JUDGEMENTS SECTION

Recent Judgements Relevant to Bankers

Joseph Raj
Asst. Legal Adviser

I. Union of India & Another vs. Delhi High Court Bar Association & Others - Civil Appeal No.4679 of 1995 - JT 2002 (3) SC 131; (2002) 4 SCC 275

Principle

Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is a valid piece of legislation and not violative of Article 14 of the Constitution of India.

Facts

For speedy recovery of the non-performing assets due to the Banks and Financial Institutions, the Parliament enacted the said Act which was preceded by an ordinance. The Act inter-alia, provides the procedures for the establishment of Tribunals and Appellate Tribunals. The Tribunals have been given jurisdiction, powers and authority to entertain and decide applications from the Banks and financial institutions for recovery of their non-performing assets. The procedure required to be followed is also provided in the Act.

The constitutional validity of the said Act was challenged before the Delhi High Court on the ground that the Act is unreasonable and violative of Article 14 of the Constitution of India and the same is beyond the legislative competence of the Parliament.

The High Court of Delhi (in Delhi High Court Bar Association and Another Vs Union of India and Others, AIR 1995 Delhi 323) held that the impugned Act was unconstitutional as it erodes the independence of judiciary and was irrational, discriminatory, unreasonable, arbitrary and was hit by Article 14 of the Constitution of India. Against the said Judgement this appeal was preferred. During the pendency of this appeal Guwahati High Court was also required to consider the validity of the Act and came to the conculsuion that the Act had violated the basic features of the Constitution of India and was void.

Observations of the Supreme Court

The Supreme Court interalia observed that Entry 45 of List 1 would cover the types of legislation now enacted, which relates to "Banking". Banking Operations would interalia include accepting of loans and deposits, granting of loans and recovery of the debts due to the bank. Recovery of dues is an essential function of any banking institution. In exercise of its legislative power relating to banking, the Parliament can provide the mechanism by which monies due to the banks and financial Institutions can be recovered. The preamble of the Act provides "for expeditious adjudication and recovery of debts, due to bank's and financial institutions and for matters connected therewith or incidental thereto". This would squarely fall within the ambit of entry 45 of list I. The term "Banking" in entry 45 of List I would mean legislation regarding all aspects of banking including ancillary or subsidiary matters relating to banking. Setting up of Tribunals for recovery of non-performing assets would clearly fall under the said entry. During the pendency of the appeal the Act has been amended and whatever lacunae or infirmities existed have been removed by the Amending Act and with the framing of more Rules.

Decision

The Recovery of Debts Due to Banks and Financial Institutions Act 1993 is a valid piece of legislation and is not violative of Article 14 of the Constitution of India. All writ petitions or Appeals filed challenging the validity of the Act or some provisions of the Act are dismissed.

II. Decision of the National Consumer Disputes Redressal Commission - Reserve Bank of India vs. T. A. Abraham - Revision Petition No. 839 of 2001 in Appeal No.845 of 1999 of the State Commission, Kerala

Principle

Mere asking for a service does not amount to rendition of service and consequently there could be no question of rendition of service. Delay in sanctioning loan cannot amount to deficiency in rendering of service.

Facts of the case

On 26th Sept. 1990 the respondent had made an application to the petitioner Bank to know whether he is eligible to avail of housing loan from the Bank under the provisions of the RBI Employees' Housing Loans Rules, 1960. In terms of the provisions of the Bank's Housing Loan Rules, 1960 the employee of the Bank is eligible for the loan if either the employee or any member of his family is not having any residential accommodation at the place where the employee intends to acquire the residential accommodation. As his wife is having a house in her name, the respondent was advised that he will be eligible to housing loan after he disposes of the house owned by his wife and production of documentary evidence for having sold the house and using the sale proceeds to the new property proposed to be acquired by him. However, the Housing Loan Rules, 1960 have been revised comprehensively and substituted by a new set of Rules to be called RBI Employees' Housing Loan Rules, 1995. In terms of the new Rules the employees of the Bank are eligible for loan though any member of the family is having residential accommodation at the place where the employee intends to acquire the residential accommodation. Accordingly, the Bank had advised the respondent that his request for sanction of housing loan would be considered on merits under the revised Rules if he applies for loan. Thereafter, on 16th April 1998 the respondent had submitted the application for loan to acquire a residential plot of land and the eligible amount sanctioned was disbursed to him in June 1998. The Bank had taken hardly two months time for legal scrutiny of the documents submitted by the Respondent and sanctioning/disbursing the loan to him.

The Respondent had thereafter, filed a writ petition under Article 226 of the Constitution of India before the High Court of Kerala to issue a writ of mandamus or any other appropriate writ, direction or order directing the Bank to assess the loss sustained by him by way of income tax deduction in case the Respondent would have been granted loan for the purchase of house at the time of permission granted by the Bank, which was dismissed by the Court vide order dated 15th July 1997. The Respondent had then filed a consumer complaint before the District Consumer Disputes Redressal Forum, Thiruvananthapuram to get Rs.1 lakhs from the Bank as compensation for delay in sanctioning the loan and pecuniary loss and hardship caused to him which was also dismissed by the Forum on the ground that the complainant was not a consumer as defined in the Consumer Protection Act, 1986.

Against the said order, the respondent had filed an appeal before the Kerala State Consumer Disputes Redressal Forum to set aside the order passed by the District Forum and to get compensation. The State Commission vide its order dated 7th November 2001 held that the appellant is a consumer under section 2(1)(o) read with section 2(1)(b) of the Consumer Protection Act, 1986 and set aside the order passed by the District Forum and remanded it the matter to the District Forum for considering it on merits.

Against the order passed by the State Commission the Bank had filed the revision petition before the National Consumer Disputes Redressal Commission on the following grounds :-

(a)	The State Commission had acted erroneously and exercised its powers illegally and in material irregularity.
(b)	The State Commission had erred in holding that the respondent is a Consumer under section 2(1)(o) and 2(1)(d)(ii) of the Consumer Protection Act.
(c)	The State Commission had erred in holding that availing of housing loan by an employee from the employer is within the meaning of section 2(1)(o) of the Consumer Protection Act as the said definition defines service to include the provisions of facilities in connection with banking, financing etc. and also states that ‘service’ means service of any description which is made available to potential users. As far as the grant of housing loans by the employer to the employees are concerned, the employer is not rendering any service to the potential users. The employer is providing a facility limited to its employees as a benevolent employer and not by way of rendering any services to the potential uses.
(d)	The State Commission has failed to appreciate the order passed by the National Commission in Virendra Prasad & Others vs. RBI (1991 CPR 661 NC) wherein it was held that discharge of statutory functions by the Reserve Bank of India under FERA cannot be said to be amounting to rendering of any banking service as there is no element of hiring of service.
(e)	The State commission has filed to appreciate that the Respondent is not the consumer as defined in section 2(1)(d) of the Act as the respondent is an employee of the petitioner. The respondent was granted the loan subject to the terms and conditions of the RBI Employees' Housing Loan Rules, 1995. The petitioner Bank acts as a banker to the Government and the banks only and not to its employees and therefore, the petitioner does not fall under section 2(1)(o) of the Consumer Protection Act.
(f)	The definition of service contained in 2(1)(o) of the Consumer Protection Act clearly shows that only those services fall within the purview of the Act which are made available to potential users. So far the grant of housing loan by the petitioner to its employees are concerned the petitioner is not rendering any service to the potential users. The petitioner is only providing a facility confined to its employees as a benevolent employer and not by way of rendering any service to the potential uses. These benefits is granted by the petitioner to its employee in view of the employer-employee relationship and such relationship does not in any way render an employee as a consumer of the Bank as defined in section 2(1)(o) read with the section 2(1)(d) of the Act.

Observations of the National Commission

District Forum had rightly dismissed the complaint as not maintainable as mere application for getting loan could not give rise to consumer dispute. Mere asking for a service does not amount to rendition of service and consequently there is no question of rendition of service. The State Commission had reversed the findings and remanded the case back to the District Forum for fresh consideration after giving opportunity to both the parties to appear. Delay in sanctioning loan cannot amount to deficiency in rendering of service. The decision of the State Commission cannot be sustained.

Decision

The National Commission set aside the decision of the State Commission and the decision of District Forum dismissing the complaint is upheld.

III. Syndicate Bank vs. Chamundi Industries and Others Writ Petition No. 22505 of 1998 -AIR 2002 Kar 56

Principle

Debt Recovery Tribunals have power to decide claims based on different courses of action. Single application for recovery of debt due under two transactions is maintainable.

Facts

1^st Respondent in a Partnership Firm and Respondent Nos. 2 & 3 are its partners. The Bank had sanctioned a loan of Rs. 2,45,000/- on 12^th July 1982 and also overdraft facility upto the limit of Rs. 1,00,000/- on 25^th February 1995. The Respondents had executed the required documents in favour of the Bank. As the Respondents were irregular in making payments, the Bank had filed an application for recovery of Rs. 12,90,934/- with cost and interest. It was argued on behalf of the Respondents that the application is liable to be dismissed for want of jurisdiction of the Tribunal as the bank had unjustly combined two distinct loans with a view to avoid recourse to the normal Courts of law. However, the Respondents had admitted the transactions. The tribunal is of the view that one transaction relates to a loan and another relates to over draft facility, which are covered with independent documents unconnected with each other and therefore the application filed by the Bank for recovery of amount due under the above mentioned transactions are based on more than on single cause of action in single application is not maintainable in terms of Rule 10 of the Debts Recovery Tribunal (Procedure) Rules, 1993. The application was dismissed accordingly. Aggrieved by the order of the Tribunal the Appellant has filed this writ petition.

Observations of the Court

The consequences of filing an application seeking for relief or reliefs based on more than single cause of action is not provided under the Rules. However, order VII Rule 10 of CPC provides for return of the plaint if the court has no jurisdiction to entertain the suit. But under the Rules, where an application is filed seeking relief based on more than single cause of action no consequences are provided. Therefore, in the absence of providing consequences in case the application is filed on more than a single cause of action the Rules is directory and not mandatory. Further Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act does not prohibit of filing an application by the Bank seeking relief or reliefs based on causes of action. However, Rule 10 of the Debt Recovery Tribunal (Procedure) Rules prohibits seeking relief or reliefs based on more than single cause of action. If the Rules are in consistent with the provisions of the Act, provisions of the Act prevails over the Rules. Therefore to the extent of in consistency Section 19 of the Act prevails over the Rules. Under Section 19 of the Act, the Tribunal has the power to adjudicate the application filed by the Bank and also the set off and counter claim pleaded by the debtor which are based on the cause of action pleaded by the Bank. Hence, the Tribunal has the power to adjudicate on the causes of action pleaded by the Bank and the debtors on one application filed by the bank.

Decision

The order passed by the Tribunal is set aside and the matter is remitted to the Tribunal to decide on merits.

IV. Suganthi Suresh Kumar vs. Jagdeeshan - Criminal Appeal Nos.65 and 66 of 2002, JT 2002(1) SC 220

Principle

Sentence for the offence should be of such nature as to give proper effect of the object of the legislation.

Facts

The Respondent was found guilty by the Magistrate’s Court under Section 138 of the Negotiable Instrument Act, 1881 for the offence of issuing two sets of cheques for a sum totalling Rs.4,40,000/, which were dishonoured by the drawee bank. The trial court convicted him of the aforesaid offence but sentenced him only to undergo imprisonment till rising of the Court and Pay a fine of Rs.5000/- in both cases. The Appellant preferred two revisions before the High Court on the premise that the sentence was grossly inadequate. However, the High Court declined to interfere with the sentence passed by the Magistrate Court and dismissed both the revisions. Hence, this appeal.

