From canteen workers to arbitration, here are the key court orders

Illustration by Ajay Mohanty
If an insurance policy states that repudiation of a claim or denial of the insurer’s liability cannot be referred to arbitration, the insured person cannot invoke arbitration and the remedy is a civil suit. The Supreme Court declared so last week while quashing the judgment of the Orissa High Court in the case, Oriental Insurance Co vs Narbheram Power and Steel Ltd. The company had taken an all-risk policy for its factory. In a cyclone it suffered damage, leading to the claim. The insurance company rejected it. The power company moved the High Court for arbitration. The High Court appointed a retired judge as arbitrator. Oriental appealed to the Supreme Court successfully. One of the terms of the policy was that “no difference or dispute shall be referable to arbitration if the company has disputed or not accepted liability". The judgment stated denial of the claim itself would not amount to a ‘dispute’ which calls for arbitration. The court did not examine the question whether such a condition was void as it was not argued.

SC to sort out arbitration riddle 

After hearing truncated arguments for a few months, the Supreme Court last week referred to a larger bench the task of interpreting the terms “venue” and “seat” in arbitration agreements. Earlier judgments were mostly according to the 1940 arbitration law and the Foreign Awards (Recognition and Enforcement) Act, 1961, which were replaced by the Arbitration and Conciliation Act, 1996. However, the Supreme Court itself has recently relied on old laws. In view of the confusion, the Chief Justice has been requested to form a new bench to get a final decision. In this appeal, Union of India vs Hardy Exploration & Production, the government challenged the award of the arbitration tribunal. The foreign firm moved the Delhi High Court which accepted its claim that Indian courts have no jurisdiction to hear the case as it was international commercial arbitration. The government appealed to the Supreme Court but the six-year-old dispute will now have to wait for the new bench to give a decision on legal points, after which the merits will be argued in the appropriate court.

Second look at incentive to exporters 

The Supreme Court has disagreed with two of its earlier judgments on the question whether a supporting manufacturer is to be treated on a par with the direct exporter for the purpose of deducting export incentives under the Income Tax Act. The new bench has therefore referred its doubts to a larger bench to reconsider the law laid down earlier. It will require the correct interpretation of Section 80HHC which is aimed at promoting export business as well as in order to keep the domestic products competitive in the global market by allowing a tax deduction on export profits. The law extended tax benefits both to the direct exporter and the supporting manufacturer who sells goods to an export house to an export house. But the computation is different for each of them. This has to be sorted out in a large batch of appeals, the leading case being Commissioner of Income Tax vs Carpet India.

Combination proposal to be notified 

In two separate judgments involving several companies, the Supreme Court has emphasised that a proposal to enter a combination must be notified before the agreement, in order to prevent practices having an adverse effect on competition. “The combination cannot be entered into and shall come into effect before the order is passed by the Competition Commission of India (CCI) or lapse of certain time from the date of the notice,” the court stated in the judgment, SCM Solifert Ltd vs CCI. Explaining the impact of Section 6(2) of the CCI Act and the Sebi regulations on the acquisition of shares and take-overs, the court stated that “ex post facto notice is not contemplated under the Act. The same would be viola tion of the rules.” In this case, the company was imposed upon a penalty of ~20 million by the CCI for non-furnishing of information on combination when it acquired substantial shares of Mangalore Chemicals and Fertilisers Ltd. The company’s appeal against the penalty was dismissed as it was a negligible amount in the circumstances and no criminality was involved. In the second judgment, CCI vs Thomas Cook (India) Ltd, the Supreme Court applied the same principles and set aside the tribunal’s decision which went against it. There were amalgamation, demerger and other transactions involving three hospitality comp a nies. The CCI found some purchases of shares from the market were not notified, calling for a penalty. The tribunal quashed the show cause notice, but the Supreme Court, on appeal, set aside the tribunal’s order and confirmed the penalty.

IOC told to re-draw dealership 

The Calcutta High Court last week ordered re-draw of the distributorship of LPG cylinders in Birbhum district as public sector Indian Oil Corporation “had made a decision intended to favour a private person who did not fulfil an essential term of eligibility". The oil company being a public authority was bound to give effect to the condition of eligibility set up by it and was not entitled to depart from it without rational justification, the judgment said, adding it affected public interest too. It reiterated the government was not and should not be as free as an individual in selecting the receipts for its largesse. In this case, Rajib Lochan vs IOC, he was selected in the first place, but then informed that there would be a re-draw which never happened. Meanwhile, another candidate was selected. Rajib challenged the selection alleging that the change was at the instance of a member of Parliament and following a letter of the concerned minister to the company. The winning candidate argued that in contractual matters, the courts could not intervene. The High Court rejected the argument and directed IOC to quash the allotment and conduct re-draw within a month.

Canteen workers get equal pay

 The Supreme Court has dismissed the appeal of Chennai Port Trust against the ruling of the Madras High Court which had declared that its canteen workers were entitled regularisation and equal pay for equal work along with other employees who do similar work. The canteen workers complained that they were working for decades but were not getting equal pay. The port trust countered that it had no control over the canteen. This was found untrue by the High Court on various parameters. The Supreme Court also rejected the contention that the dispute should have been decided by the industrial tribunal and not the High Court.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel