From Basmati rice cultivation to mining licences, here're key court orders

Insurer can’t change surveyor at its whim

An insurance company cannot appoint one surveyor after another till it gets a report favourable to it, the Supreme Court asserted in its judgment last week in the case, New India Assurance vs Luxra Enterprises. An insurer can reject a survey report, but it must give cogent reasons for doing so, pointing out inherent defects in it or it was arbitrary or excessive. In this case, there was a fire in the garment factory. It claimed Rs 55 lakh under the insurance policy. New India appointed a surveyor who allowed the full claim. Then the insurer appointed another firm as a surveyor which reduced the claim to Rs 25 lakh. Still dissatisfied with the report, New India appointed a third surveyor who recommended repudiation of the whole claim. Aggrieved by the total rejection, the garment factory moved the National Consumer Commission. It allowed the full claim but without interest. Both sides moved the Supreme Court. It dismissed the appeal of New India observing that “the appointment of surveyors was to repudiate the claim on one pretext or the other”. It also granted 6 per cent interest on the amount to the garment firm which was overlooked by the National Commission.

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Trade union is operational creditor

“A trade union represents its members who are workers, to whom dues may be owed by the employer, which are certainly debts owed for services rendered by each individual workman,” the Supreme Court stated last week while declaring that a trade union could be said to be an operational creditor for purposes the Insolvency and Bankruptcy Code. The court overruled the order of the National Company Law Appellate Tribunal (NCLAT) in the appeal case, JK Jute Mill Mazdoor Morcha vs JK Jute Mills. The trade union of the closed mills had issued a demand notice on behalf of roughly 3,000 workers under Section 8 of the Code for outstanding dues to workers. It was resisted by the company leading to a petition in the National Company Law Tribunal, which held that a trade union was not covered as an operational creditor. An appeal was dismissed by the NCLAT, stating that each worker may file an individual application before the NCLT.

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Buying assets in name of sons not ‘benami’

A real estate agent who bought properties for his sons was not violating the Benami Transactions Prohibition Act, the Supreme Court ruled in the case, Leelavathi vs V Shankarnarayana Rao. The court made this observation in a dispute dating back to 1980 between a woman and her brothers over the partition. She alleged that their father was a property dealer as well as money lender who bought assets in the name of his sons. The sons denied it and asserted that they acquired properties on their own.

The court put an end to the nearly four-decade-old case pursued by the legal heirs of the original parties, rejecting the allegation of benami transactions. It recalled in detail the tests which should be applied in cases of benami transactions.

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Curbs on Basmati rice cultivation quashed

The Delhi High Court has quashed the central government’s orders which restricted the production of Basmati rice to certain regions in the Indo-Gangetic plain. In its judgment in Madhya Pradesh vs Union Of India, it also quashed the decision of the Ministry of Agriculture to restrict the registration of Basmati varieties under the Geographical Indication to certain areas in the Indo-Gangetic plain, like the states and territories of Punjab, Haryana, Himachal Pradesh, Delhi, Uttarakhand, western Uttar Pradesh, Jammu and Kathua district of J&K. The court largely accepted the contentions of the state government that the Centre’s order was outside the scope of the Seeds Act, it encroached upon the power of the states to pass laws in relation to agriculture, which is a state subject, and that it ventured into the field of the Geographical Indications of Goods Act. 

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Mining exploration licences cleared

The Delhi High Court has set at rest a long-standing dispute raised by a few mining companies and fought in several high courts over the licensing of 62 exploration blocks in the Bay of Bengal and the Arabian Sea. They had challenged a 2010 notification passed by the Administering Authority under the Offshore Areas Mining (Development and Regulation) Act in various courts and lost. Later, the process was reconsidered in the light of the Mines and Minerals (Development and Regulation) Act and the licences were cancelled. This was challenged in the Delhi High Court and this time the companies won. The govern-ment appealed to the division Bench in the case, Union of India vs Rvg Metals & Alloys. It argued the decision was taken in public interest to avoid granting of an exploration licence for atomic minerals to private parties. Dismissing the appeal, the court directed the Administering Authority to execute the exploration licences within two weeks.

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Row over right to name arbitrator

The Bombay High Court last week ruled that once an arbitrator is appointed at the request of a disputing party and he recuses from the post, the opposite party cannot recommend a name as a substitute. That right has been forfeited when the opposite party originally refused to name its candidate for arbitration. It cannot claim a “rebirth of a right which stood forfeited,” the court stated in its judgment, Sap India Ltd vs Cox & Kings. When disputes arose between the parties over an agreement, Sap nominated a retired judge as arbitrator. Cox declined to name its choice alleging the agreement was tainted by fraud. So Sap moved the court, which appointed a retired judge. But he recused. Now Cox wanted to name a substitute but Sap opposed it arguing the right of Cox had extinguished when it had declined to name an arbitrator. The HC agreed and appointed a new judge as a substitute.