Act tough on bank frauds: SC

Written by Indu Bhan | Indu Bhan | Updated: Oct 16 2013, 09:25am hrs
BSNL to frame blacklisting guidelines

In a matter that will have major impact on government tenders, the Supreme Court has asked BSNL to lay down broad guidelines within six months for blacklisting firms, which undertake government projects or supply goods to the government. In the case of M/s Kulja Industries Ltd versus BSNL, the former had emerged as a successful bidder for the PSUs two tenders for supply of HDPE pipes (telecom ducts) and optic fibre cable in 2004. The BSNL in 2010 had blacklisted the company permanently for over-invoicing with the connivance of its officers. It had alleged that Kulja had committed gross misconduct and irregularities by receiving excessive amount to the tune of around R8 crore, thereby wrongfully causing loss to the PSU. The BSNL had also lodged an FIR with CBI against one of its senior accounts officers and a director of the company. Kulja Industries said since its products were mostly supplied for consumption to the BSNL, any order permanently blacklisting would render it jobless and economically defunct. Later, it moved the Bombay High Court which upheld the blacklisting order. On appeal, the SC quashed the HC judgment as it felt that permanently debarring the firm was too harsh. The apex court allowed the appeal of the supplier only to the extent that the period for which such blacklisting order remains operative shall be determined afresh by the competent authority on the basis of guidelines formulated by the PSU.

Tax documents

SC has dismissed Delta Distilleries Ltd's appeal seeking quashing of the Bombay High Court which allowed the arbitration petition of United Spirits Ltd (USL) in a dispute over tax dues between them.

In this case, Delta Distilleries Ltd vs United Spirits Ltd, the former had entered into an agreement with the predecessor of the USL for manufacture and sale of IMFL at a contract price which was exclusive of sales tax and other taxes. Various disputes arose between the liquor companies. USL claimed that around R2 crore was due and payable by Delta and it was entitled to the benefit of the set-off/refund on the sales tax paid on packaging material. But Delta maintained that only R39.37 lakh was payable.

The dispute was referred to the arbitration tribunal, which asked Delta to produce documents sought by its rival including sales tax assessment orders for 1995-1996 to 2001-2002. However, Delta objected to the production of highly confidential documents. The tribunal vide its 2011 order permitted USL to apply to the HC to seek production of the sales tax assessment orders, including any appellate orders. The HC ordered Delta to produce the documents despite it submitting that the documents could not be traced . On appeal to the SC, Delta reiterated its earlier stand. However, the apex court upheld the order of the high court.

Bank frauds a crime against society

Asking courts not to show leniency to the accused involved in bank frauds,the SC said that offences related to banking activities are not only confined to banks but have a harmful impact on customers and threaten the well-being of the society.

...these offences fall under the category of offences involving moral turpitude committed by public servants while working in that capacity. Prima facie, one may state that the bank as the victim in such cases but, in fact, the society in general, including customers of the bank is the sufferer, it said, while quashing the criminal proceedings against a bank employee and a private person after they refunded the amount to the bank.

In this case, a person had obtained a loan of R1.5 crore submitting forged documents, aided by officers of Indian Overseas Bank. A complaint was registered against a senior manager of the bank along with other persons including the director of the company which had taken loan.

During the pendency of the trial, they refunded the amount and later on moved the Calcutta High Court for quashing the proceedings against them. While HC quashed the trial, the Supreme Court, on CBI's appeal, set aside the HC order.