Calcutta High Court
Calcutta High Court

Calcutta High Court Original Side: Important orders and judgments of November 2019

Subhro Prokas Mukherjee

A summary of important judgments and orders passed by the Principal Bench of the Calcutta High Court on the Original Side, for the month of November 2019.

Service law and Article 226

Balmer Lawrie and Co. Ltd. Ex-Officers Forum and Another v. Balmer Lawrie and Co. Ltd. and Others WP No. 394 of 2004

In a writ petition filed before the Ex-Officers Association (Petitioner No. 1) and an ex-officer himself (Petitioner No. 2), the High Court disagreed with that the company that the writ was not maintainable. Even if Petitioner No. 1 was held not to represent all the aggrieved officers, the plea of Petitioner No. 2 (i.e. the ex-officer himself) would still survive. Thus, the High Court disagreed with the respondents on the point of locus.

In the present writ, the aggrieved petitioners prayed that the respondents be restricted from amending the Superannuation Scheme that the respondents claimed was necessitated out of financial compulsions. Disagreeing with the argument that a writ was not maintainable as there was no state act, the High Court observed that the Respondent No. 1 was controlled by the Ministry of Petroleum and Natural Gas (Government of India) and that the Respondent No. 1 nominates 50% of the Trustees controlling the Board.

Distinguishing the case of Rajveer Sharma v. NTPC as cited by the respondent, the High Court observed that the Trust in the said case was different from the one in the present case.

Allowing the writ, the High Court directed that the respondents not give any effect or further effect to the decision of the Board of Trustees in the Deed of Variation of the Superannuation Fund because

“After the employees have obtained the voluntary retirement trusting on certain terms and conditions a Deed of Variation introducing a new Scheme is plainly impermissible. The employees had accepted the terms as they had found them to be acceptable and the balance of convenience lay in favour of such acceptance. After having done so and having been assured of the benefits of certain terms and conditions by a Deed of Variation the terms could not be altered, and that too in respect of employees who had accepted the Voluntary Retirement Scheme long before the Deed of Variation was brought into being.”

Service Law

Sanjay Kumar Saha v. UCO Bank & Others WP 438 of 2017

Partly upholding the writ filed by the petitioner i.e. disagreeing with the order of the Respondent No. 1’s Appellate Authority (the AA being a committee of the Board of Directors), the High Court held that while it found no infirmity with all findings against the petitioner without indulging in an inappropriate re-appreciation of evidence, it was constrained to disagree with the AA so far as its finding of siphoning was concerned.

Commenting that even the AA found that there was no direct evidence of siphoning of the bank’s fund, it was wrong of the bank’s AA to state that “if a single allegation is proved, it may lead to prove one or more than one charge”. This was because “a composite reading of the first three allegations cannot lead to a conclusion that the petitioner had been a part of the alleged process towards siphoning of funds.”

The Bench was of the view that an incorrect finding on the petitioner’s integrity squarely attracted Part III rights and that the bank had a duty to safeguard its employees’ rights by not rendering an officer so vulnerable by drawing an imaginary nexus with the alleged siphoning of funds and other proved charges of misconduct.

Snehansu Majumdar v. West Bengal Essential Commodities Supply Corporation Limited and Others WP 294 of 2019

In the present case, the Petitioner approached the High Court praying that his employer be directed to pay interest on the retiral dues. The Respondent contended that there was a definite delay of 5 months on part of the Petitioner in claiming interest as he never protested regarding the absence of interest when withdrawing his retiral benefits. It was further contended that the Petitioner never even claimed for interest when asking for his retiral dues.

Rejecting the Respondent’s contentions and relying upon State of Kerala & Others v. M. Padmanavan Nair (1985) 1 SCC 429 and SK Dua v. State of Haryana & Others (2018) 3 SCC 44, the High Court reiterated that retirement dues were not a bounty to be given out by the Government/employer. Given the gross delay on part of the employer in taking decisions regarding the Petitioner’s resignation, the High Court found the Petitioner fully justified in harbouring an apprehension that a claim for interest on the retirement dues would unnecessarily and unfairly protract his monetary compensation.

Atanu Chakraborty v. High Court of Calcutta and Others GA No. 1608 of 2019 and WP No. 38 of 2018

In 2009, the High Court of Calcutta held an examination for direct recruitment of District Judges. The examination was divided into two parts where the preliminary examination was a written test for 400 marks, followed by an interview for 100 marks. A candidate had to secure a minimum marks in the written test to qualify for the interview. The High Court retained the power to relax the criteria of the minimum marks.