Observations of the Court

The total amount of Rs.4,50,000/- representing the two sets of cheques had not been paid during the pendency of the cases before the Magistrate Court or revision before the High Court or appeal before the Supreme Court. If the amount had been paid, there would have been justification for imposing a flee-bite sentence as had been chosen by the trial court. The sentence for the offence under Section 138 of the Negotiable Instruments Act should be of such a nature as to give proper effect to the object of the legislation. The very object of enactment of provisions like Section 138 of the Act would stand defeated if the sentence of this nature is passed by the trial court. The civil suit and attachment of all properties of the respondent is not a ground for lessening the gravity of the offence or to impose a minor sentence.

Decision

The Court set-aside the sentence passed by the Magistrate Court and remitted the case to the Magistrate Court for passing appropriate sentence after hearing both sides.

V. M/s. M.M.T.C. Ltd. And another vs. M/s. Medchl Chemicals and Pharma (P) Ltd., and Anr. Criminal Appeal Nos. 1173 and 1174 of 2001 AIR 2002 SC 182

Principle

The complaint under Section 138 of the Negotiable Instruments Act, 1881 signed and presented by the person, who is neither an authorised agent nor a person empowered under the Articles of Association or Resolution of the Board of a company to do so is not a ground to quash the complaint. It is not necessary to allege specifically in the complaint that there was a subsisting liability. If the cheque is dishonoured by reason that the payment of the cheque has been stopped by the drawer, it is maintainable under Section 138 of the Negotiable Instruments Act, 1881.

Facts

Two cheques issued by the first Respondent in favour of the Appellant were returned with the endorsement "Payment stopped by drawer" when presented for payment. As the amounts of the cheque were not paid, the Appellants had lodged two complaints before the Magistrate Court through one Shri Laxman Goel, the Manager of the Regional Office of the Appellant company. The Respondents filed a petition before the High Court for quashing the complaints on the grounds, among others, that Shri Laxman Goel is not competant to file complaints on behalf of the company. By the impugned order of the High Court, both the complaints had been quashed and held that the complaints filed by Shri Laxman Goel is not maintainable as he is not an authorised person to file the complaint. Complaint under Section 138 of the Negotiable Instruments Act, could only be filed by a person who is duly authorised to file. Authorisation must be on the date when the complaint is filed and a subsequent authorisation does not validate the complaint. Hence, taking cognizance of a complaint filed by a person who is not authorised to file the same is legally not acceptable. Aggrieved by the order and judgement of the High Court, the Appellants have filed this appeal.

Observations of the Court

Section 142 of the Negotiable Instruments Act, 1881 provides that a complaint under Section 138 can be made by the payee or the holder in due course of the said cheque. This criteria is satisfied as the complaint has been filed in the name and on behalf of the Appellant Company. By virtue of Section 139 of the Negotiable Instruments Act, the Court has to draw a presumption that the holder of the cheque received the cheque for discharge of a debt or liability until the contrary is proved. Hence, it is not necessary to allege specifically in the complaint that there was a subsisting liability. The burden of proving the same rests on the Respondents. It is the burden of the accused to show that the ‘stop payment’ instructions were not issued because of insufficiency or paucity of funds. If the accused shows that there was a sufficient funds in his account at the time of presentation of the cheque for encashment and that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of the cheque for encashment, then Section 138 of the Negotiable Instruments Act would not be attracted.

Decision

Impugned order of the High Court is set aside. The Magistrate Court was directed to proceed with the complaints in accordance with the law.

VI. Veera Exports vs. Kalavathy AIR 2002 SC 38

Principle

A cheque can be made valid by alteration of dates. Alteration in the date would give fresh life for another six months. It is always open to a drawer to voluntarily re-validate a negotiable instrument, including cheque.

Facts

The Respondent had issued 8 cheques to the Appellants for a sum totalling Rs. 4 lakhs. The cheques were dishonoured when presented for payment. The fact of dishonour was brought to the notice of the Respondent. The Respondent had changed the date of the cheques from 1995 to 1996. The cheques were again dishonoured when presented for payment. The Appellant had filed a complaint under Section 138 of the Negotiable Instruments Act. The Respondent filed a petition before the High Court of Madras to quash the complaint filed by the Appellant. The Respondent took a stand among others that she had been forced to change the dates against her will. By an impugned order dated 24^th November 2000 the High Court had quashed the complaint and held that in law, a cheque which has become invalid because of the expiry of the stipulated period could not be made valid by alteration of dates. Aggrieved by the said order the Appellant had filed the present appeal.

Observations of the Court

There is no provision in the Negotiable Instruments Act or in any other law which stipulates that a drawer of a negotiable instrument cannot revalidate it. It is always open to a drawer to voluntarily re-validate a negotiable instrument, including a cheque. Whether the alteration in the date was not made voluntarily was a question of fact, which will have to be established on evidence during trial. The High Court could not have quashed the complaint merely on the basis of an assertion of the Respondent that she had been forced to change the dates against her will.

Decision

The order passed by the High Court is set-aside. The petition filed by the Respondent is dismissed. The trial court can proceed with the complaint in accordance with the law.

VII. In the High Court of Karnataka - Writ Petition No.7357 of 1993 - Shri A.M. Sugunasundaram vs. Syndicate Bank, 2002-I-LLJ 131 (HC)

Failure/refusal to supply preliminary enquiry report to the delinquent officer for cross examination of the Investigating Officer would constitute denial of reasonable opportunity. The right to cross examine the management witness is a valuable right of the delinquent officer and that right cannot be effectively exercised without the assistance of relevant documents and if those documents are not supplied, that would be an infraction of the Rules of Natural Justice.

VIII. In the High Court of Kerala O.P.No.1771 of 1993 Philipose Vs State Bank of Hyderabad, 2002 - I - LLJ 148(HC)

Facts

The Petitioner had retired from the services of the 1^st Respondent after completing 40 years of service on attaining the age of superannuation on 7^th May 1981. However, considering his efficiency he was given 5 years extension and retired finally on 31^st May 1986. A charge sheet raising various allegations was issued to him just before the extended date of retirement. He gave explanation. However, the Respondent had issued a fresh charge sheet on 3^rd June 1986 i.e. after the retirement. He gave explanation to that charge also. No enquiry or proceedings were conducted. The retirement dues were given as per the directions of the Court in OP No.2687 of 1987 filed by the ex-employee. Thereafter the enquiry proceedings were started. After considering the evidence, the enquiry officer came to the conclusion that the petitioner was not guilty on any of the charges alleged against him. The petitioner was given a letter dated 27^th July 1991 forwarding the enquiry proceedings by the disciplinary authority and advised to submit representation if any within 15 days from the date of receipt of the letter. However, it was not mentioned in the letter that the disciplinary authority was not agreeing with the findings of the Enquiry Officer on any of the points. No orders were passed by the disciplinary authority and no retirement benefits were paid by the Respondent even after two years of the said letter. Hence, the petitioner has filed this original petition.

Observations of the Court

The disciplinary authority has passed orders on 14^th September 1993 disagreeing with the findings of the Enquiry Officer on certain minor charges and imposed retrospective punishment of compulsory retirement w.e.f. the actual date of retirement. The Court held that retrospective dismissal or retirement cannot be passed as the petitioner had completed the full years of service and again another 5 years of extended service because of his efficiency and he had completed the extended period also. The Court also relied on the judgement of the Supreme Court in Jeevaratnam Vs State of Madras (AIR 1966 SC 951 : 1967 -I-LLJ -391) wherein it was held that if a retrospective dismissal order is passed it is severable and it will act only prospectively. Therefore, retrospective compulsory retirement will not be justified considering the facts of the case. The order dated 14^th September 1993 cannot be substained as the disciplinary authority has not accepted the Enquiry Officer’s report and took a different view without complying with the principles of Natural Justice. The disciplinary authority can differ from the finding of the enquiry officer provided points of difference are put to the petitioner and only after receiving explanation to the show-cause notice issued to the employee, the disciplinary authority can pass orders. Here no show cause notice has been issued. Hence, the Bank had violated the Principles of Natural Justice.

Decision

Petition is allowed with cost of Rs.10,000/-. The petitioner is entitled to get 12% interest for the arrears of DCRG as well as arrears of pension from the respective due date till its payment.

IX. Syndicate Bank vs. Pamidi Somaiah (Decd) and Others (2002) 108 Comp cas 12(HC)

Principle

The surety is only a guarantor for the dues of principal debtor and in case of any default on the part of the principal debtor, the surety has to make good the loss. If any omission on the part of the creditor in bringing the legal representatives of the principal debtor on record in the event of the death of the principal debtor, the surety’s right under Section 140 of the Indian Contract Act 1872, to proceed against the principal debtor will not exist. Once the debt against the principal debtor stood discharged as a result of the omission of the creditor, the creditor cannot proceed against the Surety.

Facts

Syndicate Bank had filed a suit against the principal debtor and Surety impleading them as Defendant No(s) 1 & 2 for recovery. During the pendency of the suit the principal debtor died and no legal representatives had been brought on record by the creditor Bank. However, the suit was decreed against the surety. In the execution petition filed by the decree holder/Bank, the Surety against whom the decree was passed took objection that the decree is not executable against him as the creditor/Bank had not impleaded the legal heirs of the principal debtor in the suit after the death of the principal debtor. The executing Court accepted the contention and dismissed the suit. Hence, the present revision petition.

Observations of the Court

The liability of the Surety is always to make good the loss caused as a result of the default committed by the principal debtor to the creditor. If the surety discharges the liability of the principal debtor to the creditor he can have a right to proceed against the principal debtor. In the present case as a result of the omission on the part of the creditor in bringing the legal representatives of the principal debtor on record after the death of the principal debtor, the surety is denied such right. Hence, it would not be proper to hold that the surety is still liable to the creditor even after the discharge of the principal debtor, due to the omission of the creditor. The Court did not accept the contention of the petitioner that the executing Court cannot go beyond the decree. Once the suit is abated against the principal debtor it is equally abated/ dismissed against the surety also. Hence the decree passed against the surety even after discharging the principal debtor from liability is illegal and unenforceable. Hence the petitioner is not entitled to proceed against the surety and the decree passed by the trial Court is not executable.

Decision

The Revision Petition was dismissed.

...... a few minutes’ observation of the parteis in the courtroom is more informing than reams of cold record.

- JACKSON, Robert H., dissenting in

Asheraft v. Tennessee, 322 U.S. 143, 171 [1944]

If a court, Federal or state, renders an unpopular opinion, displeasing to the public or to the applicable legislative body, the mere intimation of curtailed jurisdiction in the area ruled upon is most threatening to a cout which must be objective and dispassionate.

The bandied concept that jurisdiction shall remain so long as a ‘correct’ view emerges is not only intimidating to a court but shocking and frightening to every fair-minded person.

One cannot help but wonder if a shift in the personnel of a court after withdrawal of authority would induce a return of that authority.

