From arbitration to pulses importers lose case, here’re key court orders | Business Standard News

Clipped from: https://www.business-standard.com/article/current-affairs/from-arbitration-to-pulses-importers-lose-case-here-re-key-court-orders-120090201780_1.html

The Supreme Court ruled last week that the police cannot file FIR or investigate a case of violation of the Drugs and Cosmetics Act

It is the drug inspector who has the power

Misrepresentation charge in arbitration

When contracting parties fall out with each other, a frequent allegation is that the agreement was induced by fraud or misrepresentation. One side wants to scrap the contract altogether for that reason. If there is an arbitration clause, that will also go with the contract. The Supreme Court dealt with such an issue last fortnight in the context of an international arbitration conducted in Singapore. The question was whether an arbitration clause could be acted upon when one party alleges that it entered into the agreement by fraudulent inducements by the other. This problem arose in the case, Avitel Post Studioz Ltd vs HSBC Pi Holding (Mauritius), in which the latter alleged that it had extended a loan to the Avitel group on misrepresentation of facts and fraud. The group included Avitel India, Avitel Mauritius and Avitel Dubai. They represented to HSBC that it had a project with BBC, but it turned out to be untrue. HSBC invoked the arbitration clause, which named Singapore as the venue applying the law there. The award of the tribunal went against the Avitel group, leading to a slew of litigation in the Bombay High Court and in district courts. The Supreme Court allowed those suits to continue while observing that “a reading of the foreign final award in this case would show that a strong prima facie case has indeed been made out as the award holds the BBC transaction as a basis on which the contract was entered into and the USD 60 million paid by HSBC, would clearly fall within fraudulent inducement to enter into a contract under Section 17 of the Contract Act. Such a contract would be voidable at the instance of HSBC.”

Pulses importers lose case against curbs

Importers of pulses lost their case against quantitative restrictions imposed by the Director General of Foreign Trade when the Supreme Court rejected their challenge to the amended import policy. Earlier, they had moved over hundred writ petitions in several high courts, with varying result. Some courts had stayed the notifications, allowing imports. The government moved the Supreme Court for a final answer. The government submitted that it issued four notifications to protect the interest of domestic farmers since the crops were very good. Moreover, they might be tempted to sell at distress price in view of the pandemic. In its judgment, Union of India vs Agricas LLP, the court upheld the government stand. It also noted that the importers are traders and not “actual users” who are granted licences under the rules.

Police can’t take action under Drugs Act

The Supreme Court ruled last week that the police cannot file FIR or investigate a case of violation of the Drugs and Cosmetics Act. It is the drug inspector who has the power. There was confusion in the courts below on this point. The SC clarified the law in its judgment, Union of India vs Ashok Kumar. It further ordered the police to make over the cases against spurious medicines to the drug inspectors who would pursue the prosecution of offenders.

Court stays out of credit ratings

The credit rating of a company is usually rendered after taking into account all positive or negative factors and it is an opinion rendered by experts in the field. A court will not interfere unless the opinion is “perverse, arbitrary and mala fide”. A court cannot also stop the rating agency from disclosing or publishing it. So stated the Delhi High Court in its judgment in the case, Jindal Power Ltd vs ICRA Ltd. JPL filed a suit requesting the court to quash its downgrading from BBB+ (stable outlook) to BBB (negative outlook) by Icra, which is a rating agency following the SEBI (Credit Rating Agencies) Regulations. Both parties had signed an agreement in 2016 on rating and there was no dispute for the past few years. However after the economic stress and the Covid pandemic, several issues were raised by the rating agency. Rejecting the stand of JPL, the court observed that “the evidentiary value of opinion of an expert has to be decided on the basis of the credibility of the expert and the relevant facts supporting the opinion. The emphasis has to be on the data on the basis of which opinion is formed. Further, if the opinion is intelligible, convincing, and based on reasoning, no decree declaring the said opinion as null and void, unenforceable and ineffective can be passed”.

Court separates IT wings fighting each other

Despite the Supreme Court admonishing government entities several times for suing each other, wasting public money and judicial time, the evil persists. Last week, the Delhi High Court delivered a judgment in the case, Commissioner of Income Tax vs Authority for Advance Ruling, Income Tax. CIT filed a writ petition claiming that it alone had jurisdiction in deciding a tax matter involving a foreign firm, Crocs Europe BV. It argued that its sister organisation, AAR, passed an order violating the jurisdictional bar under Section 245R(2) of the Income Tax Act. Dismissing the petition, the court stated that the questions before the two income tax authorities were different. CIT was looking into discrepancy in the declared income during random scrutiny. AAR was looking into royalty for use of intellectual property in the context of double taxation avoidance treaty with the Netherlands.

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