Category Archives: Commercial Law

Surrogate Advertisements – Meaning of

“Surrogate” has been defined in Wharton’s Law Lexicon Dictionary, Seventeenth Edition, 2018 at page 1824:

        “One that is substituted or appointed in the room of another, as by a bishop, chancellor, Judge etc., especially an officer appointed t o dispense licences to marry without banns;

        A substitute: especially, a person appointed to act in place of another.”

        P. Ramanatha Aiyar’s The Law Lexicon, Fourth Edition 2017 at page 1862 defines the word ‘Surrogate’:

        “Is one that is substituted or appointed in the room of another; as by a Bishop, Chancellor, Judge etc.

        A person or thing acting in place of another.”

        ‘Surrogate’ has been defined in Stroud’s Judicial Dictionary of Words and Phrases, Eighth Edition at page 2904:

        “Is he who is appointed in the stead of another, most commonly of a bishop or his chancellor.”

            The Concise Oxford Dictionary of Current English, Eighth Edition 1990 at page 1228 defines ‘surrogate’ as :

        “a substitute, especially, for a person in a specific role or office.”

        ‘Surrogate’ has been defined in Black’s Law Dictionary, Eighth Edition at page 1485:

        “A substitute especially, a person appointed to act in the place of another.”

        The above definitions broadly show that “Surrogate” means a “Substitute”. Surrogate Advertisements are like Advertisements which duplicate the brand image of one product to promote another product of same brand. ‘Surrogate’ or ‘Substitute’ could either resemble the original product or could be a different product altogether but it is marketed under the established brand name of original product. Surrogate advertisements are resorted by Product Owners to promote and advertise the products and brands when the original product cannot be advertised on mass media. Struggle Against Pain v. State of U.P., 2019 (3) AWC 2930.

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Injunction To Restrain Encashment of a Bank Guarantee – Principles of

In Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company, (2007) 8 SCC 110, the Hon’ble Apex Court has crystallized the principles which should be followed in the matter of injunction to restrain encashment of a Bank Guarantee or a letter of credit and it was held as under:

       “(1) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional bank guarantee or letter of credit is given or accepted, the beneficiary is entitled to realize such a bank guarantee or a letter of credit in terms thereof irrespective of any pending disputes relating to the terms of the contract.

       (2) the bank giving such guarantee is bound to honour it as per the terms irrespective of any dispute raised by its customer.

       (3) The courts should be slow in granting an order of injunction to restrain the realization of a Bank Guarantee or a Letter of Credit.

       (4) Since a Bank Guarantee or a Letter of Credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of Bank Guarantees or Letters of Credit.

       (5) Fraud of an egregious nature which would vitiate the very foundation of such a Bank Guarantee or Letter of Credit and the beneficiary seeks to take advantage of the situation.

       (6) Allowing encashment of an unconditional Bank Guarantee or a Letter of Credit would result in irretrievable harm or injustice to one of the parties concerned.”

       In Adani Agri Fresh Ltd. v. Mahaboob Sharif and Others, (2016) 14 SCC 517, it was held that bank guarantee is an independent contract between bank and the beneficiary thereof. Bank is always obliged to honour its guarantees as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance bank has given guarantee is immaterial and of no consequence.

       In Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engineering Corporation Ltd., (2007) 6 SCC 470, it was held that if bank guarantee is an unconditional and irrevocable one, it is not open to the bank to raise any objection whatsoever to pay the amounts under the guarantee. The person in whose favour guarantee is furnished by the bank cannot be prevented by way of an injunction in enforcing the guarantee in terms of the agreement entered between the parties has not been fulfilled. M/s Drake & Skull Water Energy India Pvt. Ltd. v. Paschimanchal Vidyut Vitran Nigam Ltd., 2008 (128) ALR 843.

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Interest – Meaning of

In Halsbury’s Laws of England, 4th Edition, Vol. 32, “interest” has been defined as follows:

“127. Interest in General.—Interest is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. Interest accrues from day to day even if payable only at intervals, and is, therefore, apportionable in respect of time between persons entitled in succession to the principal.”

