Brief case: Bids for Metro project to start again

A weekly selection of key court orders

The Supreme Court has reiterated for the second time in a month that the technical experience of subsidiary firms can be taken into account when the holding company enters competitive bidding for a project. It overruled the Gujarat High Court which had held that while a holding company may control its subsidiary companies which may have the requisite experience, the holding company cannot invoke that to bid for tenders unless it was a joint venture. In this case, CRRC Corporation vs Metro Link Express, the Chinese government-owned corporation was rejected at the first stage itself when the tenders were opened for the Ahmedabad Metro Rail Project. The rejection was upheld by the high court against which the corporation moved the Supreme Court. Allowing the appeal, the apex court called the high court judgment “unsustainable in law and on facts grossly illegal, arbitrary and perverse.”  The order stated that the tender process must be resumed expeditiously. Three firms had passed the first stage of the tender process; they are Bombardier, Hyundai Rotem and Alstom Transport. A similar ruling on the eligibility of the holding company was delivered by the Supreme Court recently in the case of bids for the Nagpur Metro Railway in which a Chinese firm won the project.

Arbitration without official sanction 

When two corporate entities, both belonging to the government, engage in a dispute against each other, it is not necessary to seek advice from the Cabinet Secretary as enjoined in a 2015 office memorandum; an arbitrator can be appointed, the Delhi High Court has stated in its judgment, Hindustan Steel Works Construction Ltd vs NTPC Ltd.  In this case, NTPC awarded contracts to the other government company (HSCL) for work at the Bhagalpur thermal power station. Disputes arose between them and the contracts were cancelled leading to long-drawn litigation with varying results for each party. At the ultimate stage, HSCL wanted to appoint an arbitrator. NTPC objected to it and invoked the office memorandum which stated that in such cases, the disputes should be referred to the Cabinet Secretary for clearance instead of taking them to the court or arbitration. The high court rejected NTPC’s argument stating that recourse to the ‘Permanent Machinery for Arbitration’ of the government or the Cabinet Secretary might be a remedy available on the administrative side, but is not a procedure for enforcing legal rights. That procedure has no validity in the eye of the law. The court stated that NTPC has sought to create impediments by insisting on the advice of the Cabinet Secretary and as they are not acceptable, the court itself appointed a retired high court judge as sole arbitrator to decide all disputed questions.

Pawan Hans gets compensation  

The Delhi High Court has ruled that Pawan Hans Helicopters Ltd is entitled to get damages from Maritime Energy Heli Air Services for delay in starting a seaplane project to attract tourists to the Andaman & Nicobar Islands. Pawan Hans had terminated the contract due to the conduct of Maritime Energy including delay in delivery of the amphibian plane, delay in arrival of pilots, not providing a substitute pilot, technical snag in the plane and other grounds. The contract provided for compensation in such circumstances. Maritime Energy contended that the delay was due to legal procedure and lack of infrastructure provided to it. The arbitrator and the single judge bench of the high court had denied the claim of Pawan Hans. On appeal to the division bench, the high court allowed the claim of Pawan Hans for compensation.

Tax on outdoor ads quashed 

The Allahabad High Court Has struck down an advertisement tax on hoardings, kiosks, neon lights and other outdoor devices imposed by the Kanpur Municipal Corporation through a by-law last year. The tax was challenged by the UP Advertiser’ Association, several ad agencies and owners of buildings with whom the agencies have contracts to set up hoardings and other gadgets. The high court, allowing the petitions, stated that the corporation had no authority to impose the tax through a by-law and the procedures specified in the municipal law have not been followed. The executive committee or the corporation consisting of the elected members of the corporation had not heard the objections of the advertisers. The judgment stated that power to tax was not an incidental power. Although legislative power includes all incidental and subsidiary power, the power to impose a tax is not such a power under the Constitution. The power to regulate does not include the power to impose tax, the court emphasised.  

CCI dismisses plea against WhatsApp

The Competition Commission has rejected a complaint against WhatsApp alleging anti-competitive steps using its dominant position in the Indian market. In this case, Vinod Kumar vs WhatsApp Inc, the chartered accountant argued that the messaging service through smartphones was sharing information about its users with its parent company, Facebook, which provides funds and recoups profit by marketing the data for targeted advertising. Though the service is free and the users can opt out of the contract, it was argued that few understood the terms or opted out. The commission rejected the request for an inquiry stating that though WhatsApp was in a dominant position (64 per cent of market), it was not the only provider of such services and users could opt out or download other similar services provided by Google, Apple or Samsung. Therefore the competition law would not apply. Other issues argued in the complaint, like privacy and the terms of the contract, are before the Supreme Court and therefore the commission did not deal with them.

Insurer must pay without delay 

The National Consumer Commission has insisted that once an insurance company accepts an offer of settlement by the insured person, the amount shall be paid within seven days. Otherwise, it would be “deficiency in service” defined in the Consumer Protection Act, entailing payment of compensation. This rule, found in Regulation-9 of the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, was cited in the judgment, National Insurance Company vs Lakhveer Singh.  In this case, a car was damaged and the insurance company was asked by the Punjab consumer forum to pay Rs 5 lakh minus depreciation. The company did not pay the amount for five months, leading to the appeal. The company argued that the car owner, after agreeing to the settlement, was reluctant to accept the amount. The commission did not believe it and stated that the balance of Rs 1.5 lakh should have been paid within seven days.