From arbitration to property tax, a weekly selection of key court orders

Arbitrator removed for suspected bias

The Supreme Court has removed an arbitrator selected by National Aluminium Company as he was a former chairman and managing director of the public sector firm. The Arbitration and Conciliation Act bars any person who was associated with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner. This is to instil confidence in the parties, ensuring the independence and impartiality of the arbitrator. Despite this bar in the fifth schedule of the Act, public sector undertakings include a clause in contracts to appoint its officials as arbitrators. In this case, National Aluminium vs Subhash Infra Engineers, disputes arose over a contract given to the private firm to construct an ash pond in Odisha. The government company appointed its former CMD as arbitrator. The court removed him and appointed a retired judge of the Delhi High Court as arbitrator. The private company had denied that there was a concluded contract and, therefore, there was no arbitration clause. The district judge and the Punjab & Haryana High Court had accepted the argument and stopped the arbitrator from proceeding. The Supreme Court set aside that order, stating that the question of whether there was an arbitration clause should be decided by the new arbitrator.

Arbitration must conclude within a time frame

When the parties to a dispute specify a time frame by which the arbitration must conclude, it cannot be extended without the consent of the same parties. Otherwise, the arbitration will automatically terminate, the Supreme Court ruled last week, while setting aside the judgment of the Bombay High Court, which held otherwise. In this case, Jayesh vs Subhtex India, one arbitrator died midway and another could not conclude the proceedings within the prescribed four months. Jayesh moved the high court, arguing that the arbitration has become void. However, the Supreme Court observed that because of an injunction passed by it, the case “was lying in store for 11 years”. Now the case has been decided and the proceeding was cancelled as the arbitrator could not decide the dispute within time. The high court had maintained that since the parties had participated in the proceedings, it could be presumed that they had waived the condition. The Supreme Court insisted that there was no such voluntary waiving of the condition at any stage.

Heavy fine on bounced cheques

An amendment to the Negotiable Instruments Act grants power to the trial court to impose a fine for issuing cheques without sufficient balance in the bank. The order can be passed at the interim stage, even before the final decision. The fine could be 20 per cent of the cheque amounts. This amendment was made in 2018 to tighten the rule against bounced cheque. In the judgment of the Supreme Court in the case, G J Raja vs Tejraj Surana, the trial court and the Madras High Court applied the rule against the drawer and imposed the fine. But he appealed to the Supreme Court. It found that the bounced cheques were issued in 2016. The judgment said: “The new rule is not applicable in this case. In our view, the applicability of new Section 143A must be held to be prospective in nature where offences were committed after the introduction of Section 143A.”

Seeds inspector can seal godowns

The Supreme Court has set aside the judgment of the Bombay High Court in the case, State of Maharashtra vs Maharashtraa Hybrid Seeds, stating that the seed inspector has the power to seal a godown under the Seeds Act and Rules. The company is engaged in processing of cotton and non-cotton seeds of different varieties and its plant supplies seeds throughout the state. It was found on inspection that the company had no licence under the seed laws and the godown located at Dhanora had stocked suspected seeds of various kinds. Following the procedure, the godown was sealed. The company moved the high court, which desealed the godown maintaining that the seeds inspector had no power to keep the godown sealed indefinitely till lab reports arrived. Reversing the finding, the Supreme Court stated that though the Act did not expressly state so, it has conferred wide powers on the seeds inspector where there is a contravention of the provisions of the Act. 

Withdrawal of resignation by AI pilots

Once an Air India pilot resigns after giving the mandatory six months’ notice, she cannot withdraw her resignation, the Supreme Court stated in its judgment, Air India Express Ltd vs G K Sandhu. The pilot has to fly during the notice period, according to the Civil Aviation Requirements. This is because it is difficult to find a substitute for a pilot. It takes about a year and Rs 12 lakh to train a pilot. Therefore, the airline has to get sufficient time to fill the vacancy. In this case, the woman commander gave six months’ notice, but later she withdrew the resignation, which was not accepted by the management. She moved the Kerala High Court, which said that she has a right to withdraw the resignation. The management appealed to the Supreme Court. It set aside the high court judgment stating that though in normal circumstances an employee who had tendered resignation would be well within his rights to withdraw the resignation before such resignation had become effective, the position of pilots is exceptional for the reasons given above.

Property tax on underground cables

The Chhattisgarh High Court last week dismissed the writ petition moved by Bharti Airtel challenging the demand of property tax on the underground cable network and other fixtures set up with licence from the central government. The cellular service provider argued that it was not “occupying” any land or building and, therefore, the state or local authority could not impose the tax or issue warrant of attachment. It further contended that local authorities could not impose a tax on telecommunication facilities provided with a licence from the central government. The high court, while dismissing all the arguments, relied upon Supreme Court judgments explaining the term “land”. According to the interpretation of land by the apex court, it includes persons/licensees who are laying underground cables. By a legal fiction, they are deemed as occupying lands. The high court further rejected the argument that since licensees are not owners of the buildings or lands, the tax had to be fixed with reference to the gross 'annual letting value' in the case of underground cables.


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