In a large batch of appeals moved by tenants of properties mortgaged to banks, the Supreme Court last week stated that the Securitisation Act (Sarfaesi) will prevail over the provisions of the Transfer of Property Act, though there are some inconsistencies between the two. In these 75 cases, led by Harshad Govardhan vs International Assets Reconstruction Ltd, the property owners who had taken loans did not repay the amounts leading to Sarfaesi proceedings.
The tenants in those properties resisted their eviction by the secured creditors under the Act, claiming their right to occupy the premises, leading to the appeals on the question of their rights when the property is being taken over by creditors. The court ruled, among things, that a lease of a secured asset made by the borrower after he receives notice from the creditor will not be a valid lease. The judgment also discussed the rights and remedies available to lessees when the property is being taken over by the creditors for the fault of the borrowers. Since the appeals differed on facts in each case, the court classified them into different categories, depending on whether the lease was signed before or after the Sarfaesi proceedings started. The court then remanded the cases to the chief metropolitan magistrate in Mumbai to decide according to the principles laid down in the judgment.
Pay interest first, then principal
The Supreme Court ruled last week that when a court passes a money decree against an insurance company, the amounts paid will go first to satisfy the interest part and then towards the principal amount. It set aside the judgment of the Andhra Pradesh High Court which had put the priority in reverse order.
In this case, V Kala Bharathi vs Oriental Insurance Co, the motor vehicle accident claims tribunal had awarded Rs 98 lakh as compensation for the death of an engineering graduate in a road accident. Both the legal heirs and the insurance company carried appeals, first to the single judge and then to the division bench.
Meanwhile, the insurer was ordered to pay amounts pending the final decision. When the case was finally disposed of, the dispute arose over payment of interest. The executing court took the view that the amount deposited by the insurer from time to time during the litigation should be adjusted first towards the interest component and thereafter towards the amount decreed. On appeal, the high court ordered that the payments made by the insurance company shall go first to satisfy the principal amount and then the interest. The Supreme Court said that the high court was wrong and the executing court was right.
High courts not to go into facts
In a tenancy dispute, the issue whether the landlord genuinely requires his property for his personal use is a question of fact and it should be decided on evidence by the trial court. The high court cannot go into the evidence and take its own decision on questions of facts unless law was involved, the Supreme Court ruled last week in the case, Kalpesh Shah vs Manhar Auto Stores.
A lower court had ordered eviction of the tenant, but the Bombay High Court reversed it, analysing the facts of the case. The Supreme Court stated that the high court wrongly interfered with the finding of facts by the court below.
Ore contract stopped for tiger's sake
The Supreme Court has dismissed the appeal of Steel Authority of India Ltd (SAIL) and directed it to refund the amounts paid by Tycoon Traders which had bought 1100,000 tonnes of iron ore from Kemmanagundi mines in Karnataka in an e-auction. The iron ore could not be lifted by the buyer because the chief conservator of forests had declared the Bhadra Wildlife Sanctuary as a tiger reserve and the ore was in the protected area.
SAIL forefeited the payments on the ground of breach of contract. The high court had asked SAIL to refund the money. The public sector company moved the Supreme Court, which dismissed the appeal stating that the contract has become unenforcable and unlawful as the object of the contract is forbidden by the wild life law.
Tax benefit for charitable trusts
The Supreme Court has held that a charitable institution established for the benefit of any particular religious community or caste will not be eligible for income tax exemption under Section 11 and 12 of the Income Tax Act. But if such an institution based on religious tenets serves other communities as well, it can avail of the benefit, the court stated in its judgment, Commissioner of IT vs Dawoodi Bohara Jamat. The Jamat in this case is a public trust registered under the MP Public Trusts Act.
It applied for registration before the commissioner to avail of the exemption. But it was denied as it was a religious trust. On appeal, the high court stated that it was eligible for the benefit. The appeal of the revenue authorities was dismissed and the Supreme Court explained that certain activities of a trust may contain the elements of both religion and charity. Jamat was based on religious tenets of Koran, but its activities are not exclusively for a particular community. So it would be eligible for tax benefit.
TN power corporation appeal dismissed
The Supreme Court last week dismissed the appeal of Tamil Nadu Generation & Distribution Corporation Ltd in its dispute with PPN Power Generation Ltd over payment of about Rs 1,787 crore. The two companies had a power purchase agreement for supply of the entire electricity generated by PPN Power for 30 years. The dispute arose when a rebate scheme of the central government was invoked.
According to the scheme, the distribution company was entitled to a rebate at the rate of 2.5 per cent if the payment was released within five days from the date of invoice and one per cent if the payment was released within 30 days. Accordingly, while making payment the distribution company deducted the 2.5 per cent rebate. PPN Power alleged that the distributing company had unilaterally made several disallowances on part payments without informing it. These and several other aspects were taken to the Tamil Nadu Electricity Regulation Commission, where the distribution company lost their case.
The Appellate Tribunal for Electricity as well as the Supreme Court dismissed its appeals. The court rejected the TN corporation's plea that the issues raised being complex they ought to have been referred to arbitration. The appellate tribunal correctly held that the corporation could not dictate that the commission ought to have referred the dispute to arbitration. It has "illegally arrogated to itself the right to adjudicate by unilaterally assuming the jurisdiction not available to it," the judgment said.
