Foreign investors must heed Indian laws, says SC

“WHENEVER a foreign investor operates within the territory of a host country, the investor and its properties are subject to the legislative control of the host country along with the international treaties or agreements,” a five-judge Constitution bench of the Supreme Court declared last week. Deprivation of property may cause serious concern in the area of foreign investment, especially in the context of international law and investment agreements. “Even if the foreign investor has no fundamental right, let them know that the rule of law prevails in this country. Let the message be loud and clear,” the bench presided over by Chief Justice S H Kapadia said in the judgment, K T Plantation Ltd vs State of Karnataka. The court was considering the constitutional validity of the Roerich and Devika Rani Roerich Estate (Acquisition and Transfer) Act. The validity of the law taking over the property was upheld.

 

International airlines cannot claim immunity from domestic laws
A foreign airline owned by its government cannot claim sovereign immunity from suits in India, the Supreme Court stated while rejecting the defence of Ethiopian Airlines in a consumer case. The carrier is “accountable for the contractual and commercial activities and obligations that it undertakes in India,” the judgment said while asking the consumer commission to deal with the complaint of a consumer. The latter sent a consignment of chemicals to Tanzania which deteriorated due to delay caused by the airline. The consigner filed a consumer complaint. The airline argued that it was immune from suits as it was state-owned. The court rejected the contention and said that in the modern era, where there is close interconnection between different countries as far as trade, commerce and business are concerned, the normal rules of the market should prevail. If state-owned entities are exempted, “the rule of law would be degraded and international business will grind to a halt.”

Arbitral tribunals must confine itself to terms of reference
The Supreme Court has reiterated that arbitral tribunals should not travel beyond the issues referred to them. They should not decide issues which are not in the terms of reference and should not enlarge the scope of the reference. If the tribunal goes beyond the reference a court can intervene to correct it, the Supreme Court stated in the case, MSK Projects (JV) Ltd vs State of Rajashtan. In this case, the PWD undertook a construction on the Bharatpur-Mathura road and the offer of MSK was accepted and the work was completed. When the company started collecting toll, there was an agitation which led to prohibition of entry of vehicles to Bharatpur, affecting the income of the company. It invoked arbitration and won the award against the government. The district judge set it aside. The Rajasthan also ruled against the company. The Supreme Court asked the tribunal to reconsider the specific issues formulated by it.

Packaging charges for vehicles included in excise
The Supreme Court last week dismissed the appeal of Royal Enfield Ltd, rejecting its argument that the cost of packaging charges incurred by it should not be taken into account for computing excise duty on the motorcycles manufactured by it. The company filed price declaration for vehicles sold from their depots in Chennai and claimed abatement of Rs 190 per vehicle towards packing charges. The revenue authorities disallowed the abatement claim and insisted that the cost of packing should be included in the assessable value of the motorcycles. The company moved the Customs, Excise and Service Tax Appellate Tribunal, which also dismissed its petition.

Excise tribunal cannot change the final order
The Supreme Court stated last week that the Excise Appellate Tribunal cannot revise its final order on an application for rectification of errors in its order. It can only remove errors apparent on the record, the court stated in the case, Commissioner of Excise, Mumbai vs RDC Concrete (India) Ltd . In this case, the tribunal had upheld the demand for a hefty duty and imposed penalty on the company and its directors. However, when the company sought ‘rectification’ of the order, the tribunal took a different view and withdrew the demand and penalty. The authorities moved the Supreme Court, and it set aside the latter order exonerating the company and its directors.

Give reasons for dismissing appeals, SC tells courts
A court should give reasons for its decision and should not dismiss an appeal with a cryptic order, the Supreme Court stated in the case, Chandna Impex Ltd vs Commissioner of Customs. The Delhi high court had dismissed the appeal of the importer against the customs tribunal’s order with a cryptic order, though seven substantial questions were raised. One of the issues was the power of the additional director general in the directorate of revenue intelligence. However, the high court did not deal with any. The Supreme Court stated that “every litigant who approaches the court for relief is entitled to know for the reason for acceptance or rejection of his prayer, particularly when either of the party has a right to appeal. Otherwise the right of appeal will not be meaningful.” The tribunal was asked to reconsider the case.