Company court auctions under scanner

The Delhi high court has given a candid insight into company court auctions of sick units and remarked that they did not inspire confidence. While dismissing the appeal in the case, Wholesome Bites vs State Industrial Corporation of Maharashtra, it emphasised that such auctions must be expeditiously executed.

“The reality is that more often than not parties within the trade are not interested in making a bid because of the endemic delays and obstacles. This runs counter to the expectation that the company judge should endeavour to revive the company whose fortunes are flagging; that winding-up proceedings should not be fatal to the existence of the company. If that is so, and the troubles of the company facing liquidation are a result of inept management, it would be in the general interest, and especially of the work force, to locate a party desirous of rejuvenating and continuing the business of the wounded industrial unit. Experience, however, indicates that persons participating in company court auctions are more often than not ‘scrap dealers’, whose objective is to dismember the unit and sell its sundry assets for profit. This trend needs to be reversed, and this is possible only if the court ensures a quick transfer of the company. Very seldom do the promoters of a sick company have such intentions; on the contrary their efforts are to protract proceedings in order to retain control of the assets.”

Orissa told to pay land losers

The Supreme Court has dismissed the appeal of the Orissa government in a dispute over the amount of compensation granted to land owners to set up, among other industrial units, the Central Institute of Fresh Water Aquaculture. The land owner invoked Section 28A of the Land

Acquisition Act which is a special provision for “inarticulate and poor people” to apply for re-determination of the compensation amount compared to that given to affluent land owners. The collector rejected the claim of the poor land holders. They appealed to the Orissa high court which asked the collector to consider their applications. The state moved the Supreme Court. It upheld the order of the high court. 

Goa government’s land acquisition case dismissed

The Supreme Court dismissed the appeal of the Goa government in a land acquisition case and ruled that solatium, additional amounts and interest paid under different provisions of the Land Acquisition Act could not be taken into account while determining the compensation. The reason for grant of additional benefits under the Act are different and have not bearing on the determination of the market value of the land under acquisition, the judgment said.

NH-47 arbitration dispute

The Supreme Court has set aside the judgement of the Kerala high court in the arbitration dispute between Som Datt Builders and the state government over the construction of part of National Highway-47. The dispute had arisen due to the delay in completion of the project and escalation of cost. The arbitration award largely went in favour of the contractor. The state moved the high court alleging that the award did not contain reasons, which was accepted. Both parties appealed to the Supreme Court with different grievances against the high court ruling.

It asked the arbitral tribunal to give reasons for the award and stressed the requirement of reasons under Section 31(3) of the Arbitration and Conciliation Act.

The court underlined that giving reasons for the conclusions is not an “empty formality”. However, brief they may be reasons must be indicated in the award to understand the thought process leading to the conclusion.

Arbitration petition

The Delhi high court has dismissed the arbitration petition of Jaiprakash Associates against the National Hydroelectric Power Corporation over the execution of the Chamera Hydroelectric Project Stage-II in District Chamba, Himachal Pradesh, on a turnkey basis. The corporation had promised incentive of Rs 30 crore if the project was completed ahead of time. It did not happen; therefore the corporation demanded the refund of the advance incentive.

The contractor invoked the arbitration clause. The corporation argued that the incentive was not part of the original contract, but a subsequent offer which was independent from the original contract. The high court accepted this contention. The judgment stated that if the parties chose to add a fresh contract in addition to the old one, then the arbitration clause cannot cover the new contract.