- COOKE, Lawrence H., Remarks at Mid-Year

Graduation Ceremonies of New York Law School, February 7, 1982

Judgements of The Madras High Court Relevant to Bankers

V.K. Jayakar
Deputy Legal Adviser

I. N. Krishnaswamy vs. The Chairman, State Bank of India, Central Office, Bombay and another (Madras Law Journal 1999 I 131)

Facts

The petitioner filed a writ petition seeking to quash the proceedings of the S.B.I. in which the petitioner was punished by reduction in basic pay by one stage. According to the petitioner he was called upon to explain with reference to his lapse as mentioned in the letter dated 9-1-1991 of the S.B.I.’s Trruchi branch and in reply he had sent a letter to the S.B.I. on 15-2-1991. While the same was pending, on 6-11-1991 the petitioner sent a letter requesting the Chief General Manager of S.B.I. to accept his voluntary retirement from service and to treat the same as three months’ notice, from the date of the said letter. It is the contention of the petitioner that since the period of three months was over in February 1992, and no order passed by the S.B.I. rejecting his request, he has already retired even in February 1992 and so the disciplinary proceedings cannot be initiated against him. Therefore he has challenged the impugned order on the basis that the same is illegal and without jurisdiction.

Issue

The question to be decided by the Madras High Court was whether the petitioner had retired voluntarily from service as claimed by him pursuant to the notice dated 6-11-1991.

Observations

The learned senior counsel appearing for the petitioner relied on the fourth proviso to Rule 19 of the S.B.I. Officers’ Service Rules, which reads as follows :

"Provided further that an officer who has completed 20 years’ service or 20 years’ pensionable service, as the case may be, may be permitted by the competent authority to retire from the Bank’s service, subject to his giving three months’ notice in writing or pay in lieu thereof unless this requirement is wholly or partly waived by it".

The learned counsel submitted that before the expiry of the said period of three months, no letter, rejecting the petitioner’s request was received from the respondent and so the retirement, on expiry of the three months, period, from the date of the said notice, is automatic.

The Court observed that it is clear that since Rule is contemplated for such permission, unless such permission is granted, it cannot be said that the employee has retired from service automatically. In this case, admittedly, the S.B.I. has not accepted, in the order dated 2-5-1992, the application filed by the petitioner seeking permission to retire voluntarily. The Court relied upon the decision of the Apex Court in Power Finance Corporation Ltd. vs. P.K. Bhatia (1997 4 SCC 280) in which it was held that it is now settled legal position that unless the employee is relieved of the duty after acceptance of the offer of voluntary retirement or resignation, jural relationship of the employee and employer does not come to an end.

The Court further observed that the argument advanced on behalf of the petitioner that he is not an employee of S.B.I. on the date of passing of the order and so the impugned order has to be set aside, cannot be sustained. Since the permission as sought for by the petitioner was refuse, in the order of the S.B.I. dated 2-5-1992, it has to be construed that the petitioner has been continuing as an employee of the S.B.I.

Decision

The Court dismissed the writ petition and also rejected the claim of the petitioner for terminal benefits.

II. Lakshman Balaraman vs. Punjab National Bank, Mount Road Branch, Madras (Madras Law Journal, 1999, I, 482)

Facts

PNB had sanctioned a term loan and cash credit facilities to the first defendant company in December 1985. As per the request of the first defendant company the PNB had again sanctioned in October 1986 additional loan in the nature of cash credit pledge, Inland letter of credit and import letter of credit. Since the first defendant had violated the terms and conditions of the loans, the Punjab National Bank (PNB) had filed a Suit on the Original Side of the High Court against the defendants for recovery of more than Rs. 21 lakhs and interest at quarterly rests. When the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 came into force, the Suit was transferred before the Debts Recovery Tribunal.

After the case was transferred to the Tribunal, third defendant filed an Application contending that the transfer application was not maintainable before the tribunal and therefore, the matter has to be sent back to the High Court. The reason stated was that the loan was granted under two transactions and the same constitutes two different causes of action. Under Rule 10 of the Debt Recovery Tribunal (Procedure) Rules, 1993, an application must be confined to one cause of action, and if so made, the claim will be under Rs. 10 lakhs only and, therefore, the tribunal has no jurisdiction. Only for the purpose of getting jurisdiction of the tribunal, both the causes of action have been combined and a demand is made for more than Rs. 21 lakhs. Hence, it is contended that the Suit cannot be tried by the debt recovery tribunal. According to the PNB, in short, even though the loan was under two transactions, the intention was to treat the same as one cause of action. Further, the guarantee deeds are the same and so long as there is only one security, the causes of action cannot be split upon. Therefore, the tribunal has got jurisdiction to dispose of the case.

By the impugned order, the tribunal held that the transfer application is maintainable and dismissed the I.A. The same is challenged in this writ petition under Article 227 of the Constitution.

Issue

Whether the transfer application filed before the debt recovery tribunal is maintainable.

Observations

The Court observed that the important section that has to be taken into consideration is, Section 31 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, which reads thus :

"31. Transfer of pending cases:

(1) Every suit or other proceeding pending before any court immediately before the date of establishment of a tribunal under this Act, being a suit or proceeding the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal shall stand transferred on the date to such tribunal."

The Court observed that the purpose of the enactment is to provide for the establishment of tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Accordingly the debt recovery tribunals were established by the Central Government. The Court referred to a decision of the Karnataka High Court in Smt. Gerty Suvarna vs. Union of India & others, (I.L.R. 1998 Kar. 1151) in which similar question came for consideration. In that case the learned single Judge observed that there can be several reliefs based on a single cause of action and a single relief based on several causes of action. The bank’s application before the tribunal was based on more than a single cause of action. The Judge considered the question, namely, whether the application violates Rule 10 of the Debt Recovery Tribunal (Procedure) Rules, 1993. It was observed that the second part of Rule 10, permits reliefs, based on more than one cause of action being claimed in an application, provided they are so connected that seeking of one requires seeking of the other, either as on necessity or on account of a statutory mandate. Therefore, an application to recover the amounts due under two or more accounts is not barred by Rule 10, where the amounts we are covered by two or more mortgages of the same immovable property.

The Court also referred to the decision in M/s. Jay Jee Service Station, Bangalore and another vs. Syndicate Bank and another (1998 4 Karn. L.J.5). In this case the learned Judge observed as follows :

"The two transactions even though apparently independent may have an intrinsic co-relation with each other for one may be granted for the success of the other. In any such situation just because two sets of documents have been executed or two transactions have taken place at two different points of time may not by itself give rise to two causes of action. When viewed in the wider perspective, such transactions may constitute one single cause of action capable of being brought before the Tribunal in a single action for recovery of the debt claimed."

The Court observed that in view of the said decision, in which the correct interpretation of the section is given, the application before the tribunal cannot be rejected. The petitioner wanted loan facility from the bank for the purpose of an industry. When the first loan was availed, it was found to be not sufficient. Additional loan was sought for only for the purpose of fulfilment of the earlier claim. This case could be treated only on the basis of a single cause of action. The securities are the same, and the facilities were availed under a single deed of guarantee.

Decision

The Court held that Rule 10 is not violated since the case comes under an exception, and again it comes within the jurisdiction of the tribunal. The contention of learned counsel for the petitioner cannot be sustained. The civil revision petition is dismissed.

III. Union Bank of India, Tirunelveli Junction vs. Muthiah (Madras Law Journal, 1999 I 679)

Facts

The Union Bank of India (tenant) is the revision petitioner. The landlord had filed a rent control petition for fixation of fair rent. He wanted the Chairman of the Union Bank of India to be examined as witness on his side to decide the issue rightly. By the impugned order, the lower court allowed the application, which is now challenged in the revision petition.

Issue

Whether the application of the landlord for summoning the opposite party as witness is maintainable.

Observations

The Court observed that the procedure adopted by the lower court is per se illegal since it has been repeatedly held in various decisions that the practice of summoning opposite party as witness have to be deprecated, and the same will result to embarrass the judicial investigation.

In Shatrugan Das vs. Shak Das (AIR 1938 P.C. 59) it was held that the practice of calling the defendant as a witness to give evidence on behalf of the plaintiff is condemnable and in such a case the plaintiff must be treated as a person who puts the defendant forward as a witness of truth.

In Mallangowda vs. Gavisiddangowda (AIR 1959 Mys. 194) the Mysore High Court held that the practice of calling the opposite party as witness should not be countenanced as it is not in the interest of justice.

The Kerala High Court also had an occasion to consider the same position which is reported in Muhammad Kunju vs. Shahabudeen (1969 K.L.T. 170). It was held that "the practice of party causing his opponent to be summoned as a witness has to be disapproved. As a matter of right a party cannot have them opposite party examined as a witness".

In Gadamal vs. Bhulloo Ram (AIR 1951 J&K.5) it was held thus :

"It is a still more objectionable practice to cite opposite side as one’s own witness. This places the examination and cross-examination of such a witness in wrong hands, necessitates the criticism of the evidence by the side which has called it and this embarrasses fair trial and causes obstruction of justice."

Decision

The Court held that from the above settled legal position, it is clear that the impugned order cannot be sustained and that the lower court exceeded its jurisdiction in allowing the application. The impugned order was set aside and the civil revision petition was allowed.

IV. C.V. Raman vs. State Bank of India represented by its Deputy Managing Director (Personnel and Systems) Central Office, Bombay and another (MLJ 1999 1 708)

Facts

The petitioner was working as Branch Manager in SBI. In that capacity an allegation was made against him stating that he was favouring certain persons in the matter of grant of loan. The Regional Manager of the Bank issued a memo to the petitioner calling for his explanation on the said allegation which was based on the alleged complaint received from the members of the public. The petitioner submitted his explanation. The Bank issued charge-sheet to him. The enquiry officer was appointed and he submitted his report. On the basis of the said report the disciplinary authority came to the conclusion of removal of the petitioner from service. By order dated 22-21989 the second respondent agreeing with the conclusion of the disciplinary authority, imposed punishment on the petitioner for removal from service. Aggrieved by the said order, the petitioner preferred an appeal before the first respondent. The first respondent rejected the appeal by his proceedings dated 19-3-1990. The said order of rejection is impugned in this writ petition.

The learned counsel for the petitioner argued that the allegation has no basis, principles of natural justice have been violated and statement of witness were not produced during the course of domestic enquiry. The counsel also argued that the appellate authority has not properly considered the appeal while confirming the punishment of removal from service. According to the counsel, the provisions of Rule 51(2) of the SBI (Supervising Staff) Service Rules were not followed by the appellate authority who has not assigned any reasons in the order especially on the question of punishment.

Issue

The question to be decided by the Court was whether the appellate authority has considered the appeal as laid down under the provisions ofRule 51(2) of the State Bank of India (Supervising Staff) Service Rules.

Observations

Rule 51 (2) of the SBI Service Rules provides as follows :

"The authority whose order is appealed against shall forward the appeal together with its comments and records of the case to the appellate authority. The appellate authority shall consider whether the findings are justified and/or whether the penalty is excessive or inadequate and pass appropriate orders. The appellate authority may pass an order confirming, enhancing, reducing or setting aside the penalty or remitting the case to the authority which imposed the penalty or to any other authority with such direction as it deems fit in the circumstances of the case."

The counsel for the petitioner pointed out that there was no proper consideration of the appeal as laid down by the Supreme Court in Ram Chander vs. Union of India and others (AIR 1986 SC 1173). The Apex Court in the said judgement has laid down the law that the word ‘consider’, in the context in which it appears in Rule 22 (2) of the Railway Servants (Discipline and Appeal) Rules, 1968, must mean an objective consideration by the Railway Board after due application of mind which implies the giving of reasons for its decision.

