From arbitration to tenancy agreement, here are the key court orders

Topics Supreme Court

Illustration: Binay Sinha
Arbitration is first choice: SC

The problem of interpreting contracts to identify an arbitration clause has again come up before the Supreme Court. In this case, the difficulty was further aggravated by an “unhappily translated” clause in the contract between the Chinese firm, Zhejiang Bonly Elevator Guide, and its Indian partner in Ahmedabad, Jade Elevator Components. The Chinese firm is engaged in the business of exporting and supplying high-quality elevator guide rails, fish-plates, accessories and allied goods. The Indian partnership is engaged in supplying elevator components for use in the modernisation of existing lifts. While performing the Commission Processing Contract, differences arose between them and the Chinese firm invoked arbitration under the Arbitration and Conciliation Act and named an arbitrator. The Indian partner opposed it arguing that the clause spoke of “arbitration or court”. Therefore, the dispute should be resolved in a court of law. The Supreme Court disagreed with it and stated that the Chinese firm was given a choice for resolving the dispute, either by arbitration or through court. It opted for arbitration. In similar cases, the Supreme Court had referred disputes to arbitration. Therefore, it appointed a former judge of the court as the sole arbitrator in this case too. 

Foreign award needs no stamp duty

The Supreme Court has ruled that a foreign award does not need stamp duty under the Indian Stamp Act and lack of it would not render the award unenforceable. The apex court upheld the judgment of the single judge of the Madras High Court in the case between Shriram EPC Ltd and Rioglass Solar SA. The International Chamber of Commerce  in London directed the Indian firm to pay Euro 4,366,598 along with interest as it had acted in breach of the contract. Shriram opposed the decision arguing that the foreign award could not be enforced as it did not bear stamp duty. It contended that ‘award’ mentioned in the Act included foreign award. The foreign firm argued that the restriction applied only to domestic awards. The court agreed with it and stated that the expression ‘award’ in the Stamp Act of 1899 has never included foreign award from the very inception of the law.  

Compensation math goes wrong

The Supreme Court last week recalculated the compensation in a road accident death because the motor accident claims tribunal and the Punjab High Court had not computed the loss properly. The tribunal awarded Rs 339,000 to the aged father and unmarried sister of a 24-year-old who was fatally hit by a car while riding a bike. The insurer appealed to the high court, which raised the amount to Rs 1,421,000. On further appeal in the case, Magma General Insurance Co vs Nanu Ram, the Supreme Court made another computation to arrive at Rs 1,425,000. It rejected the insurer’s argument that the father and sister were not dependents and only the mother was dependent, who had died earlier. The judgment also discussed in detail the meaning of ‘loss of consortium’ because this factor was not considered by the courts below and there is confusion prevailing among high courts on this principle. In the case of parents, it is the loss of company, care and help given by the bread-winner. In the case of spousal consortium, it also includes loss of conjugal relation. The court made both the insurer and the car owner jointly and severally liable to pay the compensation.

Tenant can change business

If a tenancy agreement does not bar a change of use of the premises, the landlord cannot evict his tenant if he starts a different business there. In this case from Haryana, Ravi Chand vs Dimpal, the landlord gave 2,000 sq ft for running a sawmill at Rs 58.26 per month in 1957. Now the landlord, who is a doctor and 96-year-old, wants to build a charitable hospital on that land. But the terms of the contract are against him. The tenant had closed his original business and has started a cloth unit. All the courts went against the landlord who argued that his tenant could not change his business. In the last appeal by the landlord, the Supreme Court granted enough time for the parties to settle the matter “in view of the laudable objective” of the doctor, but the tenant was not willing to accept compensation and move to another place. So the court dismissed the appeal last week.

Sandisk stops fake manufacturer

The Delhi High Court passed a permanent injunction and penal orders against ‘Memory World’ in a trademark infringement application moved by Sandisk LLC against the Indian firm, which sold counterfeit memory cards of the world-renowned firm. The high court had earlier appointed a local commissioner to trace the origin of the fake cards and related products and he found it in a small town in north Kerala. Though the producer of the fake cards appeared in the high court in the beginning, it later chose to stay away. The high court, therefore, accepted the prayers of Sandisk.

Ex-staff can start rival business

A clause in an employment contract barring its employees from competing with the firm for one year after leaving the job will be void as it runs counter to Section 27 of the Contract Act.  The Delhi High Court stated so in its judgment last week, Navigators Logistics Ltd vs Kashif Qureshi. In this case, the firm filed suits against several of its former executives, stating that they had been privy to the database developed by it in the field of logistics and freight forward services. It had copyright in the contents of the database. But later these employees left the firm and set up a competing business. This was against the terms of the employment contract, which barred competition for one year. The ex-employees denied any copyright or confidential information in their possession. They only had the list of clients of the firm and that information was in public domain. The high court accepted the ex-employees’ defence and stated that the firm had no copyright in the database. Moreover, Section 27 of the Contract Act barred “every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind".  The high court also observed in its judgment that a large number of such suits are being filed seeking injunctions against former employees without providing specifics, which makes it difficult for the court to pass orders against the alleged violators. The suits only contained “high-sounding/phrases which in fact have no content or meaning”, the judgement observed.

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