Legal News & Views

HDFC to pay for negligence The National Consumer Disputes Commission last week ruled that HDFC Bank was negligent by not verifying the signatures on applications for net banking and electronic money transfer, leading to siphoning of money from the salary account of one Swapan Kumar. According to his complaint, bank officials conniving with a former security guard of the bank, forged his signatures on applications. Ordering compensation, the commission observed that "had the concerned bank manager been careful, he would have rejected the applications… The official at least on noting the difference in signatures was expected to contact the complainant to verify them." Article referred: http://www.business-standard.com/article/opinion/disparity-in-computing-compensation-115112200776_1.html Note: This is a potentially dangerous situation. In this case, the plaintiff was a able prove that he had not applied for net banking. But with the all pervading presence of net based t...

The Tax Court of Cologne has ordered a minority shareholder to pay income and sales tax (case no. 13 K 3023/13). The shareholder was making a business out of systematically raising legal challenges and then being persuaded to withdraw his claims in return for a lavish settlement. The man cashed up to five-figure sums through his attorneys in return for dropping his objection to necessary capital increases, for example. Article referred: http://legalknowledgeportal.com/2015/08/12/dealing-with-legal-challenges-predatory-shareholder-ordered-to-pay-taxes/

Federal Labor Court, decision dated February 10, 2015 – 9 AZR 455/13 Facts of the case The employee was employed since more than 20 years. The employer terminated the employment with immediate effect and additionally gave statutory notice of termination under due respect of the applicable notice period in case the dismissal with immediate effect may be invalid. Furthermore the letter of termination said: “In case that only the statutory notice of termination is effective, you are released from your duty to work with immediate effect, taking into account all leave and overtime claims.” The parties reached a settlement ending the employment 5 weeks after notice was given. Although this period would have sufficed to grant the entire leave, the employee claimed compensation for the leave. The Federal Labor Court sided with the plaintiff. Article referred: http://legalknowledgeportal.com/2015/08/25/dismissal-termination-granting-leave-after-dismissal-with-immediate-effect/

Requirements for the official hearing of an employee Federal Labor Court, decision dated February 12, 2015 – 6 AZR 845/13 High demands have always been placed on terminating an employment relationship by an employer. This is especially true for so-called termination due to suspicion. Even the suspicion of a serious breach of duty can represent important grounds for an extraordinary termination of an employment relationship. A prerequisite is that the suspicion is supported by objective facts and that these suspicions destroy the trust necessary for the continuation of the employment relationship. There is a risk that the employee who will be terminated will be wrongly accused. Accordingly, the employer must make all reasonable efforts to clarify the underlying facts. This also means providing the employee with the opportunity to weigh in and comment on the allegations. Article referred: http://en.buse.de/termination-due-to-suspicion-of-a-criminal-offense.html

The Supreme Court of the Republic of Lithuania developed interpretation of provisions of the Tort law providing more guarantees to the employee injured at work in case when company (the employer) went bankrupt and extended regulations of company director liability. The Supreme Court found that in case of indirect liability (company is liable for the damages caused by its employees) and liquidation of such Company due to bankruptcy the damage incurred to injured person shall not be left because of Company bankruptcy. An employee who was injured at work shall have right to direct his request of damage compensation to the person who caused the damage. In this particular case it is the director of the Company. This interpretation is based on Principles of European Tort Law providing for liability for auxiliaries. Article referred: http://legalknowledgeportal.com/2015/11/13/new-case-law-trend-the-director-of-the-company-shall-be-liable-for-the-damage-suffered-by-the-employee-in-the-ev...

