From comparative ads to high-priced arbitrator, here are key court orders

Vehicles before sale liable to tax

Manufacturers of motor vehicles, who keep them in their possession in the course of business while the vehicles are suitable for use on roads, shall pay a tax under the Bihar Motor Vehicles Taxation Act, according to the Supreme Court. It stated so while dismissing a batch of appeals led by Tata Motors vs State of Jharkhand. The tax proviso applicable to Bihar and Jharkhand was challenged as unconstitutional earlier by manufacturers and dealers in the Patna High Court, but it was dismissed. Their appeals to the Supreme Court were also dismissed. Now they challenged the levy on the chassis in their possession while being sent to the dealers or to the ultimate buyer. The court stated that the vehicles were capable of being used and, therefore, will attract the levy. The judgment also upheld the penalty imposed on the manufacturers as the law provided it. The plea of the manufacturers that they acted bona fide was also rejected by the court. 

Dispute can be revived after settlement

The Supreme Court last week set aside a judgment of the Punjab and Haryana High Court and stated that even after a settlement between two rival parties, a new dispute over it could be revived in the court. In this case, Punjab Financial Corporation vs Paulbro Leathers Ltd, the firm could not repay the loan taken from the corporation. They arrived at a one-time settlement, in which a chartered accountant was appointed to calculate the balance of dues. The corporation disputed the CA’s calculation and demanded Rs 50 lakh from the debtor. The firm moved the high court arguing that once a settlement was signed, there could not be a further dispute. The high court agreed with it and quashed the demand, asserting that since the parties had consented to the settlement, the corporation was not justified in raising the demand. Therefore, the financial corporation appealed to the Supreme Court. It held that the high court was wrong and stated that there is a new dispute outside the settlement, which could be decided on its own merit by a new CA. The case was remanded to the high court for quick disposal as public money is involved.

Security concerns override natural justice

Though court decisions based on documents submitted by the government in sealed covers are currently a matter of debate as in the Rafale and the Alok Verma proceedings,  the Supreme Court last week adopted the same procedure while dismissing two appeals by cable network operators. In the leading case, Digi Cable Network vs Union of India, the firms were granted permission to operate according to the Cable TV Network Rules. Later, it was cancelled invoking Rule 11C as the Union home ministry did not grant it security clearance. It was challenged in the Bombay High Court, which dismissed the writ petitions. In the appeal, the government presented certain documents in sealed covers. After perusal, the Supreme Court upheld the cancellation, observing that the firms had no right to prior notice. In matters of national security, a party cannot insist on strict observance of natural justice. What's in the national interest is not a question of law, but a matter of executive policy, the judgment emphasised.

SC to solve currency poser

The Delhi High Court has left it to the Supreme Court to solve a frequent dispute arising on the conversion rate of currency in an agreement. In this case, a single judge Bench had held that "for the purposes of conversion of US dollars to Indian rupees, the exchange rate as prevalent on the date of the agreement dated (29.06.1982) would be applicable". Two companies, Royal Construction Co and National Projects Construction Corp had undertaken a project in Iraq, whose value was of the order of Iraqi Dinars 7,83,834 converted into US dollars at the agreed rate of exchange of ID 1 = USD 3.37778. Disputes arose because of delay in the project due to the Iran-Iraq war and the matter was referred to arbitration and the award came after two decades. The issue which arose now was whether the conversion rate should be that prevailing at the time of the agreement or at the time of the award. The dispute was taken to the Supreme Court. However, the matter came back to the high court in view of purported ambiguity in the Supreme Court order. The high court, therefore, directed the parties to approach the apex court for a definitive order.

Comparative ads are OK, not disparagement 

Though a certain amount of disparagement is implicit in comparative advertising, it is legal and permissible as long as it does not mislead, the Delhi High Court stated in the dispute between Horlicks Ltd and its rival, Heinz India Ltd, makers of Complan. Summarising the law on disparaging advertisements, the judgment said advertisement is a facet of commercial speech, which is protected by the fundamental right under Article 19(1)(a) of the Constitution. Horlicks had alleged that the rival company denigrated its product in ads, claiming one cup of Complan is equivalent to two cups of Horlicks in protein benefit. Heinz later modified the ad but it did not satisfy Horlicks. Its petition to stop the renewed ad campaign was rejected by the high court. The advertisement in question compared a material, relevant verifiable feature of the drink in question  and had not manipulated its serving size; an advertiser is not obliged to compare all parameters of the rival products and it is open to him/her/it to highlight a special feature/characteristic of the product which would set its product apart from the competitors', as long as it is true. 

High-priced arbitrator disqualified

An arbitrator who charges fees beyond that prescribed under the Arbitration and Conciliation Act and the concerned high court incurs disqualification, the Rajasthan High Court ruled in its order in the case, Doshion Ltd vs Hindustan Zinc Ltd. In this case, a retired high court judge demanded Rs 75 lakh as fees. Doshion protested against this rate, while the rival public sector firm had no objection. Then the arbitrator reduced his demand to Rs 50 lakh, calling it a ‘discount’ and ‘benevolence’. The aggrieved firm moved a writ petition in the high court. It held that the arbitrator has become legally disqualified by demanding fee beyond that set under the law. The high court stated that the demand made by the arbitrator would cause doubt in the mind of a party regarding prejudice against it. It would also cast a shadow on the impartiality of the proceedings before the arbitral tribunal. The court ordered the replacement of the arbitrator.