Students of Business Management frequently question the inclusion of Business Laws or Legal Aspects of Business. The answer lies in the fact that as a businessman, one should be aware of some legal principles that will help him avoid conflict with the persons with whom he comes into a business contact.
The following landmark judgements were delivered in the past three years. They have an impact on your business and, more significantly, on your financial dealings.
The following landmark judgements were delivered in the past three years. They have an impact on your business and, more significantly, on your financial dealings.
P. V. Suresh vs.
Insurance Ombudsman, Kerala High Court, 16.02.2012
(an insurer has to prove fraud to
reject a claim)
Lady dies
of cervical cancer – insured by husband – she failed to mention ayurvedic
treatment for rheumatoid arthritis while buying the policy – claims rejected by
Insurance Company – Court upheld the claim - Court held that the insurer must
prove the policyholder’s statements were fraudulent and involved suppression of
material fact.
Impact: Insurance company cannot getaway
by simply listing ‘suppression of fact’ as a reason for rejecting the claim. It
has to prove that the information supposedly hidden by the policyholder was
material, that is, had a direct bearing on the case, and there was an element of
fraud involved.
Suraj Lamps &
Industries vs the State of Haryana, Supreme Court, 11.10. 2011
(no property sale on general power
of attorney)
Property
could be lawfully transferred only through a registered sale deed – every
property sale has to be duly registered.
Impact: Sale Agreement(SA)/General Power
of Attorney(GPA)/will transactions, where a purchaser pays the full price, but
instead of getting a deed of conveyance gets a SA/GPA/WILL as a mode of transfer,
either at the instance of the vendor or at his own instance are history. A
registered deed of conveyance translates to a safer deal because records prove
the sale even if you lose the documents or are destroyed. Helps prevent
forgeries & fraud. Benefits to the government as it will help prevent
evasion of income tax, stamp duty & registrations, and circulation of black
money.
Ganga Kushan's appeal,
Supreme Court, May 2012
(Guarantor liable to repay the loan if
debtor defaults)
Ganga
Kishun, who had stood as a guarantor to a bank loan, raised by one Ganga
Prasad, who had died without clearing it. Ganga Kishun had come to the apex
court against the Uttar Pradesh government's decision to recover the loan
arrears from him after the death of principal debtor Ganga Prasad.
While
dismissing Ganga Kishun's appeal, the apex court, however, faulted the
government's decision to auction Ganga Kishun's entire stretch of land for Rs
25,000 to recover an arrear worth Rs 8,500 only and not confining the auction
to only 1/3rd of the land, which could have fetched the arrears.
Impact: Provoke people into thinking twice
before becoming a guarantor for a bank loan.
United India Insurance
Company vs Laxmamma, Supreme Court, 17 April 2012
(insurer has to pay if a policy is
cancelled after an accident)
United India
Assurance collected the premium cheque and issued the policy. The cheque got
dishonoured, and there was an accident resulting in the death of the respondent's relative. The insurance company cancelled the policy after the
accident citing cheque bounce as the reason for cancellation. The Supreme Court
did not want the respondent to suffer in this case and ruled in favour of the
claimant.
Impact: Judgement takes care of the
lacuna, wherein a mishap occurs before the policyholder is informed about the
cancellation of a policy.
Shivappa Malappa
Isapure vs Ganpat Malappa Isapure, Bombay High Court, 28.01.2010. (ancestral
family property cannot be gifted)
Mr Mallappa
Isapure had two wives. In 1959 he divided his ancestral property located in
Miraj between the children of his two wives. The second wife, Chandrabai, claimed
that in 1941, her husband had gifted her a portion of the property out of
love, and that gifted portion is in possession of the first wife's sons.
The sons
contested the claim, saying that as it is a joint family property, it cannot be
gifted.
Impact: Applies only to HUF’s & other
religions do not necessarily recognise the system of joint property.
Harsha Nitin Kokate vs
Saraswat Co-op Bank & others, Bombay High Court, 20.04.2010 (nominee,
not heir, inherits shares)
In 2008,
Harsha filed a petition in the court seeking permission to sell her deceased
husband’s shares, for which her nephew was the nominee. Nithin Kokate died in
July 2007 and made his nephew the nominee in July 2006 for the shares held in
the Demat account of the depository participant cell of the bank. The court
held that the wife has no right over the shares as the provisions of the
Companies Act mandated that the nominee inherit them.
Impact: Provisions of the Companies Act
override the legality of the will. As per Sec 109 A of the Companies Act, the
nominee legally inherits the shares after the death of the original shareholder
even if the latter has been named someone else in the will.
C. Venkatachalam vs
Ajithkumar C. Shah, Supreme Court, 29.10.2011
(non-lawyers can appear before
consumer courts)
Appeal by
the Bar Council of India against a 2002 Bombay High Court judgment – Earlier a
District forum had upheld two tour operators demand that non-advocates should
not be allowed to represent consumers.
Impact: A welcome move as it will simplify
procedures and promote easy access for members of the public to consumer
forums. One of the reasons for this decision is that the small amount of
compensation granted in consumer disputes may not make it economically viable
for appellants to factor in the high cost of legal representation.
Noel Dominic Periera
vs Pamela Ethel Kuhn & others, Bombay High Court, 29.09.2010. (only blood relations can be heirs)
One of the
defendants, who were a claimant to the
property of Late Merlyn Loretta Patton was the stepson of Merlyn’s brother
Derrick – related to Derrick’s second wife by blood, not to his stepfather or
Merlyn.
Impact: If there is no will, the law of
succession takes over, and the deceased’s property is divided accordingly.
Indian Succession Act does not make a distinction between heirs related by half-blood and full blood. The Hindu Succession Act states that heirs by full blood
shall be preferred.
Sayar Kumari vs State
of Orissa & others, Delhi High Court, 9.10.2009
(video recording of a will is legal)
Probate of
will – Sayar Kumari’s husband’s grandmother’s will – contested by her
father-in-law – court goes through the physical copies of the will, as well as
a video recording of the execution – the process of signing the will and getting it
attested by two witnesses
Impact: Makes the execution of the will foolproof to an extent. Eliminates to a large extent the questions of genuineness
or the capacity of the testator to make the will. A mere recitation of the
document’s contents is not accepted.
(Adapted from the ET dated August 20th, 2012)
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