 

According to Law Lexicon, by P.Ramanatha Aiyar, 3rd Edition (2005) Vol. 2:

“Interest” means the time value of the funds or money involved, which unless otherwise agreed, is calculated at the rate and on the basis customarily accepted by the banking community for the funds of money involved.”

 

In Words and Phrases Permanent Edition, Vol. 22, P. 148, “interest” means:

(i) “Interest” is compensation for loss of use of principal. Jersey City v. Zink, 44 A 2d 825 : 133 NJ Law 437 (1945).

(ii) “Interest” means compensation for the use or forbearance of money. Commr. of Internal Revenue v. Meyer, 139 F 2d 256 (6th Cir 1943).

 

Black’s Law Dictionary, 6th Edition. (p. 812) defines “interest” as:

For use of money.—Interest is the compensation allowed by law or fixed by the parties for the use or forbearance of borrowed money. Jones v. Kansas Gas and Electric Company, 222 Kan 390 : 565 P 2d 597 (1977).

 

There is no manner of doubt that normally a person would be entitled to interest for the period he is deprived of the use of money and the same is used by the person with whom the money is lying. State of Karnataka v. Karnataka Pawn Brokers Association, (2018) 6 SCC 363.

   

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Bank Guarantee – Invocation of

In U.P. State Sugar Corporation v. Sumac International Ltd., (1997) 1 SCC 568 it was stated that the law relating to bank guarantees is well settled. When on the course of commercial dealings an unconditional bank guarantee is given or accepted, beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. Bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. Any other view would frustrate and defeat the very purpose of such unconditional bank guarantee furnished by the party concerned. It was also observed that when an injunction is sought, Court should be slow in granting an injunction to restrain the realization of such a bank guarantee. There are two exceptions recognized, (1) a fraud in connection with such a bank guarantee and (2) where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned.
In Dwarikesh Sugar Industries v. Prem Heavy Engineering Works (P) Ltd., (1997) 6 SCC 450, it was held as under:
“If the bank could not in law avoid the payment, as the demand had been made in terms of the bank guarantee, then the Court ought not to have refused an injunction which had the effect of restraining the bank from fulfilling its contractual obligation in terms of the bank guarantee. An injunction of the court ought not to be an instrument which is used in nullifying the terms of a contract, agreement or undertaking which is lawfully enforceable.”
In Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company¸ (2007) 8 SCC 110, the principles to be followed in the matter of injunction to restrain encashment of a Bank Guarantee or a Letter of Credit were laid down as under:
“(1) While dealing with an application for injunction in the course of commercial dealings and when an unconditional bank guarantee or Letter of Credit is given or accepted, the Beneficiary is entitled to realize such a Bank Guarantee or a Letter of Credit in terms thereof irrespective of any pending disputes relating to the terms of the Contract.
(2) The Bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer.
(3) The Courts should be slow in granting an order of injunction to restrain the realization of a Bank Guarantee or a Letter of Credit.
(4) Since a Bank Guarantee or a Letter of Credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the partries to the contract is not a ground for issuing an order of injunction to restrain enforcement of Bank Guarantees or Letters of Credit.
(5) Fraud of an egregious nature which would vitiate the very foundation of such a Bank Guarantee or Letter of Credit and the beneficiary seeks to take advantage of the situation.
(6) Allowing encashment of an unconditional Bank Guarantee or a Letter of Credit would result in irretrievable harm or injustice to one of the parties concerned.”
In Adani Agri Fresh Ltd. v. Mahaboob Sharif and Others, 2016 (114) ALR 871, it was held that bank guarantee is an independent contract between the bank and the beneficiary thereof. Bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance bank has given guarantee is immaterial and of no consequence. Drake and Scull Water and Energy India Pvt. Ltd. v. Paschimanchal Vidyut Vitran Nigam Ltd., 2018 (128) ALR 843.

