Sarfaesi Act is above tribal land laws
A property belonging to a Scheduled Tribe person can be sold to a non-tribal person under the Securitisation and Reconstruction of Financial Assets and Enforcement (Sarfaesi) Act. The sale of such mortgaged asset does not violate laws protecting property of tribal people, as ruled by the Supreme Court in the case — UCO Bank vs Dipak Debbarma. In this case, tribal persons whose property was notified for sale under the Act, invoked the Tripura Land Revenue & Reforms Act, that imposed an embargo on the sale of mortgaged properties by a creditor bank to any person who is not a member of a Scheduled Tribe. The auction purchasers in the present case were not members of any Scheduled Tribe. The Gauhati High Court allowed petitions of the tribal persons, since the Tripura Act was protected under the Ninth Schedule of the Constitution, it prevailed over the Sarfaesi Act. The high court had struck down the sale notification. Setting aside the high court judgment, the Supreme Court stated the state law must give way to parliamentary legislation. They also operated in different fields. “Sale of mortgaged property by a bank is an inseparable and integral part of the business of banking,” the judgment said, while “the object of the State Act is to consolidate the land revenue law in the State and also to provide measures of agrarian reforms.”
Penalty for selling assets under BIFR
The Supreme Court has imposed a fine of Rs 2,000 each on a company and five of its functionaries for selling the company property in violation of the orders of the Board for Industrial and Financial Reconstruction (BIFR) and the court’s own order. The company — J K Jute Mills — was, at one time, declared sick and referred to the BIFR. The Board had barred sale of any assets by the company. The Supreme Court had also passed a similar order. However, some assets were sold claiming that the company's net worth had turned positive and the sale was done before the order. But, the court stated the question whether the company had turned healthy or not was disputed and had to be decided by the BIFR. The registration of the conveyance deed was done after the prohibitory order. Despite the orders, the officials at the Registrar’s office registered the deeds and the Advocate General of Bihar supported it. The judgment pointed out several “suspicious” circumstances in the deal and observed that “it is shocking that an order passed by this court could be disregarded by the officials who went ahead and registered the sale deed.” While disposing the case, Ghanshyam Sarda vs Shashikant Jha, the court granted benefit of doubt to several players in the transactions.
Compensation only for actual loss
When a party seeks compensation for loss suffered, it must prove it actually suffered such loss with evidence. Otherwise, it would amount to unjust enrichment in its favour, the Bombay High Court stated, while setting aside the arbitral award in the case, Essar Procurement Services vs Paramount Constructions. Essar invited tender for erection of water treatment plant and the latter was given the work. But the construction was delayed due to financial constraints on part of Essar for some time, and later the contract itself was terminated. It, thus, opened the dispute, in which the arbitral tribunal held by majority that the contract was terminated illegally and the contractor must be compensated. Essar, therefore, moved the high court. While largely upholding the award, the court ruled the tribunal was wrong in granting compensation for loss of overheads and profit, because it was not backed by evidence. The award did not discuss the evidence, if any, and the court said it is not possible for it to “probe the mind of the tribunal” and guess the reasoning of the arbitrators.
Cancellation of tender not unfair
The Patna High Court last week ruled that government authorities can call fresh tender after cancelling the first one for a public works project. In the case, Hariom Construction vs State of Bihar, the firm was second in line among successful candidates. The first one was not given the contract, nor Hariom, which stood second. So, it moved the high court claiming it should be given the tender. The court dismissed the petition stating the government’s was a prudent decision to cancel the tender process and to invite fresh bids. It was not malafide, unfair, unjust, arbitrary or irrational. It also saved public money, the judgment asserted. It added that a tender in response to a notice inviting such tenders is no more than making an offer which the state or its agencies are under no obligation to accept. The bidders cannot insist that their tenders should be accepted simply because a given tender is the highest or lowest. All that they are entitled to is a fair, equal and non-discriminatory treatment in the matter of evaluation.
Auction buyer saved from tax dues
A purchaser of a property belonging to a defaulting company, bought in an auction under the Sarfaesi Act, cannot be burdened with sales tax arrears of the defaulting company, the Bombay High Court held in the case, Sonoma Management Partners vs Bank of Maharashtra. The firm bought the property for Rs 11 crore, but during registration it was found that the sales tax department had a claim of Rs 28 crore against the defaulting company. The authorities said the firm bought the property on ‘as is where is’ basis and could not avoid the liability. The banks also took the same stand. However, the court stated the buyer had no knowledge of the liability, nor did the bank inform it. Therefore, the firm was not liable for the dues.
Bank not responsible for theft while in queue
An office accountant carrying Rs 2.25 lakh in cash was standing near the payment counter at United Bank of India in Kolkata, when someone played a trick and told him some money from his pocket had fallen. While the former was searching for it, his money was stolen. He filed a police complaint and moved the consumer forum alleging the bank was deficient in providing adequate security. The forum and the West Bengal Consumer Commission asked the bank and Bajaj Allianz, the insurer, to pay compensation. The bank appealed to the National Commission, which last week reversed the order of the consumer forum. The commission said in the case, United Bank of India vs Young Bengal Society, the money was still with the depositor and, therefore, the bank was not responsible for the theft. The society could not show any rule on security which the bank had violated.