Lingard v. Milne-McIsaac, 2015 ONCA 213 – This Court of Appeal case arises from a motor vehicle accident which occurred on October 28, 2008. The plaintiff sustained injuries when his vehicle was rear-ended by an uninsured vehicle. The Motor Vehicle Accident Report (MVA Report) prepared by the police at the scene of the accident listed the driver, owner and insurance company. On June 29, 2010, the plaintiff’s doctor determined that he would require back surgery as a result of the accident. The plaintiff commenced a Statement of Claim on September 24, 2010 seeking damages from both the driver and owner of the vehicle. On or about January 25, 2011, the plaintiff learned that the defendant vehicle was uninsured and the insurance was cancelled prior to the subject accident. As a result, the plaintiff brought a motion for leave to amend his Statement of Claim to claim uninsured motorist coverage from his insurer, Wawanesa Insurance Company. The motion judge denied the plaintiff leave, findi...

CBDT & Govt are bound by their own interpretation of a statutory provision. Principle of "contemporanea expositio" explained. The word "or" can be interpreted as "and" if the former leads to unintelligible and absurd results It is to be borne in mind that it is the Central Government which has framed the Rules as well as issued the notifications. If the Central Government itself is of the opinion that the rebate is to be allowed on both the forms of excise duties the government is bound thereby and the rule in-question has to interpreted in accord with this understanding of the rule maker itself. Law in this respect is well settled and, therefore, it is not necessary to burden this judgment by quoting from various decisions. Spentex Industries Ltd vs. CCE

A woman has inalienable rights over stridhan and she can claim it even after separation from her husband, the Supreme Court has ruled, saying that denying it would amount to domestic violence making the husband and in-laws liable to face criminal prosecution. As per Hindu law, stridhan is whatever a women receives during her lifetime including all movable, immovable property, gifts etc received prior to marriage, at the time of marriage and during child birth. Article referred: http://timesofindia.indiatimes.com/india/Womencan-claim-stridhan-even-after-separation-from-husband-Supreme-Court/articleshow/49872639.cms

Dealing with the question that the interest received by banks after bills of exchange have been discounted by them and a party defaults and hence has to pay compensation by way of interest as payment is made after the date stipulated in the bill of exchange is liable to tax under the Interest Tax Act, 1974, the bench of Dr. A.K. Sikri and R.F. Nariman, JJ held that the Interest Tax Act, unlike the Income Tax Act, 1961 has focused only on a very narrow taxable event which does not include interest payable on default in payment of amounts due under a discounted bill of exchange. Article referred: http://blog.scconline.com/post/2015/11/24/interest-payable-on-default-in-payment-in-case-of-a-discounted-bill-of-exchange-not-taxable-under-interest-tax-act-1974/

A Punjab and Haryana high court bench has said that women should be given preference over men in compassionate appointments, when both are born of public servants dying in harness. The high court bench of justice Rajiv Narain Raina, while dismissing the plea of a Hoshiarpur youth, said able-bodied men should be left to fend for themselves in the country today in the war of attrition fought daily in the employment market and in court. “This special provision is meant to secure chastity of the weaker sex and that they are not driven to red-light areas, to put it bluntly,” justice Raina said. Article referred: http://www.hindustantimes.com/punjab/women-should-get-preference-over-men-in-compassionate-appointments-hc/story-FrN0zqCYuYL4AuEKVUe7mI.html

The Bombay High Court last week allowed the petition of Italian firm Sideralba SPA seeking the execution of a foreign award in its favour against Mumbai firm Shree Precoated Steels Ltd. There was a series of disputes between the Italian firm, the Mumbai firm, its sister concern in UAE and insurer New India Assurance over dispatch of steel items, some of which were damaged while the ship with the consignment from Mumbai was damaged at Djibouti. The high court rejected the arguments of the Mumbai firm resisting the execution of the award stating that "the findings of facts rendered by the arbitral tribunal cannot be interfered with in this court and it cannot refuse to enforce the foreign award by adjudicating upon the disputes between the parties on merits… According to Swiss law applicable to the parties, the award has achieved finality." The judgment cited several Supreme Court judgments in respect of execution of foreign awards and concluded that enforcement could be refuse...

