From power panels to temporary workers, here are the key court orders

Legal member must in power panels

It is mandatory that there should be at least one person of law as member of the central and state electricity regulatory commissions, the Supreme Court has declared, rejecting the government’s view that the choice was only optional under the Electricity Act 2003. The court stated that such member should be “a person, who is, or has been holding a judicial office or is a person possessing professional qualifications with substantial experience in the practice of law, who has the requisite qualifications to have been appointed as a judge of a high court or a district judge". This is because the commissions have an adjudicatory function and the “trappings” of a court. The Supreme Court clarified this rule as there have been differences of opinion among the high courts over the matter. The Madras High Court had held that there was no need for a legal person in the commission. On the other hand, the Gujarat High Court stated it was mandatory to have a judicial member. In view of the difference of opinion, a large number of cases involving power companies were transferred to the apex court for a final decision. The judgment was given in the leading case, State of Gujarat vs Utility Users’ Welfare Association.

Termination of contract held illegal

The Supreme Court last week upheld the award of the arbitration tribunal which found that the Madhya Pradesh Power Generation Company had wrongfully terminated its contract with Ansaldo Energia SPA and encashed bank guarantees. The firm was given contracts for refurbishing three thermal plants, and disputes arose over the performance of the work. The contract was terminated. The firm sought arbitration. The tribunal found there was misrepresentation by the state corporation with respect to the capacity of the plants and their operation parameters. The tribunal further stated the termination of the contracts was illegal as the state corporation had committed breach of a fundamental term in the contract regarding letter of comfort from the Power Finance Corporation. The district court set aside the award. The High Court, however, upheld the award. The state company moved appeal in the Supreme Court. While dismissing the appeal, the court modified the order with respect to one bank guarantee.

Arbitration over toll collection row

Once the Supreme Court or a high court finds that there is an arbitration agreement, it is not supposed to go further and examine the contract. This is the mandate of the Arbitration Act after the 2015 amendment to Section 6, the Supreme Court stated last week while appointing an arbitrator in the appeal case, IBI Consultancy India vs DSC Ltd. The Canadian IBI Consultancy group and its Indian subsidiaries had entered an agreement with DSC Ltd for installation and commissioning of toll collection and traffic control equipment along two expressways. Disputes arose over payment and IBI moved the Delhi High Court for appointment of an arbitrator. It rejected the request on the ground that since a foreign firm was involved, it has no jurisdiction to appoint an arbitrator and the power was with the Supreme Court. The appeal of IBI group was allowed. 

Split order on coconut hair oil

Is coconut oil sold in small sachets as “hair oil” equivalent to the oil sold in large bottles? This question arose in a matter of ‘Parachute’ and ‘Shanthi’ brands as the excise appellate tribunal (CESTAT) held that it was the same for the purpose of the tax. If they are differently classified under the tariff headings, the tax liability will vary. Since the tribunal’s view went against that of the revenue department, the Commissioner of Central Excise appealed to the Supreme Court. The two judges wrote different judgments reaching opposite conclusions, especially about the position of law after the 2005 amendment to the Central Excise Tariff Act. Therefore, the appeals titled CCE vs Madhan Agro Industries were referred to a larger bench to be formed by the Chief Justice of India.

Temporary workers get protection

The Jammu & Kashmir High Court last week rejected the argument of Jammu & Kashmir Bank Ltd that the central industrial tribunal had no jurisdiction to decide on regularisation of its temporary workers. The bank had kept some employees since 2000 first on a temporary basis and then on contractual basis. The employees, who were initially, paid ~2,000 a month, asked the bank to regularise them, but the request was denied. Then they approached the central government which referred the demand to the central industrial tribunal under the Industrial Disputes Act. The bank argued that these workers were not covered by the Act. The tribunal rejected the contention and asked the bank to frame a scheme for regularisation failing which they should be absorbed. The bank appealed to the High Court. It affirmed the tribunal’s decision observing that “the continuation of the workers in a temporary/contractual capacity for years together on paltry emoluments despite availability of vacant posts was aimed at depriving them of the status and privileges of the permanent workers and, therefore, would clearly amount to unfair labour practice".

Distributors liable for misbranded food

The distributor of a food product would be liable if it is misbranded or adulterated even if he did not know about the ingredients and quality, the Madhya Pradesh High Court stated while dismissing an appeal by Alkem Laboratories Ltd. A ‘sugarless jelly’ was bought by a food inspector in Indore which was found to be misbranded following laboratory tests. The company was arrayed as an accused among others. It argued that the jelly was manufactured by a firm in Rajasthan and it was only a distributor. It did not know the contents or have the guilty mind which is essential to an offence under criminal law. The High Court rejected its plea to quash the criminal case against it under the Food Adulteration Act, stating that intention to commit an offence is not necessary in this case. The judgment explained: “In Acts enacted to deal with a grave social evil or for ensuring public welfare especially in offences against health, it is often found necessary in the larger public interest to provide for imposition of liability without proof of a guilty mind…Adulteration and misbranding of food is a rampant evil in our country. The channels of supply and the movement of goods from trader to trader, and fertile sources of adulte­ra­tion and misbranding, make it extremely difficult in a large majo­ri­ty of cases to establish affirmatively that storage or sale of adulterated or misbranded food-stuffs was with a guilty mind.”