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Power Project and Power Plant – Distinction

In Union of India v. Indian Charge Chrome, (1999) 7 SCC 314 it was held as under:
“The industrial resolution made a clear distinction between ‘power project’ which is set up for generation and distribution of electricity and a ‘power plant’ which is set up to generate power for their own requirement or captive consumption of the industrial unit. The captive ‘power plant’ cannot be considered as ‘power project’ and the two cannot be equated with each other. A power project is set up by the Government to cater to the needs of the public by generating and distributing the electricity generally while a captive power plant is set up by an industrial unit to feed power to its own plant or unit for manufacturing of goods other than power. Though it is true that an industrial unit installing a power plant to the extent of the electricity generated by it shares the burden of the Government power projects generating electricity for distribution and to that extent their purpose may be alike, the fact remains that a power generating unit in the public sector has its own limitations and shortcomings as well. An industrial unit depending on public power generation source shall have to bear with power cuts, failures and other regulations and restrictions imposed in the public interest. By installing its own power plant, the industrial unit is free to generate and avail uninterrupted power supply or the quantum and flow of electricity suited to its own requirements and thereby it can maximize its production and consequently its profits. It is therefore clear that power plant projects engaged in generation and distribution of power as its end product – the sense in which the expression has been used in the industrial policy resolution constitute a class by themselves distinct from the power plants established by industrial units generating electricity for captive consumption and not for distribution. The two classes are well defined.” Venkataraya Power Ltd. v. Commissioner of Customs, (2015) 16 SCC 295.

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Accessory – Meaning of

The term “accessory” has been defined by lexicographers broadly to mean as something which contributes to or aids in an activity or process.
Oxford Advanced Learner’s Dictionary defines it as – “a thing which can be added to something else in order to make it more useful, versatile or attractive.”
According to Merriam Webster Dictionary it is “something added to something else to make it more useful, attractive or effective.”
Black’s Law Dictionary provides that the term “accessory—Means anything which is joined to another thing as an ornament or to render it more perfect or which accompanies it or is connected with it as an incident or as subordinate to it or which belongs to or with it. Adjunct or accompaniment. A thing of subordinate importance. Aiding or contributing in secondary way or assisting in or contributing to as a subordinate.”
The meaning of the expression “accessory” has been explained by the court in Annapurna Carbon Industries Co. v. State of A.P., (1976) 2 SCC 273, in the light of the question whether “arc carbon” is an “accessory” to cinema projectors or other cinematographic equipment under Item 4 of Schedule I to the Andhra Pradesh General Sales Tax Act, 1957 as follows:
“The term accessories is used in the Schedule to describe goods which may have been manufactured for use as an aid or addition.
Other meanings given there are “‘supplementary or secondary to something of greater or primary importance’, ‘additional’, ‘any of several mechanical devices that assist in operating or controlling the tone resources of an organ’. ‘Accessories’ are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument.” Commissioner of Sales Tax v. AKZO Nobel India Ltd., (2014) 16 SCC 242.

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Words “Type” and “Form” – Have different meanings

In common parlance, the two words “type” and “form” are not of the same import. According to the Oxford Dictionary, whereas the meaning of the expression “types” is “kind, class, breed, group, family, genus”; the meaning of the word, “form”, is “visible shape or configuration of something”, or the “style, design and arrangement in an artistic work as different from its content”. Similarly, Macmillan Dictionary defines “type” as “a group of people or things with similar qualities or features that make them different from other groups” and “form” as “the particular way in which something appears or exists or a shape of someone or something”. Therefore, “types” are based on the broad nature of the item intended to be classified and in terms of “forms”, the distinguishable feature is the particular way in which the items exist. An example could be the item “wax”. The types of wax would include animal, vegetable, petroleum, mineral or synthetic wax whereas the form of wax could be candles, lubricant wax, sealing wax etx. State of Jharkand v. LA OPALA RG Ltd., (2014) 15 SCC 136.

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