From contractor plights to discharge vouchers, here're the key court orders

Plight of sub-contractors in ‘stuck’ projects

The plight of sub-contractors in infrastructure projects was highlighted by the Delhi High Court in its recent judgment in Apco-Titan (Jv) vs National Highways & Infrastructure Development Corporation. If the main contractor is facing insolvency proceedings before the National Company Law Tribunal, as IL&FS in this case, the construction work will be labelled “stuck projects” and there is little relief for sub-contractors. In this case, Apco was a sub-contractor and an IL&FS subsidiary was the main contractor. Since they are before the tribunal, there is a stay on all payments. The project — part of the highway and tunnel on NH-1 in Jammu & Kashmir — is stuck due to insolvency. The court observed that there are a large number of sub-contractors who may be awaiting payments in such contractual “quagmire”. The government is ought to evolve a mechanism for making payments on a case-to-case basis, especially in those cases where the contractor is in financial difficulty or is undergoing insolvency proceedings. The court added that “a re-think is required to address such situations in order to resolve disputes between contractors and sub-contractors, if the intention is to ensure that infrastructure projects are not impeded and are smoothly implemented.”

Orders without providing reasons

The Supreme Court has often chastised high courts and tribunals for passing summary orders without giving the reasons for arriving at the conclusions. It would seem that the practice is common among quasi-judicial bodies. So much so that the Intellectual Property Attorneys Association recently moved the Delhi High Court alleging that the Registrar of Trade Marks is passing “non-speaking” orders without writing the grounds for rejecting applications for registration. This, they argued, violated Section 18(5) of the Trade Marks Act. This provision mandates that “in case of a refusal or conditional acceptance of an application, the Registrar shall record in writing the grounds for such refusal or conditional acceptance”. The attorneys made the Controller General of Patents, Designs & Trade Marks as the respondent and sought the assistance of the high court to enforce the rule. They also pointed out that Rule 36 of the Trade Marks Rules is contrary to the mandate of Section 18(5). This rule provided for sending the copy of the order to the applicant without the grounds for refusal. He might get it only if he wants to appeal against the order within 30 days. The high court ruled that this provision was “arbitrary, unreasonable and inconsistent with the mandatory provision of the statute”. It asserted that Section 18(5) shall prevail over Rule 36. 

Insurer can’t pass on liability to father-in-law

The insurance company cannot escape its liability in road deaths if the dependents of a deceased man are taken care of by his father-in-law. Royal Sundaram General Insurance argued in a case before the Delhi High Court that the father-in-law had continued the business of the deceased person and, therefore, no compensation need be paid as ordered by the tribunal. It argued that there was no loss of income or dependency. The high court rejected the contention outright, pointing out that the father-in-law stepped in to continue the business to maintain the widow and children. It is a temporary arrangement to meet the exigencies of the situation. The dependency was on the deceased person, not father-in-law, the judgment clarified.

Summary orders in commercial suits

The Delhi High Court last week pointed out that in commercial disputes, it can grant a summary judgment where it considers that the defendant in a suit has no real prospects of winning and there is no other compelling reason why the claim should not be disposed of without recording oral evidence. Unlike ordinary suits, courts need not hold a trial in commercial suits, the judgment in Su-Kam Power Systems vs Kunwer Sachdev asserted. The judgment stated that Su-Kam is the exclusive registered proprietor of the trademarks of the same name with respect to inverters. The company, through its resolution professional, sought a summary judgment praying for a permanent injunction against the opposite party for trademark violations. It was granted.

Discharge vouchers signed under duress

Insurance companies that demand discharge vouchers from policyholders when a claim is made often argue that the amount mentioned there has been paid and there should be no further claim. The insured person can still ask for a higher claim showing the actual losses. This rule was asserted by the Delhi High Court in its judgment in United India Insurance vs Shreedhar Milk Food. In this case, a fire destroyed milk powder kept in a godown. The milk firm gave a discharge voucher for the release of over Rs 8.8 crore towards the ‘final settlement’. Later the firm demanded more compensation. The insurance company relied upon the voucher to argue that the amount due has been paid and the firm received it “without any protest and demur, and thus was not entitled to any further amount”. The firm moved the arbitrator but he gave an award against it. The award did not touch upon the “pre-printed” discharge voucher which was a key issue as the firm had pleaded that it was given under duress. Therefore, the award was challenged in the high court. It set aside the award, citing a circular of the Insurance Regulatory and Development Authority which stated: “It should be clearly understood that execution of such vouchers does not foreclose the rights of the policyholder to seek higher compensation before any judicial forum”. The judgment pointed out that the arbitrator had ignored this vital evidence and, therefore, the court was entitled to interfere in the award as an exceptional case and set it aside. 

Hi-tech solution to stop illegal constructions

To tackle unauthorised constructions, the Supreme Court has asked municipal corporations in Maharashtra, where the population is 5 million or more, to get geomapping and geophotography done not only of the municipal areas but also of areas 10 km outside their boundaries. This must be done in one year by satellite, drones or vehicles. Once it is done, the court thinks it would be easy to control illegal constructions. In a series of orders, the court also empowered the authorities to demolish any illegal construction after a short notice. The order was passed in an appeal case, Municipal Corporation vs Sunbeam Developers. Taking a tough stand, the judgment declared that “Rule of Law envisages that illegal constructions must be demolished and there can be no sympathy towards those who violate law”.