The Court observed that the appellate authority should conform to the Regulations and relied upon the interpretation of the word ‘to consider’ by the Apex Court in the above cited judgement. The Court was of the view that the appellate authority did not consider the gravity of the punishment with reference to the facts and circumstances of the case and that the appellate authority has failed in its duty in considering whether the punishment of removal is proper under the particular circumstances of the case. The appellate authority did not consider the material on record in the light of Regulation 51(2) and did not consider whether the evidence recorded was sufficient for imposing the penalty.

Decision

The Court held that there was no proper application of mind by the appellate authority while considering the appeal preferred by the petitioner and the impugned order is vitiated on this ground. The writ petition was allowed.

V. Pukhrajmal Sugarmal Lunkad, Proprietor, Lunkad Finance, hereinafter, represented by Power Agent, Sri Uttamchand Galada vs. State Bank of Mysore & another

Facts

The second defendant approached the plaintiff for advancement of loan of Rs. 10 lakhs for their business. The first defendant, Madras branch of State Bank of Mysore (SBM) agreed to provide Bank guarantee for repayment of the sum of Rs. 10 lakhs with interest on behalf of the second defendant. Accordingly, a Bank guarantee was executed by the first defendant in favour of the plaintiff for a period of one year. The Bank guarantee can be invoked by the plaintiff within the stipulated time if the second defendant failed to pay the loan advanced.

Since the second defendant failed to pay the amount due to the plaintiff, the plaintiff called upon the first defendant, invoking the Bank guarantee, to pay the amount due to the plaintiff from the second defendant. The first defendant sent a letter to the plaintiff stating that the concerned officer of the SBM had issued the Bank guarantee at the instance of the second defendant without bringing the same into accounts or books maintained by the first defendant and without the approval of the controlling authority and that, therefore, the first defendant cannot be made liable on the basis of the Bank guarantee, which was said to have been fraudulently brought about. The plaintiff has filed this Civil Suit No. 260/1988 for recovery of the amount due by the second defendant, from the defendant jointly and severally. The first defendant, SBM resisted the suit claim, among others, on the ground that the alleged Bank guarantee is an outcome of fraud practiced by the Manager of the first defendant, plaintiff and the second defendant in collusion with one another. Therefore, according to the first defendant, the alleged Bank guarantee is wholly void and inoperative.

Issues

The main issues for consideration by the Court were whether the first defendant is liable to pay the amount claimed in the Suit and whether the first defendant is not liable for the Suit claim.

Observations

On the basis of the oral and documentary evidence, the Court held that the plaintiff has advanced a loan of Rs. 10 lakhs with interest to the second defendant on the strength of the Bank guarantee issued by the first defendant on behalf of the second defendant for a sum of Rs. 10 lakhs in favour of the plaintiff. The Court observed that there is absolutely no proof on the side of the first defendant that there was collusion between the parties for the alleged concocting of the Bank guarantee with a view to defraud the first defendant, SBM and therefore, such allegation made by the first defendant cannot be sustained.

The Court referred to and relied upon the following decisions :-

a)	United Commercial Bank vs. Hanuman Synthetics Ltd. and others (1987 61 C.C. 245).
b)	United Commercial Bank vs. Bank of India and others (1982 52 C.C. 186).
c)	UP Co-operative Federation Ltd. vs. Singh Consultants & Engineers Ltd. (1989 65 C.C. 283).
d)	State Trading Corporation of India Ltd. vs. Jainsons Clothing Corporation (AIR 1994 S.C. 2778).
e)	Hindustan Steel Works Construction Ltd. vs. G.S. Atwal & Company (Engineers) P. Ltd. (1996 85 C.C. 270).

The Court observed that the principles laid down in the cases cited above, would lead to infer that normally the Court should not interfere with the Bank guarantee given by the Banks in favour of the parties, unless fraud is pleaded and established by material evidence. Since the Court has held that the first defendant has failed to establish the alleged collusion or fraud between the parties, the Court was of the view that the first defendant cannot claim that the Bank guarantee is not valid and binding on the first defendant and that, therefore, not liable to the Suit claim.

Decision

The Court held that the first defendant, SBM is also liable to the Suit claim along with the second defendant jointly and severally and the plaintiff is entitled to a decree as prayed for and the Suit is decreed with costs.

VI. The Canara Bank Officer’s Association (Regd.) represented by its Vice-President, Madras vs. Canara Bank represented by Asst. General Manager, P.P. & A Section, G. Wing, H.O. Bangalore (MLJ 1999 3 240)

Facts

The petitioner has challenged Clauses 4 & 5 of the Circular dated 25-4-1989 bearing No. 138/89. The Clauses 4 & 5 imposes certain conditions on the eligibility for allotment of quarters to officers of Canara Bank in Middle Management Grade Scale II and above and officers in Junior Management Grade Scale I. In terms of Clause 4 no officer shall be eligible to be provided with quarters by the Bank at a centre/station where he/ she has a house in his/her own name or in the name of his/her spouse or a dependent child. In terms of Clause 5 if any officer has a house outside the Municipal Corporation, the Bank shall not take such house on lease and provide for self occupation. Such officers will be eligible for only HRA.

The contention of the petitioners is that the refusal of the facility of the Bank quarters, holding them to be ineligible for the same, merely because they owned their own house in the same centre where they were working, would be arbitrary and discriminatory and Clauses 4 & 5, which authorises the Bank to take such steps, are invalid being contrary to Article 14 of the Constitution. It is further pointed out that the provision is also impracticable as the house owned by the concerned officer may not be commensurate to his own needs or to his entitlement, considering his status and seniority as a Bank officer.

The respondent - Bank opposed the petition on various grounds. It is pointed out that the Circular is on account of the clear instructions by the Central Government, which instructions were binding on the Bank. The respondent then points out that the Board’s resolution issuing these instructions is exact replica of the said instructions of the Central Government. The Bank pleads that the service regulation, more particularly Regulation No. 25 very specifically provides that no officers of the Bank shall be entitled as of right to have a quarter and it is merely a facility given by the Bank.

Issue

Whether the challenge of unreasonableness and arbitrariness to the said provisions of the Circular is in any way justified.

Observations

The Court referred to the provisions of Clause 25 of the Service Regulations and observed that, it is clear that basically, there is no entitlement or right in favour of any Bank officer for a residential accommodation and it is merely a facility given by the Bank. The question for consideration was whether the Bank has discriminated, as it has refused to give the quarters to such officers, who own their houses/flats in the same city where they served.

The Court pointed out that their is a clear distinction made between the officers who owned their own flats and the officers who did not own any such houses. In the case of officers who owned houses, there is an advantage to them that they would have the benefit in letting out their flats or utilising it for their now benefits. Such officers, who were declared ineligble, could all the same claim the House Rent Allowance. The Court was of the view that if the management was in favour of those officers who did not have any house and declared the house owners/officers ineligible for allotment of quarters, it cannot be said that there is anything arbitrary and/or discrimatory in this attitude.

The Court observed that in order to raise a contention that it was not within the power of the Central Government to issue the guidelines and in pursuance of such guidelines, no resolution could be passed by the Bank’s Board, it is imperative that the Central Government was impleaded as a party to this writ petition and secondly, the validity of the Board resolution was itself challenged. Both these aspects are conspicuously absent in the petition.

The Court observed that in the Bank the percentages of HRA have been revised and the maximum limit of HRA payable has been removed. The HRA is given as of right, while allotment of quarters is only by eligibility and by way of a facility. There can be no comparison between those two concepts.

Decision

The Court held that the writ petition has absolutely no merits and dismissed the same and ordered costs of Rs. 5000/- to be paid to the respondent.

VII. M.N. Pavithran vs. Central Bank of India, Zonal Office represented by Asst. General Manager and another (MLJ 1999 3 301)

Facts

The petitioners an officer in the respondent Bank was issued a charge-sheet by the Bank on various charges including that of misconduct. The enquiry officer after holding the enquiry submitted his report in which the petitioner was found guilty of five charges out of 12 charges. But the disciplinary authority took a different view and found the petitioner guilty of charges, 3, 5, 6, 9, 10, 11 and 12. The disciplinary authority imposed the punishment of dismissal on the petitioner without notice in terms of Regulation 4 of C.B.I. Officer Employees (Discipline and Appeal) Regulations, 1976. The said orders are impugned in the writ petition. The petitioner has prayed for quashing of the said orders and to direct the respondents to reinstate the petitioner and pay all the monetary benefits.

Issue

Whether the disciplinary authority has violated the principles of natural justice.

Observations

The main ground of attack made on behalf of the petitioner was that the disciplinary authority, who disagreed with the findings of the enquiry officer, ought to have given an opportunity to the petitioner calling for his explanation and issued the show cause notice. Hence it is argued by the counsel for the petitioner that the disciplinary authority has violated the principles of natural justice and on this ground alone, the impugned orders are liable to be quashed.

The counsel for the petitioner relief upon the decision of the Apex Court in Punjab National Bank and others vs. Kunj Behari Misra and another (1998 2 L.L.J. 809) in which it was held that when the disciplinary authority disagrees with the findings of the enquiry authority, there is a need to follow the principles of natural justice by giving opportunity of hearing. The Apex court has further held that the delinquent officer has to be given opportunity to file representation before the final decision of imposing penalty is taken. The Court referred to another decision of the Apex Court in Railway Board vs. Niranjan Singy (AIR 1969 SC 966) in which it was held that the disciplinary authority is not bound by the conclusion reached by the enquiry committee.

The Court was of the view that in the present case the respondents have not given an opportunity tot he delinquent to represent his case before the disciplinary authority who disagreed with the findings of the enquiry officer. The petitioner did not have an opportunity to persuade the disciplinary authority to accept favourable conclusion of the enquiry officer. Hence, under the circumstances the Court held that the disciplinary authority has violated the principles of natural justice, following the decision of the Apex Court in Punjab National Bank’s case.

Decision

The impugned orders were quashed and a direction was issued to the respondents to release the retirement benefits to the petitioner. The writ petition was allowed.

The publisher claims a right as a private business concern to select its customers and to refuse to accept advertisements from whomever it pleases. We do not dispute that general right. "But the word ‘right’ is one of the most deceptive of pitfalls; it is so easy to slip from a qualified meaning in the premise to an unqualified one in the conclusion. Most rights are qualified." American Bank & Trust Co. v. Federal Bank, 256 U.S. 350, 358. The right claimed by the publisher is neither absolute nor exempt from regulation.

- BURTON, Harold H., Lorain Journal v. United States, 342 U.S. 143, 155 (1951)

LEGISLATION SECTION

The Prevention of Terrorism Act, 2002

ACT NO. 15 OF 2002*

An Act to make provisions for the prevention of, and for dealing with, terrorist activities and for matters connected therewith. BE it enacted by Parliament in the Fifty-third Year of the Republic of India as follows:-

CHAPTER I

Preliminary

1. Short title, application, commencement, duration and savings.-

(1) This Act may be called the Prevention of Terrorism Act, 2002.

(2) It extends to the whole of India.

(3) Every person shall be liable to punishment under this Act for every act or omission contrary to the provisions thereof, of which he is held guilty in India.

(4) Any person who commits an offence beyond India which is punishable under this Act shall be dealt with according to the provisions of this Act in the same manner as if such act had been committed in India.

(5) The provisions of this Act apply also to-

(a) citizens of India outside India;

(b) persons in the service of the Government, wherever they may be; and

(c) persons on ships and aircrafts, registered in India, wherever they may be.

