Contractors in the National Highway Project will get the benefit of arbitration even if the state governments do not include such a clause in its contracts, the Supreme Court ruled last week. In this case, M K Abraham & Co vs State of Kerala, the contractor was awarded construction contract for part of the NH 49. However, there was no arbitration clause in the government’s agreement with the contractor. When disputes arose, the contractor wanted arbitration, but the government argued that there was no such clause. The Supreme Court stated that the arbitration provision of National Highway Project would cover all roadways project.
Hotel cannot be called a factory
The Supreme Court last week quashed the Kerala high court judgement in which it held that a small hotel using fridge and grinder fell into the category of a ‘factory’ and therefore it should contribute to the Employees’ State Insurance Scheme. The ESI Corporation had maintained that Hotel New Nalanda used power to run fridge and grinder and therefore fell into the definition of factory in Section 2(12) of the Act. The Supreme Court allowed the hotel’s appeal.
Valid licence needed for insurance payout
The Supreme Court has set aside the rulings of the national consumer commission and two courts below it and reiterated that insurance money would not be payable if the motor vehicle involved in an accident was driven by a person without valid licence. In this case, New India Assurance Co argued that the driver who died in the collision had not renewed his licence at the time of the accident, though he had applied for renewal. The Supreme Court allowed the appeal of the company and stated that the policy conditions and Motor Vehilces Act rules have been broken and therefore no amount was payable by the company.
Sub-contractor not covered by arbitration clause
The Supreme Court has ruled that an arbitration clause in a contract between the principal employer and the contractor could not be extended to sub-contractors. The sub-contract in this case provided that it "shall be carried out on the terms and conditions as applicable to the main contract." The main contract carried an arbitration clause. When a dispute arose between the Kerala PWD department, the main contractor and the sub-contractor, the latter invoked the arbitration clause in the contract between the PWD department and the main contractor. The arbitrator did not allow this. Therefore, the sub-contractor appealed to the Supreme Court. It dismissed the appeal (M.R. Engineers & Contractors vs Som Datt Builders), stating that Section 7(5) of the Arbitration and Conciliation Act could not be interpreted to mean that sub-contractors could also be covered by the arbitration agreement between the main parties.
Debt tribunal can stop sale by creditor
The Supreme Court ruled last week that the Debt Recovery Tribunal has the powers to undo the takeover and sale of assets of a debtor firm by a secured creditor. The court stated so while dismissing an appeal by the Indian Overseas Bank against the judgement of the Madras high court in the case involving Ashok Saw Mills and another firm. The latter could not return the loans and therefore, the bank sold some properties of the firm invoking the Securitisation Act. When the firms challenged it in the tribunal, the bank argued that the tribunal had no power to interfere in the recovery action as the Securitisation Act has barred it. The Supreme Court rejected its contention and stated that the tribunal could stop the takeover and sale, and even restore the property to the debtor in such cases.
