The best legal brains can forget to include crucial clauses in agreements and the authorities may also be negligent in detecting them while assessing the income of the firm. This is what was revealed last week in the Supreme Court case, Joshi Technologies International Inc vs Union of India. This firm entered into two production sharing contracts with the Ministry of Petroleum in 1992 for exploration of oil fields in Gujarat and other states. While filing income tax returns, the firm claimed benefit of Section 42 of the Income Tax Act. It is a special provision for deductions and allowances for prospecting mineral oil. Such benefits must be specifically mentioned in the agreement and they must be laid on the table of each House of Parliament. The tax authorities granted benefits to the firm from 2001-02 when production started. But in 2005-06 they found that there was no such clause in the agreement. The firm claimed that it was an "inadvertent omission", which could be cured by the ministry. The petroleum ministry therefore sought a clarification from the finance ministry, which did not respond. The tax authorities therefore rejected the claim of benefits. The firm moved the Delhi High Court, but its petition was dismissed. Its appeal was also dismissed with the observation that "though it may be somewhat harsh on the firm, we come to the irresistible conclusion that it is not entitled to the relief claimed. It availed of the benefit for a few years and acted on the understanding that such a benefit would be given to it, but we have no option but to hold that the contract did not provide for this benefit."
Late-comers miss incentives for units
Those who wait and watch the outcome of suits filed by others in similar circumstances could render themselves out of court due to the law of limitation. This has happened in the case of a batch of industries in the north-east region which were offered incentives to set up units in underdeveloped regions. The central government and the North Eastern Council declared a policy decision in 1997 for promotion of industries in that region. Several industries applied for the promised incentives, but they were delayed or not forthcoming. Therefore, they moved the Gauhati High Court. It asked the authorities to process their applications. The scheme was later caught in allegations of financial irregularities and scrapped. Meanwhile, another set of industries moved the high court seeking the same relief as given to the earlier batch of industries. The single judge bench of the high court rejected their petitions on the ground that those industries were not vigilant and waited for the result of the first batch of cases. The scheme had been scrapped. However, the division bench of the high court followed the order in the first set of cases and granted relief to the late-coming industries. The government therefore appealed to the Supreme Court. In its judgment, Union of India vs Shri Hanuman Industries Ltd, the apex court rejected the arguments of the late-comers and upheld the view of the single judge. "We are of unhesitant view that in view of their deliberate delay, negligence and inaction, they have disentitled themselves of the benefit of law," the Supreme Court judgment said, and added: "It would be iniquitous and repugnant as well to public exchequer to entertain their belated claim."
The law of limitation applies only to courts and not to tribunals or quasi-judicial proceedings, the Supreme Court has stated in the judgment, M P Steel Corporation vs Commissioner. This was a case under the Customs Act. The Commissioner of Customs and the appellate tribunal had dismissed the appeal of the ship-breaking firm at Alang on the ground of delay in moving the court. The firm contended that it had moved a wrong forum by mistake and therefore that period of litigation should not be taken into account for limitation purposes. The Supreme Court accepted that argument and set aside the orders of authorities below. It said that the consistent view in its leading judgments involving labour, sales tax, land acquisition, rent control and other disputes was that the tribunals were not courts. The Constitution in the relevant chapters also uses the expression 'court' to refer to the court system in general. As opposed to this court system is a system of quasi-judicial bodies called tribunals. Articles 136 and 227 refer to courts as distinct from tribunals. Since they have been dealt with differently, the Limitation Act will not apply to both; but only to courts.
SC appoints umpire in arbitration
In the absence of consensus between ONGC Petro Additions Ltd and Daelim Industrial Co, the Supreme Court appointed its former judge R V Raveendran to fill the post of the president of the arbitral tribunal. The Korean company won a tender for a petro chemical plant. But it apparently could not fulfill its obligations. The Indian company issued arbitration notice and nominated former chief justice V N Khare for its side. The Korean company contested arguing that the arbitration was covered by the Singapore International Arbitration Act and not the Indian Arbitration and Conciliation Act. However, it nominated a foreign arbitrator. The two arbitrators could not agree on the president. Therefore, the Supreme Court named the umpire.
Bias alleged against NTPC arbitrator
The Delhi High Court has stated that if a party to the arbitration has apprehension about the impartiality of the arbitrator, it has to approach him to give a preliminary decision on that objection. This is provided in Sections 12 and 13 of the Arbitration and Conciliation Act. The court stated so while dismissing the petition of Gangotri Enterprises Ltd against National Thermal Power Corporation. When disputes arose over the Simhadri Super Thermal Power Project in Andhra Pradesh, a manager of the NTPC was appointed arbitrator, according to the contractual clause. Gangotri objected to the choice since the arbitrator was in charge of the project and he was an employee of the power corporation, he would not be able to act impartially. It cited an earlier judgment of the Supreme Court (Indian Oil Corporation vs Raja Transport) in which it had criticised the practice of public sector undertakings nominating its own officers as arbitrators in disputes with private firms. In this case, NTPC maintained that the appointment was according to the contract and denied any possible bias. Therefore, Gangotri moved the court to appoint an independent arbitrator. It also complained that it was threatened with blacklisting and its bank guarantee had been encashed. The court stated it could not decide these issues and there was a separate procedure under the Act to raise objections. Moreover, the court found that there was inordinate delay in seeking to remove the arbitrator.
