Twelve rules on workers' claims

The Supreme Court ruled last week that the claims of workers who contend that they are entitled to payment from a company in liquidation have to be considered and adjudicated by the liquidator of the debtor company and not by the debt recovery tribunal. Laying down 12 rules in the judgment, Bank of Maharashtra vs Pandurang, the court stated that if the debtor company is not in liquidation nor any provisional liquidator has been appointed and merely winding up proceedings are pending, there is no question of distribution of sale proceeds among secured creditors. Where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen's portion in relation to the security held by the secured creditor of the debtor company. Earlier, there were differences among judges on the priority for payment of a debtor company. Therefore, a larger bench in this case clarified the law for debt tribunals and liquidation proceedings.

Flat buyers are consumers
The Supreme Court has held that people who had deposited instalments of the price for the flats being constructed by a cooperative housing society are 'consumers' according to the definition in the Consumer Protection Act. The contrary view held by the National Consumer Commission is wrong, the Court stated in the judgment, Virender Jain vs Alaknanda Coop Housing Society Ltd. The commission had dismissed the appeals of the depositors, ruling that they were not covered by the definition of consumer. The members who had deposited certain amounts but the society returned it and virtually terminated their membership on the ground that they had failed to deposit the instalments of first and second stage of construction as also the instalment of the cost of land allotted by Haryana Urban Development Authority. The dispute was taken to the consumer forum, where their petitions were rejected. Since they have been declared consumers, the forum will consider the complaint again.

Fresh tender for train food

The Delhi high court, last week, dismissed the writ petition of a caterer of the Indian Railway Catering and Tourism Corporation challenging the cancellation of its licence, following food poisoning in the Ranchi Rajdhani express. The decision of Northern Railway not to extend the licence of Ambuja Hotels and Real Estates Ltd and to call for fresh tenders was upheld. The company argued that while its licence, which was renewed from time to time for five-year periods, was pending the railway invited fresh tenders. It also alleged that some other caterers, who have also been found guilty of supplying sub-standard food to Rajdhani passengers, were granted licences. The railway denied the charge and argued that by serving contaminated food, the company committed breach of the terms of the licence. The judgment stated that the "railways would be wholly justified in not extending the contract of a caterer guilty of supplying such food to the passengers. Besides bringing bad name to it and thereby tarnishing the reputation of Indian Railway such an act would be extremely prejudicial to the public interest."

Arrested ship released
The Bombay High Court, last week, ordered the release of a ship which was ordered to be arrested in January this year. It will be allowed to sail immediately. The dispute arose over an agreement between Lufeng Shipping Co, owners of the vessel M V J Tong, with Whim Star Chartering Co Ltd, Hong Kong, as charterers for the use of the vessel for carriage of goods. It was alleged by Lufeng that it suffered losses as a result of detention of its vessel at the port of loading. It sought the arrest of the ship, arguing that this ship, Rainbow Ace, was in the beneficial ownership of Whim Star Charterers. Rainbow Ace Shipping SA, Panama, moved the high court denying the ownership pattern. The high court stated that Lufeng has failed to prove its allegation and the balance of convenience was for releasing the ship.

Interest on delayed payment
The Bombay High Court has dismissed the appeal of the Maharashtra Small Scale Industries Development Corporation against the award of interest by an arbitrator in its dispute with Snehadeep Structures. The construction firm, which supplied materials for a slurry pipeline for the Chandrapur thermal power station, alleged that the payments were not made on time and therefore it was entitled to interest on delayed payment. When the claim was disputed, the matter went to an arbitrator. He awarded interest from the date of statement of claim till the date of award and future interest at the same rate till the payment or realisation. The corporation appealed to the high court, which rejected it stating that the order of interest was justified and it would not interfere in arbitration awards.