Brief case: Creditor has no role after property sale | Business Standard Column–11.09.2017

  • The Calcutta High Court has ruled that a secured creditor who sells the mortgaged property has no interest in the immovable property after the issuance of the sale certificate. He cannot approach the district magistrate to get possession of the property invoking Section 14 of the securitisation (“Sarfaesi”) Act. “After the sale, the secured creditor can no longer claim a security interest in such immovable property as such security interest stands dissolved by the issuance of the sale certificate.
The title to the immovable property stands transferred to and vested with the purchaser. There remains nothing more to be done by the secured creditor in respect of such immovable property,” the high court stated in its judgment, United Bank of India vs State of West Bengal.
The bank wanted to initiate action by the district magistrate to get possession of the property, but he did not act for a long time, leading to the writ petition seeking a direction from the high court to the magistrate. The state government opposed it stating that the bank had no right after the sale. The high court agreed with it.
Discord over choice of arbitrators
While selecting an independent and impartial arbitrator, the 2016 amendment to The Arbitration and Conciliation Act laying down rules of disqualification has become a new point of discord. In a case before the Supreme Court, HRD Corporation vs Gas Authority of India Ltd (GAIL), former judges in the three-member panel themselves were divided on the eligibility of two of its members.
The foreign corporation challenged the appointment of two members but public sector undertaking GAIL defended their choice. One of the several allegations against a judge was that he had given advice to one of the parties and had “business relations” with it.
Another allegation was that one judge had acted as an arbitrator in a dispute between the same parties earlier. The Supreme Court rejected all such charges. Giving an opinion in another case is no business relationship.
Giving an award in a previous arbitration also did not disqualify a member of the tribunal. The judgment stated that the new lists of disqualifications were introduced in Section 12 of the Act following the 246th Law Commission report and guided by the Red, Orange and Green lists prepared by the International Bar Association Guidelines. The present selection did not violate any of the guidelines, the judgment said.
Merged company has no tax liability 
After amalgamation of a company, the merged entity is non-existent and it cannot be assessed for income tax, the Delhi High Court ruled last week in the case, Commissioner of Income Tax vs Maruti Suzuki India Ltd, dismissing the appeal of the revenue authorities against the ruling of the Income Tax Appellate Authority (ITAT). In this case, Suzuki Powertrain Ltd was merged with Maruti Suzuki in 2012.
But, in 2015, the assessing officer passed an order against the merged company, though it mentioned the merger. Maruti Suzuki objected to this, arguing that the order had been passed in the name of an entity that ceased to exist on the date of the assessment order. The ITAT accepted the contention, against which the revenue authorities appealed to the high court.
They argued that it was only a mis-description of the party and was not fatal to the assessment order. Rejecting the argument, the high court pointed out that the tax authorities had made the same mistake in a large number of cases and listed some of them. It cannot be excused as a procedural defect or mere irregularity. Even if he amalgamated company participated in the proceedings, the order would not be valid, the high court said.
Compensation for bounced cheque 
The Delhi High Court last week directed the proprietor of a firm to pay twice the amount of a bounced cheque as fine to the payee. If the amount, Rs 3,45,044, is not paid within a month, she shall undergo simple imprisonment for one year.
The amount of fine shall be released to the payee as compensation by the magistrate. In this case, Bansal Plywood vs State, the accused person was acquitted on the ground that the invoice had corrections in it. The high court stated that the correction would not make it invalid and the cheque was issued in any case.
Under the Negotiable Instruments Act, the drawer has the burden to prove that she had no obligation to pay. This duty was not discharged and the excuses were not credible, the judgment said. The high court ordered its registry to circulate the judgment to all judicial officers for future guidance.
Violating trademark to be cancelled
Virgin Enterprises Ltd has won a permanent injunction against Virgin Food & Feeds Ltd from the Delhi High Court, which directed the Indian company not to use the word ‘Virgin’ in its name and for its products. The court also directed Virgin Foods to apply to the authorities to drop the word from the company name.
The British firm claimed it has businesses worldwide in several sectors and it invented the trademark “Virgin”. It alleged that Virgin Foods was creating confusion in the market by using the word and causing losses to it. The high court, while passing the injunction, asserted that the owner of a well-known trademark can seek cancellation or prevent registration of a deceptive trademark or even a company name.
It also recalled an earlier petition moved by Virgin Enterprises against Virgin Paradise Airlines Training Ltd in which the court passed an injunction against the institute.
Case of the careless diamond dealer 
If the employees of a jeweller are careless while carrying precious goods, the insurance company will not be liable for theft, the National Consumer Commission stated while rejecting the claim of a Mumbai firm. In this case, an employee of Sangam Diamonds carried Rs 1 crore worth of jewellery to Bengaluru in a bag which had no lock. While returning to Mumbai by bus, it stopped for refreshments on the way.
The bag was left on the bus. Returning to the bus, the employee found the jewellery missing. He filed a complaint with the police and the firm invoked the Jeweller’s Block Policy covering losses worth Rs 44 crore. Oriental Insurance Company rejected the claim as the firm violated the condition that it should show due-diligence and reasonable care to avoid losses. The commission accepted this plea and dismissed the petition.

via Brief case: Creditor has no role after property sale | Business Standard Column

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