From Oriental Insurance to tax on EPIC photo, here are the key court orders

A weekly selection of key court orders

Litigation stalls development plan

Landowners, officials, and politicians can stall a town development scheme by invoking legal technicalities; even the high courts can fall victim to their ploy. This was revealed by the Supreme Court in a case related to the Bangalore Development Authority (BDA), which moved the court against the orders of the Karnataka High Court. Though the development scheme for a layout was declared in 2008, it was caught in litigation at the instance of the landowners. They managed with the connivance of influential persons to exclude large chunks of land from the scheme, freezing the whole project. When the BDA appealed to the Supreme Court, it observed that the high court should not have quashed the notification “as the landowners, state government and BDA were responsible to create a mess in the way of planned development of the Bangalore city". The judgment added that the matter could not be left at the mercy of unscrupulous authority of the BDA, the state government or in the political hands. It appointed a retired high court judge to fix the role of officials of the BDA and the state government. All records will be provided to the inquiring judge. The report shall be submitted to the court as early as possible.

Fraud in transfer of shares

In a case which the Supreme Court described as one that disclosed “a very sordid state of facts”, the court set aside the order of the National Company Law Appellate Tribunal and asked Eicher Motors Ltd to rectify its register and grant relief to a woman who was the victim of a fraud. In this case, Adesh Kaur vs Eicher Motors, the woman in Punjab had 903 equity shares of the company in physical form. Someone in Mumbai impersonated her and asked the company to change the address. Then the impersonator executed an indemnity bond by forging the signature of the Punjab woman and sought duplicate shares. The company allowed it without following the procedures and the shares were then transferred to a man in Mumbai. When Adesh Kaur came to know the fraud, she asked the company to issue revalidated fresh shares. The company did not do this, leading to her petition in the National Company Law Tribunal (NCLT). The company challenged the jurisdiction of the tribunal and contended that she should move a civil court. Rejecting the arguments as frivolous, the tribunal held the company liable for the fraud played by its employees or its agents. It also underlined that the company had flouted rules and procedures under the company law and Sebi. It allowed the woman to demat the shares. The company went on appeal and the appellate tribunal reversed the ruling, leading to the appeal in the Supreme Court. It upheld the NCLT ruling stating that it would be unfair to relegate her to further legal proceedings when she is a victim of an “open and shut case” of fraud. If the new buyer’s name has been entered in the register it would be invalid. 

Oriental Insurance to pay damages

The Supreme Court last week reiterated the principle of “pay and recover” in road accident cases. According to this rule, if the driver of the offending vehicle has no licence or there is a violation of insurance policy by the owner, the insurance company has to pay the compensation determined by the motor accident claims tribunal and then recover it from the owner. The insurance company has to meet the immediate needs of the claimants. In this case, Shamanna vs Oriental Insurance Co, the driver of the vehicle had no valid licence. The tribunal applied the ‘pay and recover’ principle. But the Karnataka High Court held that only the owner was liable. The Supreme Court set aside that ruling.

No service tax on EPIC photo

The Calcutta High Court has quashed the show cause notice issued by the Commissioner of Service Tax to Webel Technology Ltd, demanding tax on the preparation of Electoral Photo Identity Card (EPIC). According to the revenue authorities, making of EPIC involves taking of photographs of voters by a digital camera, processing and lamination and therefore, such activity came within the purview of photography service, inviting service charges. On the other hand, the company argued that its contracts with the election officers of Bihar and West Bengal did allow the commissioner to divide the activities into separate compartments. Photography is only one step in the process of making the card, which is the end product. Photography is not the sole purpose of the contract, it is not a standalone product. The court accepted the argument.

NHAI plea against award dismissed

The Delhi High Court last week dismissed the appeal of the National Highway Authority of India (NHAI) against an arbitration award against it in a dispute with PCL-STICO (JV). The contract to lay a highway in Odisha was given to the firm. However, there was a delay in handing over the project. There were also changes in the design and alignment of the highway plan. T, e firm, therefore, demanded a new rate which was denied by the NHAI, leading disputes and arbitration. The award was against the NHAI, but the government corporation appealed to the high court without success before a single judge Bench. On further appeal, a division Bench upheld the award. It said that a new rate for the excess work that was necessitated by the NHAI’s demands was justified and such excess work could not be regarded as a mere "variation”.

Injunction against bottle design

The Delhi High Court has granted an injunction in favour of Dart Industries, a subsidiary of Tupperware Brands Corporation of US, against Polyset Plastic Ltd in a dispute over the design of bottles and flip top. Dart alleged that Polyset imitated the novel designs of its bottles and caps. It also produced registration certificates in the court and further argued that its products have large sales in this country. On the other hand, Polyset denied any copying of the designs and maintained that many other firms in India have the same designs and caps. It has registration for its products. There was nothing new or original about Dart’s designs, it was argued. In its judgment, the High Court stated that the test is to keep the two bottles side by side to see if they appear to be similar or different. If the bottles are produced -- they were indeed shown in the court -- the visual images will show whether they were similar or different. The court found that there was prima facie substance in Dart’s allegation and passed injunction order.