From penalty for builder to award dispute, here are the key court orders

Penalty for builder but no demolition

Demolition of a high-rise apartment building, illegally raised in a city, is not the only answer to the problem as it would affect a large number of middle class buyers. Heavy penalty on the developer is one remedy, according to the Supreme Court. It imposed Rs 1 billion or 10 per cent of the project cost as penalty on a Pune builder, along with other levies, in the case, Goel Ganga Developers India Ltd vs Union of India. “Normally this court is loathe to legalise illegal constructions but in the present case, we have no option but to do so,” the court said. The judgment set a high interest because of the “totally intransigent and unapologetic behaviour” of the developer The judgment set a high interest because of the “totally intransigent and unapologetic behaviour” of the developer. While allowing occupation of the flats already constructed, the court stopped all further constructions and ordered the developer to return the money collected from prospective buyers with 9 per cent interest. The court rejected the plea for calculating damages on the principle of the carbon footprint as it did not want to introduce a new principle when it lacked the required scientific expertise. The court upheld the fine imposed on the Pune Municipal Corporation and its officials for colluding with the builder. It called for an inquiry report into officials’ role, especially the conduct of the principal secretary of environment, the Government of Maharashtra.

Insurer cannot allege negligence 

The Supreme Court has underlined that an insurance company cannot raise the issue of negligence by a road accident victim when Section 163A of the Motor Vehicles Act is invoked. This provision enables the victim and dependents to get speedy relief without going into the fault of the drivers of the vehicles involved. The compensation is decided on the basis of a structured formula appended to the Act. In this case, Shivaji vs United India Insurance, the driver died in the accident and his dependents moved the tribunal. It directed the insurance company to pay the compensation. The insurer moved the Karnataka High Court contending the driver caused the accident. It ruled that since the deceased driver was at fault, his parents were not entitled to the damages. Reversing the finding on the basis of precedents, the Supreme Court stated that accepting the insurer’s argument of the negligence of the driver would go against the legislative intent, which is to provide quick relief to the dependents instead of taking a long route to decide who was at fault. Section 166 deals with fair compensation after assessing all factors, including contributory negligence.

Arbitration exempted in contract 

The question whether there was an arbitration clause in the agreement came up again in the Supreme Court last week and it allowed the appeal of United India Insurance Company against the order of the Madras High Court appointing a retired judge in the dispute between the insurer and Hyundai Engineering and Construction Ltd. The dispute arose when there was a serious accident during the construction of a bridge over the Chambal river. The insurer repudiated the claim of the contracting company based on two enquiry reports and the communications between the parties. The contractor moved the high court for arbitration. The high court examined the communications and the terms of the “all risk insurance policy” and referred the dispute to arbitration. However, on appeal, the Supreme Court ruled that the case involved was within the non-arbitrable exception provided in the agreement. According to the agreement, if the insurer repudiates the claim, the dispute cannot be referred to arbitration. Hyundai was thus allowed to take recourse to a civil suit.

3 months to resolve 33-year-old award dispute

Though arbitration is promoted as a speedy and economic remedy, the judgment of the Supreme Court last week in the case, Kohinoor Transporters vs State of Uttar Pradesh casts doubt on that proposition. The dispute originated in 1980; the award was given in favour of the firm and against the state in 1984. Since then execution proceedings were caught in weird legalities. Ultimately, the Uttaranchal High Court tried to appoint a chartered accountant to decide on the quantum of dues. This was challenged by the firm in the Supreme Court. It allowed the appeal and stated that the high court had acted in “manifest, excess of its jurisdiction” while calling for a chartered accountant to determine the dues. But the story has not ended. Execution proceedings are still pending before the additional civil judge in Dehradun where orders have been passed from time to time. The Supreme Court stressed that a decree must be executed without change, neither adding nor subtracting from it. The matter was sent back to the high court asking it to put an end to the dispute expeditiously, in any event within three months, in view of its long history. 

FCI ordered to regularise workers

The Supreme Court last week dismissed two appeals moved by the Food Corporation of India against the orders of the Madras High Court and the Kerala High Court and directed it to regularise workers who were earlier employed through contractors. In the Madras case involving 955 employees, the court noted that they were doing perennial work for decades and were paid directly by the corporation. Therefore, the industrial tribunal was right in regularising them. The Kerala case was similar and the industrial tribunal rightly ordered regularising the workers employed at different places in that state.

Jewellery in steel almirah not safe

Jewellers who keep their precious wares in steel almirahs will lose their insurance cover if the items are not kept in a safe with complex locking system. If there is a burglary, the insurer can repudiate the claim. The National Consumer Commission stated so and allowed the appeal of National Insurance Company against the order of the Maharashtra state consumer commission. In this case, a burglar stole Rs 3 million worth of ornaments from Mehta Jewellery. When a claim was made, the company rejected it contending that the ornaments were kept in a steel almirah of local make and not in a sophisticated safe. The basic warranty clause read: "All property shall be secured in locked safe of standard make at all times." The state commission rejected the argument and awarded damages to the jeweller observing that there is nothing like a burglar-proof safe. The insurer appealed to the National Consumer Commission. It went into the dictionary meaning of ‘safe’ and concluded that a simple steel almirah can very well be opened by widening the space between doors. A steel almirah with a single lever lock cannot be treated as a ‘locked safe’, and the terms of the policy must be read in a strict manner.

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