Penalty on LIC to court loath to hear tender row, here're key court orders

A weekly selection of key court orders

NCLT matters not for civil court

The Supreme Court has emphasised that the jurisdiction of the civil court is completely barred in matters that are now in the dominion of the National Company Law Tribunal. The court stated so in the judgment in the case,  Shashi Prakash vs NEPC Micon, which arose before the Company Act was amended to create the tribunal. The dispute was over the transfer of shares. The Madras High Court had held that the Company Law Board would not have jurisdiction in the matter and as there are serious differences over the title, the matter should be relegated to a civil suit.  It was argued in appeal before the Supreme Court that after the changes made in the Companies Act in 2013 with regard to the power of the tribunal, the jurisdiction of the civil court is completely barred. The court noted that the dispute arose before the change in the law, but as civil proceedings will take long, the tribunal will decide the issue.

Penalty on LIC for negligence

Life Insurance of India (LIC) has been found guilty of deficiency in service by keeping the money of a consumer for five years without issuing a policy. In this case,  Madhav Hari vs LIC, a person submitted a proposal to LIC under the Jeevan Aastha plan and paid Rs 1.75 lakh. But he did not get either the policy or refund for five years. He moved the district consumer forum. It ordered LIC to refund the full amount along with a compensation of Rs 4.25 lakh.  The Maharashtra State Consumer Commission upheld the order. On appeal, the National Consumer Commission deleted the order on compensation. The consumer appealed to the Supreme Court, arguing that the plan was equity-linked and not mere insurance. So he lost the benefit of escalation of investment value. LIC submitted that the plan which the consumer opted had closed and he was given a choice to join another plan, which he did not. So he did not deserve compensation. The court agreed with the consumer and added Rs  2 lakh more to the previous compensation, observing that “mere interest will not provide sufficient redress". Retaining the money with no effort to refund it for five years clearly established a deficiency in service, the judgment said.

Caveat on arrest of co-op secretary

Can the secretary of a cooperative society be imprisoned for the default committed by the body? The Supreme Court stated that its prima facie view was that he cannot be imprisoned imposing personal liability on him. The court stated so in its order in the dispute, H K Singla vs Avtar Singh. In this case, a depositor in a society did not get back his deposit on maturity. Therefore, he moved the district consumer forum. It asked the society to pay the amount with 10 per cent interest.  Still, it was not paid as the society was in liquidation. The depositor invoked the penal clause in the Consumer Protection Act to compel the society to pay the amount. The consumer forum ordered the imprisonment of the secretary for two years. The National Commission upheld the order. The secretary moved the Supreme Court. It stayed the orders of the courts below till the appeal of society before the State Consumer Commission was decided.

Retired employee can be arbitrator

An engineer retired from the Public Works Department can act as an arbitrator in a dispute between the department and a contractor, the Supreme Court ruled in its judgment in the case, PWD Haryana vs GF Toll Road Ltd. The agreement contained a clause which stated in case of dispute, each party will nominate its arbitrator and the third one would be selected according to the rules of the Indian Council of Arbitration (ICA). Disputes did arise and the PWD named an engineer, who had retired from the department 10 years earlier. The ICA objected to the selection as according to it, he was a retired employee of the State, and there may be justifiable doubts with respect to his integrity and impartiality to act as an arbitrator. The government refuted the objection on the ground that there was no rule that prohibited a former employee from being an arbitrator, and the employee retired a decade ago. This was accepted by the Supreme Court. It said that the Arbitration and Conciliation Act did not bar a former employee from acting as an arbitrator unless there are other grounds for doubting his impartiality. The Act, which lists disqualified persons, prevents only a current employee from acting as an arbitrator, not former employees. The court then appointed a judge retired from it as arbitrator.

Court loath to hear tender row 

The Delhi High Court, while dismissing the challenge of L&T Hydrocarbon Engineering Ltd against the choice of ONGC for a project, reiterated that the tendering authority is the appropriate decision-maker while interpreting tender conditions and evaluation of bids submitted. Judicial intervention is warranted only in the face of mala fides, or perversity or manifest irrationality in the decision-making process. The dispute arose when ONGC floated tenders for various facilities for an offshore platform.  L&T was part of a consortium with McDermott Asia Pacific Ltd, which participated in the tender. The other contenders were Afcons Infrastructure Ltd and Sapura Fabrication SDN BHD, another consortium.  L&T contended that the rival consortium was not technically qualified to participate in the tender, and its bid ought to have been rejected at the threshold. The judgment delivered last week elaborately went through the contract to reject the L&T contention.

Price hike cannot alter contract

The Delhi High Court last week observed that change in the law of a foreign country and consequential increase in the price of imported coal did not amount to ‘force majeure’ or unforeseen circumstances to impact a contractor encashment of bank guarantees.  In this case, Coastal Andhra Power Ltd entered into a power purchase agreement with AP Central Power Distribution Co for setting up and operating an ultra mega power project at Krishnapatnam. The fuel to be used for generating electricity was imported coal from Indonesia. While the project was on, the Indonesian law was changed increasing the price of coal substantially. Coastal Andhra Power found itself in a financial crunch but the opposite party wanted to invoke the bank guarantee for Rs 300 crore. The company at first obtained a stay on the encashment of the bank guarantees. However, a division bench lifted the stay, rejecting the plea of the defaulting company that the price hike was beyond its control.