The common practice of keeping vacancies of chairpersons in tribunals pending for long periods and allowing bureaucrats to act as their heads received another blow, this time from the Gujarat High Court. The State Electricity Regulatory Commission was topless for a long time and one technical member was presiding over it along with a former employee of the electricity board. This was challenged by Utility Users' Welfare Association. Allowing most of its prayers, the high court stated that since "the vacancy of chairperson was not filled up for a long time and a large number of litigants are waiting for adjudication, the state government is directed to undertake the process for making the appointment of chairperson at the earliest, but not later than three months." The court ruled that the powers exercised by the commission are equal to that of a civil court and so a person with judicial background must preside over it as far as possible. Otherwise, it may result in the ex...

A charitable institution is entitled to set apart 25 per cent of the total income for charitable purposes even if it is not spent in the assessment year. It is an option permitted in the Income Tax Act but the limit should be observed. The Supreme Court stated that both the commissioner of appeals and the Andhra Pradesh High Court erred while allowing a larger percentage in the case, CIT vs G R Govindarajulu. The total income was Rs 99 lakh out of which Rs 47 lakh was spent on charity and Rs 32 lakh was set to be spent for charitable purposes in the following year. The assessee claimed that it was therefore entitled to have deduction of the entire amount and its tax liability was nil. The assessment officer did not agree stating that no option for the purpose was exercised before filing the returns and it was not done in a valid manner. Though the appellate authority and the high court accepted that contention, the Supreme Court pointed out that Rs 32 lakh was more than 25 per cent of ...

The Bombay High Court last week ruled that expenses incurred by a professional going abroad for treatment of eye is not eligible for income tax deduction. The assessee in this case, Dhimant Thakar vs CIT, was a lawyer and he argued that good vision was important for pursuing his profession. His claim for the assessment year 1986-87 was rejected by the revenue authorities. His appeal was also rejected by the Commissioner of Income Tax (Appeals) who observed that if the logic of the lawyer was stretched, it would mean that even expenditure incurred on food to preserve oneself should be treated as allowable under Section 37(1) of the Income Tax Act as being incurred for business or profession. On appeal, the high court upheld the view of the authorities observing that "eyes are essential not only for the purpose of business or profession but for purposes other than these which are so many. It is therefore clear that the said expenditure as claimed by the professional is not in th...

If an arbitrator nominated by the contesting parties withdraws from the proceedings, the court can select a substitute arbitrator of its own choice. "It is the court's duty to give effect to the policy of law, that is to promote efficacy of arbitration," the Supreme Court has stated in its judgment, Shailesh vs Mohan. In this case, the parties selected a retired judge of the Supreme Court from a panel of names but she resigned midway. The parties could not agree on a new name and the matter went back to the Bombay high court. It substituted one of its retired judges in her place. This was opposed by one of the parties, which argued that once the arbitrator withdraws, the agreement ended and the court could not name another. Rejecting this argument, the Supreme Court stated that under Section 15(2) of the Arbitration and Conciliation Act, when the mandate of an arbitrator terminates, a substitute arbitrator "shall" be appointed. Arbitration must go on. For e...

The Bombay High Court has ruled that information regarding development plans of a building company can be disclosed by the municipal authorities on an application under the Right to Information Act. In this case, Ferani Hotels Ltd and Nusli Wadia, the two parties had an agreement to develop certain lands in Mumbai. The relationship turned sour and the agreement was terminated, leading to a suit in the high court. Meanwhile, Wadia moved an application before the public information officer of the Municipal Corporation of Greater Mumbai seeking details of the architectural plans and reports submitted by the company to the municipal commissioner and his approval. When the information was denied, Wadia moved the state information commissioner, who ordered the release of the information. The company appealed to the high court, arguing that the information sought did not serve any social or public interest, it was only for private interest. Moreover, it would harm its business interest and wo...

