Legal News & Views

CIT vs. Commercial Motors Finance Ltd (Allahabad High Court) February 25th, 2014 Distinction between “hire purchase transactions” and “loan transactions” explained The vehicles were registered in the name of the respective customers. However, in the registration certificate a remark in terms of agreement was to be recorded to the effect that vehicle is held by the registered owner under a hire purchase agreement with the assessee. A “Sale Letter” was executed, reciting that the customer had on the date of the application for loan sold to the financier the motor vehicles. The sale of vehicles have not been shown by the assessee in its profit and loss account and no sales tax return has been filed by it. In its audited account, filed with the income tax returns, the assessee has shown the finance charges as revenue receipts. The auditor has certified that the assessee is not a trading company. The auditor has also certified that the assessee has followed the norms issued by the Res

Emco Ltd vs. UOI (Bombay High Court) Undue delay in passing order causes prejudice & results in loss of confidence in the judicial body. Such a delayed order has to be set aside This Court in the matter of Shivsagar Veg. Restaurant has, after considering the various decisions of the Apex Court, laid down that undue delay (four months) in delivery of judgment by the ITAT after the hearing is in itself sufficient to set aside the impugned order without considering the merits of the order. The Apex Court in the matter of Anil Rai (supra) has reiterated the observations made by an earlier Bench of Apex Court in R.C.Sharma Vs. Union of India {(1976)3-SCC-574}, which reads as under “ … … … Nevertheless an unreasonable delay between hearing of arguments and delivery of judgment, unless explained by exceptional or extraordinary circumstances, is highly undesirable even when written arguments are submitted. It is not unlikely that some points which the litigant considers important ma

Strict implementation of principles of natural justice can be done away with in a case relating to national security, the Supreme Court on Friday said. "In a situation of national security, a party cannot insist on the strict observance of the principles of natural justice. In such cases, it is the duty of the court to read into and provide for statutory exclusion, if not expressly provided in the rules governing the field," a bench of justices SJ Mukhopadhaya and Kurian Joseph said. The bench said it is not for the court to decide what is in the interest of national security which should be left to the government. "It is difficult to define in exact terms as to what is national security. However, the same would generally include socio-political stability, territorial integrity, economic solidarity and strength, ecological balance, cultural cohesiveness, external peace, etc. "What is in the interest of national security is not a question of law. It is a m

The compensation for functional disability for a motor accident victim cannot be uniformly applied, and it should depend on the impact it caused to an individual's career, said the Supreme Court directing the Metropolitan Transport Corporation Limited (MTC) to pay 6.13 lakh as compensation to a taxi driver. In September 2008, an MTC bus hit a taxi driven by G Dhanasekar, leaving him with a fractured right leg and arm. After undergoing treatment, he was not able to bend his right knee beyond 90 degrees. His leg was shortened by a centimetre and could not walk without a limp. His right hand movement was also restricted. Requesting a suitable compensation, he said, "I am not in a position to drive vehicles. I completely lost my capacity to earn." The Motor Accident Claim Tribunal in Chennai fixed the liability for accident on Dhanasekar as 50% and provided him with a compensation for 4.5 lakh. In 2010, he moved the high court for enhancement of compensation. The high co

Coming to the aid of a 63-year-old woman facing harassment for over seven years and even threats of being listed as a loan defaulter, the consumer disputes redressal forum here directed the financier firms to pay Rs. 11.25 lakh as compensation to her. Coming down heavily on the private firm, Citi Financial Consumer Finance India Limited, that later transferred the loan account to Kotak Mahindra Bank Limited, the forum directed them to pay Rs.15,000 as cost of litigation to the woman, Harjit Kaur Bhatia, a resident of Phase 10, SAS Nagar. Bhatia had taken a personal loan of Rs. 25 lakh at fixed rate of interest of 11% in March 2004. But, despite repeated requests, she was not provided copy of the agreement. She claimed that the financier hiked the rate of interest in June 2006, at which she sought to close down her loan account, expressing willingness to repay the entire loan. But she never heard back.    Now, Kotak Mahindra Bank will have to provide a "comprehensive and cor

