The Supreme Court last week ruled that disputes over trusts cannot be referred to arbitration because the Trust Act provides a "sufficient and adequate remedy", and they shall be decided by civil courts. Though the Act does not expressly bar arbitration to resolve differences, it is implied, the court ruled in its judgment, Vimal Shah vs Jayesh Shah.
In this case, a trust was created for six minors, who are now majors. The deed had an arbitration clause. When differences cropped up among the beneficiaries, one group moved the Bombay High Court for arbitration. The high court appointed an arbitrator, which was appealed against by the opposite group.
The latter argued before the Supreme Court that the parties had not agreed to the arbitration clause. It was not possible as they were minors and it was written without their consent. Therefore, the essential conditions for an arbitration agreement were absent. The high court's appointment of an arbitrator was set aside by the Supreme Court.
Tax relief for leasing companies
If a company's only income is from leasing property, it should be taxed under the provision 'profit and gains of business or profession' and not under the head 'income from house property', the Supreme Court has ruled in its judgment, Rayala Corporation Ltd vs Asst Commissioner.
In this case, the company leased its property and said even if its income was in the nature of rent, it should be treated as business income, because it is in the business of renting property, and the only income received is in the nature of business. It further said it is a private limited company and, according to its memorandum of association, its business is to deal in real estate and earn income by renting its properties.
On the other hand, the income tax assessing officer and the Madras High Court maintained that it was earning income from house properties. The Supreme Court set aside the high court judgment and accepted the company's argument.
Plastic package allowed for export
The Supreme Court has granted exemption from the Plastic Wastes (Management and Handling) Rules to R M Dhariwal, a 100 per cent export oriented unit, on giving an undertaking that it would export its Pan Masala, Gutka and tobacco in multi-layered plastic sachets.
The company, situated in the Noida Special Economic Zone, gave the undertaking that it would only export in the specified packaging and not sell in the domestic market. This order followed another passed in 2013 in the case of Baba Global Ltd, in which the court had allowed export of its products following an undertaking that they would be exclusively for export.
Agent not liable for non-payment
The Supreme Court last week ruled that an agent of a consignee and the intermediary parties in the export of goods are not liable for the fault of the consignee. Appealing against the ruling of the National Consumer Commission, two exporters complained against the agent of the US consignee firm, the bank which was to collect the payment and the shipping firm.
The consignee took delivery of two consignments of men's apparel in 520 cartons, but allegedly failed to pay. The commission ordered compensation to be paid only by the US firm. However, the exporters appealed to the Supreme Court pleading that the agent in Mumbai was also guilty under the Consumer Protection Act. The court, in its judgment, Virender Khullar vs American Consolidation Services Ltd, rejected the claim.
Dismissing he appeal, it said there was no contract between the exporters and the agent, the bank or the carrier. The exporters did not pay the agent for the shipment. Therefore, only the consignee was responsible for the default.
ONGC bar on Malaysian firm lifted
The Bombay High Court set aside the blacklisting of Malaysian firm Sarku Engineering Services by the Oil and Natural Gas Commission alleging that the foreign firm was responsible for delayed completion of a project to revamp 26 well platforms.
The company argued that it could not complete the work before the monsoon as contemplated because of default by the public sector undertaking and it was burdened with additional work and change in the nature of the job. It further said that three years after completion of the work and while arbitration was ongoing, it was barred from further contracts with ONGC.
he high court accepted the arguments and called the ONGC action "arbitrary, irrational and unreasonable". The foreign firm was allowed to bid for future ONGC contracts. The court said "there have to be strong, independent and overwhelming materials to resort to this drastic power, given the drastic consequences that an order of blacklisting on a contractor."
Service tax on short-term stay quashed
The Delhi High Court struck down the 2011 Finance Act provision whereby service tax was imposed on provision of short-term accommodation. The provision was for levy of tax on a "hotel, inn, guest house, club or camp site by whatever name called, for providing of accommodation for a continuous period of less than three months."
The petition was filed by the Federation of Hotels and Restaurants Association of India. The federation argued that Parliament had no power to impose such a levy, and it was the state legislature that had the competence under the Constitution. The court partly allowed the petition.
It rejected the challenge to another clause in the Act that levied service tax on restaurants "having the facility of air-conditioning in any part of the establishment, which has licence to serve alcoholic beverages, in relation to serving food or beverage, in its premises."
Injunction against playing music
The Delhi High Court has passed a permanent injunction against a restaurant from playing music belonging to members of Indian Singers Rights Association and its sister societies without paying royalties and obtaining clearance.
The order also covers radio stations, television and mobile companies. The court further directed 'Chapter 25 Bar and Restaurant' to render to the association the accounts of all monies earned by performing the repertoire of members of the association as exploitation of their works was an infringement of their copyright.
