From insurance cover to insolvency case, here are the key court orders

Illegal extension has no insurance cover

The demolition of an illegal extension of a building by civic authorities would not be covered by a general insurance policy, the Supreme Court has ruled in its judgment in the case, New India Assurance Co vs Rajeshwar. The appeal of the insurance company was against an order of the Jammu & Kashmir Consumer Commission, which awarded a compensation of Rs 1.728 million. It was upheld by the high court. In this case, the owner built a projection to the road. The municipal committee of Jammu found that it was against the master plan. It advertised a project removal of the projections, platforms and encroachments not in conformity with the master plan. When the projection, in this case, was demolished, the owner filed a suit in the civil court and moved the consumer commission. While the suit was pending, the commission and the high court awarded compensation. The insurer appealed to the Supreme Court arguing that any removal of construction by “order of the government or any lawful authority” was excluded in the policy. The court accepted the contention and quashed the orders of the high court and the commission. It allowed the suit to continue stating that it was a different cause of action.

Burden of proof on customs

The Supreme Court last week declared that if the customs authorities allege an importer had under-invoiced the value of goods, they have to support it by evidence of prices of contemporaneous imports of like goods. While dismissing the appeal case, Commissioner of Central Excise vs Sanjivani Non-Ferrous Trading Co, the court stated that the revenue authorities did not do any such exercise in this case. The authorities rejected the price declared in the Bill of Entry. The judgment explained that under Section 14 of the Customs Act, the invoice price can be disputed. “However, it is for the department to prove that the invoice price is incorrect. When there is no evidence of contemporaneous imports at a higher price, the invoice price is liable to be accepted,” the court said. The firm, in this case, imported aluminium scrap and submitted 843 bills of entry and invoices. The declared value was not accepted by the assessing officer who found it to be less. Accordingly, the declared value was rejected and reassessment was done by increasing the assessable value. This led to long litigation in which the revenue authorities lost. 

Arbitrator can be employee of party

“The fact that an arbitrator is an employee of one of the parties is not by itself a ground to raise a presumption of bias or lack of independence on his part," the Supreme Court stated in its judgment in the case, SP Singla Constructions Ltd vs State Of Himachal Pradesh. Arbitration agreements in government contracts providing that an employee of the department or a higher official unconnected with the work or the contract will be the arbitrator are neither void nor unenforceable. In this case, a bridge project on the Beas was given to a contractor, but when disputes arose, a superintending engineer was appointed as arbitrator, according to the General Conditions of Contract. The contractor did not participate in the proceedings. Therefore, the proceedings were terminated. The contractor appealed to the Supreme Court. It rejected the argument of bias and the exclusion of employees under the amended Arbitration and Conciliation Act in 2015. The court revived the arbitration and asked the contractor to join it.

Consumer disputes outside arbitration

The Supreme Court reiterated last week that consumer disputes cannot be referred to arbitration. In this review petition, Emaar MGF Land Limited vs Aftab, the National Consumer Commission had held that consumer disputes are non-arbitrable. The commission had also dismissed another petition under the Arbitration and Conciliation Act. In this case, a person wanted to buy a villa from the builder of an integrated township in Mohali, Punjab. Disputes arose and the matter was taken to the state consumer commission. The builder relied on the arbitration clause in the contract. However, the commission rejected the argument stating that despite the clause, the dispute cannot be referred to arbitration. The builder appealed to the Supreme Court a few months ago. It upheld the view of the state commission. The builder filed a review petition and relied on the 2015 amendment to the Arbitration Act. According to it, if there is an arbitration clause, the dispute must necessarily go to arbitration. The Supreme Court rejected the contention. Dismissing the review petition, the judgment emphasised that the amendment to Section 8 cannot be given “an expansive meaning so as to inundate the entire regime of special legislation where such disputes were held to be not arbitrable. Something which legislation never intended cannot be accepted as a side-wind to override the settled law.”

NCLT, not HC, to deal with IBC case

The Supreme Court set aside the ruling of the Rajasthan High Court in a case involving the Insolvency and Bankruptcy Code (IBC) and the Companies Act and allowed the National Company Law Tribunal (NCLT) to proceed with the insolvency proceedings. In this case, Jaipur Metals & Electricals Employees Organisation vs Jaipur Metals, the high court had refused to transfer the winding up proceedings before it to the NCLT. It had also set aside the NCLT order by which a financial creditor’s petition under the IBC was admitted. The case has a chequered history. The company was declared a non-performing asset in 1997 and ever since it was caught in litigation involving the Sick Industries Act and other laws. The Alchemist Asset Reconstruction Company had acquired substantially all financial debts of the company. The state government tried to revive the sick company without success. Meanwhile, the code was implemented and the Alchode must run their entire course,” the judgment said.

Losing leg is 100 per cent disability

Losing a leg amounts to 100 per cent functional disability in the case of a driver of a vehicle and the insurance firm must compensate the victim according to that computation, the Supreme Court stated in the case, Arun Kumar vs Ranvir Singh. The commissioner under the Employees Compensation Act had granted only Rs 387,000, including the penalty. On appeal, the insurance company argued that the benefit of an amendment to the Motor Vehicles Act could not be extended to the victim as the accident occurred prior to the amendment. The court rejected the argument and raised the compensation by Rs 1 million.

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