 Cancelling of an international flight ticket on it own has cost online travel agency Make My Trip India Rs 57,000. The district consumer disputes redressal forum (Chennai north) fined the agency for negligence and deficiency in service. M Kabilavanan said he had booked return tickets from Chennai to Colombo for his uncle D Kumaravelu and aunt K Vijaykumari. On August 10, 2011 they went to board the flight from Colombo but Kumaravelu was not given a boarding pass. Officials told him the agency had cancelled the ticket. They stayed back in Colombo and booked tickets for the next day, spending an extra 15,000, said Kabilavanan. The travel agency who apologized for the inconvenience and said it was trying to trace the number through which the cancellation request was made. But the agency neither provided a solution nor compensated him for the extra expenses, said Kabilavanan. He then moved the forum stating the travel agency had committed fraud. Make My Trip India said the allegati

The right to redeem a mortgage on repayment of a loan is a Constitutional right of a borrower and it is also a human right, which should not be fettered by unfair conditions, the Supreme Court stated last week in its judgment, Mathew Verghese vs M Amritha Kumar. The court was disposing of a complex case involving the Securitisation Act, the Debt Recovery Act, the Transfer of Property Act and other laws. It said that if there are differences in the amounts tendered and demanded by the lender, it could be decided later. The mortgaged property should be returned first and the disputes could be settled later. The court asserted: "We wish to state that the endeavour of the secured creditor while resorting to any sale for realisation of dues of a mortgaged asset should be that the mortgagor is entitled to some lenience to ensure that her constitutional right to property is preserved rather than being deprived of." Though the loan should be recovered expeditiously, financial instit

The justices rejected an appeal from Lawrence DiCristina, who said his twice-a-week games of Texas Hold ‘em should not be covered by the federal Illegal Gambling Businesses Act. DiCristina said the law targets games of chance, like lotteries, slot machines and dice but not poker, which is a game of skill. Bridge and Scrabble players weighed in on DiCristina’s behalf, worrying they could be targeted under a federal appeals court’s expansive interpretation of the law. At least three justices, Elena Kagan, Antonin Scalia and Sonia Sotomayor, like to play poker. Comment: It is interesting to note here that in October 2013, the Indian High Court described Poker as a game of skill.

The supreme court on Monday declined to wade into the politically volatile issue of gun control by leaving intact three rulings rejecting challenges to federal and state laws. The court’s decision not to hear the cases represented a loss for gun rights advocates, including the National Rifle Association, which was behind two of the challenges. The first case involved a challenge by the NRA to a Texas law that prevents 18-20 year olds from carrying handguns in public. It also raised the broader question of whether there is a broad right under the second amendment to bear arms in public. The second NRA case was a challenge to several federal laws and regulations, dating back to 1968, that make it illegal for firearms dealers to sell guns or ammunition to anyone under 21. The third case was on the narrow question of whether consumers have the legal right to challenge laws that regulate the sale of firearms. The challenge to a federal law that restricts the interstate transport of

Court Stays Out of Dispute Over Allegedly Defective Washing Machines The Supreme Court on Monday turned away challenges to large lawsuits over allegedly defective washing machines, rejecting appeals that sought to place new limits on class-action claims. The court's decision to stay out of the dispute marks a breather for justices who in recent years have issued a string of rulings disallowing class-action cases. Business groups had filed briefs supporting the defendants in the washing-machine cases, hoping the court would yet again cut back on lawsuits in which litigants make claims on behalf of a large group of plaintiffs. At issue were class actions alleging certain models of front-loading washing machines contained defects that caused them to accumulate mold. The defendants, including Whirlpool Corp.  and a subsidiary of Sears Holding Corp. , argued the cases involved too many individualized issues to proceed as class actions. Washer owners varied in how they used thei

The intention of an accused in a molestation case could be gauged only after hearing the victim's version, said the Bombay high court, declining relief to the owner of a popular chain of coaching classes in the city. A division bench of Justice Naresh Patil and Justice V L Achliya was on Thursday hearing a petition by Machindra Chate of Chate Coaching Classes, urging the court to quash an FIR lodged against him by a student. A chargesheet has also been filed under Section 354 (assault or criminal force to woman with intent to outrage her modesty) of the IPC. The incident took place on January 30, 2013, when HSC students and their parents met him at his Dadar office to complain about the teaching at his classes. According to the complaint, when a student asked him to take responsibility, he allegedly abused her and pushed her away in "such a way that made her feel ashamed". Chate's advocate K Holambe-Patil argued that the parents had assaulted him following whic

