Arbitrator can award interest for period in dispute

The Supreme Court last week set aside the judgement of the Allahabad high court and ruled that an arbitrator can award interest for the period in dispute. In this case, M/s Madnani Construction Corporation Ltd vs Union of India, the high court had rejected that part of the award which granted interest to the construction company which had constructed two bridge islands over Kosi for North Eastern Railway.

The dispute arose soon after the work was completed in 1983 and an arbitrator was appointed over the protests of the railway. He gave an award in favour of the contractor in which the railway was asked to pay compound interest from 1983 till 1992 while the dispute was pending. When the Railways appealed to the high court, it cancelled the interest part of the award. The contractor therefore appealed to the Supreme Court which quashed the high court order.

Processing marble blocks is manufacture or production
Conversion of marble blocks by sawing them into slabs and tiles and polishing amounts to “manufacture or production” and is therefore entitled to get benefit under Section of 80IA of the Income Tax Act, the Supreme Court stated while dismissing the appeal of the revenue authorities in the case, Income Tax Officer vs M/s Arihand Tiles & Marbles. Members of the Income Tax Appellate Tribunal were divided on the claim of the department that the activity was not ‘manufacture’.

The high court accepted the stand of the assessees that it was manufacture. In the appeal of the department, the Supreme Court upheld the high court view and cautioned the authorities that if the activity was not held to be manufacture, there would be “serious revenue consequence”. The firms were paying excise and other duties on the understanding that they were bringing out a new product. If it was not manufacture, all these revenue will be lost to the government. On this ground also, the assessee’s claim should be granted, the court said.

Statutory dues have precedence over mortgage
The Supreme Court has dismissed the appeal of the Orissa State Financial Corporation and ruled that sales tax and other statutory dues shall have precedence over mortgage created in favour of banks and financial institutions. There was a tussle over dues between the corporation and the Commissioner of Commericial Taxes with respect to a defaulting firm. Resolving it, the court cited its earlier rulings in cases from other states and emphasised that the statutory dues would prevail over dues to the financial institutions.

Banks liable to pay customer whose money has been wrongly paid
The Supreme Court has held that banks are liable to compensate a customer whose money was wrongly paid to another person without verifying the original signature of the account-holder. The court held in the case, Vijaya Bank vs Gurnam Singh, that the bank was guilty of deficiency in service. The court upheld the judgement of the National Consumer Commission on this point, dismissing the bank’s appeal. The court explained that the bank was negligent in honouring the cheque presented by a fraudster and releasing an amount over and above the amount in the account even though the customer Gurnam Singh had no overdraft facility.

Insurance firm’s appeal against compensation dismissed
The Delhi high court last week dismissed the appeal of ICICI Lombard General Insurance Company against the award of Rs 34.5 lakh to the dependents of a government employee who was crushed to death by a truck while riding the pillion of bike. Upholding the award of the motor accident claims tribunal, it ruled that future income could also be taken into account while arriving at a just and fair amount of compensation. At the time of the death of this government employee, the Sixth Pay Commission had just become effective. Therefore, the compen-sation should be according to the new pay scale, the court ruled.

Drug maker told to pay up for trademark violation
The Delhi high court has ordered Schon Pharmaceuticals Ltd of Indore to pay exemplary and punitive compensation to United Biotech Ltd of Delhi for ‘passing off’ a medicine under the trademark, Tazin. United Biotech had an agreement with the Indore company to manufacture the medicine. After the expiry of the contract the Indore firm continued to manufacture and sell the medicine under the same trademark. The court stated that the Indore firm was trying to make “illegal profit by misleading and deceiving potential customers.”