In the present case, the Petitioner challenged the High Court administration’s exercise of its powers to relax the criteria by reducing the marks necessary to qualify from the preliminary written test to the interview because though he secured a high rank in the written examination, he lost out to others in the interview - many of whom did not originally qualify in the written test, prior to the relaxation.

The Single Judge of the High Court, relying on Rakha Chaturvedi v. University of Rajasthan (1993) Supp. 3 SCC 168, Kendriya Vidyalaya Sangathan and Others v. Sajal Kumar Roy and Others (2006) 8 SCC 671, Food Corporation of India v. Bhanu Pratap Lodh (2005) 3 SCC 618, Ami Lal Bhat (Dr.) v. State of Rajasthan (1997) 6 SCC 614, agreed with the Petitioner that it was incumbent on the High Court to record its reasons as to why it relaxed the criteria and the basis on which the act was done, especially when the number of examinees who qualified in the written test far exceeded the number of posts. The High Court held that the exercise of its powers in an unreasoned manner violated Articles 14 and 16.

Despite agreeing with the Petitioner on merits, the Single Judge refused to upset the recruitment of 2009 on the basis of the legal maxim ‘vigilantibus et non dormientibus jura subveniunt’ meaning that equity aids only the vigilant and not the ones who sleep over their rights. Following State of MP v. Nandlal Jaiswal and Others AIR 1987 SC 251, Chandigarh Administration and Another v. Jasmine Kaur (2014) 10 SCC 521 and Rabindra Nath Bose and Others v. Union of India and Others AIR 1970 SC 470, it was held that the writ was filed after an inordinate and unexplained delay where it would be wholly unjust to deprive the private respondents (now serving as judges) of the valuable rights which had accrued to them.

Section 108(h) of the Transfer of Property Act 1882

Uma Poddar and Another v. Jaspal Singh Chandhok and Others APD 85 of 2018 with CS 994 of 1990

Rejecting a challenge to a decree by the appellant/lessees/Defendant No. 1 in a civil suit, the Division Bench traced the history of Section 108(h) of the Transfer of Property Act, 1882 as regards the rights of lessees over the structures they built over the lessor’s land. The appellants asserted that since the appellants/lessees/Defendant No. 1 were receiving a share of the rent for the land, it was accepted by the lessors that that the former was an owner of the land as well as the structure above it.

Citing a number of judgments, the Division Bench disagreed with the assertion saying that it was well established that unlike the common law in England, ownership of the land did not imply ownership of the structure on it.

Furthermore, elaborating on the history of Section 108(h) through judicial precedents of various High Courts and the Supreme Court, the Division Bench held that if a tenant/lessee does not remove the structures from the lessor’s land within the period specified in the Act (or agreement), s/he has no right to remove them thereafter or sue for compensation. The only right that the lessees possess is the right to remove the structures on expiry of the lease and the landlord/lessor cannot be made to suffer due to the structures not being removed by the lessees.

Order 47 Rule 1, Code of Civil Procedure 1908

Suresh Kumar Jain & Ors v. Madanlal Jain and Ors. GA No. 2244 of 2018, RVWO No. 24 of 2018 arising out of GA No. 862 of 2016, and APO No. 202 of 2017 arising out of EC No. 873 of 2015

Filing a review petition against an order passed on consent, the petitioners argued that “even by consent the parties could not vary/modify an arbitral award”. Agreeing with the contention of the respondents, the Division Bench held that review at the instance of the parties to a consent order was impermissible as the “the same would amount to reopening the appeal and rehearing the same on the basis that the earlier Division Bench erred in law in passing the order under review” as “that is not the scope of a review petition”.

In the facts of the case, the Division Bench held that a review was not maintainable as, at best, it could be said that the impugned order was erroneous but it could not be said that there was an error on face of the order. The principles regarding the power of review were summarised after referring to the decision of the Supreme Court in State of West Bengal & Ors v Kamal Sengupta & Anr as follows:

(i) That a decision is erroneous in law is no ground for ordering review. If the Court has decided a point and decided it erroneously, the error could not be one apparent on the face of the record or even analogous to it.

(ii) The words “any other sufficient reason” must mean a reason sufficient on grounds at least analogous to those specified in Rule 1 of Order 47 of CPC.

(iii) A review is by no means an appeal in disguise whereby an erroneous decision can be corrected.

(iv) An error which is not self-evident and has to be dictated by a process of reasoning, cannot be said to be an error apparent on the face of the record justifying the Court to exercise its power of review under Order 47 Rule 1 CPC.

