Tag Archives: liability

Pre-Deposit for Appeal under Section 18 of Securitisation Act – Refund of

The Appeal under Section 18 of the Securitisaton Act is permissible only against the order passed by Debt Recovery Tribunal under Section 17 of the Act. Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets. The partial deposit before the DRAT as a pre-condition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured asset. It is not a secured debt either, since the borrower or the aggrieved person has not created any security interest on such pre-deposit in favour of the secured creditor. If that be so, on disposal of the appeal, either on merits or on withdrawal, or on being rendered infructuous, in case, the appellant makes a prayer for refund of the pre-deposit, the same has to be allowed and the pre-deposit has to be returned to the appellant, unless the Appellate Tribunal, on the request of the secured creditor but with the consent of the depositors, had already appropriated the pre-deposit towards the liability of the borrower, or with the consent, had adjusted the amount towards the dues, or if there be any attachment on the pre-deposit in any proceedings under section 13(10) of the Act read with Rule 11 of the Security Interest (Enforcement) Rules, 2002, or if there be any attachment in any other proceedings known to law. Axis Bank v. S.B.S. Organics Pvt. Ltd., 2016 (132) RD 507.

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Filed under Debt Recovery Law, Pre Deposit under Section 18 of Securitisation Act

Term “Debt” – Meaning of

The term ”liability” has been defined as obligation, debt, etc. In First National Bank v. Sant Lal, AIR 1959 Punj 328, it is said that the term ‘liability’ is of large and comprehensive significance and when construed in its usual and ordinary sense, it expresses a state of being under obligation in law or in justice.

In Hindustan Laminators (P) Ltd. v. Central Bank of India, AIR 1998 Cal 300, Calcutta High Court has observed that word ‘liability’ obviously means obligation. Then it should be a liability which is alleged as due.

The term ‘due’ has different meanings. In State of Kerala v. V.S. Kalliyanikutty, JT 1999 (2) SC 540 the Supreme Court observed that ‘due’ means anything owning; that which one contracts to pay to another. It was in the context of Kerala Revenue Recovery Act, 1968.

In the context of the Companies Act, 1956, in Raymond Synthetics Ltd. v. Union of India, JT 1992 (1) SC 463, the court said that a debt is often said to be ‘due’ from a person where he is the party owing it; or primarily bound to pay, whether the time for payment has or has not arrived.

In the context of Income Tax Act, 1961, in CIT v. Southern Roadways Ltd., 2004 (266) ITR 135, the Madras High Court said that the word ‘due’ is used to refer to the debt or obligation which has become immediately payable. In CIT v. United Provinces Electric Supply Company, 2000 (244) ITR 764, the Apex Court while affirming above view of the Madras High Court observed that the initial determination is a pre-requisite for regarding that amount as having become ‘due’.

In Harshad Shantilal Mehta v. Custodian, 1998 (231) ITR 871 the Apex Court observed that ‘due’ means payable, justly owed.

In  Munsif Jahan v. Rajendra Prasad, AIR 1946 Oudh 226, the terms ‘due’ and ‘payable’ came to be considered. The court said that they are not convertible terms. A ;debt’ is said to be ‘due’ as soon as it has existence as a debt, though it may be payable on a future date. M/s B.K. Jewellers v. State Bank of India, 2016 (116) ALR 791.

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Filed under debt, Debt Recovery Law, Uncategorized

Composite Negligence and Contributory Negligence – Difference Between

Composite Negligence refers to the negligence on the part of two or more persons. Where a person is injured as a result of negligence on the part of two or more wrongdoers, it is said that the person was injured on account of the composite negligence of those wrongdoers. In such a case, each wrongdoer is jointly and severally liable to the injured for payment of the entire damages and the injured person has the choice of proceeding against all or any of them. In such a case, the injured need not establish the extent of responsibility of each wrongdoer separately. On the other hand where a person suffers injury, partly due to the negligence on the part of another person or persons, and partly as a result of his own negligence, then the negligence of the part of the injured which contributed to the accident is referred to as his contributory negligence. When the injured is guilty of some negligence, his claim for damages is not defeated merely by reason of the negligence on his part but the damages recoverable by him in respect of the injuries stands reduced in proportion to his contributory negligence. Khenyei v. New India Assurance Company Ltd., 2015 (3) AWC 2945.

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Filed under Civil Law, Negligence

Offence Under Section 138 Negotiable Instrument Act – Jurisdiction

(1)An offence under Section 138 of the Negotiable Instrument Act is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank.
(2)Cognizance of any such offence is however forbidden under section 142 of the Negotiable Instrument Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138.
(3)The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if —
(a)the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue.
(b)If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonor of the cheque, and
(c)If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice.
(4)The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act.
(5)The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant.
(6)Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured.
(7)The general rule stipulated under Section 177 CrPC applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the court within whose jurisdiction the dishonor takes place except in situations where the offence of dichonour of the cheque punishable under Section 138 is committed alongwith other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof. Dashrath Rupsingh Rathod v. State of Maharashtra, 2014 (86) ACC 882.

