From arbitration to bounced cheques, here're the key court orders

Supreme Court
Rap for 'speculative litigation' in arbitration

While dismissing two foreign arbitration appeals, the Supreme Court made severely critical comments on the course of litigation and imposed Rs 50 lakh as costs on a group of shareholders of a joint venture. The appeals were filed against the judgment of the Bombay High Court, which had ruled that the final four awards made by a sole arbitrator in London were enforceable in India. In the judgment, Vijay Karia vs Prysmian Sistemi, the Supreme Court observed: “We cannot help but be left with a feeling that the appellants are indulging in speculative litigation with the fond hope that by flinging mud on a foreign arbitral award, some of the mud so flung would stick. We have no doubt whatsoever that all the pleas taken by the appellants are, in reality, pleas going to the unfairness of the conclusions reached by the award, which is plainly a foray into the merits of the matter, and which is plainly proscribed by Section 48 of the Arbitration Act read with the New York Convention.”

The burden of proof in bounced cheques

The Supreme Court has reiterated that once the issuance of a cheque and the signature on it have been admitted, there's always a presumption that it was issued to satisfy a legally enforceable debt or liability. This presumption can be rebutted by the drawer by leading evidence, as prescribed under Section 139 of the Negotiable Instruments Act. The court stated so while allowing the appeal case, Aps Forex Services vs Shakti International Fashion Linkers. The trial court and the Delhi High Court had acquitted the partners in a firm but on appeal, they were convicted and sentenced to three months’ jail and fine. The accused argued that they had issued the cheque as security in their business dealings and there was no debt. It was accepted by the courts below. But the Supreme Court stated that repeated issuance of the cheque showed that there was a liability and the onus on them was not discharged in this case.

Only voluntary bodies are 'consumers'

Only a voluntary consumer association registered under the Companies Act or other laws is eligible to move a consumer forum, the Supreme Court ruled in its judgment in Sobha Hibiscus Condominium vs Sobha Developers. In this case, the condominium was a statutory body under the provisions of the Karnataka Apartment Ownership Act. It was built on a mandatory basis under that law. When it moved the National Consumer Commission against the developers, its complaint was rejected as it was held to be neither a consumer nor a registered voluntary association as defined in the Consumer Protection Act. The condominium appealed to the Supreme Court. It dismissed the appeal stating a “voluntary consumer association will be a body formed by a group of persons coming together, of their own will and without any pressure or influence from anyone and without being mandated by any other provisions of law. The association which consists of members of flat owners in a building, which has come into existence pursuant to a declaration required to be made compulsorily under the provisions of state law, cannot be said to be a voluntary association".

Appeals in gas supply bids rejected

The Supreme Court last week dismissed the appeals of Adani Gas and IMC against the decision of the Petroleum and Natural Gas Regulatory Board in the bidding for distribution of natural gas in four south Indian districts. The appeals arose over the grant of authorisation for laying, building, and operating or expanding the distribution networks in Chennai, Puducherry, Kanchipuram, and Tiruvallur districts. The challenge was taken to the Appellate Tribunal for Electricity, but the panel gave a divided verdict, the chairman and the technical member giving reaching opposite conclusions. The matter was referred to the judicial member but he recused and there was no replacement for him. Therefore, the Supreme Court had to decide the dispute under its extraordinary powers. The board has to give authorisation to any entity which undertakes to operate natural gas distribution work. The rules were amended in 2018 to introduce new criteria, leading to the current dispute. Rejecting the contentions of the gas companies, the court observed that the assessment of the reasonability of the bid was a matter solely between the highest bidder and the board. The sole question, the judgment said, was whether the highest bidder’s quote was reasonable. The power to determine such reasonability resided solely with the board. The presence and hearing of other bidders are not necessary. The assessment of the board would not alter the scores of the highest bidder vis-à-vis the scores of the other bidders.

Presumption in worker’s claims

While calculating the compensation for the death of an employee on duty, the Employees’ Compensation Act assumes that his monthly pay is Rs 8,000. Before 2010, it was Rs 4,000. In the Supreme Court judgment came in the case K Sivaraman vs P Sathishkumar, which revolved around the death of a 26-year-old employee in 2008 when the ceiling was Rs 4,000 per month. However, the Madras High Court calculated the compensation on the basis of the amended rule and granted the dependents Rs 8.86 lakh. On appeal by the employer, the court ruled that the compensation payable on the date of the accident is relevant; not the amount after the amendment. In this case, the monthly salary of the deceased employee was Rs 32,000. But that was not considered relevant because according to the government notification, “whatever be the pay” the ceiling will prevail. The rate of inflation has not been taken into account by lawmakers.

Delay bars I-T file reopening

The income tax authorities cannot revive proceedings four years after the assessment on the basis that the Supreme Court has reversed its view in a later judgment. Moreover, the revenue authorities must show that the assessee had failed to fully disclose material facts. The Calcutta High Court stated so while allowing the writ petition, Calcutta Club vs ITO, challenging the notice for reassessment. According to the law prevailing when the assessment was accepted in 2007-08, the income earned by way of interest from corporate members of a club was not taxable. But in 2013, the Supreme Court took the opposite view in the Bangalore Club case and also asserted that the income did not come under the ambit of the mutuality principle. The reversal of the apex court’s view later could not be called “omission or failure” on the part of the club, the high court ruled.

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