(v) In exercise of jurisdiction under Order 47 Rule 1 CPC, it is not permissible for an erroneous decision to be reheard and corrected.

(vi) There is a clear distinction between an erroneous decision and an error apparent on the face of the record. While the first can be corrected only by a higher forum, the latter can be corrected by exercise of the review jurisdiction. A review petition has a limited purpose and cannot be allowed to be “an appeal in disguise”.

(vii) Order 47 Rule 1 CPC does not postulate a rehearing of the dispute on the ground that a party had not highlighted all the aspects of the case or could perhaps have argued them more forcefully and/or cited binding precedents to the Court and thereby enjoyed a favourable verdict.

(viii) The power of review may not be exercised on the ground that the decision under review was erroneous on merits. That would be the province of the Appellate Court. The power of review is not to be confused with appellate powers which may enable an Appellate Court to correct all manner of errors committed by the subordinate Court.

Sections 11(6) and 10 of the Arbitration and Conciliation Act 1996

Supriya Kumar Saha v. Union of India represented by General Manager, Eastern Railway and Others AP 1024 of 2017

The GCC arbitration clause in the present case prescribed that a dispute would be decided by an arbitral tribunal by two arbitrators to be appointed by the General Manager of Eastern Railway, and in the event of the two arbitrators being divided in their opinions, the disputes would be referred to an umpire.

As the General Manager failed to appoint the two arbitrators, a Section 11 petition was filed before the Chief Justice, who appointed a sole arbitrator. Though the sole arbitrator decided the issue of competence to adjudicate in its favour, the award was set aside in Section 34 and 37 proceedings and decided in favour of the Railways. The High Court held that the Tribunal could not decide the matter as the Chief Justice could not deviate from the GCC. It is in this context that the contractor filed a Section 11 (6) petition before the High Court yet again.

Rejecting the Railways' contention that the contractor had already exhausted its remedies, the High Court noted that the Single Judge in the Section 34 proceedings had stated that the parties were at liberty to pursue their remedies in accordance with law.

Thus, it was held that because the Section 34 petition was decided only on the basis of competence of the Arbitrator to hold the arbitral proceeding, the merits of the claim were never tested.

Accordingly, in view of Datar Switchgears Ltd v. Tata Finance Ltd. and Ors , a right had accrued in favour of the petitioner to file the present application for appointment of an arbitrator by this Court. However, since Section 10 (1) of the Act of 1996 mandated the number of arbitrators shall not be an even number, the High Court appointed three officials from the Railways to constitute the Tribunal.

Section 34 and 31 of the Arbitration and Conciliation Act 1996

State of West Bengal v. Afcons Pauling (India) Limited APOs 88, 89, 90, 102, 141, 215, 233, 263 of 2017

Disagreeing with the view of the Single Judge (in Section 34 proceedings) wherein he reduced the pendente lite interest from 12% to 10% while accepting the pre-reference interest as the same was stipulated in the contract, the Division Bench of the Calcutta High Court held that the pendente lite interest too could not have been reduced as the same was provided for in the contract itself and not given by way of a flat rate.

Section 34 of the Arbitration and Conciliation Act 1996

M/s Safelift Crane Hiring Private Limited and Another v. Tata Capital Financial Services AP 678 of 2019

In the present case, the High Court was pleased to set aside an award dated 31.5.2019 even before directing that the respondent files a reply due to violation of the principles of natural justice. The Single Judge set aside the award on the following grounds demonstrating the violation of the principles of natural justice:

1) The Award did not note whether the Arbitrator serviced any notices of subsequent hearing even after proceeding ex parte under Section 25(b).

2) The Award did not contain any statement that the minutes were ever communicated and thus deprived the Petitioner from cross examining the Respondent-Award Holder’s witnesses.

State of West Bengal v. Bharat Vanijya Eastern Private Limited APO No. 349 of 2017, GA No. 2170 of 2017 with EC No. 48 of 2017, APO No. 398 of 2017, GA No. 2806 of 2017, AP No. 1087 of 2011, APO No. 419 of 2017, GA No. 2988 of 2017, AP No. 1087 of 2011

In the present case, the Division Bench of the High Court was appalled at the form and structure of the impugned Award which seemed to have been grossly copy-pasted from the note of arguments of the private party. The Division Bench prescribed that each head of the claim be scrutinised to examine if reasons have been supplied by the Tribunal instead of setting aside the entire Award in toto on the ground of being copy pasted.

