From loan default to entertainment tax, here are the key court orders

SC cautions on interim orders

An interim relief which would amount to a final order snuffing out the dispute should not be passed by any court, the Supreme Court said while setting aside an order of the Bombay High Court in connection with a property dispute. 

The high court “committed a fundamental error” by granting relief to a party which could at best be resorted to at the time of the final hearing and not at an interlocutory stage. In this commercial appeal, Samir Narain vs Aurora Properties, the high court ordered the petitioner to hand over eight flats along with 16 car parking spaces to the opposite parties, including a cooperative housing society. The Supreme Court observed that the nature of the high court order passed against him was undeniably a mandatory order at an interlocutory stage.

There was a settlement between the opposite parties to which the petitioner was not a party. By asking him to hand over the flats and parking spaces, the high court had exceeded its jurisdiction as complying with the direction would result in bestowing an unfair advantage on the opposite parties, the Supreme Court stated. It also recalled the guidelines it had set while passing interim orders, mainly based on balance of convenience. 

The judgment said: “An interim mandatory injunction is not a remedy that is easily granted. It is passed only in circumstances which are clear and the prima facie material clearly justifies a finding that the status quo has been altered by one of the parties and the interests of justice demanded that the status quo ante be restored.”

More compensation for road accident victim

The Supreme Court has enhanced the compensation awarded to a road accident victim who suffered permanent disability. The tribunal awarded Rs 343,000  and the Karnataka High Court dismissed his appeal. On further appeal, the Supreme Court granted additional Rs 500,000, observing that the high court did not take into account all relevant facts. 

In its judgment, Anil Kumar vs National Insurance Co, the court pointed out that the victim is a 25-year-old bachelor who is not able to move freely due to the accident, has lost his job and spent a substantial amount in the four major operations and medical treatment thereafter. The insurance company has been told to pay the compensation in three months.


DRT to deal with loan default

The Gujarat High Court last week dismissed a petition challenging the action of a bank taking over possession of the assets of a company that allegedly failed to repay a loan. The judgment in the case, Bengani Udyog Ltd vs Small Industries Development Bank, emphasised that when the company can raise its arguments at the Debt Recovery Tribunal, it was not proper for the high court to pass an interim order. 

The company must first exhaust alternative remedies available under the Securitisation (Sarfaesi) Act before approaching the high court, the judgment said. That Act is a complete code in itself, even providing for appeals. 

The court further stated that this being a financial matter, grant of any interim order would be injurious to the other side as it involved public money at taxpayers’ expenses. Therefore, the court would be extremely slow in exercising its discretion to grant stay, particularly in a matter under the Securitisation Act.

Arbitration cannot be restarted

The Delhi High Court has ruled that arbitration proceedings which had started before the 2015 amendment to the Arbitration and Conciliation Act need not be stopped and that,  according to the new law, there was no need for reconstituting the tribunal. 

In this case, Unity-Triveni-BCPL (JV) vs Rail Vikas Nigam, the contractor was given the job of constructing a three-line railway in Jharkhand by the public sector Nigam. Disputes arose and an arbitration tribunal was constituted. After the amended clauses came into force, the contractor wanted the new procedure to take effect. 

It moved the high court challenging the refusal of the Nigam to agree with it. The judgment stated that the amended law made it clear that ongoing arbitration proceedings would not recommence and the arbitration tribunals would not be reconstituted. 

Moreover, the High Court stated that it would not ordinarily interfere in arbitration, except for in rare cases cited in the law. In another arbitration judgment, Vedanta Ltd vs Shenzhen Shandong Nuclear Power, the Delhi High Court dismissed the challenge of Vedanta and upheld the award of the arbitrator.

Karnataka tax appeals dismissed

The Karnataka high court has dismissed a large number of appeals by the state government moved against traders who had invoked the provisions of the Karasamadhana Scheme-2017 which was issued to "enable trade and industry to clear their pending tax liabilities and start with a clean slate in GST". 

The scheme provided for waiver of 90 per cent arrears of penalty and interest payable under the respective taxing statutes subject to compliance of certain conditions as stipulated in the scheme and for some assessment years. 

The laws included VAT, profession tax, luxury tax, agricultural income tax and entertainment tax. The state had contended that the amount in deposit during the pendency of court appeals was to be adjusted first against the head of 'interest' and not under the head of 'tax' as had been resorted to by the assessees. 

They, however, refused to comply with the demand and moved the high court. It rejected the contentions of the state government.

Entertainment tax on fashion show

A fashion show is an entertainment and therefore, the sponsors are liable to pay entertainment tax, the Karnataka high court ruled last week. 

The sponsors, Dream Merchants, had organised a ‘Bangalore Fashion Week’ in which there were lifestyle parties, after-hour parties, an exhibition of designer products and apparels. Participants were provided with food and other entertainment. 

The event managers maintained that these activities did not attract levy under the state entertainment law. It moved the high court against the demand of tax by the entertainment tax officer. A single judge Bench rejected the petition. 

The sponsors appealed to the division Bench. Rejecting the appeal, the high court observed that “even if it served the business interests of the sponsors, the element of amusement and entertainment naturally woven in it cannot be taken out. 

The event organised by the sponsors clearly answers to the wide definition of ‘entertainment’". Moreover, the sponsors collected a huge amount as entry fee, sponsorship fee and advertisement charges. 

These made the event within the definition of entertainment in the state law, which is widely worded, according to the high court.

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