From arbitrator autonomy to transmission lines, here're key court orders

Arbitrator shall be above suspicion of bias

The importance of independence and neutrality of an arbitrator was emphasised again last week by the Supreme Court when it reiterated that “a person having an interest in the dispute or the outcome or decision must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator. Such a person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator”. The court stated so after citing several judgments where the issue of impartiality had been discussed. Though the Arbitration and Conciliation Act was amended in 2015 to avoid such disputes, the issue is raised repeatedly. This time it was in the case, Perkins Eastman Architects DPC vs HSCC (India). A consortium consisting of a New York architectural company and a Mumbai firm was appointed design consultants for the proposed AIIMS at Guntur. Within six days of signing the contract, disputes arose and the consortium was given a termination notice. When the arbitration clause was invoked by the contractor, the chief manager of HSCC appointed the sole arbitrator. That was challenged by the contractor in the Supreme Court as the arbitrator, having been appointed by the chairman and managing director of HSCC, was ineligible and would not be impartial. The court agreed and appointed a retired judge the arbitrator.

Arbitrator to decide limitation question

Last week, the Supreme Court observed that the Arbitration Act is intended to provide autonomy to the arbitration process and allow minimal judicial intervention. Therefore, once the arbitrator is appointed, or the tribunal is constituted, all issues and objections are to be decided by the arbitral tribunal. The court stated so in its judgment in Uttarakhand Purv Sainik Kalyan Nigam vs Northern Coal Field. In this case, the coal firm raised the rule of limitation to object to arbitration. The Uttarakhand High Court allowed it, but the Supreme Court stated that the issue of limitation would be decided by the arbitrator. It emphasised that the court is now required only to examine the existence of the arbitration agreement. All other preliminary or threshold issues are left to be decided by the arbitrator. The court appointed a former judge the sole arbitrator in this dispute.

Civic officials prosecuted for water pollution

 The Supreme Court last week ruled that municipal commissioners and chief officers of the municipal council can be prosecuted under the Water (Prevention and Control of Pollution) Act. The Karnataka High Court had quashed prosecution against them. The State Pollution Control Board challenged that order. In this case, Karnataka Pollution Control Board vs B. Heera Naik, the complaint against the civic officials was that it had accorded consent to the officials to discharge sewage effluent after treatment which had expired in 2006 but not been renewed. The condition that the officials should provide sewage treatment plant within six months was also violated. Instead, the accused continuously discharged untreated sewage into the water bodies. The Supreme Court stated that all companies as wells as “body corporates” could be held guilty of offences under the Act. “There cannot be any dispute that city municipal council is a body corporate,” the court ruled.

Relief more than what victim asked for

The Supreme Court has ruled that in road accidents, the tribunal has the power to grant compensation to victims more than they had asked for. Citing an earlier ruling, the judgment in the case Jabbar vs Maharashtra Road Transport Corporation stated that “there is no restriction that the court cannot award compensation exceeding the claimed amount since the function of the tribunal or court under Section 168 of the Motor Vehicles Act is to award ‘just compensation’”. In this case, a fruit seller had to amputate his arm in a bus accident. He wanted Rs 9 lakh for loss of income throughout life but he reduced the demand to Rs 3 lakh because he could not pay the necessary court fee. He further submitted that if he was granted a higher amount as compensation, he was willing to pay the difference in court fee. The tribunal granted Rs 1.5 lakh only. The Bombay High Court raised it to Rs 2.5 lakh. On appeal, the Supreme Court decided that Rs 5 lakh with 9 per cent interest from the date of the accident would be just and reasonable, though he had asked for a lower amount. 

Alternative remedy in income tax case

 When there is an alternative remedy provided in the Income Tax Act, it should be exhausted before approaching a high court, the Supreme Court stated while dismissing the appeal Genpact India vs Deputy Commissioner, and upholding the Delhi High Court order. In this case, shares held by its sole shareholder and holding company Genpact India Investment, Mauritius, was bought back in two stages. Meanwhile, Section 115QA of the Act, dealing with buyback of shares, was amended and an assessment order was passed according to it. This was challenged by the company. The revenue authorities maintained that the concerned provision was introduced in 2013 to counter the tax avoidance practice mainly adopted by Indian subsidiaries to distribute income among shareholders of their foreign-based holding companies under the garb of buyback of shares. They demanded tax at the rate of 20 per cent. The company moved a writ petition before the high court against the demand but the revenue authorities submitted that there was an alternative remedy provided in the Act. The high court agreed and dismissed the petition. The appeal was also rejected. 

Transmission lines over private property

Raising power transmission lines on private land often leads to suits involving several parties. The landowner does not want to part with his property, the beneficiary presses for the line, electricity authorities want unobstructed access and the government has to protect the public interest and economic development. In this case, Century Rayon vs IVP, the chemical company wanted a transmission line through a piece of land belonging to IVP firm. The latter moved a civil court and obtained an injunction against the construction. The Bombay High Court dismissed the writ petition of Century Rayon. The Supreme Court allowed the work to go on imposing several conditions. Century will pay the landowner Rs 20 lakh and the electricity authorities can complete the work which had already reached an advanced stage. The civil suit involving the Telegraph Act and the Electricity Act would go on.