The Division Bench, on scrutinising each claim allowed by the Tribunal, set aside the Award on the following grounds:

1) Even if copy pasted portions of the Award was removed, the Award would not be able to stand on its own legs inasmuch as it was still unreasoned and against public policy.

2) There were claims where the Tribunal recorded the Claimant’s arguments but did not even advert to the State’s arguments.

3) The Tribunal was incorrect in assuming that just because the State did not produce any witnesses or even efficiently cross examine the private party’s witnesses, the claims were admitted by the State when the tenor of the State’s pleadings clearly stated that it disagreed with all the claims.

4) While the Tribunal referred to evidence transcripts, it was silent as to why it found certain questions and answers to be relevant to the adjudication of the claims.

5) While denying some claims of the private party, the Tribunal did not state any reason or basis for doing the same.

Clause 12 of the Letters Patent Act

Tarapada Bhowmick v. State of West Bengal CS 369 of 1990

The plaintiff contractor and the defendant State of West Bengal entered into a contract wherein the plaintiff won a contract for the construction of a primary health centre in Midnapore (outside the jurisdiction of Kolkata). Owing to disputes, the contractor filed a civil suit wherein it was averred in the plaint inasmuch as the principal seat of governance of the state government was at Writer’s Building, Kolkata.

The issue which fell for consideration in the present case before the Single Judge was whether or not the nature of work undertaken by the state is a relevant factor for deciding whether a court has territorial jurisdiction to entertain a civil suit instituted by a citizen against the state. This was because the defendant state filed a demurrer application for revoking the leave granted to the plaintiff contractor under Clause 12 of the Letters Patent as the state could not be said to be “carrying on business” when the contract in question is an extension of the sovereign function of the state.

In the present case, on facts, it was pointed out by the state that the only reason that Kolkata was stated to have jurisdiction was because the principal seat of governance was Writers’ Building despite the fact that no actual cause of action had arisen in Kolkata.

Repelling the contention of the state that it was performing its sovereign duties, the Single Judge referred to the Supreme Court’s pronouncements in N Nagendra Rao and LIC v. Escorts to hold that the difference between sovereign and non-sovereign was fast diminishing as the same was increasingly becoming an outdated concept.

In the present case, the state performed its commercial functions and the cases cited by the state had more to do with the fact that the private plaintiffs were stopped by the courts from dragging the government to far flung corners owing to the government’s organisational omnipresence.

However, in the present case it was held,

“Writers’ Building, at the time of institution of the suit, was undeniably the seat of and the nerve centre of control and administration of the Government in the State of West Bengal. Since it has already been held that the nature of the transaction entered into between the plaintiff and the defendant partakes of a commercial flavour, the argument of counsel for the defendant, however attractive and industrious, must be seen in the back drop of the decisions where it has been held that the situs of the cause of action in determining the place of suing would be relevant only in cases where the State was exercising its sovereign functions.”

On the issue of the defendant state challenging the court’s jurisdiction 28 years after institution of the civil suit was concerned, the Single Judge held that the issue of the defendant’s acquiescence and participation was relevant for the grant or refusal of relief and was secondary to the question of the court’s power to entertain the suit under Clause 12 of the Letters Patent.

Charitable and Religious Trusts Act 1920, Hindu Succession Act

Rajat Roy Chowdhuri v. Reshmi Mukherjee ACR 1 of 2019

In a deed of dedication, the settlor had prohibited female descants from becoming trustees or shebaits at any time or for any reason. In a proceeding under Section 7 of the 1920 Act, the High Court was called upon to decide whether such a clause in the deed was repugnant to law. The High Court held that the clause was, in deed, repugnant to the law governing Hindu succession by relying upon the Full Bench decision of the court in Manohar Mukherjee v. Bhupendranath Mukherjee as a right of a shebait was a property. In the facts of the case, it was found that the deed did not envisage an independent gift in favour of the males, but mere care of the deity.

Interpretation of Contract, meaning of ‘duplicate’

Pubali Bank Limited v. Nagreeka Exports Limited & Ors APD No. 208 of 2015 with CS No. 12 of 2000

In the present case, the Division Bench was asked to decide on the issue of whether the production of the photostat copy of the radiation certificate fulfilled the requirements of clause 9 of the other terms and conditions of the Irrevocable Letter of Credit in the present case where clause 9 stated “Radiation certificate required in duplicate issued by Govt. approved reputed agencies”.

