REAL CASES IN INDIAN COURTS

BUSINESS LAW-II

SUBMITTED TO- SUBMITTED BY

MS. DEEPA ASHISH BANSAL
ANKUSH
ARJUN
KIRANDEEP
BBA-IID
CASE -I
 DISHONOUR OF CHEQUE
THE CASE
• A lady had borrowed a sum of Rs 75,000 in connection with some
personal business.

• A blank cheque was issued as security.

• However the cheque was returned for want of sufficient funds,

followed which a complaint had been filed.

• The accused stated before the court that no prosecution under

Section 138 of the NI Act can lie in this case.

• The trial court dismissed the complaint against the accused

following which the High Court was moved.
 LEGAL VIEW
• K M Natraj says once a cheque is issued
there is a presumption under the NI Act
that the cheque has been issued towards
the discharge of a legally enforceable
debt.
• It is a rebuttable presumption.
• The accused can rebutt that presumption
and the burden is on him to dislodge that
presumption.
 THE 138 SECTION OF ACT SAYS
• Where any cheque drawn by a person on an account
maintained by him with a banker for payment of any
amount of money to another person from out of that
account for the discharge, in whole or in part, of any
debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to
the credit of that account is insufficient to honour the
cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with
that bank, such person shall be deemed to have
committed an offence and shall without prejudice to
any other provisions of this Act, be punished with
imprisonment for ["a term which may extend to two
year"], or with fine which may extend to twice the
amount of the cheque, or with both:
 CONTINUED
• Provided that nothing contained in this section shall apply
unless-
(a) The cheque has been presented to the bank within a period
of six months from the date on which it is drawn or within the
period of its validity, whichever is earlier.
(b) The payee or the holder induce course of the cheque, as
the case may be, makes a demand for the payment of the said
amount of money by giving a notice, in writing, to the drawer, of
the cheque, ["within thirty days"] of the receipt of information by
him from the bank regarding the return of the cheques as
unpaid, and
(c) The drawer of such cheque fails to make the payment of the
said amount of money to the payee or, as the case may be, to
the holder in due course of the cheque, within fifteen days of
the receipt of the said notice.
 THE VERDICT
• Justice Rao observed

• The dismissal of the complaint on the plea that the

cheque was issued only as a security and therefore no
prosecution would lie, is an untenable view.
• A cheque whether issued for repayment of a loan or as a
security makes little difference under Section 138 of the
NI Act.
• In the event of a dishonour, legal consequences are
same without distinction.
• When once a cheque is issued and the same is proved,
a presumption under Section 139 of the NI Act would
arise with regard to consideration.
CASE -II
 Shri Ravi Sanghi And Ors. vs Serious Fraud
Investigation ...
• Shri Ravi Sanghi And Ors. vs Serious Fraud Investigation Office on
13/9/2006
ORDER
• K.K. Balu, Vice-Chairman

• The above application filed by the applicants herein

under Section 621A of the Companies Act, 1956 (has
been forwarded to this Bench by, the Registrar of
Companies, Andhra Pradesh. Hyderabad for composition
of the offence as provided under Section 621A(4)(a) of
The Act.
• The applicants seek composition of the offence relating to
contravention of Section 370(1) of the Act, while availing
inter-corporate deposit (loan) from Daewoo Motors (India)
Limited (DMIL) which is punishable in the manner
provided under Sections 371 of the Act.
 CONTINUED
• The facts in brief are that the company availed
inter-corporate deposit (loan) of Rs. 2 crores in
the month of 1995 and DMIL disbursed the loan
amount on 03/11/1995.
• Though the Company reports that it repaid a
sum of Rs. 2,42,16,576/- with interest in
settlement of the entire loan, as per the books of
DMIL a sum of Rs. 4.30 lakhs is outstanding as
at 30.11.1997.
• The Serious Fraud Investigation Office (SFIO)
which conducted the investigation found that
DMIL while giving the inter-corporate deposits
during the years 1993-1994, 1994-1995 and
1995-1996 violated the conditions namely
 CONTINUED

• a) the loanee company should have made profits

for three continuous years preceding the date of
giving ICD;
• (b) the loanee company should have declared
dividends above 10% in the preceding years;
and
• (c) the loanee company should have positive
net worth, imposed by the central government, hi
terms of Section 371 of the Act every person
who is knowingly a party to contravention of the
Section 370(1) of the Act including in particular
any person to whom the loan is made shall be
punishable in the manner as mentioned therein.
 CONTINUED
• According to Shri. R.Snmvasan, Authorised Representative of the
applicants, the applicant Company availed an amount of Rs. 2
crores as inter-corporate deposit in the month of October 1995 for a
period of 120 days from DMIL and it had repaid the entire loan
amount along with interest
• The applicants herein were not aware of the contravention of
Section 370 of the Act by DML while borrowing the inter-corporate
deposit.
 THE JUDGEMENT
• SMO is opposing the application only on the ground that
the offence under Section 370 of the Act could not be
rectified in view of DMIL is under liquidation. In terms of
Section 446(1) of the Act, when a winding up order has
been made or the Official Liquidator has been appointed
as provisional liquidator, no suit or other legal proceeding
shall be commenced, or if pending at the date of winding
up order, shall be proceeded with, against the Company,
except by leave of the Court and subject to such terms
as the Court may impose.

• The balance amount of Rs. 7,86,322.91 as on

25.04.1998 is bonafide disputed.
 CONTINUED

• Accordingly, the Company shall pay a sum of

Rs. 50000/- and the officers in default each Rs.
10,000/- towards compounding fee by
15.10.2006. The officers in default shall pay the
tee from their personal sources. This order shall
be without prejudice to the right of the Official
Liquidator in recovering the amount due if any.
from the applicants.
 THE 370 ACT
• Loans, etc., to companies under the same management.
• No company (hereinafter in this section referred to as" the lending
company") shall- (a) make any loan to, or
• (b) give any guarantee, or provide any security, in connection with a
loan made by any other person to, or to any other person by, any
body corporate 1[ , unless the making of such loan, the giving of
such guarantee or the provision of such security has been
previously authorised by a special resolution of the lending
company.
• Provided that no special resolution shall be necessary in the case of
loans made to other bodies corporate not under the same
management as the lending company where the aggregate of such
loans does not exceed [ such percentage of the aggregate of the
subscribed capital of the lending company and its free reserves as
may be prescribed:]
• Provided further that the aggregate of the loans made to all bodies
corporate shall not exceed without the prior approval of the Central
Government-
 CONTINUED

• (a) [ such percentage of the aggregate of the subscribed capital of

the lending company and its free reserves as may be prescribed]
where all such other bodies corporate are not under the same
management as the lending company;
• (b) [ such percentage of the aggregate of the subscribed capital of
the lending company and its free reserves as may be prescribed]
where all such other bodies corporate are under the same
management as the lending company. Explanation 4[ 1].- If a
special resolution has been passed by the lending company
authorising the making of loans up to the limit of 3[ the percentage
of the aggregate specified in clause (a) or, as the case may be, the
percentage of the aggregate specified in clause (b) of the second
proviso]
 Section 446(1) in The Companies Act, 1956

• When a winding up order has been made or the

Official Liquidator has been appointed as
provisional liquidator, no suit or other legal
proceeding shall be commenced. or if pending at
the date of the winding up order, shall be
proceeded with, against the company, except by
leave of the Court and subject to such terms as
the Court may impose.
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