Brief case: Conditions to challenge auction sale

A weekly selection of key court orders

Conditions to challenge auction sale

If a debtor whose property has been auctioned by a bank wants to set aside the sale, it is not enough to show that there were irregularities or fraud in the auction proceedings. She must also prove that the irregularities in the conduct of the auction resulted in substantial harm to her interests, the Supreme Court stated last week in its judgment in the case, Chilamkurti Bala vs Samanthapudi Vijaya. In this case, State Bank of India auctioned the property of the debtor following the procedure. After the sale, the owner moved the executing court to set aside the sale, alleging irregularities. The court rejected her contentions. But on her appeal, Andhra Pradesh allowed her to offer a higher price for the property. The auction purchaser appealed to the Supreme Court. It quashed the high court order and stated the debtor did not prove substantial loss suffered by her. Other objections like notice outside the stipulated period and low reserve price were also rejected.

Essar Power’s plea rejected 

The Supreme Court last week dismissed the appeal of Essar Steel seeking exemption from paying electricity duty for its Hazira plant, which was set up under a private-public participation scheme. Earlier, the steel company had been granted exemption from duty by the Gujarat government as the power generated by it was used for captive consumption, based on gas as fuel and later, steam turbine. In the early 1990s, the government’s power policy changed and it allowed private sector participation in generation. Following this, Essar Power was set up as a special purpose vehicle to produce 515 Mw to be shared with the promoter, Essar Steel, and Gujarat Electricity Board.  Essar then sought exemption from duty as before, but the government denied it based on a notification. The company moved the Gujarat High Court against it but failed, and the Supreme Court upheld the high court stand, stating that the conditions in the notification would not benefit the Essar group.

IPR questions for larger bench  

A division bench of the Delhi High Court has doubted the correctness of a judgment of the full bench in the matter of intellectual properties and requested the chief justice to reconsider the issue by a larger bench. The request was made in its judgment in the case, Carlsberg Breweries vs Som Distillers, while dismissing the plea of the Danish beer company for an injunction against an Indian competitor for imitating the design of its beer bottle. The court’s doubt was whether one composite suit could be filed when there was allegation of violation of design, trade mark and also accusation of passing off, spread over different laws. In the 2013 Mohan Lal case, the court had ruled that the judge had discretion in the matter. This was doubted by the present court. While dismissing the injunction plea on the facts of the case, the court stated there was little that distinguishes the shape of the Tuborg bottle of the Danish firm from other beer bottles available in the market, in this case Hunter of Som Distilleries. There were some indentations on the Tuborg bottle but they were an insignificant and non-essential part of the entire bottle’s design. “It is not something that appeals to the eye, and when an overall view of the design of the two bottles is taken, the same pales into insignificance,” the judgment said.

Delhi Customs sale held illegal  

The Delhi High Court has charged the Customs authorities at the Delhi airport of apathy, negligence and acting illegally in selling confiscated broadcast equipment and software at a low price even while there was an injunction against them by the Customs tribunal. The equipment, claimed to be worth Rs 52 lakh, was confiscated on the ground of wrong declaration and auctioned by the Delhi International Airport Ltd (DIAL) for Rs 81,000. The tribunal had found the action of the Customs authorities and DIAL illegal as it was against the tribunal’s injunction and without notice to the importer, Dejero Logix. The high court also criticised the attempt of the Customs authorities to pass the buck on to DIAL as the latter could not sell the goods without their sanction. The judgment therefore asked the authorities to refund the claimed amount with nine per cent interest. 

Defining ‘commercial dispute’ in new law

Every dispute arising from a commercial transaction cannot be called a commercial dispute within the recently passed commercial courts Act; it must fall within the clauses set out in the Act, the Delhi High Court stated in its judgment, Qatar Airways vs Airports Authority of India. Parliament has not defined commercial disputes but opted to list 22 transactions as commercial and the court must go by the list. The observation was made in the suit filed by the airline for recovery of Rs 4.5 crore as damages for loss suffered by it on account of damage to its aircraft at Calicut International Airport. “All suits that in common parlance may be stated to be of commercial nature cannot be brought within the ambit of Act; if it is done and the doors of the commercial courts and the commercial division of the high court are opened too wide, the purpose of setting up specialised courts would be defeated with such courts being inundated, making expeditious disposal impossible,” the judgment stated.

SBI indicted in ATM fraud 

When a person complains of specific incidents of unauthorised withdrawal of money using his ATM card, it is the duty of the bank to carry out verification. It cannot wash its hands off, the National Consumer Disputes Redressal Commission stated last week while dismissing the appeal of State Bank of India (SBI). The judgment in the case, SBI vs Dr J C S Kataky, held the bank guilty of deficiency in service. The cardholder had complained to the Jorhat branch of the bank which asked him to file a police complaint. The police could not trace the fraudsters; and the Bank Ombudsman closed the case, leading to the consumer complaint. The national commission upheld the verdict of the Assam commission that the bank must pay the loss with interest to the cardholder. The bank quoted the condition in the card that the transaction record generated by the ATM or sale points will be binding on the cardholder unless verified otherwise and corrected by the bank.  The commission replied that it was clear “the bank flatly refused to even look into the matter, what to speak of making any investigation into the same”.