(6) Save as otherwise provided in respect of entries at serial numbers 24 and 25 of the Schedule

(a) the previous operation of, or anything duly done or suffered under this Act, or

(b) any right, privilege, obligation or liability acquired, accrued or incurred under this Act, or

(c) any penalty, forfeiture or punishment incurred in respect of any offence under this Act, or

(d) any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and, any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if this Act had not expired.

2. Definitions.- (1) In this Act, unless the context otherwise requires,-

(a) "Code" means the Code of Criminal Procedure, 1973 (2 of 1974);

(b) "Designated Authority" shall mean such officer of the Central Government not below the rank of Joint Secretary to the Government, or such officer of the State Government not below the rank of Secretary to the Government, as the case may be, as may be specified by the Central Government or, as the case may be, the State Government, by a notification published in the Official Gazette;

(c) "proceeds of terrorism" shall mean all kinds of properties which have been derived or obtained from commission of any terrorist act or have been acquired through funds traceable to a terrorist act, and shall include cash irrespective of person in whose name such proceeds are standing or in whose possession they are found;

(d) "property" means property and assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and deeds and instruments evidencing title to, or interest in, such property or assets and includes bank account

(e) "Public Prosecutor" means a Public Prosecutor or an Additional Public Prosecutor or a Special Public Prosecutor appointed under section 28 and includes any person acting under the directions of the Public Prosecutor;

(f) "Special Court" means a Special Court constituted under section 23;

(g) "terrorist act" has the meaning assigned to it in sub-section (1) of section 3, and the expression "terrorist" shall be construed accordingly;

(h) "State Government", in relation to a Union territory, means the Administrator thereof;

(i) words and expressions used but not defined in this Act and defined in the Code shall have the meanings respectively assigned to them in the Code.

(2) Any reference in this Act to any enactment or any provision thereof shall, in relation to an area in which such enactment or such provision is not in force, be construed as a reference to the corresponding law or the relevant provision of the corresponding law, if any, in force in that area.

CHAPTER II

Punishment for, and Measures for Dealing with, Terrorist Activities

3. Punishment for terrorist acts.

(1) Whoeve

(a) with intent to threaten the unity, integrity, security or sovereignty of India or to strike terror in the people or any section of the people does any act or thing by using bombs, dynamite or other explosive substances or inflammable substances or fire arms or other lethal weapons or poisons or noxious gases or other chemicals or by any other substances (whether biological or otherwise) of a hazardous nature or by any other means whatsoever, in such a manner as to cause, or likely to cause, death of, injuries to any person or persons or loss of, or damage to, or destruction of, property or disruption of any supplies or services essential to the life of the community or causes damage or destruction of any property or equipment used or intended to be used for the defence of India or in connection with any other purposes of the Government of India, any State Government or any of their agencies, or detains any person and threatens to kill or injure such person in order to compel the Government or any other person to do or abstain from doing any act;

(b) is or continues to be a member of an association declared unlawful under the Unlawful Activities (Prevention) Act, 1967 (37 of 1967), or voluntarily does an act aiding or promoting in any manner the objects of such association and in either case is in possession of any unlicensed firearms, ammunition, explosive or other instrument or substance capable of causing mass destruction and commits any act resulting in loss of human life or grievous injury to any person or causes significant damage to any property, commits a terrorist act.

Explanation.- For the purposes of this sub-section, "a terrorist act" shall include the act of raising funds intended for the purpose of terrorism.

(2) Whoever commits a terrorist act, shall,-

(a) if such act has resulted in the death of any person, be punishable with death or imprisonment for life and shall also be liable to fine;

(b) in any other case, be punishable with imprisonment for a term which shall not be less than five years but which may extend to imprisonment for life and shall also be liable to fine.

(3) Whoever conspires or attempts to commit, or advocates, abets, advises or incites or knowingly facilitates the commission of, a terrorist act or any act preparatory to a terrorist act, shall be punishable with imprisonment for a term which shall not be less than five years but which may extend to imprisonment for life and shall also be liable to fine.

(4) Whoever voluntarily harbours or conceals, or attempts to harbour or conceal any person knowing that such person is a terrorist shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to imprisonment for life and shall also be liable to fine:

Provided that this sub-section shall not apply to any case in which the harbour or concealment is by the husband or wife of the offender.

(5) Any person who is a member of a terrorist gang or a terrorist organisation, which is involved in terrorist acts, shall be punishable with imprisonment for a term which may extend to imprisonment for life or with fine which may extend to rupees ten lakh or with both.

Explanation.- For the purposes of this subsection, "terrorist organisation" means an organisation which is concerned with or involved in terrorism.

(6) Whoever knowingly holds any property derived or obtained from commission of any terrorist act or has been acquired through the terrorist funds shall be punishable with imprisonment for a term which may extend to imprisonment for life or with fine which may extend to rupees ten lakh or with both.

(7) Whoever threatens any person who is a witness or any other person in whom such witness may be interested, with violence, or wrongfully restrains or confines the witness, or any other person in whom the witness may be interested, or does any other unlawful act with the said intent, shall be punishable with imprisonment which may extend to three years and fine.

4. Possession of certain unauthorized arms, etc.- Where any person is in unauthorised possession of any-

(a) arms or ammunition specified in columns (2) and (3) of Category I or Category III (a) of Schedule I to the Arms Rules, 1962, in a notified area,

(b) bombs, dynamite or hazardous explosive substances or other lethal weapons capable of mass destruction or biological or chemical substances of warfare in any area, whether notified or not, he shall be guilty of terrorist act notwithstanding anything contained in any other law for the time being in force, and be punishable with imprisonment for a term which may extend to imprisonment for life or with fine which may extend to rupees ten lakh or with both.

Explanation.-In this section, "notified area" means such area as the State Government may, by notification in the Official Gazette, specify.

5. Enhanced penalties.

(1) If any person with intent to aid any terrorist contravenes any provision of, or any rule made under the Explosives Act, 1884 (4 of 1884), the Explosive Substances Act, 1908 (6 of 1908), the Inflammable Substances Act, 1952 (20 of 1952) or the Arms Act, 1959 (54 of 1959), he shall, notwithstanding anything contained in any of the aforesaid Acts or the rules made thereunder, be punishable with imprisonment for a term which may extend to imprisonment for life and shall also be liable to fine.

(2) For the purposes of this section, any person who attempts to contravene or abets, or does any act preparatory to the contravention of any provision of any law, rule or order, shall be deemed to have contravened that provision, and the provisions of sub-section (1) shall, in relation to such person, have effect subject to the modification that the reference to "imprisonment for life" shall be construed as a reference to "imprisonment for ten years".

6 Holding of proceeds of terrorism illegal.-

(1) No person shall hold or be in possession of any proceeds of terrorism.

(2) Proceeds of terrorism, whether held by a terrorist or by any other person and whether or not such person is prosecuted or convicted under this Act, shall be liable to be forfeited to the Central Government or the State Government, as the case may be, in the manner provided under this Chapter.

7. Powers of investigating officers and appeal against order of Designated Authority.-

(1) If an officer (not below the rank of Superintendent of Police) investigating an offence committed under this Act, has reason to believe that any property in relation to which an investigation is being conducted, represents proceeds of terrorism, he shall, with the prior approval in writing of the Director General of the Police of the State in which such property is situated, make an order seizing such property and where it is not practicable to seize such property, make an order of attachment directing that such property shall not be transferred or otherwise dealt with except with the prior permission of the officer making such order, or of the Designated Authority before whom the properties seized or attached are produced and a copy of such order shall be served on the person concerned.

(2) For the removal of doubts, it is hereby provided that where an organisation is declared as a terrorist organisation under this Act and the investigating officer has reason to believe that any person has custody of any property which is being used or intended to be used for the purpose of such terrorist organisation, he may, by an order in writing, seize or attach such property.

(3) The investigating officer shall duly inform the Designated Authority within forty-eight hours of the seizure or attachment of such property.

(4) It shall be open to the Designated Authority before whom the seized or attached properties are produced either to confirm or revoke the order of attachment so issued:

Provided that an opportunity of making a representation by the person whose property is being attached shall be given.

(5) In the case of immovable property attached by the investigating officer, it shall be deemed to have been produced before the Designated Authority, when the investigating officer notifies his report and places it at the disposal of the Designated Authority.

(6) The investigating officer may seize and detain any cash to which this Chapter applies if he has reasonable grounds for suspecting that-

(a) it is intended to be used for the purposes of terrorism;

(b) it forms the whole or part of the resources of an organisation declared as terrorist organisation under this Act:

Provided that the cash seized under this sub-section by the investigating officer shall be released not later than the period of forty-eight hours beginning with the time when it is seized unless the matter involving the cash is before the Designated Authority and such Authority passes an order allowing its retention beyond forty-eight hours.

Explanation.-For the purposes of this sub-section, "cash" means-

(a) coins and notes in any currency;

(b) postal orders;

(c) traveller's cheques;

(d) banker's drafts; and

(e) such other monetary instruments as the Central Government or, as the case may be, the State Government may specify by an order made in writing.

(7) Any person aggrieved by an order made by the Designated Authority may prefer an appeal to the Special Court and the Special Court may either confirm the order of attachment of property or seizure so made or revoke such order and release the property.

(8). Forfeiture of proceeds of terrorism.- Where any property is seized or attached on the ground that it constitutes proceeds of terrorism and the Special Court is satisfied in this regard under sub-section (7) of section 7, it may order forfeiture of such property, whether or not the person from whose possession it is seized or attached, is prosecuted in a Special Court for an offence under this Act.

9. Issue of show cause notice before forfeiture of proceeds of terrorism.-

(1) No order forfeiting any proceeds of terrorism shall be made under section 8 unless the person holding or in possession of such proceeds is given a notice in writing informing him of the grounds on which it is proposed to forfeit the proceeds of terrorism and such person is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of forfeiture an is also given a reasonable opportunity of being heard in the matter.

(2) No order of forfeiture shall be made under sub-section (1) if such person establishes that he is a bona fide transferee of such proceeds for value without knowing that they represent proceeds of terrorism.

(3) It shall be competent for the Special Court to make an order in respect of property seized or attached,-

(a) directing it to be sold if it is a perishable property and the provisions of section 459 of the Code shall, as nearly as may be practicable, apply to the net proceeds of such sale;

(b) nominating any officer of the Central or State Government, in the case of any other property, to perform the function of the Administrator of such property subject to such conditions as may be specified by the Special Court.

10. Appeal.-

(1) Any person aggrieved by an order of forfeiture under section 8 may, within one month from the date of the receipt of such order, appeal to the High Court within whose jurisdiction, the Special Court, who passed the order appealed against, is situated.

(2) Where an order under section 8 is modified or annulled by the High Court or where in a prosecution instituted for the contravention of the provisions of this Act, the person against whom an order of forfeiture has been made under section 8 is acquitted, such property shall be returned to him and in either case if it is not possible for any reason to return the forfeited property, such person shall be paid the price therefor as if the property had been sold to the Central Government with reasonable interest calculated from the day of seizure of the property and such price shall be determined in the manner prescribed.

11. Order of forfeiture not to interfere with other punishments.- The order of forfeiture made under this Act by the Special Court, shall not prevent the infliction of any other punishment to which the person affected thereby is liable under this Act.

