In arbitration between a public authority and a private firm, the authority cannot claim that it is a government agency to avoid legal obligations according to the award. All government organisations are not "extended wings of the state or part of the government", the Supreme Court stated in the judgment, Kanpur Jal Sansthan vs Bapu Constructions. In this case, there was an arbitration award against the Jal Sansthan. It moved Allahabad High Court to quash the award, invoking the Arbitration and Conciliation Act. The high court, in its interim order, directed the Jal Sansthan to deposit the entire awarded sum in the court as security. It moved the Supreme Court, arguing that as it is a wing of the Uttar Pradesh government, it could not be asked to furnish security. It cited Order XXVII Rule 8A of the Civil Procedure Code to claim immunity for government agencies. Rejecting the contention, the Supreme Court explained that the CPC protection is available only to the government and not to instrumentalities or agencies of the state. Jal Sansthan is not extension of the government.
SC says no to clubbing units to claim benefit
The Supreme Court ruled last week that when a sales tax benefit is granted to an industrial unit on the basis of its production, that benefit cannot be claimed after clubbing the unit with its sister units. The apex court set aside the judgment of the Punjab and Haryana High Court in the case, State of Haryana vs Bharti Teletech Ltd, and upheld the view of the revenue authorities and the sales tax tribunal. In this case, the company was granted the tax exemption on condition that it shall continue its production at least for the next five years not below the level of average production for the preceding five years. If the company fails to keep the promise, the tax benefit should be returned with interest. The taxation commissioner, while monitoring thee production level, found that the company had lesser production than stipulated under the provisions. When he issued a show-cause notice, the company challenged it, contending it had established another unit as an expansion of the existing unit and the total production would satisfy the condition. The tribunal did not agree, but the high court accepted the argument. On the state's appeal, the Supreme Court upheld the authorities' stand. The judgment stated that though tax exemption rules should generally be read liberally, it could not be done in when the conditions are violated by the assessee. When the benefit is unit-specific, it cannot be clubbed with other units to claim exemption, the court said.
Interest from date of accident
SC rap for luxury litigation
The Supreme Court has severely criticised government authorities for indulging in unnecessary litigation over small amounts. "It has become the definite attitude of the officials not to take any responsibility even for petty issues and would waste public money approaching this court. Government departments would spend any amount on litigation instead of paying petty amount to the other party," the court lamented in the case, Haryana Dairy Development Cooperative Federation vs Jagdish Lal. The dispute was over Rs 8,724 claimed by an employee as medical reimbursement. The corporation lost in the high court. It appealed to the Supreme Court, spending money on litigation many times over. Dismissing the appeal of the corporation against the high court judgment, the Supreme Court asked the managing director of the corporation to pay personally the legal expenses incurred in the litigation. The order, which was sent to the chief secretary of the state, further said: "We are being burdened with cases where the litigation cost may be hundred times more than the amount involved."
Challenge to Sarfaesi rejected
The Delhi High Court has dismissed several petitions moved by M/s Holystar Natural Resources Ltd and others assailing the constitutional validity of the definition of non-performing assets (NPA) in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act) as well as a Reserve Bank of India (RBI) circular of last year. It was argued NPA was defined vaguely and without guidelines, as it did not explain what is "sub-standard, doubtful or loss asset". It gave uncontrolled discretion and arbitrary power in the hands of financial institutions/RBI to declare any entity as an NPA. It was unconstitutional. Rejecting the contentions, the high court declined to exercise its power of judicial review of statutes dealing in fiscal matters where discretion is conferred on high-ranking statutory authorities like the RBI.
Blacklisting frowned upon
The Delhi High Court has criticised NTPC Ltd for blacklisting M/s Deccan Mechanical & Chemical Industries Ltd for three years without giving any reasons and not hearing the affected firm. "Reasons form indispensable component of the decision-making process and are the link between the order and the mind of its maker," the judgment said while ordering re-hearing of the company before passing the order. The court said the firm was supplying chemical products to NTPC for the past 25 years without complaint. Moreover, a Council of Scientific & Industrial Research report on the chemical supplied, alleged to be sub-standard, wasn't given to the company for explanation. Therefore, the court modified the NTPC order granting partial relief to the supplier.