Late-comers miss incentives for units
Those who wait and watch the outcome of suits filed by others in similar circumstances could render themselves out of court due to the law of limitation. This has happened in the case of a batch of industries in the north-east region which were offered incentives to set up units in underdeveloped regions. The central government and the North Eastern Council declared a policy decision in 1997 for promotion of industries in that region. Several industries applied for the promised incentives, but they were delayed or not forthcoming. Therefore, they moved the Gauhati High Court. It asked the authorities to process their applications. The scheme was later caught in allegations of financial irregularities and scrapped. Meanwhile, another set of industries moved the high court seeking the same relief as given to the earlier batch of industries. The single judge bench of the high court rejected their petitions on the ground that those industries were not vigilant and waited for the result of the first batch of cases. The scheme had been scrapped. However, the division bench of the high court followed the order in the first set of cases and granted relief to the late-coming industries. The government therefore appealed to the Supreme Court. In its judgment, Union of India vs Shri Hanuman Industries Ltd, the apex court rejected the arguments of the late-comers and upheld the view of the single judge. "We are of unhesitant view that in view of their deliberate delay, negligence and inaction, they have disentitled themselves of the benefit of law," the Supreme Court judgment said, and added: "It would be iniquitous and repugnant as well to public exchequer to entertain their belated claim."
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Time bar does not apply to tribunals
The law of limitation applies only to courts and not to tribunals or quasi-judicial proceedings, the Supreme Court has stated in the judgment, M P Steel Corporation vs Commissioner. This was a case under the Customs Act. The Commissioner of Customs and the appellate tribunal had dismissed the appeal of the ship-breaking firm at Alang on the ground of delay in moving the court. The firm contended that it had moved a wrong forum by mistake and therefore that period of litigation should not be taken into account for limitation purposes. The Supreme Court accepted that argument and set aside the orders of authorities below. It said that the consistent view in its leading judgments involving labour, sales tax, land acquisition, rent control and other disputes was that the tribunals were not courts. The Constitution in the relevant chapters also uses the expression 'court' to refer to the court system in general. As opposed to this court system is a system of quasi-judicial bodies called tribunals. Articles 136 and 227 refer to courts as distinct from tribunals. Since they have been dealt with differently, the Limitation Act will not apply to both; but only to courts.
SC appoints umpire in arbitration
In the absence of consensus between ONGC Petro Additions Ltd and Daelim Industrial Co, the Supreme Court appointed its former judge R V Raveendran to fill the post of the president of the arbitral tribunal. The Korean company won a tender for a petro chemical plant. But it apparently could not fulfill its obligations. The Indian company issued arbitration notice and nominated former chief justice V N Khare for its side. The Korean company contested arguing that the arbitration was covered by the Singapore International Arbitration Act and not the Indian Arbitration and Conciliation Act. However, it nominated a foreign arbitrator. The two arbitrators could not agree on the president. Therefore, the Supreme Court named the umpire.
Bias alleged against NTPC arbitrator
The Delhi High Court has stated that if a party to the arbitration has apprehension about the impartiality of the arbitrator, it has to approach him to give a preliminary decision on that objection. This is provided in Sections 12 and 13 of the Arbitration and Conciliation Act. The court stated so while dismissing the petition of Gangotri Enterprises Ltd against National Thermal Power Corporation. When disputes arose over the Simhadri Super Thermal Power Project in Andhra Pradesh, a manager of the NTPC was appointed arbitrator, according to the contractual clause. Gangotri objected to the choice since the arbitrator was in charge of the project and he was an employee of the power corporation, he would not be able to act impartially. It cited an earlier judgment of the Supreme Court (Indian Oil Corporation vs Raja Transport) in which it had criticised the practice of public sector undertakings nominating its own officers as arbitrators in disputes with private firms. In this case, NTPC maintained that the appointment was according to the contract and denied any possible bias. Therefore, Gangotri moved the court to appoint an independent arbitrator. It also complained that it was threatened with blacklisting and its bank guarantee had been encashed. The court stated it could not decide these issues and there was a separate procedure under the Act to raise objections. Moreover, the court found that there was inordinate delay in seeking to remove the arbitrator.