12. Claims by third party.-

(1) Where any claim is preferred, or any objection is made to the seizure of any property under section 7 on the ground that such property is not liable to seizure, the Designated Authority before whom such property is produced shall proceed to investigate the claim or objection:

Provided that no such investigation shall be made where the Designated Authority considers that the claim or objection is designed to cause unnecessary delay.

(2) In case claimant or objector establishes that the property specified in the notice issued under section 9 is not liable to be forfeited under the Act, the said notice shall be withdrawn or modified accordingly.

13. Powers of Designated Authority.- The Designated Authority, acting under the provisions of this Act, shall have all the powers of a civil court required for making a full and fair enquiry into the matter before it.

14 Obligation to furnish information.-

(1) Notwithstanding anything contained in any other law, the officer investigating any offence under this Act, with prior approval in writing of an officer not below the rank of a Superintendent of Police, may require any officer or authority of the Central Government or a State Government or a local authority or a bank, or a company, or a firm or any other institution, establishment, organisation or any individual to furnish information in their possession in relation to such offence, on points or matters,where the investigating officer has reason to believe that such information will be useful for, or relevant to, the purposes of this Act.

(2) Failure to furnish the information called for under sub-section (1)or deliberately furnishing false information shall be punishable with imprisonment for a term which may extend to three years or with fine or with both.

(3) Notwithstanding anything contained in the Code, the offence under sub-section (1) shall be tried as a summary case and the procedure prescribed in Chapter XXI of the said Code [except sub-section (2) of section 262] shall be applicable thereto.

15. Certain transfers to be null and void.-Where, after the issue of an order under section 7 or issue of a notice under section 9, any property referred to in the said order or notice is transferred by any mode whatsoever, such transfer shall, for the purpose of the proceedings under this Act, be ignored and if such property is subsequently forfeited, the transfer of such property shall be deemed to be null and void.

16. Forfeiture of property of certain persons.-

(1) Where any person is accused of any offence under this Act, it shall be open to the Special Court trying him to pass an order that all or any of the properties, movable or immovable or both belonging to him, shall, during the period of such trial, be attached, if not already attached under this Act.

(2) Where a person has been convicted of any offence punishable under this Act, the Special Court may, in addition to awarding any punishment, by order in writing, declare that any property, movable or immovable or both, belonging to the accused and specified in the order, shall stand forfeited to the Central Government or the State Government, as the case may be, free from all encumbrances.

17. Company to transfer shares to Government.- Where any shares in a company stand forfeited to the Central Government or the State Government, as the case may be, under this Act, then, the company shall, on receipt of the order of the Special Court, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or the articles of association of the company, forthwith register the Central Government or the State Government, as the case may be, as the transferee of such shares.

CHAPTER III

Terrorist Organisations

18. Declaration of an organization as a terrorist organization.-

(1) For the purposes of this Act, an organisation is a terrorist organisation if-

(a) it is listed in the Schedule, or

(b) it operates under the same name as an organisation listed in that Schedule.

(2) The Central Government may by order, in the Official Gazette,-

(a) add an organisation to the Schedule;

(b) remove an organisation from that Schedule;

(c) amend that Schedule in some other way.

(3) The Central Government may exercise its power under clause(a) of sub-section (2) in respect of an organisation only if it believes that it is involved in terrorism.

(4) For the purposes of sub-section (3), an organisation shall be deemed to be involved in terrorism if it-

(a) commits or participates in acts of terrorism,

(b) prepares for terrorism,

(c) promotes or encourages terrorism, or

(d) is otherwise involved in terrorism.

19. Denotification of a terrorist organization.-

(1) An application may be made to the Central Government for the exercise of its power under clause (b) of sub-section (2) of section 18 to remove an organisation from the Schedule.

(2) An application may be made by-

(a) the organisation, or

(b) any person affected by inclusion of the organisation in the Schedule as a terrorist organisation.

(3) The Central Government may make rules to prescribe the procedure for admission and disposal of an application made under this section.

(4) Where an application under sub-section (1) has been refused, the applicant may apply for a review to the Review Committee constituted by the Central Government under sub-section (1) of section 60 within one month from the date of receipt of the order by the applicant.

(5) The Review Committee may allow an application for review against refusal to remove an organisation from the Schedule, if it considers that the decision to refuse was flawed when considered in the light of the principles applicable on an application for judicial review.

(6) Where the Review Committee allows review under sub-section (5) by or in respect of an organisation, it may make an order under this sub-section.

(7) Where an order is made under sub-section (6), the Central Government shall, as soon as the certified copy of the order is received by it, make an order removing the organisation from the list in the Schedule.

20. Offence relating to membership of a terrorist organization.-

(1) A person commits an offence if he belongs or professes to belong to a terrorist organisation:

Provided that this sub-section shall not apply where the person charged is able to prove-

(a) that the organisation was not declared as a terrorist organisation at the time when he became a member or began to profess to be a member; and

(b) that he has not taken part in the activities of the organisation at any time during its inclusion in the Schedule as a terrorist organisation.

(2) A person guilty of an offence under this section shall be liable, on conviction, to imprisonment for a term not exceeding ten years or with fine or with both.

21. Offence relating to support given to a terrorist organization.-

(1) A person commits an offence if-

(a) he invites support for a terrorist organisation, and

(b) the support is not, or is not restricted to, the provision of money or other property within the meaning of section 22.

(2) A person commits an offence if he arranges, manages or assists in arranging or managing a meeting which he knows is-

(a) to support a terrorist organisation, or

(b) to further the activities of a terrorist organisation, or

(c) to be addressed by a person who belongs or professes to belong to a terrorist organisation.

(3) A person commits an offence if he addresses a meeting for the purpose of encouraging support for a terrorist organisation or to further its activities.

(4) A person guilty of an offence under this section shall be liable on conviction, to imprisonment for a term not exceeding ten years or with fine or with both.

Explanation.- For the purposes of this section, the expression "meeting" means a meeting of three or more persons whether or not the public are admitted.

22. Fund raising for a terrorist organization to be an offence.-

(1) A person commits an offence if he-

(a) invites another to provide money or other property, and

(b) intends that it should be used, or has reasonable cause to suspect that it may be used, for the purposes of terrorism.

(2) A person commits an offence if he-

(a) receives money or other property, and

(b) intends that it should be used, or has reasonable cause to suspect that it may be used, for the purposes of terrorism.

(3) A person commits an offence if he-

(a) provides money or other property, and

(b) knows or has reasonable cause to suspect that it will or may be used for the purposes of terrorism.

(4) In this section, a reference to the provision of money or other property is a reference to its being given, lent or otherwise made available, whether or not for consideration.

(5) A person guilty of an offence under this section shall be liable on conviction, to imprisonment for a term not exceeding fourteen years or with fine or with both.

CHAPTER IV

Special Courts

23. Special Courts.-

(1) The Central Government or a State Government may, by notification in the Official Gazette, constitute one or more Special Courts for such area or areas, or for such case or class or group of cases, as may be specified in the notification.

(2) Where a notification constituting a Special Court for any area or areas or for any case or class or group of cases is issued by the Central Government under sub-section (1), and a notification constituting a Special Court for the same area or areas for the same case or class or group of cases has also been issued by the State Government under that sub-section, the Special Court constituted by the Central Government, whether the notification constituting such Court is issued before or after the issue of the notification constituting the Special Court by the State Government, shall have, and the Special Court constituted by the State Government shall not have, jurisdiction to try any offence committed in that area or areas or, as the case may be, th case or class or group of cases and all cases pending before any Special Court constituted by the State Government shall stand transferred to the Special Court constituted by the Central Government.

(3) Where any question arises as to the jurisdiction of any Special Court, it shall be referred to the Central Government whose decision in the matter shall be final.

(4) A Special Court shall be presided over by a judge to be appointed by the Central Government or, as the case may be, the State Government, with the concurrence of the Chief Justice of the High Court.

(5) The Central Government or, as the case may be, the State Government may also appoint, with the concurrence of the Chief Justice of the High Court, additional judges to exercise jurisdiction of a Special Court.

(To be continued)

BIBLIOGRAPHY & BOOK REVIEW

Select Bibliography

V. Raghavendra Prasad
Legal Officer

Akhilesh R. Bhargava, "SICA's Obituary", (2002) 35 SCL 28 - highlights the weaknesses of the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 which proposes to repeal the SICA and entrust the task of dealing with industrial sickness to the National Company Law Tribunal proposed to be set up under the Companies Act, 1956.

Akhilesh R. Bhargava, " Creation & Enforcement of Security Interests by Banks Bill, 2001, -Nipping NPAs in the Bud," (2002) 35 SCL 82 -highlights the salient features of the proposed legislation titled "Creation and Enforcement of Security Interests by Banks and Financial Institutions Bill, 2001" as the existing laws being incapable of dealing with the menace of NPAs effectively.

DR. K.R.Chandratre, "Auditor's Duty of Care and Liability for Negligence: Recent Judicial Exposition", (2002) 35 SCL 109 - discusses questions like what is the nature of an auditor's duty of care in the matter of making his audit report and how far is he liable for negligence in performance of his duty in case of misstatements in his report, in the light of judgements rendered in a number of English cases, especially the judgment of the House of Lords in this case of Caparo Industries Ltd. v. Dickman (1990) BCC 164.

DR. S.K. Tuteja, "A Case for Enactment of Law to Introduce Limited Partnership as a Business Entity in India ", (2002) 35 SCL 173 - notes that limited partnership form of business has been operating in several western countries viz., Italy, UK, France and Germany successfully for a very long time and gives a brief descriptive account of the salient features of a limited partnership and various legal requirements connected with it and makes several suggestions for modifications thereof while introducing this new form of business entity in India, keeping in view the conditions prevailing here.

Dharini Mathur And Shilpa Mankar, "Independent Directors on Corporate Boards in India: Role and Positioning", (2002) 36 SCL 121 -discusses the necessity and desirability of appointing a certain number of independent directors on corporate boards and identify three areas in which independent directors have a special role to play, viz., as members of the remuneration committee, the nomination committees and the audit committees.

G.D. Agrawal, "Producer Companies - Under the Companies (Second Amendment) Bill, 2001", (2002) 35 SCL 20 - looks at the salient features of the Companies (Second Amendment) Bill, 2001, introduced in the Lok Sabha on August 31, 2001 which aims at amending the Companies Act, 1946, so as to provide for conversion of existing inter-state co-operative societies into companies and formation of companies which will conduct business which is at present being carried on in the form of a co-operative society and bring out their implications - the new type of company, which will function on co-operative principles of mutual assistance and patronage, will be known as a producer company.

G.M. Ramamurthy, "Judicial Interpretation of Non-obstante Clause", (2002) 35 SCL 115 - explains the nature, meaning, scope and effect of a non-obstante clause in the light of several pronouncements of the Supreme Court.

Gopal Chalam & Shashikala Rao, " Independent Directors - Concept and Role", (2002) 35 SCL 86 - discusses the concept of `independent directors', focussing especially on the concept of independence in this context and on the role of independent directors in ensuring the growth and prosperity of a company in the direction of good corporate governance.

Hari Shankar, "An Unjustified Levy", (2002) 35 SCL 11 - examines and discusses the proposal contained in the Companies (Amendment) Bill 2001 for amendment of the Companies Act, 1956 by insertion of sections 441A to 441F to provide for the levy of a cess on companies for the purpose of revival or rehabilitation of a sick company or for the production of assets of sick companies and criticises the proposal mainly on the ground that a company which is not a sick company will be made to pay for the misdeeds of the management of another company which is sick.

