The Supreme Court last week ruled that if a successful bidding firm goes back on the contract, it could be blacklisted. In this case, Patel Engineering Ltd, the National Highway Authority of India (NHAI) advertised for a six-lane express way in West Bengal and Orissa and as the firm was the highest bidder it was given the project. However, soon thereafter it informed NHAI of its decision not to undertake the project because it was not found to be unviable on second look. The authority gave the project to another firm and blacklisted Patel Engineering for one year. It was challenged by the firm in the Delhi high court, as it carried a stigma. The high court dismissed the petition. On appeal, the Supreme Court confirmed the high court view and remarked that “dereliction, such as the one indulged in by the petitioner-firm, if not handled firmly, is likely to result in recurrence of such activity not only on the part of the petitioner, but others also, who deal with public bodies such as NHAI giving scope for unwholesome practices.”
SC names ex-judge as arbitrator
The Supreme Court has referred all disputes between Al Jazeera Steel Products Company SAOG of Oman and MID India Power & Steel Ltd of Indore for arbitration by its former judge, Justice S N Variava. The dispute was over the quality of 2000 metric ton prime alloy steel billets of specific chemical composition and physical specifications described in sale purchase contract. The Oman company alleged that all efforts to rectify the complaint failed and therefore it invoked the arbitration clause. It selected the judge as the arbitrator. The Indian company alleged that the dispute was raised after the contract has been completed and therefore belated. The court stated that the disputes were bona fide, live and not belated.
Maharashtra VAT law upheld
The Bombay High Court last week dismissed the challenge to the constitutional validity of Section 48(5) of the Maharashtra Value Added Tax Act, 2002. It was argued that the provision gave unequal treatment to equals and did not provide any machinery for the purchaser to ascertain whether the seller has actually paid VAT. It did not protect the purchaser in a case where the seller has not paid the tax into the government treasury which he had collected from the purchaser. This constitutes an unreasonable classification between the seller and the purchaser. It was further argued in the case, Mahalaxmi Cotton Ginning vs State of Maharashtra, that the provision also cast an unbearable burden on the purchasing dealer. Though he has paid tax to the vendor, if a set-off is disallowed, he would be liable to pay the same amount once again together with interest and penalty. The high court rejected these contentions based on equality and freedom of trade granted by the Constitution.
Arbitral award set aside
The Delhi high court last week set aside the arbitral award in the dispute between PTC India Ltd and Jaiprakash Power Ventures Ltd arising out of a power purchase agreement of 2006. Jaiprakash, a generating company, was to sell to distributor PTC 704 MW for 35 years. Jaiprakash later wanted a tariff revision, but it was denied leading to litigation and ultimately arbitration. Since the Central Electricity Regulatory Commission (CERC) had been set up, the dispute arose whether it could fix tariff between the parties. The majority award held that CERC did not have the power to determine the tariff for supply of electricity by a generating company. Setting aside this view, the high court upheld the dissenting view, that CERC had "ample and full power" to determine and approve the tariff for supply of electricity by a generating company to a trading licencee and that the dispute in that regard had to be decided by CERC alone. Jaiprakash was asked to approach the CERC for fixation of tariff.
New India Assurance loses appeal
The National Consumer Commission last week dismissed the appeal of New India Assurance Ltd against the order of compensation passed by the Chandigarh commission in a case of loss of textile goods by fire accident. The insurance company repudiated the claim of the insured invoking the conditions under Standard Fire and Specified Perils Policy. The textile trader alleged that the surveyor demanded illegal gratification and the claim was rejected on grounds which were not precise. The company first sent the surveyor and then an investigator, who reported that the fire was caused intentionally. The state commission, after reading the report, concluded that the investigator was heavily biased against the insured. It also showed contradictions between the reports of the surveyor and the investigator. The latter visited the site after nearly six months and he could not have concluded that “the fire was caused by spraying inflammable materials”. On the contrary, the surveyor, who had visited the site immediately after the fire, had found only ‘foul smell due to burnt cloth and water’.