From creditor's claim to death on duty, here're the top court orders

Secured creditor’s claim above taxmen’s

The income tax authorities cannot claim a superior right to attach a property already sold under the direction of the debt recovery tribunal, the Supreme Court stated in its judgment in Connectwell Industries vs Union of India. “Unless there is preference given to the Crown debt by a statute, the dues of a secured creditor have preference over Crown debts,” the court clarified. In this case, a firm took a loan from Union Bank of India to buy a plot from Maharashtra Industrial Development Corporation (MIDC). The loan was not repaid. The bank moved the tribunal, which asked the recovery officer to attach and sell the mortgaged property. It was sold through an auction. Then came a note from MIDC that the income tax authorities had already sent an attachment notice over the same property. When the dispute reached the Bombay High Court, it ruled in favour of the revenue authorities. The buyer of the property appealed to the Supreme Court. It set aside the high court judgment and lifted the attachment of the taxmen. It further ordered MIDC to issue a no-objection certificate to the buyer.

Damages for death while on duty

The Supreme Court has extended the meaning of the phrase “arising out of employment” to the benefit of employees claiming damages under the Employee's Compensation Act. The Act provides for compensation for death or injuries occurring in the course of employment. The employees are insured under the Act, as in this case, Poonam Devi vs Oriental Insurance Co. The death, in this case, was of the driver of a truck who went to the River Yamuna to get water while driving from Ambala to Meerut in 42 degrees C. He fell into the river and drowned. The commissioner under the Act granted the heirs Rs 4.45 lakh. The insurer appealed to the Punjab and Haryana High Court. It ruled against the heirs holding that though the death occurred during the course of employment, it did not arise out of the employment. The law says compensation must be paid if the death occurred “arising out of and in the course of his employment”. The heirs appealed to the Supreme Court and won. It said that “a truck driver who would not keep himself fresh to drive in such heat would be a potential danger to others on the road by reason of any bona fide errors of judgement by reason of the heat”. So the death was in the course of employment.

Backdoor shut for blacklisted firms

The Supreme Court has foiled the attempt of over 180 blacklisted rice millers of Punjab to enter through the backdoor to supply goods to Food Corporation of India. Agencies of the state government procured rice and allocated it to various millers for processing and supply to FCI. It was found that the rice supplied by many millers to FCI was inedible and adulterated. After a CBI investigation, many of them were blacklisted for seven years. FCI, which suffered huge losses, demanded dues from them with penalty and interest. Those millers then leased their units to new entities to bypass blacklisting. FCI resisted the move. The new millers moved the high court arguing that they were clean. The high court agreed. FCI appealed to the Supreme Court. It allowed the appeal, FCI vs V K Traders, stating that the blacklisted millers were standing in the shoes of the new ones. Moreover, the lease deeds were also not registered.

Liability of insurance company extended

The collapse of a building because of excavation carried out in the adjacent plot will be covered under general insurance, though it may not be explicitly excluded in the policy document. If there is ambiguity in the terms of the policy, they should be interpreted in a way beneficial to the insured, the Supreme Court stated in its judgment, Sangrur Sales Corporation vs United India Insurance. In this case, a sanitaryware showroom collapsed as a result of the work of excavation carried out in an adjacent plot. The owner reported the incident to the police and then approached the insurance company. It repudiated the claim. The owner moved the district consumer forum, which directed the company to pay Rs 18 lakh with interest. That order was upheld by the Punjab state consumer commission. However, the National Consumer Commission ruled that the policy did not cover damage caused by activities in the neighbourhood. Allowing the appeal of the owner, the court stated that damage from a third party was also covered by the standard policy. The court cited its 2004 judgment, in which the same insurer raised the same argument in an identical case and lost.

Farmer can sue seed distributor

A farmer who is offered seeds by a company with a promise to buy back the harvest at a higher rate is a “consumer”, according to the Consumer Protection Act, said the Supreme Court in its judgment in Nandan Biometrix vs Ambika Devi. Those who resell goods or indulge in commercial activities are barred from moving consumer courts. In this case, the company supplied seeds to the woman and agreed to provide technical support, guidance and insurance. Her complaint before the consumer district forum in Kerala was that the company refused to buy back the crop which was a breach of contract and negligence. The company argued that it was a resale and she was not a consumer as she cultivated seeds for commercial purpose. The district forum agreed with the contention. But on her appeal, the National Consumer Commission and now the Supreme Court rejected the argument and directed the district forum to reconsider the complaint.

Rly officials judges in their own cause

The Calcutta High Court has set aside an arbitration award delivered by the railway tribunal in which the presiding arbitrator and his two co-arbitrators were officials of Eastern Railway. The court stated that they decided the issues in a “unilateral manner”, gave no reasons for some of their conclusions, and there was a violation of public policy. “There is not an iota of evidence in the discussion that the tribunal made the slightest attempt to adjudicate on the rights of the parties starting from the legality of the termination,” the judgment remarked. In this case, BBR Construction Co vs Union of India, a project to link some towns of Jharkhand with those in West Bengal was awarded to the contractor. The contract was terminated on the ground of delay leading to the arbitration. The court found that there were “obvious discrepancies” in calculating the liabilities and unjustifiable deductions.

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