From bypassing of tribunals to Anglo-Saxon law, here are key court orders

From bypassing of tribunals to Anglo-Saxon law, here are key court orders

SC frowns at bypassing of tribunals

The Supreme Court last week criticised the Kerala High Court for passing an interim order in a debt recovery case, that too in a writ petition when alternative remedies were available under the Securitisation (Sarfaesi)  Act.  “The writ petition ought not to have been entertained and the interim order was granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the lender bank to contest the maintainability of the writ petition,” the judgment stated in the case, State Bank of Travancore vs Mathew  K C.  

The borrower was declared a defaulter and the mortgaged property was taken over by the bank. The borrower moved the high court, arguing that he had not been given an opportunity to regularise the loan. The high court accepted the plea and stayed the recovery proceedings. The Supreme Court stated that staying the proceedings amounted to judicial adventurism as the law is well settled that a writ petition would not be entertained when debt recovery laws allow appeals before tribunals. “In financial matters, grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved person has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the taxpayers’ expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public,” the court observed.

Larger bench to interpret ‘shareholder’ 

A two-judge bench of the Supreme Court has referred to a larger bench the interpretation of the term ‘shareholder’ in the definition section of the Income Tax Act, as it felt that the meaning given by the Delhi High Court should be reconsidered.  An amendment to the provision added a new category by introducing concerns in which a shareholder is a member or partner and in which he/she has a substantial interest. In this case, National Travel Services vs CIT, the issue arose when a partnership with Naresh Goyal, Surinder Goyal, and Jet Enterprises Ltd took a loan from Jetair Ltd and the firm subscribed to its equity capital. The tax liability over the dividend necessitated a relook at Section 2(22)(e) of the Income Tax Act.

NHAI rapped for wasting court time  

The Delhi High Court has stated that successive appeals against the award of arbitration tribunals, especially by public sector undertakings, “have effectively reduced the exercise of arbitration to the civil trial".  Despite repeated disapproval by the Supreme Court as well as several high courts, these appeals have contributed a great deal to the menace of "docket explosion", which consumes valuable time which could be used for settling more important disputes. “We unhesitatingly deprecate this practice,” the court wrote in the case, NHAI vs M/s Bsc-Rbm-Pati Joint Venture. The dispute over a road project in West Bengal was referred to a three-member arbitration panel. The award was in favour of the contractor. The National Highway Authority of India challenged it in the high court and lost. It appealed to a division bench, where also it lost.  The court imposed a cost on NHAI, stating that the appeal was an attempt to re-argue the case all over again. The court would not hear such appeals, as several judgments have held that the award should normally be accepted as final.

Maharashtra power company criticised 

A similar view was expressed by the Supreme Court in its judgment in Maharashtra State Electricity Distribution Co vs Datar Switchgear Ltd. Dismissing the appeal of the state entity, the court noted that its appeals against an arbitration award of 2004 in a 1999 contract were rejected twice by the Bombay High Court. Its appeal to the Supreme Court is “only an attempt to re-argue the matter afresh which is impermissible”. The dispute arose from a contract for installation of load management systems. Following disputes, Datar company terminated the contract and refused to maintain even the objects installed by them.  When the dispute went to arbitration, the government entity was asked to pay Rs 185,97,86,399 to the contracting firm.

The Supreme Court criticised the government firm for not accepting the well-reasoned decisions of the arbitration tribunal and the high court. The judgment said: “Once it is established that the party was justified in terminating the contract on account of fundamental breach thereof, the innocent party is entitled to claim damages for the entire contract, i.e. for the part which is performed and also for the part of the contract which it was prevented from performing.”

Accept decisions with grace, taxmen told

The Bombay High Court has severely criticised the central excise authorities for “not accepting with grace” the verdict of the appellate tribunals and raising technical issues in appeals. The remarks were made in the judgment of the Commissioner of Central Excise vs Mahindra & Mahindra case.  The revenue authorities accused the motor vehicle manufacturer of evading excise duty when its vehicles were transferred from one regional sales office to another and sold at higher price. They issued nine show cause notices to the firm, but they were beyond the limitation period, often four years late. But, the revenue department carried appeals to the high court. The judgment called the appeals frivolous, waste of time of appellate courts and abuse of process. The high court imposed a fine of Rs 100,000 on the authorities remarking that “no abuse can go unpunished.” 

Relic of Anglo-Saxon shipping law 

The Bombay High Court has pointed out an outdated colonial rule under which the Sheriff of Mumbai is entitled to a “poundage” when he arrests ships, though the dispute between the parties may have been settled.  The court stated in its judgment, Sinica Graeca Shipping Ltd vs M T Chemroad Mega, that “this is one of the Anglo-Saxon legacies which has continued without any justification whatsoever. In the past, it is possible that the Sheriff's office was not paid any salary as such and perhaps it was not a part of the Department of the Government…Since the parties had to necessarily go through the Sheriff, he was justified in demanding some commission by way of his remuneration or fees. Today it is totally different. The Deputy Sheriff is an officer of the government and all the staff are paid their salaries". The court called the rule “obsolete and antiquated”, which should be deleted. However, the court did not strike down the rule but asked the Rules Committee of the court to seriously reconsider it.