From lapses in tax cases to cheque bounce trial, here're key court orders

Related person cannot name arbitrator

After the 2015 amendment to the Arbitration and Conciliation Act, any person having a relationship with the parties or counsel or the subject of dispute becomes ineligible to be an arbitrator. Such a person cannot nominate an arbitrator either. “His mandate automatically terminates, and he shall then be substituted by another arbitrator,” the Supreme Court underlined in its judgment last week in the case, Bharat Broadband Network Ltd vs United Telecoms Ltd. The amendment was carried out after a report from the Law Commission following controversies over the independence and impartiality of arbitrators. Public sector firms had insisted on their executives becoming arbitrators. Therefore, Section 12 introduced a list of ineligible candidates for arbitration. In this case, the managing director of BBNL, a public-sector unit, nominated a person as sole arbitrator in its dispute with the contractor for a solar project. The question arose whether an MD, who is himself not eligible to be an arbitrator, as he was party to the case, can nominate an arbitrator. The judgment said no, and elaborately discussed the concerned provisions. It clarified that any prior agreement contrary to the present law is wiped out after the amended Section 12 (5). The only way in which this ineligibility can be removed is by waiving the applicability of the Section by an express agreement in writing showing faith in the nominee. While allowing the appeal, the Delhi High Court was asked to nominate another arbitrator.

Lapses by high courts in tax cases

The Supreme Court had found fault with the Delhi High Court two weeks ago for dismissing an appeal of income tax authorities without framing “substantial questions of law” prescribed under Section 260-A. It had asked the high court to reconsider the appeal in the Nokia India case. Last week, it was the turn of the Bombay High Court to get a similar rap because the high court had dismissed revenue authorities’ appeal without framing issues. The appeal, CIT vs AA Estates Ltd, was remanded to the high court after the Supreme Court framed three issues. The court further clarified that the questions framed by the assessee are not relevant and those framed by the court should be decided.

Finance company to pay compensation

The Supreme Court last week set aside a judgment of the National Consumer Commission and asked a finance company to compensate a widow for “unnecessarily dragging her through legal proceedings on account of its deficiency of service.”  In this case, Ashatai vs Shriram City Union Finance Ltd, a person took a loan from the finance company. The loan was secured through an insurance policy issued by a sister company of the finance company. After paying the first instalment and insurance premium, the person died. The company demanded further instalments towards the loan. His wife asked the company to recover the loan through the insurance policy. The company refused to do so. Therefore, the woman moved the consumer court. Though she succeeded in the district and state consumer fora, the National Commission rejected her plea. She moved the Supreme Court. It found fault with the National Commission, which had interfered with the courts below when it was not called for. Its power was limited to the error of jurisdiction committed by courts below. Moreover, the National Commission erred on facts also, the Supreme Court said. 

Hotel to pay for swimming pool death

Combining the duty of a lifeguard with that of a bartender in a hotel with a swimming pool is not only against the rules but also amounts to deficiency in service, the Supreme Court ruled while imposing compensation on Kerala Tourism Development Corporation for death in its Kovalam hotel.  The court upheld the finding of negligence on part of the hotel management and ordered it to pay Rs 6,250,000 to the wife and two children of a 35-year-old businessman who drowned in the pool. In this case, KTDC vs Deepti Singh, the man was in the pool with others when he lost consciousness and sank. A foreign tourist took him out and handed him over to the lifeguard who acted also as a bartender. However, the man died. The woman filed a criminal complaint as well as a consumer complaint. The National Consumer Commission allowed her complaint and awarded damages. KTDC appealed to the Supreme Court. It recalculated loss to the family and raised the compensation amount.

IBC does not bar cheque bounce trial

The Calcutta High Court ruled last week that the declaration of a moratorium on a company under the Insolvency and Bankruptcy Code (IBC)  did not prohibit the continuation of criminal proceedings against the company or its directors in a cheque bounce case. In this case, Mbl Infrastructure Ltd vs Sri Manik Chand, the company and its chairman-cum-managing director were being prosecuted under the Negotiable Instruments Act for issuing a cheque which was dishonoured by the bank. They moved the high court to quash the trial, arguing that the cheque was issued while IBC proceedings were pending and the resolution professional was in charge. The high court rejected their plea and told them to stand trial. The judgment pointed out that Section 14 of the IBC showed that the declaration of a moratorium itself did not create any bar for the continuation of the criminal proceedings under Section 138/141 of the Act. Moreover, the high court cannot go into the merits of the case while using its discretionary power and the accused can raise objections before the trial court. 

Essential features in trademark

In trademark infringement cases, if essential features of a registered mark are adopted by a rival, it is immaterial if the get-up, packaging and other writings or marks on the goods or on the packets of the rival show marked differences,  the Delhi High Court stated last week in its judgment in Nuvoco Vistas Corporation vs JK Lakshmi Cement. The dispute was over the mark Concreto of Nuvoco and Concreta of JK Lakshmi. The court passed an injunction against JK, rejecting its various contentions. It pointed out that there was a difference of only an alphabet in the trademark adopted by JK and the market was the same, cement. The judgment also rejected the argument of JK that Nuvoco had suppressed information about the proceedings in the Competition Commission of India regarding a transitional agreement between Lafarge and Nuvoco over the Lafarge mark. In any case, that mark was not the main point of objection, the court remarked.

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