Brief case: SC sorts out arbitration issues

A weekly selection of key court orders

The Supreme Court (SC) delivered three judgments in recent weeks deciding questions on arbitration matters. Last week, it set aside the judgment of the Calcutta High Court (HC) in the appeal case, Sri Chittranjan Maity vs Union of India. The contract for building a goods terminal in Howrah ran into legal controversy and the arbitral tribunal awarded a sum with interest to the contracting firm. The railway argued that the contractor had forfeited its claim by issuing a 'no claim certificate'. But that argument was not taken in the HC. Therefore, it was rejected. But, the apex court ruled that the firm was not entitled to interest on the awarded amount.

In the judgment, Srie Infrastructure Finance Ltd vs Tuff Drilling Ltd, the SC upheld the Calcutta HC judgment, and stated that an arbitral tribunal has the power to recall its order terminating the proceedings. In this case, Tuff Drilling did not file its claim before the tribunal for a long time, leading to the termination of arbitration itself. Later the firm came forward and filed the claim before the tribunal with reasons for the delay. It was rejected by the tribunal, which maintained that the proceedings had already closed. The HC rejected the tribunal's stand. The SC dismissed the appeal, pointing out that the tribunal had not examined the cause for delay and it would be in the interest of justice to examine it.

Yet another tricky question arose over the valuable right to appeal of a party and the issue was referred to a larger Bench, as the earlier SC judgments have differed on the answer. In this case, State of Jharkhand vs Hindustan Construction Co, the court had appointed an arbitrator and asked him to file the award before it. When he did so, the government wanted to challenge it in a civil court. The firm objected to it, asserting that since the SC was seized of the matter, only that court can hear the challenge to the award. The present judgment found that there were contrary rulings by the apex court and it required a final answer. The Chief Justice will set up the larger Bench of at least three judges.

Tea companies lose tax appeals 

The Supreme Court (SC) has rejected the argument of several tea companies challenging the 40 per cent additional income tax on them on the dividend distributed to shareholders under Section115-O of the Income Tax Act. In these appeals by Union of India vs Tata Tea Co, the tea companies argued that they cultivate tea in gardens and processes them in factories for marketing it.  The cultivation is an agricultural process and processing is an industrial process. Agricultural income is within the state powers and Parliament cannot impose additional income tax on it. The argument was dismissed by the Gauhati High Court but partly allowed by the Calcutta high court. Therefore, both the central government and the tea firms moved the SC. The revenue authorities argued that when dividend is declared and paid to the shareholders, it was not impressed by the character of the income. The court accepted it and stated that the taxing power cannot be limited to part of the dividend income as it would be altering the provision, which is already held to be constitutional.

SC defines forest produce  

In a hotly contested set of appeals involving over hundred firms from Uttar Pradesh, Uttarakhand and Madhya Pradesh, the Supreme Court (SC) upheld the transit fee charged on forest produce. The 200-page judgment in the appeal, State of Uttarakhand vs Kumaon Stone Crusher, clarified the character of forest and forest produce which were some of the main points of discord. The court clarified that crushing of stones, stone boulders into stone grits, stone chips and stone dust did not create a new commodity different from forest produce. The crushed materials continued to be stone. Similarly, coal with its various varieties like limestone, slake line, veneer and plywood waste are all forest produce. Marble blogs, marble slabs, marble chips are all forest produce. While fly ash, clinker, synthetic gypsum are not forest produce, gypsum is a forest produce.

Humans vs computers in contract bids

A technical glitch in e-tender prompted the Bombay High Court (HC) to discuss the issue of humans versus machines at length. In the judgment, Shapoorji Pallonji & Company vs Maharashtra Housing Development Authority, it said: "In the process of tender it is very much necessary to ensure that the bidders are not shunted out of the procedure only on account of any technical glitch and technology needs to be developed in a manner to cater to their needs without causing any delay in the scheduled time."  In this case, the construction company bid for a city project in two e-envelopes. The company claimed it had clicked the right buttons but no acknowledgement was generated. The authorities maintained that the bid had to be rejected because the company did not press the "freeze button", which was mandatory. The arguments went technical and the National Informatics Centre was made a party, which supported the authority. The company brought another expert firm which backed its case. The court observed that "ultimately, it is the human being who controls technology and when it errs, it is for the human being to rectify it." After the discussion on the technological issues of the cyber era, the court allowed the firm to participate in the bid.

Penalty for violating copyright

The Delhi High Court (HC) imposed a penalty of ~5 lakh on a firm which violated the copyright of another and issued a permanent injunction against it in the judgment, Xegent Consultants Pvt Ltd vs Ea Water Pvt Ltd. Xegent claimed that it is an international consultancy and project development company in the field of irrigation/water resources and one of the most recognised brand names in the water sector news and information domain. It stated that several of its readers confused its articles with that of Ea Water as the contents were often exact copies. The contents of its website indiawaterreview.in were also found copied by another site, 'Everything about water'. Xegent objected to the copyright violation but the rival persisted in the violation. It moved the HC, which granted its prayers observing that it had shown "prima facie violation of Xegent's exclusive right on the literary work done during many years. The conduct of violating the copyright is deplorable."

Cement firm denied reimbursement

The Supreme Court last week set aside the judgment of the Himachal Pradesh High Court and rejected the claim of Gujarat Ambuja Cements for reimbursement of all the amounts paid by it on account of Peak Load Exemption Charge. The company had set up a portland cement project in Solan in 1995 under an incentive scheme promising jobs to the local people. There were some changes in tariff due to power shortage and the firm was given power under special dispensation. Analysing the government orders, the court concluded that the firm was not entitled to reimbursement under such circumstances.