Contract hits impossible hurdle

The law says that a contract to do an act, which turns out to be impossible of performance after the agreement, becomes void and the person who suffers must be compensated. If environment restrictions not contemplated in the contract frustrate a project and it becomes impossible or impracticable to implement it, the contractor deserves compensation, according to the Supreme Court. The contractor who could not undertake a housing project because of environment curbs not contemplated by the government at the time of signing the agreement was compensated in the judgment, Delhi Development Authority vs Kenneth Builders. The development authority (DDA) gave to a contractor a housing project in the ridge area of the capital, which is an ecologically sensitive area. At the time of the contract, this fact was not taken into consideration by either party. Later it was found that the project could not be undertaken because of various regulations to protect the area. Any development activity at the site required sanction from the Ridge Management Board and the Supreme Court itself, because of environment litigation. Though DDA granted the contract on the "as is where is" basis, the construction could not be undertaken which is prohibited by law and without permission. Invoking Section 56 of the Contract Act, the court asked DDA to refund the deposit made by the contractor with interest.

Revived unit must pay tax dues
An industrial unit which was protected by the Sick Industries Act during revival plans could be asked to pay its tax dues when it is revived, the Supreme Court ruled in the case, Director General of Income Tax vs GTC Industries. The firm was declared sick in 1997 and referred to BIFR. After a draft rehabilitation scheme was circulated, the revenue authorities demanded Rs 366 crore in taxes. However, it was barred from recovering it due to the SICA provisions. In 2007, the net worth of the company became positive and it asked the board to de-register it and it was done. Income tax authorities now demanded Rs 761 crore outstanding. The company, which allegedly alienated some of its properties, moved the board for stay of any coercive steps. It was granted. After more appeals, the high court asked the company to approach the board. The authorities appealed to the Supreme Court. It allowed the appeal and stated that the high court had gone wrong as the company has been revived and the scheme had also expired in 2011. So the tax authorities can go ahead and recover the arrears.

Mining after expiry of licence

The Supreme Court last week indicted the Ministry of Environment and Forests for allowing a mining firm to continue mining though the local residents complained that its licence had expired long ago. In this case, Talaulicar & Sons vs Union of India, the licence was granted for two years. The regulations permitted five years, which ended in 2010. When the mining continued, some residents moved the Bombay high court and the National Green Tribunal against the operations. The high court found that operations in the Saniem Sacorda iron ore mine was without sanction. The firm appealed to the Supreme Court. It agreed with the high court and stated that regulations, including a public hearing, have not been followed. It asked the ministry to take a fresh look at the issue and take a decision after scrupulously following the regulations and all factors leading to the environment impact assessment including effective public hearing preceded by due publication in the media.

Auction of property cancelled
In a dispute over the sale of property of a liquidated company, the order of the company court is binding on the recovery officer under the Debt Recovery Act, the Supreme Court has held in its judgment, Anita International vs Tungabadra Sugar Works Mazdoor Sangh. The winding up proceedings of Deve Sugars Ltd of Karnataka gave rise to complex litigation in the Madras and Karnataka high courts. The Madras high court appointed an official liquidator. State Bank of Mysore, which had extended loan to the firm, moved the debt recovery tribunal in Karnataka and got a recovery certificate. This was challenged in the Karnataka high court by the workers. Ultimately, the recovery officer sold the property to Anita International for Rs 10.25 crore, which was alleged to be far below the actual price. Ending the multifarious litigation, the Supreme Court cancelled the sale made by the recovery officer, holding that his sale was in utter violation of the company court order.

Garware loses claim over 'suncontrol'
The Bombay High Court last week rejected the petition of Garware Polyester Ltd to stop 3M Company of US and its Indian subsidiary 3M India Ltd from using the words sun control/suncontrol for their products. Garware alleged that they were its registered trade marks for window films for sun protection and the rival firms had infringed the right and was also guilty of 'passing off'. The high court ruled that the expression 'sun control' is purely descriptive and ordinary words found in any common dictionary. It only indicates the kind, quality and intended purpose of these films. It describes their main characteristic, which is to block certain effects of sunlight.

Bank must protect cash in transit
If proper security is not provided by a bank for transiting huge cash and it is robbed on way, the insurer would not be liable, the National Consumer Commission ruled last week, setting aside the order the Gujarat state commission ordering New India Assurance to recoup the loss to a cooperative bank in Ankhleswar. According to the indemnity policy, the bank was required to employ two guards with firearms when the amount is more than Rs 10 lakh. However, the Navsarjan Industrial Bank sent two clerks and a guard with a wooden stick to State Bank of India to encash a cheque of Rs 20 lakh. While returning with the cash, two men on bike fired the guard injuring him. They carried away the trunk with cash. The coop bank sued the insurance company. The state commission allowed the claim. New India appealed to the national commission. It set aside the state commission judgment and ruled that the coop bank had infringed the conditions in the policy regarding the number of guards with firearms. The commission rejected the contention of the coop bank that it was not told about those conditions. It also did not believe the coop bank which pleaded that Ankhleswar being a small city, it was difficult to find armed guards.