From e-auctions to women footwear, here are the key court orders

A weekly selection of key court orders

Race at the last second in e-auctions

With e-tender becoming the norm, seconds matter before hitting the submit button by the bidders. Some late-comers had to fight tough legal battles in recent times to prove that they beat the deadline. The latest is the case, L & T Hydrocarbon Engineering Ltd vs ONGC, decided by the Delhi High Court last fortnight. L&T sent its bid to ONGC for an offshore process platform at 13.58.43 hrs while the deadline was 14 hrs. ONGC allegedly kept extending the deadline 18 times. According to L&T, it was late because ONGC kept on amending the tender specifications, compelling it to revisit the conditions and coordinate with its suppliers. Still, its bid was on time. ONGC refuted it with technical details. The court, therefore, set up two technical expert teams, one to examine the L&T computers and the other that of ONGC e-tender website. The court discussed their findings and found that the L&T version rang true. Though it pressed the submit button at the last moment, for some technical reason, it did not register in the server log of ONGC. Therefore, the court directed ONGC to consider the L&T bid along with that of six others. Technical glitches in tenders also were dealt with recently by the Supreme Court in the case of Shapoorji Pallonji. Referring to such suits, the High Court prefaced the judgment thus: “Gone are those days when it was said that when someone does something at the ‘eleventh hour’, they do it at the last possible moment. In today’s day and time, when technology is advancing at lightning speed, even a fraction of a minute is akin to the ‘eleventh hour’. L&T’s case hangs on those very fleeting seconds.”

Double trouble for stockbroker

A stockbroker who acted on behalf of public sector Indian Bank had to fight over two decades to absolve himself from criminal charges and income tax demands. The bank, in order to save itself from being charged a high rate of interest on borrowing money from the market, lured public sector undertakings (PSUs) to make fixed deposits at 12.5 per cent, against the RBI approved-rate of 8. To pay higher interest to the PSUs, the bank requested its broker to purchase securities at a prescribed price, which was unusually high but adequate to cover the market price of the securities. However, the revenue authorities raised a demand of ~14,73,91,000 from the broker on payment of additional interest to the PSUs, maintaining that he had not acted on behalf of the bank but as an independent dealer. He was also prosecuted for the transactions but was acquitted by the trial court, which held that he was acting as an agent of the bank. That evidence was accepted by the Madras High Court and on appeal, by the Supreme Court. Dismissing the appeal case, CIT vs T Jayachandran, the court stated that though there were irregularities in the whole transactions, the broker held in trust the additional interest paid to the PSUs on behalf of Indian Bank and it was not the income of the broker.

IT search linked to ‘connected person’

Any material or evidence found in the search by income tax authorities can be linked to a survey made on the premises of a connected person while making block assessment of the assessee, the Supreme Court stated while setting aside the judgment of the Madras High Court and the Income Tax Appellate Tribunal. In this case, Commissioner of Income Tax vs S Ajit Kumar, a search was conducted on the premises of Kumar. Simultaneously, a survey was conducted on the premises of a firm of interior decorators who built his house. An undisclosed cash payment was discovered. The taxmen held that the amount was liable to tax as undisclosed income of the block period. The assessee moved the tribunal which quashed the notice. The High Court dismissed the revenue authorities’ appeal. They argued that a survey is very much part of the search process and the inquiry and investigation is one process. The Supreme Court accepted the contention and allowed the appeal.

Tender can be withdrawn in public interest

The Delhi High Court last week stated that the decision of the Ministry of Defence to withdraw its tender to set up 45 bird detection radars to protect aircraft from bird strikes was not arbitrary as it was “not based merely on factors such as fulfilment of technical qualifications and financial viability of the offer but much more”. Axiscades Aerospace was the lowest bidder, but the government withdrew the proposal. The firm challenged it, but the court dismissed it observing that “vital public interest is a necessary condition, which invariably informs every decision of the executive authority or agency that is to award the contract". The court further remarked that the tender process dealt with technology for protecting the country’s aircraft from bird strikes, and the court also ought to bear in mind the security implications involved. Another factor which weighed with the court is that all other contenders tendered in Indian currency, whereas this firm tendered in a manner that allowed it to hedge in foreign currency. This, according to the Ministry of Defence, resulted in an unequal playing field, which compelled it to withdraw the bid.

Defaulter cannot rush to High Court

The Calcutta High Court has reiterated that a borrower against whom action has been taken under the Securitisation (SARFAESI) Act should approach the debt recovery tribunal if there is any grievance and not file a writ petition in the High Court. In this case, Mackeil & Co vs SBI, the bank had taken possession of some properties against which the company moved the High Court on several grounds. The High Court did not go into the merits but allowed the company to approach the tribunal.

Red-faced over women footwear

French firm Christian Louboutin, whose goal reportedly is to "make a woman look sexy, beautiful, and to make her legs look long”, has lost its case in the Delhi High Court when it dismissed a trademark suit against a Mumbai shoe shop chain. The firm with celebrity clientele claimed that its trademark ‘Red Sole’ was passed off by the Indian shops, painting their soles red. It argued that the red sole was its signature mark internationally. However, the High Court observed that a single colour could not be claimed as an exclusive trademark or even a mark. A combination of colours could be a trademark. US courts might have recognised a single colour as a trademark, but the Indian Trade Marks Act does not allow it. Even if the colour is registered, it is against the law, the judgment asserted. Moreover, the Indian shops sold their ware under the name Veronica while the French firm used its full name on the product as a ‘wordmark’.