SC resolves arbitration dilemma

The Supreme Court ruled last week that if an arbitration appeal can be filed in a district court or a high court, the choice under the Arbitration and Conciliation Act has to be exercised in favour of the high court. Usually, the court where the appeal was filed first will have the jurisdiction, according to the Act. But this suit raised a peculiar problem. In this case, chief engineer vs Atlanta Ltd, both the parties were dissatisfied with the arbitral award. The chief engineer of the Maharashtra public works department, who was asked to pay Rs 58 crore plus interest at the rate of 20 per cent by the arbitrator, moved the appeal before the Thane district court because a bypass was to be built in that district. Builder Atlanta, equally dissatisfied with the award, moved the Bombay High Court on the same day, creating a jurisdictional conundrum as both the appeals were filed on the same day, in different courts. Two courts cannot deal with the same award. This situation has not been contemplated in the Act. Atlanta moved the high court for transferring the Thane appeal to the high court. It ruled in favour of Atlanta. The state appealed to the Supreme Court. It upheld the high court view and ruled in favour of the jurisdiction of the high court interpreting Section 2 (1)(e) of the Act.

Food colours, essences are not 'foodstuff'

The Supreme Court has ruled that food colours and food essences cannot be included in the definition of 'foodstuff' for sales tax purposes. A dealer in such goods sought a lower duty claiming that he was selling foodstuff. Rejecting his plea in the case, Gulati & Co vs Commissioner of ST, Uttar Pradesh, the court explained that "the two products are either chemically manufactured or processed after their isolation from a plant and therefore, available as retail products in their concentrated forms. Thus, the food colours and essences cannot be consumed as such and their addition to any foodstuff is basically to ornamentally improve the end product by making it attractive and impressive. The purpose behind their addition is to aid appetite by pleasing one's olfactory and ocular senses. They have only aesthetic value but no food value."

Auction purchaser's rights

The right of a bona fide purchaser of property for consideration in a public auction was asserted by the Supreme Court in the judgment, Sadashiv Prasad Singh vs Harendar Singh. In this case, a partnership firm took loan from Allahabad Bank mortgaging certain properties but the debt was not repaid, leading to public auction by the recovery officer appointed by the debt recovery tribunal. Later, a partner challenged the auction in the Allahabad High Court. It set aside the auction on the ground that the recovery officer had not complied with Rule 11 of the Income Tax (Certificate Proceedings) Rules. The high court held that the proceedings before the recovery officer were in flagrant violation of the IT Rules. The purchaser moved the Supreme Court, which set aside the high court order. The court said that the objection raised to the auction long after the property had passed on to a third party should have been rejected by the high court.

Kin can be employee in law

When a person employs his brother as a driver of his vehicle, there is employer-employee relationship under the Workmens' Compensation Act and the insurance company is liable to compensate for his death in a road accident in the course of employment, the Supreme Court ruled in the case, T S Shylaja vs Oriental Insurance Co. In this case, a 20-year-old youth was driving his vehicle when a truck hit and killed him. His mother sought compensation and the Commissioner under the Act granted him Rs 4.48 lakh. However, the insurance company moved the Karnataka High Court arguing that the youth was employed by his brother and therefore there was no employer-employee relationship under the Act. The high court agreed with that and stated that the remedy is under the Motor Vehicles Act. The mother moved the Supreme Court which reversed the high court judgment. The court asked the insurance company to pay the compensation within three months with 12 per cent interest.

Building tax on charity hospital

Building tax can be exempted on charitable hospitals only if the building gives free medical treatment, but not if it charges fees from patients, the Supreme Court ruled last week while dismissing the appeal of Medical Centre Hospital against the Kerala High Court judgment. The court held that the buildings were not used principally for a charitable purpose as the medical services were not rendered free of charge to all patients, but only to those who could not afford it. The rest were charged a nominal fee for services at the hospital. A building used for providing free medical service alone can claim exemption under the Kerala law, the court said.

Insurance companies lose appeals

The Supreme Court has dismissed the appeals of general insurance companies and ruled that those employees who had opted for voluntary retirement scheme (VRS)are entitled to claim pension under the pension scheme of the insurers. Various high courts had held that the staff was entitled to pension, but dissatisfied with the rulings, the companies moved the Supreme Court. It ruled that those who opt for VRS would also qualify for payment of pension if they have put in the qualifying 10 years of scheme under the pension scheme of 1995.

Fera penalty set aside

The Supreme Court last week quashed the penalty of Rs 50,000 each imposed on Tulip Star Hotel Ltd and its executive director for violation of foreign exchange laws by selling dollars and sterling pounds through persons deputed by another firm, Hotel Zam Zam. The foreign exchange tribunal and the Bombay High Court had confirmed the penalty. But on appeal, the Supreme Court reversed the finding of the courts below and exonerated the hotel. Analysing the provisions of the Foreign Exchange Regulation Act and the Foreign Exchange Management Act and an RBI memorandum the court stated that they gave a free hand for licensed 'full fledged money changers' to indulge in purchase of foreign currency. The only restriction was that while making such purchase, the rupee value of the foreign currency should not be paid by way of cash, but should always be paid in the form of an instrument such as banker's cheque/pay-order/demand draft, or by debiting the purchasers' bank account. In this case, both parties were licensed money changers and the amounts were paid by pay orders.