The appellant argued that Clause 9 implied that even the duplicate had to be certified by the issuing authority while the first Respondent/plaintiff argued that the duplicate meant a simply photocopy as the original would be in possession of the state authorities during the course of business.

Relying upon the principles enunciated in various English judgments as also Indian judgments, the Division Bench prescribed that a commercial interpretation of the contract be adopted instead of textual. The Division Bench further relied upon the meaning of ‘duplicate’ from various judicial dictionaries as well as the nature of the industry concerned (rice exporting) at play to hold that ‘duplicate’ did not mean a copy certified by the issuing authority as the same was not specified and it was widely known that Bangladeshi Customs would be in possession of the original Radiation Certificate.

Further, relying upon Dasarath Gayen v. Satyanarayan Ghosh & Ors., the Division Bench held that when there was an ambiguity in the terms of a deed, it must be resolved against the executors of the deed which was the appellant in the present case.

Condonation of delay in favour of government departments

Ashok Kumar Saha v. State of West Bengal and Others GA No. 2901 of 2015 with CS No. 45 of 2015

In the present case, the state filed an application to set aside an ex parte decree against it where the delay in filing such an application was 316 days. Condoning the delay while imposing costs of Rs. 50,000/-, the Court observed that the senior advocate engaged on behalf on behalf of the petitioner/defendants state could not make himself available when the case was called out, as a result of which the suit was decreed undefended and judgment passed in absentia.

Finding that sufficient cause was well explained, the delay was condoned so that substantive rights were protected. The Single Judge relied upon State of Nagaland v. Lipok Ao in support of the proposition that the State and private parties could not treated in the same manner as the former always took decisions as a collective and its loss eventually implied loss to the public interest.

Grant of probate as per Indian Succession Act, Information Technology Act 2003

Kishan Lal Chadha @ Krishan Lal Chadha (Deceased) and Anup Chadha v. Kamini Sarin TS No. 21 of 2012 arising out of PLA No. 3 of 2012

In a caveat brought about by the younger daughter of the deceased testator against her brother/executor, the High Court allowed the probate of the deceased’s will on the following grounds:

1) The High Court disagreed with the caveator/younger daughter that Section 65B Information Technology Act 2003 was necessary to prove the will as the same was computer generated. The High Court held that just like a type writer would not be required to certify that he had typed out the document, similarly, simply because a will draft has been typed written on computer monitor and print out has been taken out therefrom, it cannot be said that such document has been stored in the CD or in the monitor process. On a reading of Anvar PV v. PK Basheer the preamble to, and Section of the 2003 Act, it was held that the process of proving a will was a process under Section 68 of the Indian Evidence Act read with Section 63(c) of the Indian Succession Act, and a Section 65B certificate was not necessary.

2) As regards the caveator’s objection that the deceased was under the undue influence and control of the executor/son (caveator’s brother), the High Court noted that the caveator’s own mother and elder sister had accepted the will as genuine. Moreover, it was an admitted position that the deceased had gone for work 2 days before this death, thus belying the fact that he was under anyone’s control or was no diminished mental capacity.

3) The caveat could not have been filed through the caveator’s brother in law without a Power of Attorney and the brother in law could not have sworn upon portions of his affidavit as he was not a primary witness. Moreover, the caveator’s brother in law had no locus to file the caveat anyhow as he was neither a proper nor a necessary party.

4) Contrary to the caveator’s objections, the attesting witnesses and the testator need only see each other sign the documents in each other’s presence as per Section 63(c) of the Indian Succession Act. The attesting witness was not required to know the contents of the will that the testator was signing.

5) Upholding the caveator’s objection that the first attesting witness’ testimony could be relied upon as he had not subjected himself to cross examination, the High Court held that the second attesting witness’ testimony sufficed in proving the veracity of the will.

Trademark law

Sharma Ayurved v. Private Limited v. BN Sharma Ayurved Private Limited GA No. 772 of 2013 and CS No. 62 of 2013

A partnership firm carrying on the business of selling hair oil was subsequently dissolved to make way for a company. Subsequently, owing to factional fights, the CLB was approached which directed that the plaintiff (headed by the Saraswati Group) carried on its business in Kolkata while the defendant (headed by the Bishwanath Group) carries on the business in Delhi and Baddi.

In the present case, the plaintiff prayed for an injunction to restrain the defendant from using the word ‘Banphool’ on its carton and label as it claimed that as per the CLB order, the entire business, assets, liabilities of the erstwhile partnership firm came to be vested in the plaintiff company. Thus, the plaintiff was the owner of the copyrights on the label and carton.