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Filed under Dishonour of Cheque

Composite Negligence and Contributory Negligence – Difference Between

‘Composite Negligence’ refers to the negligence on the part of two or more persons. Where a person is injured as a result of negligence on the part of two or more wrong doers, it is said that the person was injured on account of the composite negligence of those wrongdoers. In such a case, each wrongdoer is jointly and severally liable to the injured for payment of the entire damages and the injured person has the choice of proceeding against all or any of them. In such a case, the injured need not establish the extent of responsibility of each wrongdoer separately, nor is it necessary for the court to determine the extent of liability of each wrongdoer separately. On the other hand where a person suffers injury, partly due to the negligence on the part of another person or persons and partly as a result of his own negligence, then the negligence on the part of the injured which contributed to the accident is referred to as his ‘contributory negligence’. Where the injured is guilty of some negligence, his claim for damages is not defeated merely by reason of the negligence on his part but the damages recoverable by him in respect of the injuries stand reduced in proportion to his contributory negligence. Pawan Kumar v. Harkishan Dass Mohan Lal and others, (2014) 3 SCC 590.

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Filed under Composite Negligence, Negligence

Contract of Guarantee vis-à-vis Contract of Indemnity

A contract of guarantee is defined in Section 126 of the Indian Contract Act, 1872 which says that a “contract of guarantee” is a contract to perform the promise or discharge liability of a third person in case of his default. The person who gives the guarantee is called “surety”, person in respect of whose default the guarantee is given is called the “creditor”. A guarantee, therefore, is an accessory. It is essentially a contract of accessory nature being always ancillary and subsidiary to some other contract or liability on which it is founded without support of which it must fail. The distinction between the “contract of guarantee” and “contract of indemnity” comes out from the definitions of the two. The phrase “contract of indemnity” is defined in Section 124 of the Indian Contract Act, 1872 which says that a contract by which one party promises to save the other from loss caused to him by the conduct of the petitioner himself or by the conduct of any other person is called “contract of indemnity”. One of the apparent distinction between the two is that a “contract of guarantee” requires concurrence of three persons, namely, the principal debtor, surety and the creditor, while the “contract of indemnity” is a contract between two parties and promisor enters into such contract with other party. In other words, a person who is party to a contract, if executes a promise to other party to save him from loss on account of promisor’s conduct or by the conduct of any other person, it is a “contract of indemnity”, while for the purpose of “contract of guarantee”, it requires presence of three parties at least. Punjab National Bank v. Ram Dutt Sharma, 2013 (120) RD 507.

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Filed under Civil Law, Contract Law

Electricity Dues – Liability of Directors

In a recent Judgment of the Allahabad High Court – Piyush Kumar v. State of U.P., it was held as under:
“A company is an artificial person and can only contract through agents. The normal mode of signing is to use the words ‘on behalf of the Company’ and if the Director, as an agent of the company signs the contract for the company, no personal liability is attached to him. The Directors thus under Section 46 of the Companies Act, 1956 can sign the contracts for the Company, which binds the Company, unless the Articles of Association of the Company or any resolution of the Board of Directors restricts or takes away such authority. The Directors are not personally liable, unless it appears that they take personal liability. The Directors may be made personally liable in damages, where they act beyond their powers; act by making negligent misrepresentation; acts in violation of the provisions of the Companies Act such as Section 77 or plays fraud representing the company.
Clause 4.3 (f) (iv) of The U.P. Electricity Supply Code, 2005 provides that outstanding dues will be first charge on the assets of the company and the licensee shall ensure that this is entered in the agreement with the new applicant. Sub-clause (v) provides that recovery proceedings against the defaulting consumer, and where the consumer is a company, from the directors of the Company, shall be ensured.
It is only after the assets of the Company are unable to meet the demand of the department then recovery proceedings may be initiated against the Directors of the Company. Clause (v) of Para 4.3 (f) of the Supply Code provides that where a financial institution has auctioned the property without consideration to licensee’s charge on assets, claims may be lodged with the concerned financial institution with diligent pursuance. The Directors manage the company for its shareholders. They are in charge of the management and the business of the Company for the benefit of the shareholders. They are not liable for the dues of the company on the ground that they have signed an agreement on behalf of the company, unless there is specific provision, or when they agree under the agreement or execute personal guarantees or bonds for due payment of the amount.”

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Filed under Electricity Laws, Liability of Directors