordingly, the bank levied interest at the rate of 12.75 per cent from August 20, 2008 and 12.50 per cent from August 20, 2011.

The borrower contested the levies and filed a complaint with the OBO.

Verification of the loan arrangement showed that the original interest contracted was 7.50 per cent fixed. There were no enabling clauses to reset the interest periodically.

The bank explained that an internal circular was issued on August 16, 2005, which the branch did not incorporate in the loan documents by oversight. Its internal audit team had pointed out the short levy in November 2011, after which the demand notice was issued.

The OBO held that the bank’s action of revising the rate without prior notice to the borrower was arbitrary and contractually not binding.

Neither did the loan documents carry any provision for resetting the interest rate every three years.

Accordingly, the bank was directed to roll back all interest revisions and refund the excess levies. The bank refunded Rs 46,170 to the complainant.

Banks not liable to book-profit tax: Tribunal

http://www.thehindubusinessline.com/industry-and-economy/banking/article3776059.ece

A bank may be a company but since it is mandated to prepare its accounts in accordance with the Banking Regulation Act, 1949 and not in accordance with Schedule VI of the Companies Act, 1956, it is not required to pay minimum tax on its book profits.

This was the verdict of the Bangalore Income-tax Appellate Tribunal in Canara Bank v. CIT for the assessment year 2005-6.

Section 115JB of the Income-tax Act extracts a minimum tax at the prescribed rate on the book profits where a company’s tax on total income computed under the income-tax law is lesser vis-à-vis such book-profit tax. Canara Bank had filed a ‘nil’ return but admittedly had a book profit of Rs 2,900.65 crore which too it declared in its return. The Commissioner had sought to add to its book-profits certain amounts using his revisionary powers under section 263.

Canara Bank taking a cue from two favourable judgments emanating from Kerala High Court and Bombay High Court that section 115JB did not apply to banking companies, mounted a challenge not only to the revisions sought to be made by the Commissioner but more importantly to the core issue, though belatedly — whether a banking company came under the pincer of section 115JB. The Bangalore Tribunal had no hesitation in ruling in favour of the bank in view of the language of section 115JB that targeted companies preparing their accounts according to Schedule VI of the Companies Act, 1956 which by implication bailed out banking companies, among others, that prepared their accounts under other enactments.

HDFC Bank penalised for delay on loan

http://www.financialexpress.com/news/hdfc-bank-penalised-for-delay-on-loan/983368/0

The Chandigarh HDFC Bank has been penalised Rs 50,000 by the UT Consumer Disputes Redressal Forum for ‘deficiency in services’. Anju Khurana, the complainant, stated that she planned to buy a car as a gift for her husband on their marriage anniversary for a sum of Rs 40 lakh. She said that she approached the bank for taking a loan of Rs 10 lakh for this purpose.

According to her, she submitted all the relevant documents, along with three post-dated cheques of Rs 63,240 each as EMI security. The bank issued an approval letter for the loan, but when she reached the car dealer for taking the delivery of the car, she was informed that he had not received the payment from the bank.

She alleged that due to the fault of the bank, the delivery of the car could not be taken on the stipulated date. Finally, she had to avail a loan from another financial institution to take delivery of the car.

The complainant stated that a loan agreement had been executed between the parties and EMI format was also issued to her. Additionally, the insurance cover of the vehicle in favour of the bank had been completed, but in-spite of that, the amount was not disbursed to the concerned dealer.

The bank, in its written reply, pleaded that the verification of the documents was still in process when the complainant approached the dealer for car delivery.

The bank denied having given any assurance to the complainant for the disbursement of the loan, as alleged. It was further pleaded that merely handing over the relevant documents, did not entitle any person to get the loan. Furthermore, the issuance of approval letter, in principle, was subject to certain conditions for verification of the documents.

The forum observed deficiency in services by the bank and directed it to pay a compensation of Rs 50,000 to the complainant on grounds of harassment. Additionally, the bank has to bear litigation costs of Rs 15,000.

Insurer accountable to the insured for act of agent: Consumer forum

http://www.thehindubusinessline.com/industry-and-economy/banking/article3687586.ece

When an insurance company accepts without demur personal cheques of its agents, after the agent had collected premium from the insured favouring himself in the first instance, it cannot subsequently wriggle out of its commitment to the insured.

The National Consumer Disputes Redressal Commission in Bajaj Allianz Insurance Company Ltd v. Sali Thomas found the argument of the appellant—insurer, that it was not responsible for the actions of its agent in not paying the premium collected in his personal name and deposited in his personal bank account, untenable after having acquiesced in the act by accepting the first few instalments.

The insurer’s plea that the agent was no longer its employ when the third and the last instalment was collected by him once again in his personal capacity did not wash with the Commission. Had it put its foot down on the pernicious practice of the agent collecting premium in his personal name and then issuing his own cheque to the insurer, its stand would have been tenable. The commission pointed out that the insured obviously cannot be faulted because the insurer had fostered the notion that the agent had apparent authority to collect cheques in his personal name by condoning this act earlier.