The Supreme Court has ruled that the government cannot amend its export-import policy to take away rights already accrued to exporters under a specific scheme. A special scheme related to their performance was announced in 2004 to boost exports by giving incentives on some items. Later it was amended by removing certain items. This spawned a rash of petitions in various high courts, which took different stands, especially Bombay and Gujarat high courts. All the parties appealed to the Supreme Court. In its common judgment, DGFT vs Kanak Exports, the court stated the government can decide policy. However, if the government realised that the earlier policy was "ill-considered" it was free to withdraw it but it could do so only prospectively, but not from a back date. "Duty credit entitlement cannot be snatched from exporters by making the amendment retrospectively." Article referred: http://www.business-standard.com/article/opinion/compulsory-pre-emptive-buying-held...

When several persons are guilty of causing a road accident leading to death or injury, the claim for compensation can be made against each,or all of them. The claimant has a choice. The persons liable can later sue each other for their share of liability after paying the amount to the claimant. This rule was reiterated in the case, Kamlesh vs Attar Singh, by the Supreme Court. A speeding car hit an equally negligent tempo killing a passenger in the latter. His widow, mother and three minor children sued the drivers of both vehicles, the owner of the car and its insurance company. The tribunal found that they were all guilty of 'composite negligence' and they should pay Rs 5.81 lakh to the family. The tempo driver appealed to the Punjab & Haryana High Court, which set aside the award made by the tribunal. The family appealed to the Supreme Court and it restored the order of the tribunal, stating that the high court had not assessed the evidence properly. Article referred: ...

After an award is passed in an arbitration, there cannot be any examination or cross-examination of witnesses in court on an allegation of legal misconduct by the arbitrator. The court can only examine the records of the arbitration proceedings, the Supreme Court has stated in its judgment, Cochin Shipyard Ltd vs Apeejay Shipping Ltd. "Examination of any witness in court is impermissible to substantiate legal misconduct on the part of the arbitrator. It is because it must be palpable from the proceedings," the court said. In this case, the government undertaking agreed to build a ship for Apeejay. Disputes arose between them which were referred to arbitration by a retired Supreme Court judge. The shipyard moved the civil judge to execute the award of 2009. Apeejay then wanted to examine the arbitrator and the general manager (GM) on its allegation that the arbitrator was guilty of legal misconduct (not moral misconduct, which is different in law). The judge rejected it. The K...

In a collaboration agreement between the holder of land and the developer, there need not exist a sale of the property. The income tax authorities cannot assume there is a transfer and order compulsory pre-emptive purchase under Section 269UD of the Income Tax Act. This provision intends to prevent tax evasion by undervaluation of property. In this judgment delivered by the Supreme Court last fortnight, Unitech Ltd vs Union of India, the building company had an agreement with Vidarbha Engineering Industries, lessee of land received from the Nagpur Improvement Trust, to raise a commercial complex. The builder will get 78 per cent of the developed area and the lessee will retain 22 per cent as consideration. The revenue authorities issued a show cause notice to Unitech accusing it of undervaluation of property. The Bombay High Court dismissed the challenge of Unitech, leading to the appeal. The Supreme Court stated that the tax authority as well as the high court made decisions on wrong ...

The Supreme Court has ruled that names of gods or holy books cannot be trademarked to sell goods and services. A bench of Justice Ranjan Gogoi and Justice N V Ramana also said that allowing such a thing could offend people’s sensibilities. Article referred: http://indianexpress.com/article/india/india-news-india/supreme-court-gods-religious-texts-cant-be-trademarked/

Prosecution has been using electronic evidence to seek conviction of accused for a decade but for the first time, the Supreme Court on Monday permitted an accused to bring on record taped telephonic conversations to prove his innocence in a child sexual abuse case. Article referred: http://timesofindia.indiatimes.com/india/SC-allows-accused-to-produce-taped-phone-conversation-as-defence/articleshow/49914539.cms

