CAG no arbiter of policies, says Supreme Court

The Comptroller and Auditor General of India (CAG) is not entitled to question the merits of the policy objectives of a government venture, the Supreme Court stated while dismissing an appeal against the judgment of the Gujarat High Court. The state government had launched a Rs 9,700-crore project for developing an international financial services city at Ahmedabad. CAG had made certain remarks about policy deficiencies in land allotment. On that basis a public interest petition was filed in the high court. It dismissed the petition. An appeal was filed in the Supreme Court. It dismissed the appeal case, Pathan Mohammed vs State, observing that "CAG is a key figure in the system of parliamentary control of finance and is empowered to delve into the economy, efficiency and effectiveness with which the departmental authorities or other bodies had used their resources in discharging their functions. CAG is also the final audit authority and is a part of the machinery through which the legislature enforces the regulatory and economy in the administration of public finance. But we cannot lose sight of the fact that it is the government which administers and runs the state, which is accountable to the people. State's welfare, progress, requirements and needs of the people are better answered by the state, also as to how the resources are to be utilised for achieving various objectives. If every decision taken by the state is tested by a microscopic and a suspicious eye, the administration will come to stand still and the decision-makers will lose all their initiative and enthusiasm."

Cement firms' pleas for large bench

The Supreme Court last week referred a bunch of four appeals moved by cement companies from Tamil Nadu to a larger bench as they raised substantial questions of law. One of the issues was, what is the true nature of royalty/dead rent payable to minerals produced/mined/extracted from mines. A related question is what is the true legal character of the expression royalty under the Mines and Minerals (Development and Regulation) Act, and whether it is a tax or a consideration for a contract of mining lease? The problem arose when Dalmia Cement Ltd and three other firms challenged the demand of the collector to remit royalty and the dead rent at the rates prescribed under the MMDR Act. The Madras High Court dismissed their petitions, leading to the appeals. The Supreme

The Court criticised the cement companies for their "wholly bald and vague assertions" and the government for "callous, imprecise counter". As a general observation, the court lamented that "in the adjudication of writ petitions, unfortunately a system of paying minimum attention, (to employ a mild expression of disapproval) has developed over a period of time." In view of this situation, the court asked the companies and the state to file details in a clear manner. These appeals will be heard along with another batch of cases involving the Mineral Area Development Authority and Steel Authority of India Ltd, which was pending since 1999.

Guarantor's role in debt recovery

The Supreme Court has dismissed the appeal of the chairman and a director of a company who stood as guarantors for a firm that turned sick, stating that their liability will remain despite the firm being declared sick and the executives could not claim protection under Section 22 of the Sick Industrial Companies Act. In this case, Inderjeet Arya vs ICICI Bank Ltd, the bank instituted recovery proceedings against Rajat Pharmacem Ltd in the Debt Recovery Tribunal in Delhi. The guarantors were made parties. They appealed to the high court invoking the protection purportedly given in the Act and when they lost they moved the Supreme Court. The apex court stated that they were not protected from recovery proceedings filed by the bank.

Dismissal of 'overworked' employees

The Supreme Court has dismissed the appeal of Sundaram Industries Ltd against the judgment of the Madras High Court in a dispute involving dismissal of workers. A section of the workers were told to do additional work and they were not paid for it. Several of them therefore refused to do the extra work. They were dismissed. The employees' union took up the matter before the labour tribunal on a reference under the Industrial Disputes Act. The tribunal held that though the allegations against the workers were proved, dismissal was "shockingly disproportionate" to the misconduct of the workers. The Madras High Court upheld the view. The company appealed to the Supreme Court. While dismissing the appeal, the court observed: "Refusal to carry out the instructions requiring workmen to do additional work beyond the shift hours clearly tantamounts to changing the conditions of service which was impermissible without complying with the legal requirements." The court also stated the tribunal was wrong to hold that the charges against the workers were proved.

Highest bidder has no vested right

Even if a bidder had quoted the highest price, the tender process can be discharged due to technical or administrative reasons, the Supreme Court stated in the appeal case, Maa Binda Express Carrier vs North-east Frontier Railway. The tender was for a three-year lease on the parcel van of Kamrup Express. When it was cancelled, the bidder who stood a high chance moved the Gauhati High Court which dismissed the petition. The appeal was also dismissed by the Supreme Court. It observed that the tender process suffered from serious deficiencies. However, it could not be described as a mala fide action. The reserve price was so low according to the market conditions that it would have resulted in heavy loss to the railway. The court reiterated that it would not interfere in commercial transactions unless there was gross unreasonableness in the process.

SC clears air on common areas

What are common areas and facilities in an apartment complex? The Supreme Court answered this ticklish question in favour of the builders in a Haryana case involving DLF Ltd. The court ruled that the flat owners cannot claim any undivided interest over facilities like schools, shops or community centres. It overruled the Punjab and Haryana High Court which had held that the apartment owners are entitled to undivided interest in common areas and facilities under Section 6 of the Haryana Apartment Ownership Act. The colonisers have the ownership and the flat owners have only a right to use. According to the judgment, nursery schools, shops and community centre could not be treated as common areas. "They are parts of planning for a larger area. It is not meant for the exclusive use of the flat owners. The position would have been different had these been integral parts of the facilities, in the sense that these facilities are essential for the enjoyment of the flats."