Bank collecting forged draft from customer has to bear the cross: Court

http://www.thehindubusinessline.com/industry-and-economy/banking/article3643027.ece
Author: S. MURLIDHARAN

A collecting bank enjoys immunity only when it had acted in good faith after exercising due diligence held the Delhi High Court in the Corporation Bank vs Punjab National Bank case.

An accountholder having account in the name of his firm with the appellant bank had got made a draft for a small amount, Rs 400, from the respondent bank. He thus was in possession of the draft number and other details appearing on the face of the draft.

Thereafter, he forged a draft bearing the same number for a larger amount, Rs 3 lakh or so, favouring himself rather than his firm and post-haste got the amount collected by the appellant bank which assumed that being a demand draft there was little likelihood of it bouncing and released the payment even before it got advice from the respondent as to issuance of such draft.

The trial court said that while it may be the standard practice for banks to go ahead and credit the account of the presenters of drafts even before receiving the advice from the issuing bank, in the instant case it ought not to have done this so early in the day given the fact that it had not known the customer for sufficiently long time with the personal account having been opened only a few days before the forged draft was deposited.

It, therefore, went on to hold the appellant negligent and pay a price for its negligence. The High Court endorsed this view and absolved the respondent of any liability.

Sell only what is sufficient to recover dues: Apex Court

source: http://www.thehindubusinessline.com/industry-and-economy/banking/article3643087.ece
author: S. MURLIDHARAN

The liability of the guarantor/surety might be coextensive with that of the borrower but that does not mean the recovery proceedings can be made with gay abandon, disturbing and upsetting his property rights, held the Supreme Court, while exhorting financiers to sell only so much of the mortgage/guarantor’s property as is required to recover their dues

In Ram Kishun and others v State of UP and others, the borrower had taken a loan of Rs 8,425 from Union Bank of India for which his father stood guarantor.

When both died, the bank moved the District Collector for recovery of the principal along with interest, aggregating to Rs 14,500 as arrears of land revenue. The Government machinery swung into action but was able to recover only Rs 6,000 from the estate of the borrower. It took over a large land belonging to the legal heirs of the guarantor and auctioned it for Rs 25,000 to recover the remaining amount of Rs 8,500.

The Supreme Court brushed aside the contention of the appellants, the legal heirs of the guarantor, that the borrower had other properties as well and they should have been sold before descending on the guarantor’s estate. While doing this, the Apex Court reiterated the well-settled law that the guarantor’s liability was coextensive with that of the borrower and that it was upto to the lender to decide who he is going to proceed against, without being dictated to.

Having said this, the Apex Court found fault with the District Collector’s official machinery for selling more than what was required. Sale of a third of the land belonging to the legal heirs of the guarantor would have served the bank’s purpose. Yet it chose to sell the entire piece of land, thus robbing the appellant of his property rights. Since the person who had bought the property in auction had carried out extensive improvements on the land, the Court did not deem it proper to rock the boat and order annulling the sale of the excess land.

Court: No leniency in cheque bounce case

http://www.financialexpress.com/news/no-leniency-in-cheque-bounce-cases-court/966939/0

A Delhi court has sentenced a jeweller to one year in jail in a cheque bounce case saying that convicts in such cases cannot be shown mercy as the offence is on "rise in the society".

The court also directed 57-year-old jeweller to pay a compensation of Rs 2.8 lakh to the man to whom he had issued the cheques worth Rs 1.4 lakh to repay a loan in 2007.

Metropolitan Magistrate Shefali Barnala Tandon rejected the convict's plea for leniency and release on probation saying that deterrent punishment is needed in cheque bounce cases.

"I am not inclined to grant the benefit of Probation of Offenders Act as the cases of dishonour of the cheque are on high rise in the society and the same (leniency) shall not serve as deterrence to others.

"Considering the totality of circumstances and also considering the age of the convict, he is sentenced to simple imprisonment for a period of one year and is further ordered to pay compensation to the complainant for an amount of Rs 2,80,000 under section 357(3) CrPC (regarding compensation)," the magistrate said.

The court said if convict Jagdish Kumar Bhola, owner of Jagdish Jewellers, failed to pay the compensation, he would have to undergo a further imprisonment for three months.

It, however, suspended the sentence for one month and granted him bail to enable him to file appeal against the order.

The order came on Delhi-resident P S Bhatia's complaint under the the Negotiable Instruments Act, which alleged that Bhola had taken a loan of Rs 1.4 lakh and issued cheques to repay it but the same were dishonoured by the bank with a comment "payment stopped by drawer".

Bhola denied the charges contending that he had already repaid the loan amount and had stopped the payment through cheques as they were issued only as security in lieu of loan. The court convicted him saying no document was brought on record by the accused to show the payment of loan.