M J Antony: DRT auction rule mandatory

Last Updated: Sun, Feb 03, 2013 20:12 hrs

The Supreme Court has ruled that the provision for deposit of 25 per cent of the purchase money in an auction sale under the Debt Recovery Act (DRT) is mandatory and the recovery officer cannot relax it. According to the law, if there is a default on this, the property shall be resold immediately. The court thus dismissed the appeal of the purchaser in the case, C N Paramasivan vs Sunrise Plaza, against the Madras High Court judgment. In this case, which was fought over two decades, the partners of a firm defaulted in repaying the loan advanced by Indian Bank. The property was sold in auction, which was challenged by the partners for violation of the rules. The debt recovery appellate tribunal held that the purchasers did not act bona fide and set aside the sale and asked the partners to deposit the entire loan amount. The buyer challenged that order, contending that the rule to deposit was not mandatory, but only directory. The high court rejected his petition, and the Supreme Court dismissed the appeal.

Customs tribunal order quashed
The Supreme Court has set aside the order of the Customs and Excise Appellate Tribunal upholding the levy of duty and penalty for the import of furnace oil by Uniworth Textiles Ltd. The company had argued that the demand was delayed and therefore not valid. The tribunal reasoned that since the company procured furnace oil not for its own captive plant but for a sister concern, it could not claim exemption from payment of duty. The Supreme Court stated that the tribunal was wrong and its conclusion that non-payment was equivalent to collusion or willful misstatement was untenable. It rejected the revenue authorities contention that the act of the company was willful and mala fide. It is a serious allegation requiring high order of credibility and the authorities have not discharged this burden of proof.

Forced to submit resignation
An employee of Atlas Cycle (Haryana) Ltd, who was allegedly beaten up, given electric shocks and forced to write his resignation letter was ordered to be reinstated by the Punjab and Haryana High Court, and that order was upheld last week by the Supreme Court. The worker was in service since 1977 and his resignation without any acceptable reason and without any monetary incentive should be considered in context. He complained about the forcible resignation within a day and he wrote to the chief minister and others. However, these factors were not considered by the labour court and it dismissed his complaint. On appeal, the high court passed the order of reinstatement with 25 per cent back wages. The Supreme Court stated that since the labour court overlooked material evidence on record, the high court was justified in interfering with the finding of facts by the labour court.

Injunction set aside
The Bombay High Court last week set aside the order of interim relief granted by the arbitrator in the dispute between Moser Baer Entertainment Ltd and Goldmines Telefilms Ltd. According to a three-year contract, Goldmines granted exclusive rights to Moser Baer to manufacture, record, copy, sell and distribute various films through DVDs, VDCs and all devices for the home video markets in the country. The dispute arose when Moser Baer complained that though Goldmines was required to deliver source material for 305 films it received material only for 51 films. The disputes were referred to arbitration and the arbitrator restrained Moser Baer from marketing VCDs, DVDs, etc until the final award. The high court stated that the arbitrator, at the preliminary stage itself, interpreted the terms of the contract and “finally concluded the rights and obligations of the party.” This kind of injunction was not permissible under the Arbitration and Conciliation Act, the high court said while asking the arbitrator to get on with the proceedings.

Scope of consumer complaint
The National Consumer Commission ruled last week that even if a work contract is terminated for breach of terms, a consumer complaint can be moved before it. In this case, Poonam Chambers vs Aluplex India Ltd, the former filed a complaint for recovery of damages for the work left unfinished by the latter. The contract was terminated and the work was got completed through other agencies. When Poonam Chambers moved the Maharashtra state consumer commission, it dismissed the complaint at admission stage on the ground that the contract was terminated earlier to filing of complaint. Hence, no relationship of consumer and service provider subsisted between the parties and there is no consumer dispute under Consumer Protection Act. On appeal, the national commission set aside the state commission’s judgment and stated that “once the parties entered into a contract to provide service and the latter stopped work, the aggrieved party is entitled to file claim on account of deficiency of service even after termination of contract. Merely by termination of work contract it cannot be inferred that there was no relationship of consumer and service provider between the parties.”

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