Brief case: Buyer not liable to clear old power bills

A weekly selection of key court orders

More powers to arbitral tribunals

The Supreme Court (SC) has conferred more powers on arbitral tribunals and stated they have power to punish a party for flouting its orders, without taking the trouble of referring the issue to the high court (HC). This applies to interim orders of the tribunal also, the court stated in the judgment, Alka vs Shamshul Khan, while setting aside the judgment of the Bombay High Court. The SC pointed out that the 246th report of the Law Commission had recommended more teeth to the decisions of the arbitral tribunal and therefore Section 17(2) was added to the Arbitration and Conciliation Act in 2015, so that the cumbersome procedure of an arbitral tribunal having to apply every time to the HC for contempt of its orders would no longer be necessary. "Such orders would now be deemed to be orders of the court for all purposes and would be enforced in the same manner as if they were orders of the court," the judgment said. In this case, there was a dispute over sale of flats. The tribunal had stayed the sale. Despite that five flats were sold, leading to the alleged of the tribunal's order. The SC, after interpreting the law, remanded the case to the HC.

Assets to be auctioned despite appeals 

The Calcutta High Court last week dealt with a related question on arbitration in its judgment in the case, Citicorp Finance (India) Ltd vs Manoj Ray. There were four similar cases in which borrowers failed to repay the amounts though the arbitrators directed them to do so. Therefore, the finance companies wanted to appoint receivers and sell assets though appeals against the award were pending. According to them, the equipment and vehicles hypothecated to them will suffer depreciation in the interim period and, therefore, they should be auctioned to save loss, without waiting for the decision in the appeals. The high court allowed the plea of the finance companies and appointed receivers who would auction the equipment and vehicles. The sale proceeds will be kept with the court and not given to the finance companies. If the borrowers succeed in the appeals against the awards, they will be restituted. The court asserted that it has the power under the Arbitration Act to pass interim order for sale of the assets till the appeals are decided.

Buyer not liable to clear old power bills  

An auction purchaser of property cannot be called upon to clear arrears of electricity charges of the past owner, the Supreme Court stated in its  judgment, Southern Power Distribution Co vs Gopal Agarwal. In this case, the assets of a company, which failed to repay the loan given by City Union Bank, was auctioned. Agarwal, being the highest bidder, was given the certificate of sale by the bank. When he applied for power connection, the distribution company claimed the previous owner had not cleared his dues to the tune of Rs 2 crore. Therefore, it did not give electricity connection to the buyer of the property. He moved the high court in Andhra Pradesh, which asked the company to give power connection. The company appealed to the Supreme Court. It dismissed the appeal stating that the buyer went by the “as is where is" condition and he had not undertaken to clear the dues of the previous owner.

Tenders must follow CVC guidelines 

If the guidelines of the Central Vigilance Commission for tenders are violated, the procedure could be held invalid. One of the rules is that the tender should be opened before the parties. Owing to the violation of the rule, the Supreme Court has asked Haffkine Bio-Pharmaceutical Corporation, a Government of Maharashtra undertaking, to float fresh tender for supply of bulk drugs, including two oral polio vaccines. However, the court made it clear that the new tender to be floated should be e-tender to avoid any allegations. The terms of the tender should be clear and unambiguous setting out the period of tender and approximate quantities of drugs required. The court made these directions in Haffkine's appeal against the Bombay High Court (HC) order in its dispute with Nirlac Chemicals. The Supreme Court upheld the HC’s  view that the tender was not opened before Nirlac representatives, as required by the CVC guidelines. Therefore the entire tender opening process was vitiated. “When a technical bid is opened, it is the right of the rival bidders to see whether the documents attached by a bidder meet the technical requirements or not. This can only be done if the documents attached to the bid are shown to the other side," the court said. It added that Nirlec was also not qualified as it did not fulfill the qualifications. Therefore a fresh tender under new guidelines were ordered.

GSK gets clean chit on price control

The Supreme Court has set aside the judgment of the Bombay High Court in the appeal case, GSK vs Union of India, allowing the argument of the pharma major that it had not violated the Drug Price Control Order and an exemption notification under it. The authorities had demanded Rs 2 crore, alleging violation of the order by selling a drug at higher price fixed by the company itself, even after the exemption period. The court stated that “the exemption related only to manufacture and has no reference to sale whatsoever. ”There must be some time-lag between the period the drug is manufactured and the actual sale by a retail dealer to the customer. The judgment further explained that the exemption order referred only to bulk drugs and formulations based thereupon which are “manufactured” by the company. The cut-off date related to the commencement of commercial production.

Fine in cheque case for wasting time 

Though the drawer and payee of a dishonoured cheque settled their 16-year-old dispute out of court, the Supreme Court imposed Rs 1 lakh on the drawer as “exemplary cost” for “wasting public time”. P Chandrakala borrowed money from K Narender but her cheque for repayment bounced for want of sufficient fund in her account. Narender moved the magistrate court in Hyderabad invoking Section 138 of the Negotiable Instruments Act. She was sentenced to six months imprisonment and ordered to pay Rs 7 lakh as compensation. Her appeals were dismissed by all courts. While it was pending in the Supreme Court, the money was repaid and the case was compounded. But, the court did not stop with that. It felt that the woman should be “burdened with exemplary cost”. It will go to an orphanage in Delhi, according to the order.