The Madras High court today said as per 'dharma', sons are duty-bound to maintain the mother and directed a man settled in Canada and earning Rs. 3 lakh a month, to provide his mother living in India with Rs. 15,000 a month. Disposing of a criminal revision petition filed by the first son of the woman, Pon Devaki, Justice S Vimala of the Court's Madurai Bench, said the "right of the mother to expect her children to maintain (her) is not only statutory right, constitutional right, fundamental right, natural and moral right but also human right." Article referred: http://www.ndtv.com/tamil-nadu-news/sons-are-duty-bound-to-look-after-mother-says-madras-high-court-1245298

NCDRC has upheld the repudiation of claim by the insurance company in a case of theft of cash on the ground that complainant (appellant) failed to take reasonable care for protection of cash by leaving the doors of the car unlocked. Article referred: http://blog.scconline.com/post/2015/11/19/repudiation-of-claim-upheld-as-complainant-failed-to-take-reasonable-steps-to-safeguard-insured-property/

In a significant ruling, the Delhi High Court has held that the invocation of a bank guarantee can be stopped only if it is proved that there was fraud or irretrievable injury or injustice in the course of a commercial dealing. Allowing an appeal against a Single Judge's order, a Division Bench said in a recent judgment that a bank guarantee has to be respected irrespective of the disputes pending between the parties. The existence of a dispute between the parties with regard to an underlying contract cannot be a ground for issuing an injunction to restrain the enforcement of the bank guarantee. Article referred: http://www.thehindu.com/news/cities/Delhi/bank-guarantee-can-be-stopped-only-on-fraud-says-high-court/article7875157.ece

The right to maintenance of a Hindu widow is not a "mere formality" but a spiritual and moral right that can be judicially enforced upon by claiming "absolute right" on the property given to her for sustaining herself, the Supreme Court has ruled. A bench, headed by Justice M Y Eqbal, while upholding a Andhra Pradesh high court verdict in favour of a widow who had transferred the property willed to her by her husband for her lifetime to a relative, said it was the woman's "absolute right" and she was free to bequeath the property. Article referred: http://timesofindia.indiatimes.com/india/Widows-have-right-on-maintenance-property-SC/articleshow/49776259.cms

Just because a man earns a high salary, it does not mean that the family is not dependent on a wife's salary, the Bombay high court has ruled. A division bench of Justices Abhay Oka and Revati Dere directed New India Assurance to pay around Rs 47 lakh in compensation along with 7% interest to Sangli resident Sunil Garud (52) and his two young sons for the death of his wife in a car accident. Article referred: http://timesofindia.indiatimes.com/city/mumbai/If-hubby-earns-a-lot-family-still-depends-on-wife-Bombay-HC/articleshow/49649874.cms

The questions that came before the bench of H.L. Dattu, CJ and Arun Mishra, J were whether in the wake of lease agreement entered into by registered owner with Karnataka State Road Transport Corporation (KSRTC), the registered owner and insurer along with KSRTC can be fastened with the liability to make payment to the claimants and that whether KSRTC can recover the amount from registered owner and its entitlement to seek indemnification from insurer. Taking note of the definition of the term ‘owner’ as defined under Section 2(30) of the Motor Vehicle Act, 1988, the Court said that under the MV Act, the owner means a registered owner and where the agreement on hire-purchase or an agreement of hypothecation has been entered into or lease agreement, the person in possession of the vehicle is treated as an owner. It was held that the KSRTC being in actual control of the vehicle would also be liable to make the compensation, however, it can recover the amount from the registered owner or...