In a landmark ruling, a five-judge bench of the Madras High Court here by a majority ruling has held that persons acquitted from criminal cases or suppressing information about their past brush with law can be disqualified from joining the Police Department. The verdict sets to rest past interpretations to the contrary by various single judges of the High Court. In essence, the larger bench by a 4:1 majority has upheld the February 2008 judgment (Manikandan Case) laid down by the three-judge Full Bench of the High Court disallowing those acquitted in criminal cases from being recruited as policemen as per Rule 14 (b) (iv) of the Tamil Nadu Special Police Subordinate Service Rules. The larger bench comprising Justices R Sudhakar, S Tamilvanan, A Selvam, M Sathyanarayanan and B Rajendren, was constituted by then Chief Justice R K Agrawal on a reference by Justice S Nagamuthu last year. Delivering a common verdict, the four members of the larger bench, except for Justice Tamilvanan

The Bombay High Court on Thursday questioned whether a woman can be booked for molesting another woman under section 354 of the Indian Penal Code? The court was hearing a petition filed by a 78-year-old woman seeking to quash a molestation case filed against her by a 55-year-old lady. The division bench headed by Justice Naresh Patil sought to know the legal provision under which a woman can be booked for molesting another woman. “If a woman is alleged to have committed such an act, can she be held under the available section?” the bench questioned. While adjourning the matter for two weeks, the court asked the petitioner’s lawyer Pradeep Havnur to ascertain the legal position. The petitioner Vimalabai Shah and her family approached the High court seeking to quash a case lodged against them on March 1, 2010, for allegedly assaulting and molesting the lady in their building in suburban Mumbai. According to Shah and her family, the complaint was filed in retaliation to a notice

The Kerala high court has ruled that a habeas corpus petition cannot be entertained in the case of missing persons. The court clarified that a writ (court order) of habeas corpus is issued only for producing a detainee and to release him if the detention is illegal. Habeas corpus petitions are often filed by relatives and friends of persons who go missing. The ruling was given by a division bench comprising justices Antony Dominic and Anil K Narendran while considering a habeas corpus petition filed by Rafeeq M of Edathanattukara in Palakkad. Rafeeq alleged that his uncle, 53-year-old Mammed alias Manuppa, was missing since May 18th last year and police had taken no action despite a complaint. He wanted the court to issue a writ of habeas corpus for tracing his uncle. Director general of prosecution T Asaf Ali informed the court that person could not be traced and a final report was filed before Mannarkkad judicial first class magistrate court on September 25th. Declining to iss

Reiterating its view that daily wage workers or those employed on contract have no legal right to be absorbed in service, the Supreme Court has yet again said that unless they are working against a sanctioned post, temporary employees cannot demand regularisation of their services. A bench consisting of Justice B S Chauhan and Justice A K Sikri, passing orders on a labour case that had its origins in Tamil Nadu, cited earlier orders of the apex court in the matter and said temporary service for a certain number of years cannot entitle an employee to claim regularisation of his services. The bench made the ruling in a case pertaining to R Govindaswamy and five others, who were appointed part-time sweepers by the school education department. As their services were not regularised even 10 years after the appointment, they filed writ petitions in the Madras high court in 2012. The same year, the coutrt directed the department to absorb them as fulltime employees, from the date they co

In a seven-year-long legal tussle between wind turbine maker Enercon (India) and its German joint venture partner, Supreme Court ruled that only courts in the country had the right to decide on the issue, even if arbitration takes place abroad. The ruling is seen as a setback for the German partner which had been keen to have the issue settled in a London court. Experts said that the ruling is also likely to have a broader impact with foreign partners now taking a closer look at the fineprint of their agreements. The Supreme Court ruled that the "venue" of an arbitration, which is merely geographical location chosen based on convenience of both parties is not the same as "seat" of arbitration, which decides the appropriate jurisdiction. In 1994, Enercon Gmbh had entered into a joint venture with Mumbai-based Mehra Group to form Enercon (India) to make wind turbines and a technology know-how pact was signed. Initially, the foreign partner had a 51 per cent sta

