Upholding the validity of the Pondicherry Protection of Interests of Depositors in Financial Establishments Act 2004, the Supreme Court said that the legislation is similar to the Acts in Tamil Nadu and Maharashtra and was meant to protect the interests of depositors in the Union Territory.
Since the latter two Acts have been held valid by the Supreme Court earlier, the Pondicherry legislation is also valid, the apex court said, while dismissing the appeal of New Horizon Sugar Mills, which had challenged the validity of the Pondicherry Act. Stating that this is the case where funds have been collected from the gullible public to invest in projects other than those indicated by the front company, it observed that the Pondicherry Act was meant to protect the interests of depositors who stand to lose their investments on account of the diversion of the funds collected by Pondicherry Nidhi Ltd (PNL) for the benefit of the sugar mill, whose directors were V Kannan and V Baskaran. In this case, the mill had availed of credit facilities to the tune of R26.5 crore from the Indian Bank. The directors had stood as guarantors for repayment of the loan and offered their personal properties as collateral securities. After the mills defaulted, the state revenue and disaster management department in February 2006 ordered attachment of properties acquired by PNL. On the basis of various complaints, it was found that PNL had changed its name five times. The investigation conducted by the CID revealed that the deposits collected from the depositors of PNL had been channelised to the mill.
Mortgaged property can be sold
Quashing the Uttarakhand High Courts judgment in the case of Pradeep Kumar vs UPFC, the Supreme Court has restrained high courts from interfering in the sale of properties pursuant to default in the repayment of loans. In this case, Uttar Pradesh Finance Corporation (UPFC) had sanctioned a term loan of R4.55 lakh to Sangam Ice Cream, a proprietorship firm owned by one Nisha Devi Jaiswal. To secure the repayment of the loan, the borrower had created an equitable mortgage by deposit of title deeds of land. After Jaiswal defaulted, UPFC issued a notice, which called upon her to clear all the dues. If she failed, recovery of proceedings including sale of mortgaged property was contemplated. Before selling the mortgaged property under the State Finance Act 1951, the owner of the property sold it to another and there was a resale to one Vishnu Dutt Sharma. Pursuant to the advertisement, the corporation accorded its approval for the sale of the land in favour of one Pradeep Kumar Sharma.
However, Vishnu filed a petition seeking quashing of the sale made to Pradeep. The HC in 2006 cancelled the sale in favour of Pradeep, who appealed to the Supreme Court. The top court said that under the Act, the corporation had the power to sell the mortgaged property and courts should not interfere in such private sales of property.
When there is no arbitrator
The Supreme Court has appointed former Kerala High Court Chief Justice Arvind Savant as arbitrator to resolve a dispute between Fugro Survey Ltd and Ramunia International Services Ltd. The two firms had entered into a survey contract in April 2008, whereby Fugro agreed to perform various surveys, which were necessary for the performance of the tasks in the main contract. After the completion of the main part of the work, when Fugro demanded payment of $5,65,614.98, there was no response from Ramunia. Though it proposed to appoint one Pawan Aggarwal as the arbitrator, Ramunia did not confirm the same, thus leading Fugro to move the Bombay High Court seeking appointment of an arbitrator under the Arbitration and Conciliation Act, 1996 and later in the Supreme Court. Despite Ramunia not appearing before it, the apex court appointed the arbitrator.