Allegation of duress must be tested before arbitration: SC

If a contractor alleges that he had signed a ‘no-claim’ certificate on the work done by him was under fraud, duress or undue influence, he must show evidence before the dispute is sent for arbitration. A bald allegation of duress will not do, the Supreme Court has stated in the judgment, Union of India vs Master Construction Company. In such cases the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to Dvalidity of the discharge voucher or no-claim certificate or settlement agreement appears to be lacking in credibility, there may not be necessity to refer the dispute for arbitration at all. “It cannot be overlooked that the cost of arbitration is quite huge – most of the time, it runs in six and seven figures,” the judgment said. “It may not be proper to burden a party, who contends that the dispute is not arbitrable on account of discharge of contract, with huge cost of arbitration merely because plea of fraud, coercion, duress or undue influence has been taken by the claimant. A bald plea is not enough and the party who sets up such plea must prima facie establish the same by placing material before the Chief Justice/his designate. If the Chief Justice/his designate finds some merit in the allegation of fraud, coercion, duress or undue influence, he may decide the same or leave it to be decided by the arbitral tribunal. On the other hand, if such plea is found to be an after-thought, make-believe or lacking in credibility, the matter must be set at rest then and there.” The Supreme Court thus set aside the order of the Punjab and Haryana high court appointing an arbitrator in this dispute. In this case, the builder was given the task of raising a technical structure. After the payments were made and a no-claim certificate was issued, the contractor raised the plea that it was obtained illegally. This was held to be non-arbitrable.

Apex court sets aside Kerala HC ruling

The Supreme Court has set aside the judgment of the Kerala high court in the claim of MRF Ltd for concessional rate in sale tax on the purchase of rubber used in the production of compound rubber. The government and the high court had denied the concession. But the Supreme Court stated that the high court had not gone into the crucial issue, namely, whether or not "rubber compound" and "compound of rubber" are two different and distinct articles or they are the same article. The state government maintained that it was "compound of rubber" and not "rubber compound". However, this is a technical issue which required further evidence. Therefore, the apex court remitted the question to the high court for reconsideration within six months. 

Delhi High Court imposes punitive damages on Orex

The Delhi high court has imposed punitive damages on Omax Healthcare Ltd for infringing the trade mark of Pfizer Products Inc. on a popular cough syrup, Corex. The Indian company sold a cough syrup Orex. Pfizer sought a permanent injunction against the infringement of its trade mark, which was registered in 1963, and rendition of accounts. The high court stated that with a view to deter Omax from indulging in similar acts in future, it was necessary that exemplary damages be awarded. 

PSU has no prior claim from sick unit

Delhi high court has ruled that a public sector undertaking having dues outstanding in respect of a commercial transaction from a sick company cannot claim priority in payment under the Sick Industrial Companies (Special Provisions) Act. It is also not entitled to the get notice on the revival scheme. In this case, Lords Chloro Alkali Ltd vs BHEL, the high court set aside the order of AAIFR and allowed the writ petition of the private company. The latter had obtained an electrical system from the PSU, but before it could be fully paid for, the company became sick. The PSU claimed special status as it was a government company and sought priority in payment. However, the high court, after discussing the definition of “other authority” in the Act, stated that a PSU cannot claim the status of the government in a commercial deal. Its status was merely that of an unsecured creditor. Moreover, it was a commercial deal, and “the unpaid price cannot be categorized as financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices.”

Bombay HC reverses view on sex selection equipment

The Bombay high court held last week that the power to search, seize and seal any object conferred by Section 30 of the Preconception and pre-natal Diagnostic Techniques (Prohibition of Sex Selection) Act includes the power to seal an ultrasound machine or “any other equipment” in hospitals, if the authority has reason to believe that it may furnish evidence of violating the law. Reversing its earlier view, a full bench stated in the case, Dr Suhasini vs Kolhapur Municipal Corporation, that the power of the authorities are wide in this matter in view of the killing of female foetus. Since several cases are pending for long years on this point, the high court asked the subordinate courts to decide them expeditiously.