HC ruling set aside in Sidco case

LEGAL DIGEST

The Supreme Court has set aside the ruling of Allahabad High Court and allowed the appeal of ICICI Bank which claimed priority of right over Punjab National Bank in the recovery of debts accumulated by Sidco Leathers Ltd.

ICICI, IFCI and IDBI had extended loans to Sidco for providing working capital funds on the strength of mortgage. Punjab National Bank had also given loans on the delivery of titles.

The company was later wound up and the assets were sold. The creditors disputed over the priority of payment. The Debt Recovery Tribunal accepted the first claim of Punjab National Bank for recovery of debts. ICICI moved the high court, asking for pro rata payment excluding Punjab National Bank.

The high court rejected the request and equated it with unsecured creditor bank. On appeal, the Supreme Court set aside the high court judgment asserting that the first charge holder (ICICI) should be repaid first.

Arbitration Act proceedings

The Supreme Court has ruled in the Parwani Builders vs Western Coalfields Ltd case that if the proceedings in an arbitration matter started under the Arbitration Act 1940, they would continue under the same Act and not under the provisions of the new law, the Arbitration and Conciliation Act of 1996.

In this case, Parwani Builders was given civil construction work. Later, disputes arose and the builders asked Western Coalfields to appoint an arbitrator. It did not. So the builders approached a civil judge and he appointed an engineer to decided the matter.

When he gave an award, the coalfields company invoked the new Act and moved the court of a district judge. Later, it realised the mistake and moved an application under the old Act. This was not allowed by the judge.

So the coalfields company moved the high court. It held that since the arbitration proceedings started under the old law, they should continue under the old law. The Supreme Court reiterated that when the proceedings started under the 1940 Act, that law would be applicable and not the 1996 Act.

Sugar mill's plea dismissed

The Supreme Court has dismissed the appeal of Dharampur Sugar Mills Ltd challenging the trade tax imposed on it by the UP government. The issue was whether the price of molasses could be adjusted towards the licence fee paid to the owner of the mill.

Sir Shadilal Sugar & General Mills was owned by Swaroop Vegetable Products Industries Ltd. A deed of licence was executed between the latter company and Dharampur Sugar Mills. It was agreed that part of the licence fee would be paid in the shape of molasses.

The stand of Dharampur Sugar Mills was that the exchange was in consideration of the licence fee. This was not accepted by the authorities, who maintained that since molasses has been supplied in lieu of rent, it would amount to sale of goods.

The Supreme Court upheld this view. It said: "The transfer of molasses by Dharampur Mills to Swaroop Vegetables, would not be transfer by way of transfer of stock. It is transfer of ownership in goods. It is a sale within the meaning of the provisions of the UP Trade Tax Act."