Shareholding in financial institutions

NEWS DIGEST

The Supreme Court has held that even if the shareholding of the state in a state financial institution was reduced below 50 per cent, it will remain a state institution for the purpose of recovery of debts and take-over and sale of assets.

This was stated in the Amar Alcoholi Ltd vs Sicom Ltd case. The company had defaulted in its financial obligations several times and therefore Sicom, a Maharashtra state financial corporation, sold the assets in an auction.

The company moved a writ petition in the Bombay High Court arguing that since Sicom shareholding had been diluted and the state held only 49 per cent stake, the State Financial Corporation Act was not applicable to it. The high court rejected the argument.

The company appealed to the Supreme Court without success. The apex court pointed out that the corporation was established by the state government and the central government had had notified it as a state financial corporation.

Apex court refuses to name arbitrator

The Supreme Court declined to appoint an arbitrator in the dispute between Rite Approach Group Ltd, a Singapore firm, and Rosoboronexport, an undertaking owned by the Russian government.

The Russian entity approached the Singapore firm for procuring orders in India for supply of helicopters to Border Security Force (BSF).

The latter firm agreed to act as agent for procuring the contract. The helicopter was selected. Subsequent to that, disputes arose between the two undertakings about the commission.

The dispute was taken to the Delhi High Court and the Arbitration Act of 1996 was invoked. Meanwhile, the Singapore firm wanted an arbitrator to be appointed by the Chief Justice of India.

This application was delegated to Justice AK Mathur, who rejected it. Justice Mathur that according to the arbitration clause in the agreement, disputes should be arbitrated in the Chamber of Commerce and Trade of the Russian Federation.

Therefore, the Supreme Court had no jurisdiction in the matter, he said.

Punjab's appeal dismissed

The Supreme Court has dismissed the appeal of the Punjab government and declared that the purchase tax could not be charged on the element of market fee on the basis that it did not form part of the turnover. It asserted that there was no liability to pay sales tax on the element of market fee.

The judgment said: "Once it is held that the buyer has an obligation to pay the market fee and it is the duty of the seller to deposit the market fee on behalf of the buyer and to realise from the buyer, it is not the legal obligation of the seller to pay market fee on such a transaction and thus the amount of market fee cannot be treated as part of the sale consideration."

Order on casual workers' pleas

The Supreme Court ruled last week that high courts should not entertain writ petitions from casual workers asserting that they had worked for 240 days in a year entitling them to regularisation.

The court said in the case, ONGC vs Shyamal Chandra, that such claims are disputed and therefore, the tribunals set up under the Industrial Disputes Act should decide the facts of the case.

The state government should refer such disputes to the tribunal, which will go by the evidence available.

While overruling the Gauhati High Court which had held a contrary view, the Supreme Court asked the state government to refer this particular dispute to the tribunal, to shorten litigation.