Arbitration clause can outlive agreement

The Supreme Court has held that an arbitration clause in a contract would survive although the agreement has come to an end on account of its termination. In this case, Magna Leasing & Finance Ltd vs Potluri Madhavilata, the latter was granted a loan for buying a luxury car. Since the instalments were not paid, the contract was revoked and the company invoked the arbitration clause. The hirer resisted stating that since the contract has been scrapped, the arbitration clause would not survive. The Andhra Pradesh high court accepted this argument. But when the company appealed to the Supreme Court, it reversed the high court ruling and asserted that the arbitration clause would survive even if the contract was revoked. The court said: “Merely because the contract has come to an end by its termination due to its breach, the arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising in respect of the contract.”

Airline employee’s right to voluntary retirement
The Supreme Court has ruled that in the case of an Indian Airlines employee that he has no inherent right to voluntary retirement and it is subject to the rules framed by the employer governing the scheme. If the voluntary retirement scheme stipulates that the offer made by an employee is to be approved by the competent authority, the employee cannot insist that he should be granted retirement even if it is not approved by the management. The court thus dismissed the appeal by Padubidri Damodar Shenoy, airport manager of the airlines, who challenged the state-owned carrier's decision not to accept his offer of voluntary retirement.

Bhakra-Beas Board sub-stations’ staff to be heard on ESIC
The Supreme Court last week quashed the judgement of the Delhi high court which had stated that the sub-stations of Bhakra-Beas Board were not factories and therefore not obliged to contribute to the employees’ insurance fund. The Employees State Insurance Corporation appealed to the Supreme Court arguing that the board was covered by the ESI Act and therefore obliged to contribute to the fund. The Supreme Court found that the employees were not heard either by the insurance court or the high court before passing orders. Since the scheme was beneficial to the employees, their representatives should be heard, according to the Supreme Court. Therefore, it remanded the case back to the insurance court for affording a hearing to the employees or their representative unions.

Selling mutual fund products a taxable service?
The Supreme Court will soon decide on the question if selling mutual fund products is a taxable service. The Supreme Court has admitted an appeal filed by the Commissioner of Service Tax arguing that the sale of mutual funds amounted to service for the purpose of levying service tax. On the other hand the Customs, Excise and Service Tax Appellate Tribunal dismissed the appeal of the revenue department holding that the consultancy firm involved in this case, which was selling MF products for a commission, was not liable to pay any service tax.

Insurance firm told to compensate merchant
The National Consumer Commission has dismissed the appeal of Bajaj Allianz General Insurance Ltd and ordered it to compensate a food grain merchant, M/s Gondamal Hardyal Mal, whose stocks were damaged in storm and heavy rains. When the claim was made, the argument of the insurer was that according to the surveyor’s report, the loss was not caused due to the flow of water from the floor of the godown, but water had entered from the holes of roof of godown, which is made of iron sheets. Therefore, the risk was not covered by the terms of the policy which took care of only flood and inundation. Rejecting this contention, the commission emphasised that earlier rulings and according to the Oxford Concise Dictionary, ‘Flood’ also means, “….An outpouring of water…” and therefore the risk was covered in this case.

Land development scope no ground for less compensation
In an order that would benefit thousands of land owners, the Supreme Court has ruled the government cannot pay lesser compensation to them merely because the land does not have any development potential. The apex court gave the judgement while dismissing the Goa government’s appeal challenging a Bombay High Court order that had enhanced the compensation to Rs 200 per sq mt of land in Curti village, acquired for constructing the Panda bypass road. “A long strip of land measuring more than two-thirds of an acre lying alongside the highway cannot be treated as a land without value or without any potential for development, merely on the ground that the law relating to highways prohibited construction on either side of the highway, up to a depth of 40 metres from the centre of the highway," a bench of Justices R V Raveendran and B Sudershan Reddy observed. The state government acquired the land under the Land Acquisition Act and fixed a compensation of Rs 7 per sq mt, which was enhanced to Rs 154 per sq mt by a reference court. The high court, however, further enhanced it to Rs 200, following which the government moved the apex court.

It argued that such high compensation could not be directed for the piece of land as it did not have any potential for development, being a narrow strip of 2,715 sq mt which fell within the 40-metre margin from the centre of the highway where constructions were prohibited.