From arbitration law to labour cases, here’re the key court orders | Business Standard Column

Builders to face more heat in class action

The Supreme Court has widened the scope for class action in the real estate business in the context of consumer disputes. Its judgment came in the case Anjum Hussain vs Intellicity Business Park Ltd, in which some 40 flat buyers moved the National Consumer Commission, alleging that they had paid amounts to the builder but delivery was not given even after four years and the project was still at the excavation stage. They wanted their money back. Later they moved an application to turn their complaint into a class action under the Consumer Protection Act and the Civil Procedure Code. The project consisted not only of residential units, but also shops and offices at Greater Noida, near Delhi. The National Commission dismissed the application to make it a class action suit because under the Consumer Protection Act, only those who buy goods/services for their own use are recognised as consumers. Those who buy property for commercial purpose, except for self-employment, have no right to move consumer fora. The National Commission stated that it was not shown that all those who bought properties in the project wanted to use them for their personal use, without commercial intent. Since the application was dismissed, the buyers moved the Supreme Court. It set aside the commission’s order and remitted the complaint for reconsideration. The judgment declared that a class action could be filed “on behalf of, or for the benefit of, all persons having a common grievance, seeking a common relief and consequently having a community of interest against the same service provider.”

Parent company not party in labour cases

In an industrial dispute, the parent company cannot automatically be made a party if the subsidiary company is an independent corporate entity, the Supreme Court ruled. In this case, Globe Ground India Employees Union vs Lufthansa German Airlines, the subsidiary Indian company was providing ground handling and ancillary services at airports. It formed a joint venture with another company which, in turn, floated another firm for ground handling. It terminated the services of some employees who moved the industrial tribunal. They failed there and so moved the Delhi High Court, where also they did not get a favourable order. They wanted the Supreme Court to make the airlines a party to the dispute. The plea was rejected, observing that if a subsidiary company is an independent corporate entity, and another company is holding shares, that by itself is no ground to implead the parent company.

Insurer must notify exclusion clauses

If the terms of exclusion in an insurance policy are not made known to the insured, the insurer cannot repudiate a claim. This was stated by the Supreme Court in its judgment in Bharat Watch Company vs National Insurance Co. There was a theft at the showroom of a watch shop in Solapur. The owner moved the district forum which awarded him damages. The Maharashtra consumer commission upheld it. But the National Consumer Commission rejected the claim on the ground that there was no sign of forcible entry. Only if there was force, the insurer was liable to compensate the insured, it ruled. There was a clause in the policy to that effect. But the Supreme Court pointed out that such an exclusionary clause was not communicated to the shopkeeper and therefore, it was not valid. The court upheld the compensation.

Central arbitration law over state law

Some states have their own arbitration legislation. This situation has raised legal questions as there could be a conflict between the state law and the central Arbitration and Conciliation Act. In a Madhya Pradesh case recently, there was a difference of opinion among Supreme Court judges and it was resolved by a larger Bench. Last week, the issue arose again in the case Kamladitya Constructions vs State of Bihar in the Patna High Court. The state has its own Bihar Public Works Contract Disputes Arbitration Tribunal Act. Last year, the high court had ordered that the arbitration between the parties should be conducted before the state tribunal according to the state law. This was reviewed in the latest judgment and the high court has now recalled its earlier order and ruled that the central law will apply. Moreover, the state Act passed in 2008 has not received presidential assent.

Plant extracts under pharma law

Two manufacturers of eye drops prescribed for the age-related dimness of vision and diabetic retinopathy warred in the Delhi High Court over their trade names, Gloeye and Glotab. Since they contain plant extracts, though using different ingredients, they are termed as ‘nutraceuticals’ under the Food Safety and Standards Act. The question was whether nutraceutical eye drops ought to be treated on a par with pharmaceuticals. Since both of them have registered their trademarks, the suit was turned into a ‘passing off’ action. In this order, Sun Pharma Laboratories vs Ajanta Pharma, both names started with ‘Glo’. Sun named its medicine Gloeye and the rival Glotab. Sun moved the high court alleging passing off by its rival. The court granted an injunction in favour of it, stating that the rules in relation to pharmaceuticals are applicable in this case and the test in passing off case is “probability or likelihood of confusion and not actual confusion. In the case of medicinal and pharmaceutical products, confusion and deception ought to be avoided…The suffixes EYE and TAB are insufficient to create any distinction between ‘Gloeye’ and ‘Glotab’”.

CGST on school workbook quashed

Taxmen could often be nit-picking, as one finds in the judgment of the Delhi High Court in the case Sonka Publication vs Union of India. The Central Board of Excise and Customs demanded 6 per cent goods and service tax from the publisher of children’s educational books. If a notebook has only lines for improving the handwriting of the student, it is charged the levy. But if there is a mixture of questions in the book and the pupil has to enter short answers or fill up blanks, it becomes a ‘workbook’ or a ‘practice book’, which is exempt from tax. In this case, the revenue department strenuously argued that a workbook is practically a notebook attracting the levy. The court rejected the contention and stated that such books are not notebooks and are exempted under the GST rules. The judgment explained that “the attempt is to help the child think on its own and to enable the teacher to evaluate the child’s output. It cannot be said that these books are for enabling a child to merely copy words to improve its handwriting”.

via From arbitration law to labour cases, here’re the key court orders | Business Standard Column

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