Only a wife with no sufficient source of permanent income can claim maintenance from her husband, the Bombay high court has ruled. A division bench of Justice Vijaya Kapse-Tahilramani and Justice P N Deshmukh rejected an application by an Andheri resident, Sheela Sharma (61), who had sought Rs 15,000 as monthly maintenance from her husband, Nitin Sharma, who is based in Australia. "It is a well-settled law that only a wife who has no sufficient permanent source of income can claim and get maintenance from her husband who has sufficient means," said the judges. The Sharmas have a son and daughter who are married and settled abroad. The couple has been living separately since 2007. The court pointed out that it had come in evidence that Sheela had invested Rs 50 lakh in fixed deposits and also made investments in mutual funds. She has also invested another Rs 2 lakh that she got from Nitin in a fixed deposit. She resides in a flat that she had bought with Nitin, who said s

A trial court can use powers under the Criminal Procedure Code to initiate criminal proceedings against a person who may not have been booked by police in a case, the Bombay high court has said. Justice Revati Dere ruled that even if a person is not named as an accused in the police charge sheet, at any stage of the trial a court can launch prosecution against him, but added that this power had to be used sparingly. The court's order comes as a relief to Malabar Hill resident Mani Narayan in a 17-year-old case of assault and outraging her modesty. "It is well settled, that once a Magistrate takes cognizance of an offence, he can proceed against those offenders also who have not been sent up by the police and that absence of charge sheet is not a bar. The power of Section 319 of CrPC is not controlled by the result of investigation," said Justice Dere. The court set aside as "premature" a sessions court order which while accepting that such a power was availab

1) Visvesvaraya Technological University vs. ACIT (Karnataka High Court) S. 10 (23C): An institution which regularly makes more than 10% – 15% surplus is existing for profit & is not eligible for exemption S. 10 (23C) (iiiab), (iiiad) and (vi) applies to an institution “existing solely for educational purposes and not for purposes of profit”. As long as “surplus” is “reasonable surplus”, there should not be any difficulty in giving exemption u/s 10(23C) (iiiab) of the Act. There could be surplus every year, but the word “surplus” will have to be read and understood in proper perspective. In our opinion, “Surplus” cannot be more than 10% – 15% so as to meet contingencies or unforeseen expenditure. If an University or an educational institution under the guise of “surplus” start making huge profit, in our opinion, it would cease to exist for net making profit and in that event would not be entitled for exemption under this provision. On facts, the University collects huge sums w

In an important decision that resolves apparent tensions in previous case law, the Supreme Court in Arasmeta Captive Power Company Private Limited v Lafarge India Private Limited continued its recent trend of pro-arbitration decisions and restricted the extent to which courts could interfere and scrutinize the scope of the arbitration agreement when appointing an arbitrator under Section 11 of the Arbitration Act. Background The case concerned various disputes that had arisen between parties to a power purchase agreement. The issue in dispute was whether there were certain sums due and payable under the agreement. The power purchase agreement provided that where the dispute was in the nature of a 'billing dispute', it had to be submitted to an expert for determination; in all other cases, the dispute was to be decided by an arbitral tribunal. The Appellant ("Arasmeta") contended that the dispute amounted to a billing dispute, and sought to appoint an expert to

The Madras high court has directed the state agricultural marketing and agricultural business department to reimburse the medical expenses incurred by a retired government employee for his heart surgery. The Madurai bench of the court ordered the director of the department to make the payout after considering the plea of one N Chidambaram. He approached the high court after his insurance claim under the Tamil Nadu Government Employees Health Fund Scheme was rejected by the authorities on the ground that the hospital where he underwent surgery was not in the list of approved hospitals mentioned in the government order. Chidambaram underwent angioplasty and other coronary procedures in a private hospital in 2009. His medical reimbursement amounted to Rs 1.94 lakh. Chidambaram's writ petition was heard by Justice M M Sundresh who passed orders favouring him. In his order, the judge said that the petitioner's counsel A Haja Mohideen rightly pointed out that the right to medi

