HC ruling in contract case set aside

LEGAL DIGEST

The Supreme Court has set aside a judgment of the Orissa High Court in a dispute between the Orissa Small Industries Corporation (OSICL) and the Industrial Development Corporation of Orissa (IDCOL) over lifting of copper cable scrap.

OSICL offered Rs 80 per kg. There was no other contender. Later, IDCOL offered Rs 84 per kg. The matter was processed at the level of the chief minister and the contract given to IDCOL.

Later, OSICL made an offer of Rs 85 per kg. The offer was rejected. The company moved the high court, which struck down the government order.

Its rival appealed to the Supreme Court, which remitted the case for reconsideration by the high court, saying it had interfered in a contractual case without hearing the party whose offer had been accepted.

Govt need not pay workers of sick cos

The Supreme Court has stated that in respect of a sick industrial company, even if it is a subsidiary of a government company, there is no legal obligation upon the state government to pay the workers' wages . The rights of the workers are governed by the Companies Act.

These observations were made in the case, State of UP versus Uptron Employees' Union. The BIFR directed the state government to pay wages to employees of the defunct company.

The government appealed to the Supreme Court and said the BIFR had no power to pass such an order.

The Supreme Court set aside the order and observed it was "most unfortunate" that the BIFR and the Allahabad High Court did not take up the workers' case for 12 years as the appeal was pending before it. It asked the BIFR and the high court to dispose of the case early, preferably within six months.

Arbitrators selected in payment dispute

The Supreme Court has appointed former CJI RC Lahoti and former judges S Ratnavel Pandian and DP Wadhwa as arbitrators in a dispute between Groupe Chimique Tunisien SA and Southern Petrochemicals Industries Corporation Ltd (SPIC).

The Indian company placed orders for phosphoric acid. The acid was supplied, but a dispute arose over payment. The arbitration clause was invoked. The Tunisian company named its arbitrator but SPIC did not. The former moved the Supreme Court.

Tax on interest from doubtful advances

The Supreme Court has ruled that a bank is not liable to be taxed under the Income-Tax Act for interest on doubtful advances credited to the interest suspense account.

It set aside a judgment of the Bombay High Court in Mercantile Bank Ltd versus Commissioner of Income Tax case. The high court relied on a wrong judgment whereas the Supreme Court has laid down the correct decision in UCO Bank versus CIT (1999).

On if two separate limits applied for computing disallowance under Section 40A(5) of the Income Tax Act if an employee retired the previous year, the Supreme Court upheld the high court view that only one limit is prescribed for deduction on account of salary, whether paid to an employee who is in service or retired, in any one previous year.