ONGC rapped over blacklisting of firm

The Bombay High Court last week came down heavily on Oil and Natural Gas Corporation (ONGC) for blacklisting Anchor Offshore Services Ltd, which had done in the last three decades considerable work for the government company by installing and commissioning various equipment used in oil and gas production at various sites. The blacklisting order was passed last year without giving reasons and giving proper opportunity to Anchor to rebut the complaint made by other companies. The latter were not inquired into and "it is indeed most surprising ONGC should have so wholly accepted such a spurious and specious complaint," the judges remarked and continued: "We are not suggesting that ONGC does not have the power to blacklist. It does. This power need not even be statutory. The power, however, must be exercised within the constraints of law and in a manner that is legally tenable. In other words, the only legal limitation on the exercise of this power is that the state, through any of its instrumentalities, must act fairly and rationally without in any way being arbitrary." The long judgment, containing searing criticism, described how three inquiries were made into allegations against Anchor and how the inquiry officer made somersaults. ONGC itself took contradictory stands and alleged large-scale forgery by Anchor which was described by the judges as "an argument of desperation".

Casual workers get ESI benefits

The benefits of the Employees State Insurance Act (ESI) would cover all those who are casual employees and engaged for a part of the wage period, the Supreme Court has reiterated in its new judgment, Royal Western India Turf Club vs ESI. The employer must therefore contribute to the ESI fund. The definition of the term "employee" is wide enough to cover those employed for a few days on a work of perennial nature and wages includes that payable to casual workers. "A person who is employed for wages in the factory or establishment on any work of, or incidental or preliminary to or connected with the work is covered," the judgment said and added that "the Act is a welfare legislation and is required to be interpreted so as to ensure extension of benefits to the employees and not to deprive them of the same."

Royalty on minor minerals payable

The Supreme Court has set aside the judgment of the Rajasthan High Court which had quashed a circular providing for deduction of royalty payable to the mining department from the bills of contractors who have been given government projects. In this case, State of Rajasthan vs Deep Jyoti Co, the department claimed royalty from contractors who were given construction work using mineral masonry stone, grit, boulder, river sand and ordinary sand. The contractors challenged the demand arguing that it could not be done by a circular. The high court allowed it. But the Supreme Court upheld the circular observing that "the minor minerals removed from the quarries admittedly are the property of the government and the same cannot be removed and used without payment of royalty. It is therefore the duty of the government to ensure that only royalty-paid minerals are used in the work and the purpose of issuing such circular was to avoid pilferage/leakage of revenue because royalty can be very conveniently evaded by the contractors either by not purchasing the material from the mining leaseholders or obtaining it from unauthorized excavators."

L&T loses case on bank guarantee

The Bombay High Court last week dismissed the petition of L&T challenging the invocation of performance bank guarantee worth Rs 98.35 crore by GVK Projects. At the behest of L&T, Allahabad Bank had issued the guarantee with respect to a hydel project on Chenab in Jammu & Kashmir. L&T was a sub-contractor. The project was delayed due to various reasons and the guarantee was invoked. This was challenged by L&T as illegal and contrary to the contractual terms. The high court stated that the company was not able to show that the conditions for stopping the bank guarantee existed. It had not shown that there was any "absolute and egregious" fraud to the knowledge of the bank vitiating the guarantee. Secondly, the company's contention that it will suffer irretrievable injury is also misplaced. "A mere apprehension that the other party will not be able to pay is not enough," said the judgment. GVK group's revenue last year was Rs 700 crore and L&T has not shown any proof of exceptional circumstances justifying its fear that it would not be reimbursed the disputed amount in case it succeeds in the suit.

Sony to pay for wasting court's time

The Delhi High Court has directed Sony India Ltd to pay Rs 25,000 as penal cost to its legal services committee for wasting its time and adopting "tactics without strategy, creating noise to confuse the court". In this decade old case, City Palace Electronics vs Sony, the authorised retailer bought goods with brand names Sony and Aiwa from Sony. There was a dispute over payment to Sony. It moved the court for restraint on the retailer from selling the goods. It also got a court commissioner to value the goods with the retailer. The dealer countered that the deal was on a principal to principal basis and therefore there could be no claim on the goods by Sony. The appointment of the commissioner was also challenged and the denial of warranty on the goods by Sony was opposed. In the course of the decade, Sony changed its stand and apologised for its claim on goods and the commissioner's appointment. The high court felt that Sony was guilty of shift in 'tactics' and 'strategy'. It remarked: "Useless and frivolous pleadings, vacillating stands and perhaps, as in the instant case, mutually contradictory, are being adopted by some parties and we must blame their lawyers for the ill-advice given. The aim is to somehow or the other obtain an order. These random applications are filed to take advantage of time constraint in courts, hoping that something may stick."

Second thoughts on sick industries law

Faced with self-doubts over its earlier judgments, a division bench of the Delhi High Court has referred to a larger bench a nettlesome question over the rights of creditors in a case under the Sick Industries Act. The earlier judgments, especially the Modi Rubber decision of 2012, have to be revisited, according to this bench of two judges. The issue is whether, without consent of unsecured creditors, the scheme for rehabilitation envisaging reduction of their debt is binding on them. The reference was made in the case, Singer India vs TVS Sewing Needles last week.