Brief case: Taxmen take long, futile path in litigation

A weekly selection of key court orders

Taxmen take long, futile path in litigation

Even if there is no “substantial question of law” involved, the income-tax (I-T) authorities can file appeal after appeal, prolonging the litigation for decades. This was the case in the fourth futile appeal by the revenue department in the case decided by the Supreme Court (SC) last week, CIT vs Equinox Solution. In this 1994 assessment, the Ahmedabad-based company decided to sell the entire going concern at one go in the nature of a “slump sale”. It claimed deduction, arguing the amount received from the buyer, Amtrex Appliances, was in the nature of long-term capital gains. However, the assessing officer said it was short-term gain, and denied deduction. This led to 23 years of litigation. The SC agreed with the view of the Gujarat High Court that the issue did not raise any substantial question of law to be decided by the appellate courts. 

SAIL plea on anti-dumping rejected 

Though the Customs Act provides for a direct appeal to the Supreme Court (SC) against the decision of the appellate tribunal, the apex court would not interfere in the decision of the tribunal unless there is a question of general importance affecting a large number of assesses or it involves interpretation of the constitution. The court declared so while dismissing last week the appeal of Steel Authority of India (SAIL) against the decision of the Director General of Anti-Dumping Authority. The judgment stated that though the relevant Section 130E (b) is broadly worded, its precise contours should be limited. In this case, the public sector undertaking imported graphite electrodes from China. The government imposed anti-dumping duty on it. The company moved appellate tribunal, arguing the “normal value” was calculated in an impermissible manner. The tribunal rejected the contentions. The SC dismissed the appeal, saying even if it could take a different view, the tribunal’s view should be upheld.

Row over seat of arbitration

The Supreme Court (SC) last week said that where more than one court has jurisdiction to deal with an arbitration application, it is open for the parties to choose one and exclude all others. The court said so in the judgment, Indus Mobile Distribution vs Datawind Innovations in which the company with registered office in Amritsar sent its products from Delhi to Chennai. The arbitration agreement between the disputing parties specified Mumbai as the place of arbitration. When disputes arose, the Amritsar-based company moved the Delhi High Court (HC) to appoint arbitrator. The court claimed jurisdiction, saying no part of the dispute arose in Mumbai. Only courts in Delhi, Chennai or Amritsar could deal with the arbitration application. Since the party came first to the Delhi HC, it appointed an arbitrator. The SC set aside that judgment and asserted that unlike the Civil Procedure Code where the cause of action decides the jurisdiction, the Arbitration and Conciliation Act allows a party to choose a neutral venue. In this case, a Mumbai court alone will have jurisdiction, the judgment said. 

NHAI criticised for casual approach

The Delhi High Court (HC) last week criticised National Highway Authority of India (NHAI) for its “casual approach” in filing documents causing delay in an arbitration case against Gammon India. The public sector undertaking pleaded that the officer who had to sign the documents was outside Delhi; hence the delay of over three months. The court did not accept this excuse. The dispute arose because NHAI blamed Gammon for delay in completing a project. Gammon objected to the charge and went in for arbitration. The award was in its favour. NHAI moved the court against the award after the period of limitation. The judgment upheld the award and asserted the delays were caused by NHAI itself. In another NHAI challenge to two awards in favour of Bridge & Roof Co, the HC found some claims against the contractor lacked evidence. It dismissed the petitions, directing NHAI to pay costs to the contractor. 

Speedy route to debt recovery 

The Supreme Court (SC) last week rejected a borrower’s challenge to the Madhya Pradesh (MP) rules for recovery of debts under the Micro, Small and Medium Enterprises Development Act. The rule provided for speedy recovery of debt as arrears of land revenue and it was in addition to the remedy provided under the Arbitration and Conciliation Act. The debtor-company argued that the Civil Procedure Code (CPC) has set the procedure for recovery of dues and the state rules were contrary to those in the arbitration Act. Dismissing the appeal case, Power Machines India vs MP government, the SC stated that “in the matter of providing such remedies, it is open to legislate different remedies, which may be inconsistent. It is a question of electing a remedy. Election of a remedy for recovery of the amount would depend upon the choice of the award-holder.”The court remarked that it has become cumbersome due to the tactics of the debtors. Therefore, laws which provide for additional speedy remedies are the “need of the day”. 

Land mafia grabs housing co-ops 

In an appeal moved by the Delhi Development Authority (DDA), the Supreme Court (SC) has found the hands of land mafia in reviving defunct cooperative housing societies and admitting new members demanding heavy amounts. In this batch of appeals, DDA vs Bankmens Co-operative Group Housing Society, the modus operandi was to revive old liquidated co-operatives by unknown persons with the connivance of officers of DDA and the Registrar Co-operative Society. The Central Bureau of Investigation had investigated several cases and confirmed the illegal practice. The high court, however, asked DDA to verify the members. It appealed to the SC, which held that the revivals were all tainted with corruption; it quashed them.

Company wins eviction suit

The Supreme Court (SC) has ordered the eviction of certain persons occupying the quarters allotted to employees of Unichem Laboratories but were squatting there for years paying only Rs 23 as monthly rent. They had retired from job and others were occupying the accommodation. They argued that the Mumbai firm could not file eviction suit without a resolution passed by the company and the quarters in Ghaziabad were owned by the Uttar Pradesh government under a state housing law. The court rejected the arguments and said after leaving service, the employee or his successors have no right to stay on. That was also the rule under Section 630 of the Companies Act, the court stated while allowing the appeal of Unichem.