From criminal cases to commercial suits, here’re the key court orders | Business Standard Column

Commercial court isn’t for every dispute

Disputes involving high-value transactions cannot be dressed up as commercial suits and taken to commercial courts for speedy disposal. “The very purpose for which the Commercial Court Act was enacted in 2015 would be defeated if every other suit merely because it is filed before the Commercial Court is entertained,” the Supreme Court stated in its judgment in Ambalal Sarabhai Enterprises vs K S Infraspace LLP. “This is for the reason that the suits which are not actually relating to commercial dispute but being filed merely because of the high value and with the intention of seeking early disposal would only clog the system and block the way for genuine commercial disputes, which may have to be entertained by the commercial courts as intended by the lawmakers.” In this case, the issue was the mortgage of immovable property in Vadodara. The commercial court can hear it only if the property is used exclusively in trade or commerce. That was not so in this case, the court stated while dismissing the appeal.

State must keep its promise of incentives

In two judgments, the Chhattisgarh High Court has ruled that the state cannot turn its back on entrepreneurs, who set up industries based on the promise of concessions in one industrial policy, and re-write the terms when a new policy is announced. In this case, concessions were provided in the 2004-2009 policy and companies made huge investments. But the benefits were unilaterally withdrawn when the 2009-2014 policy started. The terms of the expired policy were also changed to deny or curtail the benefits under the former policy. Two firms, Jindal Steel and Power and Shri Bajrang Power & Ispat challenged the action of the government in the high court. Allowing their petitions, the high court asserted that the government could not justify its action as “rectification of mistake”. The industries are entitled to a legitimate expectation that the promises given to them will be fulfilled. The court asked the government to re-work the extent of benefits payable to the firms within two months. It was allowed to set off the investment subsidy in respect of the arrears, as well as the tax liability.

Criminal cases in road accidents valid

The Supreme Court has set aside the order of the Gauhati High Court issued to subordinate officers to prosecute offenders in motor vehicle accidents only under the provisions of the Motor Vehicles (MV) Act, and not the Indian Penal Code. The high court had issued the direction to officers of Assam, Nagaland, Meghalaya, Manipur, Tripura, Mizoram, and Arunachal Pradesh. The high court had ruled that in cases of road traffic or motor vehicle offences, prosecution under the provisions of the Indian Penal Code (IPC) is illegal. Therefore, the question arose which law would apply — the MV Act, or the IPC. The high court held that criminal law must succumb to the statutory provisions of the MV Act, and any investigation contrary to the same would be unsustainable in law. Appeals were filed by Arunachal Pradesh and Tripura. The Supreme Court ruled that in view of the rise in road accidents due to negligence, both laws would apply. “Both the statutes operate with full vigour in their own independent spheres. Even assuming that some of the provisions of the MV Act and the IPC are overlapping, it cannot be said that the offences under both statutes are incompatible,” the judgment emphasised.

Drinks for club members free from tax

The Supreme Court has ruled that service tax cannot be imposed on members’ clubs for the supply of food and drinks to permanent members. This applies from 2005 onwards, whether clubs are incorporated or not. The court stated so while dismissing the appeals of the revenue authorities against the ruling of the Calcutta High Court involving demand notices issued to Calcutta Club. The club argued that it is not a dealer within the meaning of the West Bengal Sales Tax Act as there is no sale of any goods in the form of food, refreshments, drinks or other consumables to its permanent members. It further contended that the club treated itself as an agent of the permanent members and no consideration was passed for supplies of food, drinks or beverages. There was only reimbursement of the amount by the members and therefore, no sales tax could be levied. The authorities countered it by insisting that profit-motive is unnecessary as the supply of goods by a club to its members fell within the definition of “sale” in law. While rejecting the revenue authorities’ contentions, the Supreme Court also set aside the view of certain high courts and accepted that of Gujarat and Jharkhand.

IBC applicable to tea firm without sanction

In the case of tea companies, it is not necessary to get the government’s consent to initiate proceedings under the Insolvency and Bankruptcy Code (IBC), the Supreme Court declared in its judgment in Duncans Industries vs A J Agrochem. Duncans, which had 14 tea estates, was the corporate debtor in this case. It argued in the National Company Law Appellate Tribunal that according to the Tea Act, the permission of the government was mandatory to initiate winding up of a tea company. Therefore, the action under the IBC initiated by the operational creditor against it was not maintainable as there was no government consent. The argument was rejected by the tribunal. The Supreme Court rejected Duncans’ appeal. It said that the IBC has overriding effect over the Tea Act. The purpose of the IBC was to revive the industry and winding up came as the last resort. The objectives were different. Moreover, the IBC is a later enactment and it would eclipse the old Tea Act.

Duty-free shops at airports saved from GST

The Bombay High Court last week stated that if duty-free shops (DFS), which cater for outgoing or incoming international passengers, are subjected to local taxes like GST by the state, the tax burden will increase and price of goods, which are supposed to be free of taxes and duties, will go up. That would prevent DFS’ in India from competing with those at international airports elsewhere in the world. This will also prejudicially affect our foreign trade and augmentation of foreign exchange. The court thus quashed the show cause notice issued to a Mumbai airport DFS in the case, Flemingo Travel Retail vs Union of India. It further stated that the state action was arbitrary and violative of Article 286 of the Constitution which restricts tax on import and export of goods or services.

via From criminal cases to commercial suits, here’re the key court orders | Business Standard Column

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