Brief case: SC irked by high court's 'cryptic' order

A weekly selection of key court orders

The Supreme Court last week criticised the Bombay High Court for dismissing an arbitration appeal with a “cryptic” order when neither party was present before it. The judgment said: “The high court while dismissing the appeal did not set out even the factual controversy properly nor dealt with any of the grounds taken by the parties.” In this appeal case, Navnirman Development Consultants vs District Sports Complex, the work on the sports complex in Pune was completed in 2005, but the bill was not paid. The contractor sought arbitration and asked the state authorities to appoint its arbitrator. It was not done; so the high court appointed the arbitration tribunal. It gave a Rs 25 lakh award in favour of the contractor. The government authorities moved the district court which reduced the award to Rs 7 lakh. This led to an appeal in the high court and the “cryptic reasoning” by which the contractor’s pleas were dismissed with a short note. The Supreme Court asked the high court to reconsider the contractor’s appeal on merits and dispose of it expeditiously in view of the decade-old delay in adjudication. “The least which was expected of the high court was to give brief facts and brief reasons to enable the superior court to examine the legalities,” the judgment said. The court had earlier too decried the practice of high courts and tribunals giving “non-speaking” orders disabling it from examining the factual and legal issues raised before it.

Anti-dumping duty on steel items upheld 

The Supreme Court last week quashed the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in an anti-dumping case, which favoured importers of cold rolled stainless steel of certain specifications. The indigenous industries had made representations to the designated authorities that some firms were hiding facts about the true dimensions of the goods imported from countries like China, Japan, Taiwan, and the European Union. They alleged that a 2010  notification did not take into account the tolerance level of the product and, therefore, the importers were avoiding anti-dumping duty. Following this, another notification was issued to fill the gap. This was challenged by the importers before the CESTAT. It allowed exemption from the duty. It led to the appeal before the Supreme Court, Commissioner of Customs Duty (Exports) vs M/s Mascot International. Setting aside the tribunal’s order, the apex court stated that it had not taken into consideration the tolerance level specified in the 2011 notification. Therefore, the demand of duty was upheld. 

Disputes survive even after payment  

A contractor might accept payment for the work done for the employer, but it does not mean that all disputes between them had ended. If the contractor does not sign the final bill, he would not get even the payment admitted by the employer. However, the Delhi High Court has stated that even if he signs the usual clause of “full and final settlement” in his anxiety to get the payment, he can invoke arbitration on the disputed issues. The court stated so in its judgment in Union of India vs Baga Brothers. After the work done for the Supreme Court, the contractor accepted the bill prepared by the government. Then he invoked arbitration according to the contract. The award was in his favour. The government moved the high court arguing that he had accepted the bill prepared by it. It further argued that the first step in disputes is conciliation and only if it fails arbitration can be resorted to. The court  rejected both arguments. It pointed out that the bill was prepared by the government and not agreed to by the contractor. Therefore, the disputes survived. Secondly, conciliation is not mandatory under the Arbitration and Conciliation Act. There are procedures for conciliation and mutual discussion to resolve differences but that does not prevent an aggrieved party from seeking arbitration, the high court stated. 

Punitive compensation on website 

The Delhi high court last week imposed a punitive fine of Rs 20 lakh on a website that sold damaged and counterfeit goods of various companies on a large scale. The order was passed against 99labels.com on a complaint of Burberry Ltd. The company, which designs, manufactures and sells luxury goods, complained that the website sold spurious goods using its trade marks registered in India and abroad. The judgment stated that the illegal act of the website had eroded the goodwill and global  reputation of the company built over many years. Therefore, it was entitled not only to compensation but also punitive damages. 

Tax dues have priority over bank claims

The Rajasthan High Court has reiterated that though banks and financial institutions might fall in the category of secured creditors, the state’s dues will come first when the property is attached for non-payment of dues. In this case, Gmc Engineers & Contractor Ltd vs State of Rajasthan, the property of SR Foils and Tissue Ltd was attached by sales tax officers. ICICI Bank, which provided loan to the failed company, auctioned it and transferred title documents to Gmc, the highest bidder. However, the government invalidated the auction and offered the property for sale for recovering its tax dues. This was challenged by Gmc in the high court. It argued that the amended Section 26E of the Securitisation Act and the Debt Recovery Act granted priority to secured creditors and, therefore, the ICICI auction was valid. The high court rejected the argument analysing various laws and following the Supreme Court ruling in a similar case. 

Jurisdiction in trademark suits 

The Bombay High Court stated that it has jurisdiction to deal with a trademark dispute as the name was registered in Mumbai and the company has multiple offices in the country. In this case, Kalpataru Properties Private Ltd vs Sri Kalpatharu Housing Private Ltd, the second firm argued that the Bombay High Court has no jurisdiction as it had its office in Andhra Pradesh and, therefore, only the court there has the power to decide the dispute. The high court rejected the argument on the basis of the Trade Marks Act and the Copyright Act. According to the judgment, a person aggrieved by infringement of trademark or copyright may file a suit either at the place where it carries on business or at the place where the opposite party has office. The two Acts give a choice to the aggrieved person to file a suit where he prefers. The place where the cause of action arose, like the infringement of the trade mark, is not quite relevant, the judgment said.