SC says no to clubbing units to claim benefit
The Supreme Court ruled last week that when a sales tax benefit is granted to an industrial unit on the basis of its production, that benefit cannot be claimed after clubbing the unit with its sister units. The apex court set aside the judgment of the Punjab and Haryana High Court in the case, State of Haryana vs Bharti Teletech Ltd, and upheld the view of the revenue authorities and the sales tax tribunal. In this case, the company was granted the tax exemption on condition that it shall continue its production at least for the next five years not below the level of average production for the preceding five years. If the company fails to keep the promise, the tax benefit should be returned with interest. The taxation commissioner, while monitoring thee production level, found that the company had lesser production than stipulated under the provisions. When he issued a show-cause notice, the company challenged it, contending it had established another unit as an expansion of the existing unit and the total production would satisfy the condition. The tribunal did not agree, but the high court accepted the argument. On the state's appeal, the Supreme Court upheld the authorities' stand. The judgment stated that though tax exemption rules should generally be read liberally, it could not be done in when the conditions are violated by the assessee. When the benefit is unit-specific, it cannot be clubbed with other units to claim exemption, the court said.
Interest from date of accident
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The Supreme Court has declared that compensation and interest on it under the Workmen Compensation Act must be paid from the date of the accident and not from the date of the award by the commissioner under the Act. In this case, the fatal accident took place in 1996. The commissioner decided the compensation application only in 2010. He directed National Insurance Company to pay compensation with 12 per cent interest to the widow of the driver who died in the road accident from the date of the accident. The insurance company moved the Gujarat High Court, which relied upon wrong judgments and awarded compensation from the date of the award by the commissioner and asked the widow to return the excess paid to the government corporation. The widow, Saberabibi, appealed to the Supreme Court. It quashed the high court decision and underlined that interest must be paid from the date of the accident.
SC rap for luxury litigation
The Supreme Court has severely criticised government authorities for indulging in unnecessary litigation over small amounts. "It has become the definite attitude of the officials not to take any responsibility even for petty issues and would waste public money approaching this court. Government departments would spend any amount on litigation instead of paying petty amount to the other party," the court lamented in the case, Haryana Dairy Development Cooperative Federation vs Jagdish Lal. The dispute was over Rs 8,724 claimed by an employee as medical reimbursement. The corporation lost in the high court. It appealed to the Supreme Court, spending money on litigation many times over. Dismissing the appeal of the corporation against the high court judgment, the Supreme Court asked the managing director of the corporation to pay personally the legal expenses incurred in the litigation. The order, which was sent to the chief secretary of the state, further said: "We are being burdened with cases where the litigation cost may be hundred times more than the amount involved."
Challenge to Sarfaesi rejected
The Delhi High Court has dismissed several petitions moved by M/s Holystar Natural Resources Ltd and others assailing the constitutional validity of the definition of non-performing assets (NPA) in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act) as well as a Reserve Bank of India (RBI) circular of last year. It was argued NPA was defined vaguely and without guidelines, as it did not explain what is "sub-standard, doubtful or loss asset". It gave uncontrolled discretion and arbitrary power in the hands of financial institutions/RBI to declare any entity as an NPA. It was unconstitutional. Rejecting the contentions, the high court declined to exercise its power of judicial review of statutes dealing in fiscal matters where discretion is conferred on high-ranking statutory authorities like the RBI.
Blacklisting frowned upon
The Delhi High Court has criticised NTPC Ltd for blacklisting M/s Deccan Mechanical & Chemical Industries Ltd for three years without giving any reasons and not hearing the affected firm. "Reasons form indispensable component of the decision-making process and are the link between the order and the mind of its maker," the judgment said while ordering re-hearing of the company before passing the order. The court said the firm was supplying chemical products to NTPC for the past 25 years without complaint. Moreover, a Council of Scientific & Industrial Research report on the chemical supplied, alleged to be sub-standard, wasn't given to the company for explanation. Therefore, the court modified the NTPC order granting partial relief to the supplier.