From serious fraud probe to Malaria death, here are the key court orders

States cannot withdraw tax incentives
 

Denial of fiscal incentives offered to industries set up in certain states to encourage development and generate employment continues to be a matter of dispute reaching the Supreme Court. In the latest case, Bajaj Auto Ltd vs Union of India, the two-wheeler manufacturer in Uttarakhand challenged the demand of three levies — the National Calamity Contingency Duty, the Education Cess and the Higher Education Cess. It cited the exemptions granted to special category states, including those in the northeast, to claim that it was not liable to pay the three levies. The high court rejected the claim. On appeal, the Supreme Court quashed the state government orders, stating that when excise duty is exempted, the three levies which are of the same nature also must be exempted. Exemption notifications must be given a liberal interpretation, though no violence should be done to the language used in the law, the judgment clarified. The court has been passing such judgments in favour of industries which had established units in the northeastern states. After the promise given to these states a decade ago, the authorities have been trying to withdraw excise benefits on one ground or another.

Serious fraud probe can be extended
 

Investigating officers have been given more leeway in serious fraud investigations as the Supreme Court held last week that the time limit fixed in an order to complete probe is not mandatory. The government has the power under Section 212(3) of the Companies Act to extend the deadline. The law itself does not prescribe any time limit for submission of the investigation report. Setting aside the Delhi High Court order which granted bail to three accused in the case, Serious Fraud Investigation Office vs Rahul Modi, the Supreme Court stated that an interpretation of the law that brings investigation to a halt immediately on the expiry of the time limit “will cause great violence to the scheme of legislation”. If such interpretation is accepted, investigating agencies would be denuded of power to probe and with the expiry of mandate, the SFIO would also be powerless which would lead to an incongruous situation that serious frauds would remain beyond investigation. That could never have been the idea of the legislation, the judgment asserted.  The only possible interpretation is that the prescription of the period within which a report has to be submitted to the government is purely discretionary.

Malaria death not covered by insurance
 

Death from a mosquito bite in an African country is not an accident; it is “neither unexpected nor unforeseen”, the Supreme Court ruled after elaborate discussion on what is an accident, quoting various dictionaries and judgments from western countries.  In this case, National Insurance Co vs Mousumi  Bhattacharjee, the husband of the latter was working as a manager of a tea factory in Mozambique. He had taken a housing loan from Bank of Baroda. Incidental to the loan, there was accidental insurance. It was a non-life policy but insured against fire and other perils. The manager died of malaria caused by a mosquito bite. The widow moved consumer forum which asked the insurer to pay the entire housing loan. The appeals of the company were rejected by the West Bengal state consumer commission and the National Commission. They maintained that sudden death due to a mosquito bite in a foreign land was not a natural death, but an accidental one. The insurer successfully appealed to the Supreme Court. The judgment quoted World Health Organisation data to show that death from malaria was common in that country.

Deterrent law to protect forest wealth
 

The forest authorities have the power to confiscate not only forest produce illegally gathered but also tools, equipment, vehicles, boats, and other articles used by the accused under the Forest Act, the Supreme Court stated while setting aside a series of judgments of the Madhya Pradesh High Court. The high court had ordered magistrates in the state to release the vehicles used for smuggling forest produce. The government appealed to the Supreme Court. It barred the release of the vehicles. The judgment, State of MP vs Uday Singh, stated that the state government had tightened the forest law to act as an effective deterrent. The court should interpret the provisions purposively. “It is only if the interpretation of law keeps pace with the objective of the legislature that the grave evils which pose danger to our environment can be suppressed,” the court emphasised.

Employer can blacklist contractor
 

A party which allots a contract has an inherent discretion to blacklist a firm that plays fraud or acts with mala fide intentions, stated the Delhi High Court. It asserted that there was no need for any clause in the contract to claim the power to blacklist a defaulting firm.  It is a business decision. In this case, Allied Medical Ltd vs UP Health Services Projects, the latter floated an e-tender for the purchase of medical equipment, including 23 cardiac monitors. After the import, the Central Scientific Instrument Organization examined the monitors and found that they were not according to the specifications in the tender.  Therefore, the UP authorities forfeited the bank guarantee and blacklisted the company for a year. The importer moved the Allahabad High Court and the district court, which rejected its pleas. It later raised some other issues in the Delhi High Court. Dismissing the appeal, the Delhi High Court stated that the “director and officers at the helm of affairs of the firm might have thought to get through the defective monitors by bribing or winning over the public servants. The officers of the Heal Services deserve appreciation in taking the bold decision to blacklist such company.”

MMTC challenge to award dismissed
 

The Delhi High Court last week dismissed the appeal of MMTC, challenging an arbitral award that went against it and in favour of Karam Chand Thapar & Bros. The National Thermal Power Corporation had placed orders on MMTC for import of coal for supply to its power stations. MMTC issued a tender inviting offers for importing coal to Indian ports. Karam Chand Bros, engaged in the business of handling, was selected. Disputes arose over various points and the unanimous award was in favour of the contractor. MMTC challenged the award on six grounds but in vain. The court reiterated its jurisdiction to intervene in arbitration matters was limited. It rejected the argument of the government corporation that the claim could not have been granted in US dollars and the rate of interest granted at 12 per cent was highly excessive and the interest should have been at LIBOR rates.