A company cannot enter into an arbitration agreement even before it is formally registered under the Companies Act, the Supreme Court (SC) ruled in the case, Andhra Pradesh Tourism Development Corporation vs Pampa Hotels Ltd. However, the promoters of the company can enter into such an agreement if it was warranted by the terms of incorporation of the company. But the company which is yet to be born cannot sign an arbitration agreement. In this case, the corporation and the hotel chain signed agreements on lease and management of a new hotel in Hyderabad. The corporation later terminated the agreement. The hotel company moved the high court for appointment of an arbitrator. It appointed an arbitrator. The state corporation appealed to the Supreme Court, which set aside the high court order stating that the registration of the company was a year after signing the agreement.
Arbitration agreement different from a contract
A contract can be entered into orally or it can be inferred from the conduct of the parties, but an arbitration agreement is different from a contract. An arbitration agreement must follow the norms prescribed in Section 7 of the Arbitration and Conciliation Act and the main point is that it should be in writing, the Supreme Court emphasised in the judgment, Indowind Energy Ltd vs Wescare Ltd, last week. The Supreme Court set aside the contrary view of the Madras high court, which had appointed a sole arbitrator.
‘Public Moneys Act’ not for recovery of dues from firms
The Supreme Court last week set aside the judgment of the Allahabad high court in the dispute between APT Ispat Pvt Ltd and the UP Small Industrial Corporation over the recovery of two loans purportedly given by the government corporation to the private company. The corporation invoked Section 3 of the UP Public Moneys (Recovery of Dues) Act to get back the dues for supplying iron and steel rods. It argued it had given ‘financial assistance’ by supplying the goods. The private company countered that it was not financial assistance but straight purchase. So the Public Moneys Act could not be invoked. The Supreme Court agreed with this and further pointed out that after coming into force of the Recovery of Debts Due to Banks and Financial Institutions Act 1993, the UP Act cannot be invoked for recovery of dues from companies.
Workers of contractor ineligible for ESI benefits
The workers of a contractor engaged by an establishment do not get the benefits of the Employees State Insurance Corporation Act, the Supreme Court stated last week in the judgment, Managing Director, Hassan Co-operative Milk Producer's Society Union Ltd vs ESI Assistant Regional Director. The ESI authorities demanded contribution to the fund from the milk coop maintaining that the loaders of the contractor engaged to bring milk to the main plant were in effect engaged by the coop. The ESI tribunal and the Karnataka high court upheld the demand. But on appeal, the Supreme Court overruled them and stated that the coop had no direct control over the workers of the contractors and had no supervisory power over them. The wages were not paid by the coop. Therefore it was not bound to pay the contribution under the law.
Converting bitumen does not amount to manufacture
The Supreme Court last week dismissed the appeal of the Commissioner of Central Excise against the ruling of the excise tribunal and held that the conversion of ‘straight grade bitumen' into 'blown grade bitumen' did not amount to manufacture. Therefore, the company, Tikitar Industries, was exempted from excise duty, the court said.
Insurance firm’s appeal against tribunal award dismissed
The Delhi high court last week dismissed the appeal of ICICI Lombard General Insurance Co against the award of the insurance tribunal granting Rs 10,000 to a widow and two minor children for the death of the sole bread winner of the family. The high court remarked that it was only a “token amount” for the loss of “love and affection” of the youth and the Supreme Court had granted much higher amounts on the same ground. The insurance company argued that the income of the deceased youth was uncertain as there was no salary certificate. The high court rejected this contention observing that not giving salary slips was “usual in this country”. In such cases, the minimum statutory wages should be taken as the income.
Debt Recovery Appellate Tribunal’s judgment quashed
The Delhi high court has quashed the judgment of the Debt Recovery Appellate Tribunal which had upheld the claim of Bank of Rajasthan against PG Foils Ltd. The latter company had floated a public issue which was oversubscribed. It had asked the bank to refund the money paid by unsuccessful applicants.
The bank paid the amount from overdraft of the company while the latter had asked the bank to take it from its fixed deposits. The bank claimed that it had discretion in this matter. The high court rejected this contention and remarked that “surely, it defies all logic, especially in view of the admitted clauses in the agreement that why should at all the company have taken loan in the form of an overdraft in the current account when amounts in the form of fixed deposits were already available to it with the bank for encashment of the refund orders.”