Rejecting the plaintiff’s arguments, the Single Judge held that neither of the parties challenged the CLB’s finding that it was actually Bishwanath Sharma (head of the Bishwanath Group) who started the business and put in the maximum effort, and further that he was the author of the copyright.

Moreover, the plaintiff did not challenge the CLB order which noted that it was, in fact, the defendant’s faction which was being oppressed by the plaintiff’s faction even though the plaintiff had approached the CLB alleging oppression at the hands of the defendant. Finally, the application came to be dismissed because it was observed that the division of the family business necessary entailed that the defendant was at liberty to carry on the same business, as was carried out by the earlier jointly held company and erstwhile partnership firm, albeit vide a newly floated private company (which was the first defendant in the present case).

Ad interim orders

Ashok Kumar Saha v. Tata Chemicals Limited APO No. 146 of 2019, GA No. 2155 of 2019 in CS No. 51 of 2019

M/s Kshitish Bardhan Chunilal Nath and Others v. Tata Chemicals Limited APO No. 157 of 2019, GA No. 2139 of 2019 in CS No. 50 of 2019

Appalled that the Single Judge wrote an ad interim order in excess of 50 pages and heard the matter for 10 days, the Division Bench was constrained to note as follows:

"At the outset, it is alarming to note that the matter was heard at the ad interim stage for no less than ten days. Ordinarily, it has been the age-old practice in this Court for ad interim hearings to be confined to minutes and hours and no more. A workable order has to be passed in accordance with law at the ad interim stage upon getting an impression of the matter, whereupon the parties are called upon to exchange affidavits for the matter to be heard finally at the interlocutory stage on a returnable date. Such hearing, in complex matters, can stretch over days and weeks; but it is not acceptable that an ad interim hearing continues for ten days or any more than a couple of hours at the most.

Though considerable industry appears to have gone into the judgment and order impugned dated July 17, 2019, it is surprising to see an ad interim order run into 50 pages or more. For one, very tentative findings ought to be rendered at the ad interim stage since they may be corrected upon affidavits being received at the final interlocutory stage and even at the final interlocutory stage, the findings are, at best, prima facie and may not have any bearing at the time of the trial of the suit.

Without intending to sermonise, it is best if ad interim hearings are confined to much less time than may have been expended in this case and ad interim orders are made as brief as possible without compromising on the necessity to furnish reasons thereof."

Article 226 - Effect of withdrawal of government subsidy

Phosphate Company v. Union of India APO 300 of 2016 in WP 711 of 2009

In this case, the Division Bench of the High Court found that the petitioner company had entered into two business transactions on the basis of a fertiliser subsidy scheme floated by the Government of India. However, unknown to the petitioner company, even before the transactions were consummated, the Union had already withdrawn the fertiliser subsidy. Because the Union of India did not ‘contemporaneously’ intimate the persons affected by the withdrawal of the scheme, the Division Bench held the writ to be maintainable.

Interpretation of contract, group of companies doctrine, corporate veil

McLeod Russel India Limited v. IL&FS Financial Services Limited and Others APO 143 of 2019, GA 2167 of 2019 in CS 177 of 2019

Eveready Industries India Limited v. IL&FS Financial Services Limited APO 144 of 2019, GA 2168 of 2019 in CS 177 of 2019

In a case before the Division Bench of the Calcutta High Court, the respondent, NBFC IL&FS, advanced money to the defendant Bharat McNally. Apprehending that the borrower would not have enough assets to pay back the money, the NBFC obtained ad interim orders against the borrower, its promoters as well as other companies of the promoters, namely McLeod Russel India Limited and Eveready Industries India Limited, so as to restrain them from alienating their assets.

The Division Bench set aside the order of the Single Judge on the following grounds:

1) The plaintiff NBFC admittedly neither made either of the appellant companies the guarantors nor held them contractually responsible for any default. In the interpretation of a commercial contract, an omission was as important as an inclusion.

2) The concept of corporate veil, group of companies doctrine were irrelevant. Such concepts were applicable only in case of a pleaded case of fraud where the commercial bargain itself was vitiated. But, in this case, no case was fraud was credibly set up and no wrongdoing/impropriety was attributed to the appellants themselves. In fact, in the present case, it was an admitted position of the appellants that they were a group concern of the borrower and controlled by the borrower’s promoters.

