Page 17 - BANKING FINANCE JULY 2016

LEGAL UPDATE

Company and directors can be prosecuted for cheque 2005 notification on
Mines Department
bounce in bank striped by Punjab HC

The Bombay High Court has ruled that judgment which had held that Section The Punjab and Haryana High Court
a company and its directors can be 446(1) of the Companies Act, dealing has struck down a 2005 notification
prosecuted for issuing a of the Mines Department of the
cheque which gets with winding up compa- Haryana government increasing the
dishonoured by a bank even nies, has no application to rate of royalty 50 per cent, from Rs
if the company is facing wind- proceedings under the Ne- 24 per tonne to Rs 36 per tonne and
ing up proceedings under the Compa- gotiable Instruments Act also enhancing the rate of dead rent
nies Act 1956. and therefore it is not necessary to to Rs 2,000 per hectare. The higher
obtain the consent of the company rate was notified amending the
It is not necessary to get the assent of court. schedule to the central law, the
the company judge to prosecute the Mines and Minerals (Regulation and
accused persons under Section 138 of The matter involved the interpretation Development) Act.
the Negotiable Instruments Act which of Section 446(1) which says that when
deals with bounced cheques as a crimi- a winding up order has been made or The minor mineral companies, which
nal offence. There were two contra- an official liquidator has been ap- have existing leases, argued that the
dicting judgments on this point in the pointed "no suit or other legal pro- rates have been fixed in their seven-
Bombay high court. ceeding shall be commenced." The year contracts with the Haryana
question was whether the phrase in- government and they cannot be
Therefore, the issue was referred to a cluded criminal proceedings like changed midway. There was no em-
larger bench in the case, Indorama cheque bounce. The high court said pirical data to justify the hike and
Synthetics Ltd vs State of Maharashtra. no, which means they can be taken therefore it was arbitrary, it was
It upheld the view expressed in the forward. contended.

Bid conditions can't be read 'literally' Accepting the arguments, the high
court stated, in its judgment in the
The Delhi High Court has asked Oil and Natural Gas Corporation (ONGC) not to case Faridabad Gurgaon Minerals vs
reject the bid of Quippo Oil & Gas Infrastructure Ltd in- State of Haryana, "The contract was
voking non-essential conditions for eligibility in bidding for a statutory contract. It was obliga-
deployment of drilling rigs and carrying out of 3D seismic tory on the state to incorporate the
survey. statutory terms CWP No. 17958 of
2005 which it intended to bind the
The financial criteria of ONGC insisted on 100 per cent. Quippo argued that the contracting party, but having for-
margin was minimal, not relevant to the execution of the project and was dis- saken such a course it cannot jump
criminatory. Agreeing with it, the court stated that "the condition is not an es- the statutory gun on the contracting
sential condition but merely ancillary and subsidiary with the main object to be party to enforce terms which were
achieved and ONGC cannot insist upon strict literal compliance of the condition." not visualised in the contract. In-
deed, it is a case where the state
Supreme Court rejects PIL for WhatsApp ban fettered its own powers either
through neglect or convenience."
WhatsApp's end-to-end encryption might still be a contentious issue, but the
Supreme Court refused to allow a PIL seeking a ban on the popular app and
similar messenger services.The PIL, filed by Gurugram-based RTI activist Sudhir
Yadav, said these apps have complete encryption, which poses a threat to the
country's security.

A bench of Chief Justice T S Thakur and Justice A M Khanwilkar rejected the PIL,
suggesting Yadav could approach the government or Telecom Regulatory Au-
thority of India (TRAI) with his plea. But Yadav said his application to the de-
partment of telecommunication and the government got the response that they
did not possess information in this regard.

BANKING FINANCE | JULY | 2016 | 17

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