Lt. Col. Rajindra Kuma Tripathi, "An introduction to Cyber Evidence", AIR 2002 Journal 34 -elucidates the provisions of Section 4 of Information Technology Act 2000 in respect of legal recognition of Electronic Records and Section 65B relating to admissibility of electronic records and opined that I.T. Act 2000 is in its infancy and there is a great scope of bringing out further amendments in the Indian Evidence Act with the passage of time.

M.A. Sujan, "Accountability of an Arbitrator" AIR 2002 Journal 66 - analyses the point of accountability of an arbitrator in the arbitration proceedings with the help of case law and highlights that arbitrator is required to use the power conferred on him under Arbitration Agreement and in case the Arbitrator uses that power malafide, then the arbitrator is liable for damages in contract and in tort.

N. Sridharan, "Repeal of SICA - Blow to Existing Sick Industrial Companies", (2002) 35 SCL 101 - brings out salient features of the new legal framework proposed to be enshrined in the Companies Act, 1956 for rehabilitation/revival/ protection of sick industrial companies, or their winding up, if necessary - opines that the proposed new provisions are better than the old ones and points out that certain problems of the existing BIFR companies which fall under the purview of the SICA need be taken care of.

N. Vijia Kumar, "Private Banks - Whether Amenable to Writ Jurisdiction of High Court ", (2002) 35 SCL 52 - elucidates and analyses on the basis of several judgements of the Apex Court as well as a recent judgement of the Allahabad High Court, that even private banks are amenable to the writ jurisdiction of the High Court under article 226 of the Constitution of India.

N. Vijia Kumar, "Transfer of Shares - Pre-emptive Provisions - Whether Valid and Permissible", (2002) 35 SCL 122 - analyses the issue whether an agreement which puts a pre-emptive restriction on the transfer of shares of a company is legally valid- brings out various facets of the issue in the light of relevant statutory provisions, expert academic opinion and, several judicial pronouncements including a recent judgment of the Andhra Pradesh High Court and concludes by observing that there is no authoritative pronouncement on the issue from the Supreme Court.

R. Ramkumar, "Implications of New Income-tax Rules on Valuation of Perquisites for Managerial Remuneration under Companies Act", (2002) 36 SCL 115 -gives a concise descriptive account of valuation of perquisites given by public companies to their managerial personnel.

R. Thangamani, "Voting By Postal Ballot - Some Practical Aspects", (2002)36 SCL 109 -examines and discusses the procedure required to be followed by a company under the newly introduced section 192A of the Companies Act,1956, wherein a listed public company may get passed by postal ballot any resolution otherwise required to be passed at the general meeting.

R. Thangamani, "Companies (Amendment) Bill, 2001: Some Questionable Definitions", (2002) 36 SCL 41 - examines definitions of certain key terms as given in the Companies (Amendment) Bill, 2001 and highlights certain defects therein which need to be removed to forestall confusion and avoidable litigation - the proposed bill incorporates the provisions to take care of matters pertaining to revival, rehabilitation or winding up of sick industrial companies.

Rajesh Relan, "Companies (Amendment) Bill, 2001: A Bird's Eye-view",(2002)36 SCL 14 -critically examines the new provisions incorporated under the Companies Act, 1956 by amending it through the Companies (Amendment) Bill, 2001, especially those relating to the establishment of the National Company Law Tribunal (NCLT) which will be the central body empowered to deal with the issues of recognition of industrial sickness, revival/rehabilitation/winding up sick industrial companies and related matters.

Rumeer Shah, "Directors and Officers Liability Insurance", (2002) 36 SCL 121 - sketches out the salient features of the insurance policy, popularly known as "Directors and Officers liability cover."

S. Murlidharan, "A critical View of Certain New Company Law Provisions", (2002) 35 SCL 69 -critically examines certain provisions newly introduced by the Companies (Amendment) Act, 2000 in the Companies Act, 1956 - however, while welcoming the provision which makes it mandatory for a company with a paid-up capital of not less than rupees five crore to set up an audit committee, the author criticises the ambiguity in this provision regarding the right of the company's board of directors to accept or reject the recommendation of the Audit Committee and analyses some of the lacunas in the newly added clause (g) of section 274 pertaining to disqualification for holding a directorship in a company.

S. Murlidharan, " Why Subsidiaries At All", (2002) 35 SCL 17 - examines the usefulness and reasons for establishment of subsidiary companies.

S. Venugopalan, "Highlights of the Companies (Amendment) Bill, 2001", (2002) 35 SCL 14 -notes that the Companies (Amendment) Bill, 2001, presented before the Parliament on August 30, 2001, aims at amending the Companies Act, 1956 to introduce therein some important international legal practices regarding the functioning of the corporate world and brings out the highlights of the Bill in a succinct manner.

S.Venugopalan, "Companies (Amendment) Bill,2001",(2002)35 SCL 73 - examines salient features of the two Bills introduced by the Parliament viz., Companies (Amendment) Bill,2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 and focuses on the proposed new procedure for winding up of a sick industrial company.

S.Venugopalan, "Producer Company": A New Concept", (2002) 36 SCL 104 - gives a bird's eye view of the salient features of the proposed Companies (Second Amendment) Bill, 2001 (the Bill) introduced in the Parliament based on the recommendations of the Y.K. Alagh Committee, which would enable a co-operative business to be run in the form of a company to be called a `producer company'

Shakti Prosad Datta Purkayastha, "Fake compromises and remedies against vis-à-vis the Code of Civil Procedure, 1908" , AIR 2002 Journal 31 - examines in detail the provisions relating to compromise decree under order XXIII, Rule 3 of the Civil Procedure Code and suggest that some remedy to the aggrieved party in respect of vitiated compromise decrees filed before the Trial Court itself even after disposal of suit, may kindly be provided by necessary legislation or amendments of the Code, so that the same can be pursued as of right.

Sivadas Chettoor, "Whether 'Deposit' Includes 'loan' under section 3(1) (iii) d) of the Companies Act, 1956", (2002) 35 SCL 31 - analyses section 3(1) (iii) (d) of the Companies Act, 1956, as amended by the Companies (Amendment) Act, 2000, wherein a private company is prohibited from inviting or accepting deposits from persons other than its members and directors of their relatives - opines that the term 'deposit' does not include 'loan' for the purposes of section 3(1) (iii) (d).

Suresh Thakur Desai, "Corporate Governance: Its Meaning and Scope", (2002) 35 SCL 94 -discusses the meaning and scope of corporate governance, with special reference to India and highlights the necessity of a divorce between ownership and management and reinforcement of management by making it truly professional and independent.

T.K.A. Padmanabhan, "Maintenance of Minute Books and Registers in Electronic Form", (2002) 35 SCL 6 - discusses the purpose of maintaining certain registers, commonly known as statutory registers, such as the register of members, the register of directors, the register of directors shareholding, etc. in electronic form and the legal requirements to be fulfilled under the Companies Act in view of the passing of Information Technology Act, 2000 - and points out that better infrastructural facilities to be developed for putting electronic corporate governance on a firm footing.

Uday M. Chitale, "Conciliation - An Effective way to Settle Commercial Disputes", (2002) 36 SCL 5 - presents a lucid and comprehensive account of conciliation as a technique of resolving commercial disputes and brings out its advantages over the conventional methods of litigation and arbitration and also outlined salient features of the Arbitration and Conciliation Act, 1996.

Vijay Kumar Gaba, "Demutualization of Stock Exchanges", (2002) 35 SCL 57 -explains the concept of demutualisation and the driving forces underlying the trend towards it and highlights the problems and issues that are likely to arise therefrom and also gives a brief description of the demutualisation scenario in India as well as several developed countries like the USA, the UK, Australia and Singapore.

Vijay Kumar Gaba, " WTO - India's Position and Concerns", (2002) 36 SCL 47 - discusses in detail the Indian position on various issues on which the WTO has already formulated agreements as well as issues which are being deliberated upon or are likely to be deliberated upon the WTO in the near future.

Vijay Kumar Gaba, "WTO: Agreement and Issues", (2002) 36 SCL 73 - presents an overview of the basic principles underlying the WTO, a brief historical perspective on its emergence and a succinct account of various agreements concluded by its member

Allthough under our existing selection sysytem many lawyer of great intellectual capacity and unueestioned integrity have ascended the bench, there is a firm conviction among many at the Bar that they were not produced by our current election system but despite it. -HERSHMAN, Mendes, review of the Politics of the Bench and The Bar by Richard Watson and Rondal Downing in "The Lawyer’s Bookshelf, "New York Law Journal, July 3, 1969, p.4, col. 7

BOOK REVIEW

Bank Frauds Including Computer Crimes & Credit Cards Crimes Prevention and Detection

by Dr. B.R. Sharma

D.V.Sekhar
Asstt. Legal Adviser

Bank frauds are on the increase and effective defence against this scourge is knowledge about them. The losses and sticky loans in India run into thousands of crores of rupees. There are still unsettled accounts relating to unmatched entries. Many banks hide most of the frauds for which the banks are yet unprepared to make them public. The graph of the fraud money is rising steeply. Bank frauds concern all citizens. However, the prima donna in the drama is the banker. He opens the purse. He is often the target and at times the tool. Occasionally, he is the victim of the temptations. Other contributory factors are incompetence, lethargy, negligence, connivance and ignorance. Bank frauds have become a big business today. It is becoming bigger every day. The real defence against bank frauds is knowledge about them. The banker must know their nature, their modus operandi, their detection and their prevention.

BANK FRAUDS: DETECTION AND PREVENTION, edited by Dr.B.R.Sharma presents an analysis of Bank frauds including computer and credit cards crimes and its prevention and detection. The book under review has been published by Universal Law Publishing Co. Private Ltd., C-FF-1A, Ansal's Dilkhush Industiral Estate, G.T.Kamal Road, Delhi-110 033. The author of the book has stated in the preface that the information contained in the book have been collected from all available sources, laboratory files, police diaries, court cases, published literature, scattered in news papers, magazines, journals, and other publications.

The contents of the book are divided into 21 Chapters. In Chapter 1, the author has discussed the meaning and nature of fraud. Fraud has not been defined in the Indian Penal Code directly. However, Sections dealing with cheating (Section 415 to 420), concealment (Section 421 to 424), forgery (Section 463 to 477A), counterfeiting (Section 489A to 489E), misappropriation (Section 403, 404) and breach of trust (Section 405 to 409) cover the same adequately. The word 'Fraud has been defined in law in the Indian Contract Act, Section 17. In short, fraud is dishonesty leading to loss to someone. The author has discussed the Banker's role in preventing various Bank frauds.

In Chapter 2, the author has discussed 'The Bunko Banker'. Bank frauds are the failures of the bankers. They are mainly due to either their negligence or due to their dishonesty. Ignorance about the tactics of frauds or of the rules is also responsible for the same to a limited extent. Loopholes in the banking system are also exploited both by the bunko banker and the cheat at large. There are case studies in this chapter, giving glimpse of the variety of bank frauds. There is a discussion on branding the Bunko in this chapter. The bunko banker has a distinct personality. He can be identified in most of the cases without difficulty. The targets of the bunko banker should be identified and hardened. The targets should be so managed that the bunko banker is unable to penetrate them and defraud the bank. A list of areas to be identified along with preventive measures to be taken has also been stated in the chapter.

