M J Antony: Insurer told to pay first

Last Updated: Mon, Jan 07, 2013 06:22 hrs

The insurance company must first pay the victim of a road accident and then it may recover the amount from the owner of the guilty vehicle in a third party insurance case, the Supreme Court stated last week. In this case, the injured person was travelling in a goods vehicle as a spare driver, though he was employed as a driver of another vehicle of the owner of the insured vehicle. When the spare driver sued the insurance company, the latter argued that he was travelling as a gratuitous passenger in a goods vehicle and therefore the risk was not covered by the policy. Moreover, he was not in employment when the accident occurred, which permanently disabled him. The tribunal and the Kerala high court rejected its plea and awarded compensation.

When the appeal case, National Insurance Company vs Saju Paul was taken up, the Supreme Court asked the company to deposit the compensation money in a fixed deposit. Since the case is 10 years old, the court allowed the victim to withdraw the money and the insurance company was allowed to recover it from the owner of the vehicle. Whether such an arrangement is permissible under the Motor Vehicles Act is doubted and has been referred to a larger bench five years ago. Till there is a final decision, the insurance companies have to recover the money they paid from the owners in such situation, the court said.

Pre-deposit in arbitration awards
The Supreme Court has set aside the ruling of the Andhra Pradesh high court which had held that under Section 34 of the Arbitration and Conciliation Act the party which had to pay had to deposit 75 per cent of the amount awarded or the appeal will be dismissed for non-compliance of Section 7 of the Interest on Delayed Payments to Small-Scale and Ancillary Industrial Undertakings Act, 1993. While allowing the appeal case, M/s Sri Paravathi Parmeshwar Cables and others vs A.P. Transmission Corporation Ltd, the Supreme Court disagreed with the proposition that 75 per cent of the awarded amount was required to be deposited before the application under the Arbitration Act could be heard.

Tax on royalty to foreign firm
The Delhi high court last week allowed three writ petitions of Xerox Modicorp against the reopening of the income tax assessment against it. The reason for reopening the assessment under Section 147 of the Income Tax as given by the Deputy Commissioner was that the company had claimed and was allowed an expenditure of Rs 438.59 lakh on account of royalty under a technical services agreement paid to its parent company in England in foreign exchange in lieu of rendering technical assistance. Since this expenditure has provided the company a benefit of enduring nature, this expenditure ought to have been treated as capital expenditure. The high court noted that under the law, reassessment was permissible after four years only under certain circumstances.

In this case, for the first time in the court, the revenue authorities took the stand that the company had not furnished the royalty agreements in the course of the assessment proceedings. "It is settled law that the assessing authority cannot keep improving his case from time to time and that the reassessment proceedings have to stand or fall on the basis of what was stated in the reasons recorded and nothing more," the high court said while quashing the reassessment orders. The judgment added that the department's submission before the court that the facts relating to the past years disclosed that the Indian company was wholly dependent on the parent company for the technical inputs goes against the revenue authorities' stand, in the sense that it was always known to them that the company did not develop any technology of its own but was dependent on the technology from the parent company.

Challenge against tender rejected
The Bombay High Court last week dismissed the petition of Vidarbha Infotech Ltd against the decision of the Pune Municipal Corporation to give a project for computerisation of 38 octroi posts and the octroi department to Priyatech Solutions Ltd. The high court stated the consortium, which claimed that it had qualified personnel for undertaking of the project, could not prove that they were technically eligible. The project had already been given to the rival firm. Since the work is already in progress, the court did not want to disturb it.

Damages for delay in paying loan
The National Consumer Commission last week directed the Tamil Nadu Industrial Investment Corporation Limited to pay Rs 26 lakh to M/s Packer Sea Food Ltd for delay in disbursement of a loan. The delay resulted in losses to the firm which was setting up a marine products processing unit. Even after two and a half years, the sanctioned loan was not fully provided, and therefore, there was deficiency in service as defined in the Consumer Protection Act. So the state investment corporation was liable to pay compensation for the loss and harassment suffered by the borrower, the judgment said.

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