In a ruling that will restrict the right of women seeking equal share in ancestral property, the Supreme Court has said that the 2005 amendment in Hindu law will not give property rights to a daughter if the father died before the amendment came into force. The court held that the amended provisions of the Hindu Succession (Amendment) Act, 2005, could not have retrospective effect despite it being a social legislation. The court said the father would have had to be alive on September 9, 2005, if the daughter were to become a co-sharer with her male siblings. Article referred: http://indianexpress.com/article/india/india-news-india/supreme-court-sets-2005-cut-off-on-women-right-to-ancestral-property/

Expenses incurred for getting eyes treated cannot be claimed as a professional deduction under the Income Tax (IT) law, the Bombay high court has said. A lawyer had undergone eye treatment in the US about 20 years ago and asked IT authorities to treat it as a professional deduction. Disagreeing with him, the court gave reference of a few of its lawyers, saying though they were visually impaired they could carry out their work efficiently. The judges also observed that eyes are important for the human body and essential for efficient survival of a human being. Eyes are, therefore, not only essential for carrying out a business or profession, but also for doing a lot of other things. Article referred: http://indianexpress.com/article/cities/mumbai/eye-treatment-cant-be-considered-professional-expenditure-bombay-high-court/

Dealing with the question relating to admissibility of confessional statement made by an accused under Section 27 of the Evidence Act, 1872, the Court explained the law by stating that Section 25 of the Evidence Act provides that no confession made to a Police Officer shall be proved as against a person accused of any offence. Section 26 provides that no confession made by any person while he is in the custody of a police officer, unless it be made in the immediate presence of a Magistrate, shall be proved as against such person. Section 27 is in the form of a proviso, it lays down how much of an information received from accused may be proved. The bench of H.L. Dattu, CJ and Arun Mishra, J further explained that for application of section 27 of Evidence Act, admissible portion of confessional statement has to be found as to a fact which were the immediate cause of the discovery and only that would be part of legal evidence and not the rest. In a statement, if something new is discove...

In cases of sale of flats, transfer of title after the issuance of occupancy certificate will not attract service tax. The Central Board of Excise and Customs (CBEC) issued the clarification in relation cases to pertaining to areas under the jurisdiction of Municipal Corporation of Greater Mumbai - Brihanmumbai Municipal Corporation (BMC). "...it has been conveyed to the Service Tax Authorities in Mumbai (on October 23, 2015) that sale of flats/dwellings etc., where the entire consideration is received after issue of occupancy certificate by BMC, leading to a mere transfer of title in immovable property, falls outside the definition of 'Service'" under the Finance Act, 1994, and is "therefore, not taxable", the CBEC said. The board in the Finance Ministry said the clarification was issued to resolve a long standing issue relating to levy of service tax on sale of flats/dwellings etc after issue of occupancy certificate but before issue of completion ce...

In what could benefit companies making acquisitions and internal restructuring, a recent Supreme Court judgement has given clarity on whether tax losses could be allowed in the event of a change of shareholding beyond 51%. A problem that many Indian companies faced was the uncertainty on whether the buyer in a transaction — acquisition or restructuring of a group company — can add tax losses. The income tax department's view was that tax losses caused by the seller cannot be added as cost to the transaction. This was struck down by the SC. In a case involving Amco Power Systems, the SC has allowed the company to accrue tax losses. Industry trackers said the whole debate was around Section 79 of the Income Tax Act, where the dispute was whether tax losses could be carried forward. There are cases for and against on interpretation of beneficial owner versus registered shareholder for the purposes of carrying forward tax losses under the section. The recent judgement is the fi...

It took the judiciary 24 years to declare that an air conditioner makes a room cool and does not turn it into a cold storage. This happened in a case pertaining to a city-based trading firm, Gokaldas Trading Co, which is a commission agent of chocolates, tomato ketchup and other food items. This firm had 10 employees and an AC was installed in the manager's room. Employees State Insurance Corporation (ESIC) declared it a factory saying it had more than 10 employees and was carrying out manufacturing with the aid of power. It showed an AC as the instrument used in the manufacturing activity. ESIC concluded that according to Section 2K(vi) of the Factories Act, by employing more than 10 persons and preserving and storing food articles in a cold storage, which is a manufacturing activity, the firm fell in the category of a factory. With this, ESIC sent a notice to the firm, asking it to pay Rs 68,278 as tax from 1983 and 1988. After due communication with ESIC, the firm filed ...