In Chapter 3, the author has discussed about forged signatures, which come across by the bankers. The author has also discussed some variety of forged signatures. The forger copies from a model signature. If he is to succeed in his undertaking, he has to make a close copy to the model as possible. He, therefore, carefully follows the outline of the model signature. He has to go not only letter by letter but stroke so that slats, curvatures, heights and widths all correspond to the original model.

Material alterations are discussed in Chapter 4. Material alteration is one which varies the rights, liabilities or legal position of the parties as ascertained by the deed in its original state, or otherwise varies the legal effect of the instrument as originally expressed, or reduces to certainty. The methods of alterations of cheques, drafts, receipts and other fiduciary documents are comparatively simple. They do not require skill and patience. Material alterations ordinarily are not done by professional forgers. The forgeries are, therefore often crude and permit identification in most of the cases. The author has discussed the Bankers role in detecting the bank frauds and the instruments that are required for the bankers to detect the frauds.

In Chapter 5, the author has dealt with forged currency notes. The author has described the various essential features of the Genuine currency notes. Some model currency notes highlighting the important features of the notes are also find place in this chapter. If forgery of currency notes could be done successfully then it could, on the one hand, make the forgers a millionaire overnight and on the other, it could destroy a nation's economy. All nations therefore, try to make forgery-proof currency notes. But still the forgery of currency notes is highly luring. It is, therefore, an ever-ending recurring headache. Banker's role in detecting the forged currency notes has also been discussed in this chapter.

Chapter 6 deals with the Counterfeits of cheques, travellers cheques, bank drafts etc. Forging cheques, unauthorised printing of traveller cheques and banker's drafts has been increasing in recent times. It is becoming a serious source of trouble to the banking business as in many cases forged cheques, counterfeit cheques and drafts have been encashed. The author has specified some typical cases of counterfeit of currency notes. The author has given special emphasis in this chapter on cheque & traveler cheque fraud and its prevention.

In Chapter 7, the author has discussed the topic of Credit Card Frauds. The sub topics viz., what is credit card, how can one distinguish the fake from the genuine, how can it be made safe against the depredations of the defrauder are also discussed in this chapter. There is a discussion on Bankers role in prevention of the credit card frauds in this chapter.

In Chapter 8, the author has emphasized the need to use the cheque writer and type-writers. Possibilities of frauds in cheque writers & typewriters, nature of frauds, Banker's role in detection of such frauds, identification of machines used for cheque writing/ typing etc., are also discussed in this chapter.

In Chapter 9, the author has discussed about the fingerprints. The author has also highlighted the advantages and disadvantages of fingerprints. Bankers in India come across fingerprints fairly frequently. There are large number of illiterate persons in our country. There is increasing emphasis to develop banking service among the illiterate persons who do not know how to sign their names. Such persons use fingerprints instead of signatures to operate their accounts. The banker should, therefore, know how to identify fingerprints.

In Chapter 10, the author has specified the use of seals and stamps in the various instruments used in the banking transactions. The nature of frauds in using the seals and the role of the bankers in preventing such frauds are also discussed in this chapter.

The use of counterfeit coins and its importance thereof are discussed in Chapter 11. The author has emphasized the nature of fraud that might be possible in using the coins and the banker's role in detecting the same.

In Chapter 12, the author has discussed the topic on Bank Robberies. Robberies in general and bank robberies in particular are heinous crimes. They are highly demoralizing and attract wide adverse publicity. Robberies and decoits are grave crimes. Bank robberies may be of two types viz., ambush robberies and premises robberies. The author has also discussed the banker's role in handling the robberies and has highlighted the systematic approach to the problems of robberies.

In Chapter 13, the author has discussed the Computer Frauds in Banks. Transactions worth trillions of rupees are being carried out globally every month, through computers. When so much money is being handled through computers, it is no surprise that the computer con-artist has come around and is making money in a big way. Computer depredations have, by some, been classified as Computer Frauds and Computer Crimes. The author has highlighted the impediments and the difficulties that are occurred in the investigation of the Computer crimes. The various types of the computer crimes are also find place in this chapter. The author has identified class of persons who are involved in the computer crimes. The laws & legislation that are existing to tackle the computer crimes and some clues for preventing the computer crimes are also find place in the book.

In Chapter 14, the author has discussed about the Prima Facie Case in respect of the bank frauds. The author has suggested the procedures and the precautions that are required to be taken by the bank immediately after the bank comes to know about the frauds.

In Chapter 15, there is a discussion on the Departmental Processing. The author has discussed about the various powers and procedures of the vigilance department of the banks, Central Vigilance Commission (CVC), Reserve Bank of India, Vigilance Division of the Ministry of Finance etc.

In Chapter 16, the author has discussed about the Police Investigations. The topics relating to the various police agencies that are required to be contacted by the banks in case of frauds.

The chapter contains the investigation procedures also.

In Chapter 17, the author has discussed about the Departmental Inquiries and the procedure that are required to be followed while conducting departmental inquiries in the banks.

Chapter 18 deals with the Punitive Actions that are required to be taken in case of bank frauds. The principles of natural justice have not been defined in law, and rightly so. They are free from rigid restrictions. They are adaptable to changing times, traditions and moods of the people. The author has discussed the principles of natural justice that are required to be followed in the cases relating to the bank frauds.

In Chapter 19, the author has identified the important bank documents that are required to be protected with proper care and caution. The author has suggested some techniques of protections of the said bank documents.

The relevant laws that deal with the bank frauds have been identified in Chapter 20. The chapter contains the important sections in the Indian Penal Code, Criminal Procedure Code, Indian Evidence Act, Reserve Bank of India Act, Reserve Bank of India (Note Refund Rules), Negotiable instruments Act.

The Chapter 21 contains various case laws relating the bank fraud cases. The case law has been arranged topic wise for the convenience of readers.The book also contains a Subject Index at the end. The book is a multi-professional monograph, written in non-technical language, addressed to all those who are concerned with and have to deal with bank frauds: Administrators, Bankers, Investigators, Experts, Counsels, Judges and even the public who suffer from the initial blues. It is priced Rs. 315/-.

The right to be let alone is indeed the beginning of all freedom.

- DOUGLAS, William O., in Public Utilities Comm’n. v. Pollak,

343 U.S. 451, 467 (1952)

But freedom to differ is not limited to things that do not matter much. That would be a mere shadow of freedom. The test of its substance is the right to differ as to things that touch the heart of the existing order.

- JACKSON, Robert J., West Va. state Bd. of Educ. v. Barnette,

319 U.S. 624, 642 (1943)

All rights tend to declare themselves absolute to their logical extreme. Yet all in fact are limited by the neighborhood of principles of policy which are other than those on which the particular right is founded, and which become strong enough to hold their own when a certain point is reached. The limits set to property by other puboic interests present themselves as a branch of what is called the police power of the State.

- HOLMES, Olover Wendell, in Hudson water Co. v. McCarter,

209 U.S. 349, 355 (1908)

LD NEWS

Foreign Visits

Shri N.V. Deshpande, Principal Legal Adviser and Shri M.A. Batki, Legal Adviser attended a Seminar on Legal & Regulatory Aspects of Financial Stability at BIS in Basel Switzerland from 18th January to 25th January 2002.

Shri N.V. Deshpande, Principal Legal Adviser presented a paper at the seminar on Legal and Regulatory Framework for Financial Sector Reforms held at Lusaka, Zambia.

Congrats !

Shri K.D. Zacharias, Joint Legal Adviser (GradeE) has been selected and empanelled for the post of Legal Adviser (Grade-F).

Seminar/Lecture/Training

Shri S.R. Kolarkar, Legal Adviser attended the conference on "Mumbai an International Financial Centre-The Way Forward," organised by the Confederation of Indian Industry.

Shri K.D. Zacharias, Joint Legal Adviser participated in the panel discussion in a seminar on Accounting Standards and Documentation for Derivatives at the Banker’s Training College, Mumbai (BTC). Shri Zacharias also spoke to the participants of the Programme on Bond Portfolio Management on Legal Aspects of Debt Markets at the BTC.

Shri P.S. Bindra, Joint Legal Adviser spoke to the participants on I.T. Act, Online Contract, Online Banking, Online Security Trading in a seminar on "Cyber Laws" conducted by the Institute of Company Secretaries of India-Centre for Corporate Research & Training, CBD, Belapur.

Shri D.N. Tripathi, Joint Legal Adviser attended a program on Communication, Effective Leadership and Management Styles for Senior Officers of RBI conducted by CAB Pune.

Shri P.S. Bindra, Joint Legal Adviser addressed the In-charges of Computerised Departments of the Bank regarding Legal System Governing Usage of I.T. in 6th program for In-charges of Computerised Departments organised by Reserve Bank of India Staff College, Chennai.

Welcome

Smt. Indu John, Clerk/CNE-II reported to this department on 14-1-2002.

Goodbye !

Shri Rakesh Joshi, Clerk/CNE11 was relieved from this department on 14-1-2002 and transferred to cash department.

Study Circle

Shri Shabbir Wakharia, partner of M/s. Wakharia & Wakhari & CO, Solicitors and Advocates, Mumbai delivered a talk on "Time Factor in Litigation in U.K., U.S.A and India and Role of Law Firms in Globalisation" on 15 February 2002.

MAIL BAG

Dear Shri Deshpande,

I could read the July-September 2001 issue of "RBI LEGAL NEWS AND VIEWS" after my return from abroad in the last week of January. I am writing this letter just to convey to you that I was greatly impressed by the depth and width of your paper titled "A Critical Evaluation of Legal Reforms Mitigating Banking Crisis". It is very comprehensive and shows insights in the intricacies of banking business. I am very sure that the contents will add great value to the readers’ knowledge base. Please accept my heartiest congratulations! I am looking forward to read the concluding part in the next issue.

With warm personal regards,

Yours sincerely,

(P.B. Kulkarni)

We have also received letters from M/s. Fouzy P.K., Yogesh N. Chande, Brijesh Kumar Mishra, G.K. Manjunath, D.K. Vasal, Ashok Rajdan, Vidyadhar Anaskar, T.S. Rayalu, P.V.S. Reddy, K. Jogeshwar Rao, Maruti Arvind Golikrishnan, Chandra Sekhar, Madhur Chakravedi, Desh Deepak, M.N. Singhi, Ravindran Nair, Hemlata, Shankar Narayan, Asmi Varma, M. Sreedar, R.N. S.P. Achanta, S.M. Kulkarni, Dinesh Shanbaug, Rajeev Kaushik, B.V. Prakash, M.S. Rao, Irshad Hussain, Rajeev Deval, K.H. Sharma, K. Anand and Meera Bashikar.

The names of these readers have been included in the mailing list.

Statement about ownership and other particulars concerning
RBI LEGAL NEWS AND VIEWS
FROM IV
1.	Place of Publication	:	Mumbai
2.	Periodicity of publication	:	Quarterly
3.	Editor, Publisher and printer’s name,	:	Sri N.V. Deshpande,
	nationality and address	:	Indian,
			Reserve Bank of India,
			Legal Department,
			Central Office,
			Shahid Bhagat Singh Road,
			Mumbai-400 001.
4.	Name and address		Reserve Bank of India,
			Legal Department,
			Central Office,
			Shahid Bhagat Singh Road,
			Mumbai-400 001.
I, N.V. Deshpande, hereby declare that the particular given above are true to the best of my knowledge.
Dated: March 2002				N.V. Deshpande
				Signature of Publisher