The Supreme Court has stated that a person who is accused of theft of electricity can be prosecuted both under the Electricity Act upon a complaint by an officer or on a complaint to the police. In this case, Vishal Agrawal vs Chhattisgarh State Electricity Board, the consuming firm was charged with drawing excessive power unauthorisedly. An officer of the board filed a complaint, but the consumer moved the high court arguing that he was not authorised under the rules. It was rejected, and on appeal, the Supreme Court upheld the high court view. It stated that the authorities could proceed under the Electricity Act or under the Criminal Procedure Code. Article referred:  http://www.business-standard.com/article/opinion/double-whammy-on-power-theft-114020900792_1.html

In a significant ruling the Madras High Court bench has said insurance companies cannot reject medical claims reasoning that the disease for which reimbursement had been sought was caused by the claimant's health problems that existed before they took insurance cover. Allowing an appeal filed by one Manivasagam, Justices R Sudhakar and V M Velumani said there could be several reasons for a pre-existing disease or ailment. The doctors alone could identify them and provide the treatment, they said and ruled that the terms of the mediclaim policy did not permit interpretation of a particular disease. "The insurance companies are strictly bound by the disease or ailment specified in the policy as pre-existing disease. No addition or deletion by way of interpretation can be done. The authority cannot read something more into the terms and conditions of the policy and come to the inference that one disease is relatable to other disease and, therefore mediclaim is rejected ,&quo

A charitable society whose members have renounced the world and have no family can claim compensation if a member dies in a road accident under the Motor Vehicles Act. The society will be deemed to be the legal representative of the deceased member, the Supreme Court held last week in the appeal, Montfort Brothers vs United India Insurance Co. According to the rules of the registered society, whatever a member, called 'brother', receives by way of salary, subsidies, gifts, pension or from insurance or other such benefits belongs to the community as by right and goes into the common purse. In this case, one of the brothers died in an accident in Aizawal when his jeep hit a Maruti Gypsy. The society demanded compensation, and the tribunal allowed it. However, the insurance company moved the Gauhati High Court which upset the order stating that the society had no locus standi. On appeal, the Supreme Court restored the tribunal's order. Article referred: http://www.busines

The Supreme Court last week ruled that though a mortgage of assets of a company which failed to return a loan may have come to an end with their sale, the contract of indemnity with regard to the loan would continue. They are independent contracts. The directors who stood guarantee will still be liable to return the full loan. Therefore, the financial institution which proceeded against the borrower firm can sue it and the guarantors for recovery of the balance of the loan if the sale proceeds are not sufficient to satisfy the claims of the secured creditors. The court reconciled two of its earlier judgments which were apparently contradictory in the new judgment, Deepak Bhandari vs Himachal Pradesh Industrial Development Corporation. In this case, the corporation issued recall notice to the firm in 1990 and sold the assets in 1994. But the amount recovered was not sufficient to meet the claims of the corporation and another secured creditor. Therefore, the directors of the firm w

1) Tirumala Music Centre (P) Ltd vs. ACIT (ITAT Hyderabad) S. 32(1)(ii): Any right (including leasehold rights) which enables carrying on business effectively and profitably is an “intangible asset” & eligible for depreciation S. 32(1)(ii) allows depreciation on “business or commercial rights” The expression “business or commercial rights” means rights obtained for effectively carrying on business or commerce. Commerce is a wider term which encompasses business in its fold. Therefore, any right which is obtained for carrying on business effectively and profitably has to fall within the meaning of the term “intangible asset” (Kotak Forex Brokerage Ltd 33 SOT 237(Mum) & Smifs Securities Ltd 348 ITR 302 (SC) followed) 2) ITO vs. Shailesh D. Shah/ Yusuf R Tanwar vs. ITO (ITAT Mumbai) S. 41(1): Liability outstanding for long period of time is assessable as income (despite no write-back in A/cs) if assessee unable to prove genuineness of liability It is very improbable tha