Accord and Satisfaction, practice and procedure

M/s SIBCO Investment Private Limited v. Small Industries Development Bank of India APD No. 291 of 2015 in CS No. 79 of 2006

In the present case, the Division Bench held that because the defendant/respondent Small Industries Bank Development Bank of India wrongfully withheld payments on account of interest (despite being no statutory embargo to release the same on the due dates), because there was no cause for it to delay the payment on account of interest or principal upon the bonds maturing, the plaintiff was entitled to pay interest for the delay between the dates on which the interest accrued and when such interest was fully paid.

The Division Bench was constrained to note that it was ‘tragic’ that the trial court ought reserved the order for 11 months before pronouncing the judgment- a prolonged period of delay as it “is quite impossible for there to be any degree of authentic recollection of a matter or of the arguments made in course thereof some eleven months after the conclusion of the hearing”.

It further depreciated the practice by the trial court of reliance on a judgment against the plaintiff which was not cited by either of the parties without putting the case law to the plaintiff as being violative of the principles of natural justice in the common law system.

The Division Bench disagreed with the trial court as well as the defendant that there was accord and satisfaction on part of the plaintiff. While it was true that the plaintiff did not receive payment with any caveat or reservation, it was equally true that the defendant ensured that acceptance of the payment made by it would be deemed to be an unconditional acceptance.

Section 11 (6), 12, 13 Fifth and Seventh Schedule of the Arbitration and Conciliation Act 1996

International Commerce Limited v. Steel Authority of India AP 633 of 2019

In the present case, disputes arose between the appellant and respondent. In compliance with Clause 39 of the GCC, the appellant requested the respondent’s MD to nominate 3 names, out of which the appellant was to choose one name to act as the sole arbitrator.

Ensuing correspondence showed that that MD nominated 3 former employees who had retired more than 3 years back and the sole reason for the appellant rejecting all three names was that the nominees were all former employees. Citing a breakdown of the dispute resolution mechanism for appointment of the arbitrator, the appellant filed a Section 11 (6) application before the High Court.

Relying upon the case of Dibyendu Bose v. South Eastern Railway, the Single Judge disagreed with the appellant’s contention that the cases of TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377 and Bharat Broadband Network Limited v. United Telecoms Limited (2019) 5 SCC 755 were attracted in the facts of the case for four reasons:

1) In the case of TRF Energo and Bharat Broadband Network Limited, the Supreme Court faced a situation where the Chief Executive Officer/MD of the PSU companies had the power to act as the sole arbitrator in violation of Section 12 read with Schedule 7 of the 1996 Act. In both cases, the stated offices directed that their nominees act as sole arbitrators.

Thus, in both the cases, the Supreme Court merely held that once a person (CEO/MD) was barred by Section 12 read with Schedule 7 to act as an arbitrator despite the contract stating to the contrary, that prohibited person could not have the power to nominate someone else. This was not the situation in the present case as the contract between International Commerce Limited and SAI stipulated that the MD would nominate 3 persons and the petitioner would choose one, and not that the MD had the power to act as the arbitrator.

2) The correspondence between the parties showed that all along the petitioner’s objection was merely that the MD could not nominate former employees and not that the MD did not have the power to nominate. Furthermore, the petitioner could not show that Section 12 read with Schedule 7 was attracted in the case of the nominees after their retirement till the time of nomination. Thus, the cases of TRF Energo and Bharat Broadband Network Limited were cited as an afterthought by the petitioner. It was held to be a stretch to assume that retired employees had any ‘business relationship’ with the former employer.

3) In view of entry 31 of the Fifth Schedule to the Act of 1996, if a person who has retired from the service of the respondent PSU three years before his/her appointment as the Arbitrator, there cannot be any justifiable doubt as to his/her independence and impartiality as stipulated in sub-Section (1) of Section 12 of the Act of 1996.

4) Lastly, it was held that the petitioner’s only remedy was under Section13 of the 1996 Act and Section 34 thereafter. Section 12(1) of the 1996 Act stated that when a person is approached in connection with his possible appointment as an arbitrator, it is his duty to disclose in writing any circumstances which are likely to give rise to justifiable doubts as to his independence and impartiality as per Sixth Schedule.

The grounds stated in the Fifth Schedule are a guide in determining whether circumstances exist which give rise to justifiable doubt as to the independence or impartiality of the arbitrator. Once such disclosure is made, the appointment of the arbitrator may be challenged by a party under Section 13 of the Act of 1996 and it is the duty of the arbitrator to first decide on the said challenge and if it is not successful the arbitrator shall continue with the proceeding and make an award. It is only after making of the award that the decision of the arbitrator rejecting the application under Section 13 of the Act of 1996 can be assailed in an application for setting aside of the award.

