From consumer law to pre-deposit rule, here're the key court orders

A weekly selection of key court orders

Tenant cannot squat on secured asset

The right of a tenant in a flat, which was mortgaged by a defaulting landlord-borrower, came up in the Supreme Court in the case, Bajrang vs Central Bank of India. The residential flat in Mumbai was a secured asset. When the bank tried to take possession of it, invoking the Securitisation Act (Sarfaesi), the tenant obtained a stay against the landlord who sought his eviction. The bank alleged that the landlord and the tenant were in collusion to defeat its rights. The Bombay High Court had given judgment in favour of the bank. The tenant appealed to the Supreme Court, which dismissed it. It ruled that the tenant was overstaying and the right of the secured creditor was above that of the tenant. Reflecting the bank’s argument, the court also observed that “such devious practices by the borrower to obstruct the rights of the bank cannot be appreciated”. 

State housing board can fix price of plot

The Supreme Court has set aside the judgment of the Patna High Court and asserted that the Bihar State Housing Board had the power to fix the price of plots given in auction as it is a commercial decision. In this case, the board had invited bids for a large plot and the only applicant was Radha Healthcare Institute. However, the plot was not allotted despite paying the earnest money. The institute was later offered two smaller plots, which were accepted but the value was disputed by the institute. It moved the high court, which asked the board to charge the price proportionate to the price advertised earlier. The board appealed to the Supreme Court. It stated that the board took a commercial decision. In the matter of fixation of price, the board has a right to fix it. The board was “more than indulgent” in allotting plots to the institute. In fact, “public property could not be disposed of without any advertisement and without giving opportunity to eligible persons to apply in a transparent and non-discriminatory manner,” the judgement underlined.

Fraud charge does not bar arbitration

The question whether an arbitration clause could be invoked when there are allegations of fraud in the functioning of a partnership was discussed by the Supreme Court in its judgment in the case, Rashid Raza vs Sadaf Akhtar. When there are serious allegations involving disputed issues of facts and evidence, the court has earlier held that they should be decided by a civil court. But if there are only “simple allegations”, the arbitration clause would be operative. In this case, there was a partnership deed with an arbitration clause. When disputes arose between the partners, one of them accused the other of financial irregularities and lodged a complaint with the police. One partner invoked the arbitration clause and moved the high court for appointment of an arbitrator. The application was dismissed stating that there were complex questions, which only a civil court could handle. In the appeal, the Supreme Court reversed that judgment and appointed a retired judge as arbitrator. It observed that this case fell on the side of “simple allegations” as there was no allegation of fraud, which would vitiate the partnership deed as a whole.

SC overrules own view on consumer law

The Supreme Court last week overruled its earlier judgment, which had given a wrong interpretation of a clause in the Consumer Protection Act. In that judgment, HUDA vs Sunita (2005), the court had held that the National Consumer Disputes Redressal Commission had no jurisdiction to adjudicate the legality of the demand of “composition fee” and “extension fee” made by the Haryana Urban Development Authority. This was because the HUDA (the Haryana Urban Development Authority) was a statutory authority and the demand was a statutory obligation. There could be no “deficiency in service” which could be taken to a consumer court. This view was doubted by a later bench and the issue was referred to a larger bench. This bench now declared in Punjab Urban Development Authority vs Vidya Chetal that the earlier judgment did not reflect the correct law. It asserted that determination of the dispute concerning the validity of the imposition of a statutory due arising out of a “deficiency in service” can be undertaken by the consumer forums.

Pre-deposit rule cannot be diluted

In a large number of appeals led by Tecnimont vs State of Punjab, the Supreme Court last week upheld the view of the high court that the condition of 25 per cent pre-deposit for hearing the first appeal in value-added tax (VAT) cases is not unreasonable or unconstitutional. Dismissing the appeals, it added that the condition was not “onerous or harsh”. The judgment also underlined that the condition is mandatory and the appellate authority cannot override the rule. Otherwise, the provision will be unworkable. The court has earlier dealt with similar questions from other states relating to taxation. The judgment asserted that the state government had the power to pass a law imposing the condition under challenge. There is no reason why the legislature, while granting the right of appeal, cannot impose conditions so long as they are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory.

Liquor can’t be ordered online

The Karnataka High Court has upheld the ban on the business of online order processing and delivery of liquor in the state. In this case, Hip Bar vs State, the company claimed that it has a valid certificate issued by the RBI for the operation of a mobile wallet. It also asserted that it has a food safety licence from the Karnataka government, which also issued a letter of authority for online order processing and delivery of IFML. However, following media reports, the latter licence was cancelled leading to the writ petition. Dismissing the petition, the high court stated that though there was no prohibition in the state, “that would not mean absolute liberty to deal in the liquor trade.” Home delivery of alcohol is barred. The business model of the company requires authorisation under the state excise law. It cannot take shelter under the RBI authorisation. “Indisputably, liquor is deleterious to the health of mankind. The social stigma attached to it as far as family and society are concerned cannot be lost sight of,” the judgment said, adding, “younger generation, including children, below the permissible age, succumbing to this temptation of liquor consumption through online orders may be stringently regulated. The eligibility of the age and sound mind to receive and consume liquor are difficult to monitor with the trade carried out by the company.”