From lottery winner to stored food items, here are the key court orders

Illustration by Ajay Mohanty
Centre’s approval for gold prospecting 

The Supreme Court last week ruled that though the state government is the owner of land and minerals, it must seek the approval of the Central Government before issuing prospecting licence or mining lease for exploitation by state corporations. The state can make a proposal to the Centre to reserve land not already under lease for exploitation, but the Centre’s approval is essential, the court stated in its judgment, Geomysore Services Ltd vs Hutti Goldmines Co. In this case, Geomysore and Deccan Exploration Services Ltd had sought prospecting licences for gold. Later, the state-owned Hutti Goldmines also joined the gold rush. The state government sought reservation of land for its company. It was rejected by the Centre. The private companies approached the Karnataka High Court against the state government’s move to reserve land for its company. The High Court rejected their pleas, leading to their appeals to the Supreme Court. The judgment, while clarifying the law regarding the role and power of the Centre under the provisions of the Mines and Minerals Regulation Act, stated that “the central government cannot be bound by any specific parameters. Each case has to be decided on its own merits. However, the central government cannot only take into consideration factors of national security or public interest but also economic factors, the policy of the government and all such other factors which are rele­vant to decide the issue whether the land should be reserved for exploitation only by state government undertakings.”


The Supreme Court has quashed the judgment of the Delhi High Court and set aside the arbitration award in the appeal case, Union of India vs Varindera Constructions Ltd. After completing the project of building a residential complex in Haryana, the contractor claimed additional amount due to the escalation of wages during the construction. The government denied it pointing out that such escalation had specifically been kept out in the contract. The contractor invoked the arbitration clause and the award was in its favour. The government moved the High Court against the award but its petitions were dismissed, leading to the appeal. The Supreme Court allowed the appeal, agreeing with the government that the terms of the contract had excluded claims on account of statutory increase in wages of labour. The parties to a contract were free to settle the terms. In this case, the contractor entered the contract with open eyes. The judgement reiterated the judicial policy that courts would examine an arbitration award only under exceptional circumstances.

Stored food items also under scrutiny

Even if a substandard ingredient for making food is merely stored and not sold, the storing itself is an offence under the Food Adulteration Act, the Supreme Court ruled setting aside the view of the Delhi High Court. In this case, Delhi Administration vs Vidya Gupta, the food inspector collected ghee from the vendor of a well-known brand. On analysis, the samples were found to be substandard. The vendor argued that she was not selling the ghee but only the sweets made out of it. The magistrate did not buy the argument and convicted her in 2004. On appeal, the High Court accepted the argument and acquitted her. The authorities appealed, and the Supreme Court convicted her but since she completed 70 during the litigation, the sentence was reduced to the period she has already undergone.

Income tax woes of a lottery winner

A businessman of Rajasthan won the first prize of ~2 million in Sikkim Lottery in 1986 but he had to fight 32 years to ward off taxmen, and he was second time lucky as he won his case in the Supreme Court. The Sikkim authorities had deducted income tax on the prize under the rules of the former kingdom which prevailed there till 1990. The authorities convinced the Rajasthan High Court that he was bound to pay tax under the Indian Income Tax Act. Mahaveer Jain appealed to the Supreme Court and it quashed the High Court order stating that the income had already been taxed in Sikkim and double taxation is not allowed unless specifically permitted by law. The court, however, rejected Jain’s argument that the income was earned in Sikkim, till 1975 a foreign country, and it cannot be charged in India. “Income accruing in foreign countries can be brought to tax provided the assessee is ordinarily resident and the income was received in India,” the judgment said.

Entertainment tax on ropeway ride

Companies providing aerial ropeways in Himachal Pradesh are liable to pay entertainment tax, the state High Court ruled in the case, Ganpati Ropeways Ltd vs State of HP. This firm was providing ropeway to Naina Deviji temple. It argued that it was not providing entertainment but attending to the spiritual needs of pilgrims and was protected by the fundamental right to worship. The High Court rejected the contention stating that there are other traditional modes of reaching the temple. “It is not on account of compulsion that one has to travel in the gondola that is used in aerial ropeway, but it is on account of entertainment and amusement of travelling in a gondola that one opts to travel by aerial ropeway,” the judgment explained after discussing the meaning of entertainment. It pointed out that travelling by ropeway is far more expensive than travelling by bus or taxi.

Prolonged litigation by PSUs

Despite several admonitions by the Supreme Court against government corporations litigating among themselves, the phenomenon continues unabated as shown by last week’s judgment of the Delhi High Court in the case, Central Warehousing Corporation vs Oriental Insurance Co. The dispute was going on for more than two decades. The warehousing corporation was keeping paddy belonging to the Food Corporation of India (FCI) in the open during the 1995 monsoon. The FCI was slow to lift the stock in Dhuri, Punjab, and therefore the warehousing corporation insured it. Then there were three successive floods and a fire, destroying huge quantities of the paddy. The warehousing corporation demanded reimbursement but the insurance company rejected it on the ground that the policy was taken after the natural disasters and that fact was concealed by the corporation. It produced the rainfall data to buttress the argument. The court rejected the argument, observing that the officers of the corporation are not “perfect astrologers”. There was nothing illegal in expecting flooding which may or may not happen. “It was open to the insurance company to refuse to undertake the risk of issuing the policy,” the High Court commented.

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