Brief case: Arbitration law, cancelling trademark, gratuity, and more

A weekly selection of key court orders

Supreme Court suggests change in arbitration law

The Supreme Court last week suggested an amendment to the Arbitration and Conciliation Act to avoid unnecessary delay and additional expenses in this alternative dispute resolution mechanism. As the law stands, it allows piecemeal appeals against interim awards. The court prefers a consolidated appeal. The recommendation was made in its judgment, IFFCO vs Bhadra Products. In the dispute between IFFCO and Bhadra over a tender for defoamers, a retired Supreme Court judge was appointed arbitrator. He passed an interim order on the question of limitation.

This was challenged before the Orissa High Court by IFFCO. The question was whether the interim order on limitation could be challenged as an interim award.

The Attorney General said yes, but Bhadra argued it was only a question of jurisdiction and could not be called an interim award. The high court dismissed the IFFCO appeal. The Supreme Court, however, set aside the high court view and stated that the interim award could be challenged. The law says that an award includes an interim award. But, in a given case, more than one award may be necessary. In such cases, the arbitrator should consider “whether there is a real advantage in delivering an interim award or in proceeding with the matter as a whole and delivering one final award. Ultimately a fair means for resolution of all disputes should be uppermost in the mind of the arbitration tribunal,” the judgment said.

Notice before cancelling trademark 

The Bombay High Court has ruled that the registration of a trademark cannot be removed without giving notice to the company owning it. Even if the owner of the trademark neglects to apply for renewal of the trademark, the Registrar of Trade Marks cannot unilaterally remove the name, the high court stated in its judgment, Kleenage Products Ltd vs Registrar of Trade Marks. In this case, the company was using its registered trademark Klitolin for its washing and cleaning preparations for a long time. But in 2009, it inadvertently failed to apply for renewal of registration. The registrar then removed the trademark from the list. He also did not permit the company to renew or re-register the name. The company moved the high court against the denial and succeeded. The judgment emphasised that if the registered proprietor did not apply for renewal, the Registrar must notify him of the approaching expiry of the trademark. Prior notice is a mandatory requirement because loss of the trademark has serious consequences for the company. The court directed the Registrar to consider the company’s application for renewal of the trademark.

Samsung gets relief on VAT 

The Allahabad High Court has ruled that Samsung (India) Electronics is not liable to pay VAT (value-added tax) separately on the mobile phone pack which also contains its charger. The commissioner of commercial taxes had maintained that the charger, although sold as part of a composite package, was liable to be taxed at the higher rate of 14 per cent. The tribunal upheld the view. But on appeal, the high court set aside the authorities’ view. The judgment explained that the primary intent of the contract appeared to be the sale of the mobile phone and the supply of the charger was at best collateral. The predominant intent of the transaction must be recognised. The charger can possibly be purchased separately also. However, in case it is placed in a single retail package along with the mobile phone, the primary intent is the purchase of the mobile phone. Also, the composite package bears a singular MRP, the court pointed out.

New owner not liable for past power bill

The Delhi High Court last week dismissed the appeal of Tata Power which demanded from an auction purchaser the electricity dues of the previous owner. The consumer forum had directed the power company to give a new connection to Neeraj Gulati, who had bought a shop in an auction by the debt recovery tribunal under the Income Tax Act.

Tata Power contested it in the high court arguing that she was liable to pay the dues. Rejecting the prayer, the high court upheld the consumer forum ruling which had explained that she had purchased the property by way of auction on "as is where is and whatsoever there is basis". It did not constitute a charge or liability to make the payment of outstanding dues raised by Tata Power. She cannot be made responsible to clear the electricity arrears, the high court ruled. 

Gratuity immune from attachment

A division bench of the Calcutta High Court has ruled that United Bank of India cannot attach the gratuity payable to its employee on the ground that he owed money on account of a housing loan that had been advanced by the bank to him while in service. He was dismissed from service though he had not caused any financial loss to the bank. But, his gratuity was not paid. When he moved the court, the bank deposited the sum in his bank account, which was frozen.

He again moved the single judge of the high court, who stated that the banker's lien could not be exercised over the terminal benefits of an employee. Gratuity under the Payment of Gratuity Act had immunity. The bank also could not adjust that amount for arrears of the housing loan. The obligation is based on public policy. Even the employee cannot sign away his right under duress. Upholding the order of the single judge, the division bench characterised the bank’s action in depositing the amount in a frozen account as “sharp practice” and deprecated it. 
 

Interest after maturity date of deposits 

The National Consumer Commission has ruled that the postal department was bound to pay interest at the rate of six per cent on deposits which were lying with it after the maturity date and not received by depositors of public provident fund (PPF). Several ‘Hindu Undivided Families’ had started PPF accounts though it was not permissible. But, the postal staff were negligent and the deposits were received. Even after maturity they were not paid with interest. This led to several complaints before the Raipur district consumer forum.

They were all dismissed on the ground that the deposits were not valid. But on appeal, the Chhattisgarh state commission ordered the postal authorities to pay the depositors the amounts with nine per cent interest. The department appealed to the National Commission. It reduced the rate of interest to six per cent. But it upheld the finding of deficiency of service on the part of the authorities.