From Arbitration tribunal to I-T returns, here are the key court orders

A weekly selection of key court orders

Arbitral tribunal can award interest 

An arbitration tribunal has the power to award interest on the money kept out of the reach of a party during the period from the start of the arbitration until the award is made. “The liability for interest during the period does not arise from any term of the contract, or during the terms of the contract, but in the course of determination by the arbitrators of the losses or damages that are due to the claimant,” the Supreme Court stated in its judgment, Raveechee & Co vs Union of India. “Specifically, the liability to pay interest arises because the claimant has been found entitled to the damages and has been kept out from those dues due to the pendency of the arbitration,” the judgment explained. In this case, the infrastructure firm was given quarrying work on Western Railway near Udvada and disputes arose between the contractor and the government. The arbitrators awarded 12 per cent interest on the claim for the delay caused by a mining order. The Gujarat High Court struck down the interest part of the award. The firm appealed to the Supreme Court. It set aside the high court order and ordered payment of interest.

Compensation is related to IT returns

The Supreme Court has dismissed the appeal of United India Insurance Company in a fatal accident case and ruled that the income tax returns of a deceased are more reliable than the salary certificate while calculating the compensation. The tribunal had calculated the compensation according to the salary certificate from Food Corporation of India where the deceased person was an employee. It found that the income from the salary and what was declared in the income tax returns were different and therefore, rejected the tax declaration. The Punjab and Haryana High Court overruled it and decided the compensation payable according to the tax returns. The insurance company appealed to the Supreme Court. It dismissed the appeal stating that the tax returns showed the real income as the deceased person could have other sources of income.

PSUs on blacklisting spree

The Delhi High Court last week quashed the order of the National Highway Authority of India (NHAI) blacklisting L N Malviya Infra Projects Ltd for three years for allegedly misrepresenting its experience in road building. The NHAI contended that there should be no court interference with its orders as it had carefully considered all relevant facts and circumstances before issuing a detailed order. It cited an earlier project in which there were disputes between the parties. The firm contended that it was not given a hearing before taking the drastic step. The High Court agreed with it and observed that “blacklisting entails serious consequences in terms of its implications, which is why it should be kept in mind that apart from objectivity in terms of decision-making there must also be a clear understanding that cases of this nature would also require the satisfaction beyond just minimum requirements… it would be required that the authority observes a higher standard of objective fairness and must attempt to ensure that justice is rendered in their maximum capacity.”  Analysing the facts of the case, the court held that the firm could not be accused of indulging in fraudulent or corrupt practices in any manner.  In another case, the Bombay High Court last week quashed the blacklisting of Acer India Ltd by Central Bank of India and Punjab National Bank. There was a delay in the supply of computer goods from Thailand which was hit by floods. Central Bank took steps to blacklist Acer on that ground. Meanwhile, PNB also blacklisted the firm believing that the other public sector bank had done so. The High Court set aside the penal action based on the facts of the case.

Court order as ‘unexpected event’

The Gujarat High Court has dismissed the appeal of the state government challenging the arbitration award against it in its dispute with Ashvika Construction Ltd. The contractor was given the work of building a four-lane overbridge on Ahmedabad-Mumbai National Highway and a BOT agreement was signed between the Union Government, the Gujarat government and the contractor. It permitted the firm to collect toll for 23 months from users of the road. However, disputes arose over the collection of toll from one side of the road in which a civil judge passed an injunction order. This caused loss to the contractor and the firm demanded compensation from the government. The firm argued that the court injunction was an unexpected event beyond its control (force majeure) which was covered in the contract in its favour. The arbitrator accepted the contention of the contractor. The High Court upheld the award and also observed that its power to interfere in awards was limited.

Demand notices can be corrected

A mere correction in the demand notice served on a defaulting borrower or issuing corrigendum would not invalidate the notice under the Securitisation (SAFAESI) Act, the Madhya Pradesh High Court ruled in the case, Utkarsh Industries Ltd vs State Bank Of India. The bank had issued a notice to the guarantors of the firm which did not repay a loan. It was declared a non-performing asset (NPA) and notice was published in the newspapers along with the photographs of the defaulters. The firm moved the debt recovery tribunal. It declared that the publication of the photographs was deplorable and a revenge act. The tribunal quashed the notice and ordered the return of the mortgaged properties to the owners. The appellate tribunal reversed the order.  On appeal, the High Court declared that the corrigendum only corrected the size and boundaries of certain properties in the list and did not invalidate the demand notice. There was no substantive change of the original demand, the judgment clarified upholding the appellate tribunal’s order.

A duel with Sword and Talvar

The Delhi High Court last week passed an injunction order against Supermax Personal Care Ltd and Tigaksha Metallics Ltd at the instance of Gillette Co LLC in a ‘passing off’ case. Gillette argued that the rival companies had imitated its brand name and style, Wilkinson Sword Lemon Splash, in the double-edged blade market. The offending trademark was Talvar, which means sword, and there was a picture of a sword and the name was written slanted, which Gillette claimed was its distinguishing feature. The High Court judgment is a long essay on the vagaries of the human mind citing various research findings on consumer behaviour. Ultimately, the court stopped Gillette’s rivals from using Talvar mark till the suit is finally settled.