Section 73 of the Indian Contract Act 1872

Steel Authority of India Limited v. M/s AM Industries Limited APD No. 272 of 2015 in CS No. 385 of 1999

The respondent plaintiff filed a suit against SAIL for occupation charges as SAIL failed in handing over vacant possession of its land even after the tenancy came to an end as there were 3 cranes in the middle of the vacant land. The suit was decreed, and it was against this judgment that SAIL approached the High Court.

The Division Bench started its judgment with the caustic remark,

“The only reason that this appeal may have been filed appears to be for the amusement of the officials of Steel Authority of India Limited (SAIL) or since the officials do not fund any litigation.”

It dismissed the case with the following observations:

"There is no reason to interfere with the judgment and decree impugned. SAIL may have spared the Court this useless appeal. However, since the officials of SAIL will not be paying, it does not matter if a further Rs.20,000/- is imposed on SAIL by way of costs for this frivolous appeal."

Finding nothing wrong with the respondent's conduct, the Division Bench noted that when the handling contractor approached the plaintiff to release the cranes, the plaintiff refused to release the cranes. The plaintiff had no independent relationship with the handling contractor, but had a relationship with SAIL which had left behind the cranes at the plaintiff’s property and it was SAIL which was liable to pay occupation charges for the plaintiff’s property not being vacated despite the termination of the tenancy.

Since the suit was instituted in July 1999, it cannot be said that the plaintiff merely allowed the cranes to remain on the plaintiff’s property and counted occupation charges thereof. In any event, it was reasonable of the plaintiff to require an order from an appropriate forum before the plaintiff abandoned or was forced to give up the lien that it claimed. The circumstances were such that there was nothing else that the plaintiff could do to remove the oversized machines from its property before the handling contractor had them removed.

Order XII Rule 6 of CPC

Ashis Kumar Sen & Another v. Sudipta Banerjee APO No. 228 of 2016 in CS No. 157 of 2012

The plaintiff contractor filed a suit for Rs. 8.35 lakh against the defendant employers. The contractor filed an application under Order XII Rule 6 on grounds of an admission in the employers’ letter dated 1.3.2016 wherein after stating out the allegations against the Ccntractor, the letter stated as follows:

"That it would be further pertinent to mention here that you raised a bill dated 05.02.2010 for Rs.8,35,353.00 for your construction work but it was settled during the course of discussion held between you and us at Rs.7,25,000.00 which we are ready to pay to you immediately.

In view of the aforesaid facts you are requested to contact us within 7 days from the date of receipt of the letter to receive the bill amount which has been settled between you and us."

The trial court allowed the application for judgment on admission to the extent of Rs. 7.25 lakh as it was admitted by the employers. The employers contended in appeal before the Division Bench that their willingness to pay INR 7.25 lakh was laced with the condition that the contractor contact it within 7 days. In this case, instead of agreeing to the proposal, the contractor approached the trial court and filed a suit.

Rejecting the appellants’ case, the Division Bench held that the contractor could not have accepted the reduced money offered by the employers/appellants as it would amount to accord and satisfaction.

Stating that the rules of evidence state that the contractor need not prove the sum of Rs. 7.25 lakh but needs to prove any sum over and above that as the stated sum is already admitted. The admission as to the quantum of the employers’ liability as apparent from the letter has to be seen in the context of what precedes the admission in the relevant letter. The employers were dissatisfied with the construction and perceived the time taken for the same to have prejudiced the employers.

Thus, it could be said that the employers quantified the loss and damage that they allegedly suffered on account of the perceived poor construction work and the delay in completion thereof and deducted such amount from the final bill of the contractor, which was in excess of Rs. 8.53 lakh, by offering to pay Rs. 7.25 lakh instead.

Rejecting the ground of appeal that the employers had a counter claim and thus the Order XII Rule 6 application ought not have been allowed, the Division Bench said that the plaintiff cannot be stopped from exercising his right to immediately receive such payment merely because there is a counter-claim which has been filed by the defendants.

Indeed, it was open to the defendants to apply for an order in the nature of attachment before judgment and upon the unimpeachable character of the counter-claim being established, there was a possibility that the decretal amount here may have been attached.

The author would like to place on record his appreciation for the assistance provided by his researcher Mr. Avinash Shukla. Once again, this series would not have been possible if not for the complete support and encouragement of the author's chamber senior Mr. Gourab Banerji.

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