PAYMENT OF WAGES
DURING LOCKDOWN- LEGALITY OF THE MHA ORDERS UNDER THE DMA ACT, 2005
In Ficus Pax Pvt. Ltd. v. Union of
India &Ors., the Supreme Court has been called upon to examine the
legality of the Orders dated 20.3.2020 issued by the Ministry of Labour and
Employment and 29.3.2020 issued by the Ministry of Home Affairs, Govt. of India
whereby directions were issued to all States under Section 10(2)(l) of the
Disaster Management Act, 2005 to ensure
that all establishments to continue to pay wages during the period of the
lockdown, irrespective of whether the employees attend work or not.
The orders are to be tested on the anvil
of Articles 14 and 19(1)(g) of the Constitution of India, on the ground of
being contrary to the principle of Equal Work Equal Pay and No Work No Pay.
Among other grounds, the availability of Section 10(2)(l) to impose financial
obligations on private employers has also been questioned. The constitutional
validity of the said provision itself is also under challenge.
The said orders have since been
withdrawn by the Central Government (w.e.f. 18.5.2020). The question that
remains is the applicability and validity of the said orders during the period
of their operation. The Supreme Court has called upon the Central Government to
file its detailed response to the petitions, and in the meanwhile issued the
following interim directions:
(i)
The interim direction prohibiting any
coercive action for non compliance of the orders has been continued;
(ii)
Private establishments have been urged
to enter into a negotiated settlement with their employees for payment of wages
during the period of lockdown, and if such a settlement is arrived at, the same
be given effect to notwithstanding the orders dated 20.3.2020 and 29.3.2020;
(iii)
The private establishments to permit the
workers and employees to continue to work, without regard to their demand for
payment during the period of lockdown.
The petitions have now been listed for
hearing in the last week of July.
PERIOD OF LIMITATION UNDER
ARTICLE 113 IS TO BE RECKONED FROM THE DATE OF ACCRUAL OF THE CAUSE OF ACTION,
AND NOT THE DATE OF FIRST ACCRUAL OF CAUSE OF ACTION
Shakti Bhog Food Industries Ltd. v. The
Central Bank of India &Anr. arose out of a
suit initiated by the Appellant against the Respondent for rendition of
accounts in relation to interest charged by the Respondent on the current
account of the Appellant as also for recovery of the excess amount charged by
the Respondent. The suit plaint came to be rejected under Order VII Rule 11 of
the Civil Procedure Code, 1908 as being barred by limitation.
The Appellant’s reference to the date of
rejection of its’ representation to the Respondent as the commencement of the
period of limitation was rejected by the Courts below relying, inter alia
on the decisions of the Supreme Court wherein it was held that the
correspondence between parties could not be relied upon to extend the period of
limitation.
The Supreme Court examined the plain
meaning of Article 113 of the Schedule to the Limitation Act, 1963 wherein the
expression used is ‘when the right to sue accrues’ and not ‘when the
right to sue first accrues’. It was found that in the present facts,
the rejection of the representation of the Appellant by the Respondent would be
the date of accrual of cause of action for the purpose of Article 113 (being a
firm denial by the Bank) since until then the Appellant had a sanguine hope
of a favourable resolution. The decisions of the Court relied upon by the
Respondent were distinguished since they did not deal with Article 58 of the
Schedule.
The Court further held that the case was
not one which was fit for rejection of plaint under Order VII Rule 11(d) of the
CPC since the question of limitation is a mixed question of law and facts.
SCOPE OF THE ‘NATURAL JUSTICE’
GROUND UNDER SECTION 48(1)(b) OF THE ARBITRATION AND CONCILIATION ACT, 1996
In M/s Centrotrade Minerals and
Metals Inc. v. Hindustan Copper Ltd., a Bench of three Hon’ble Judges
of the Court heard and disposed off a reference arising from a difference of
opinion of two Hon’ble Judges in the matter of enforcement of a foreign award.
The arbitration clause between the parties provided for a two tier arbitration
procedure, where the arbitration award of the Indian arbitral tribunal was to
be tested by the ICC Arbitral Tribunal in London.
The difference of opinion between the
two Hon’ble Judges on the question of validity of such an arbitration clause
was answered by three Judges of the Court in 2017. The only question remaining
for examination was whether the Respondent in the present case (the judgment
debtor under the award) was granted sufficient opportunity of hearing in terms
of Section 48(1)(b).
The Court examined a plethora of case
law on the ‘inability of a party to present its case’ as a ground for resisting
enforcement of the award, and relied upon and reiterated the ratio in Vijay
Karia v. PrsymianCavi E Sistemi SRL that a good working test to determine
whether a party has been unable to present his case is to see whether factors
outside the party’s control have combined to deny the party a fair hearing.
Applying the test to the facts of the case, it was found that matters could not
be said to be outside the control of the Respondent so as for it to be able to
claim ‘inability to present its case’.
The Court also held that the ‘remand’ of
a proceedings under Section 48 to the arbitral tribunal to deliver a fresh award,
as had been done by one of the two Hon’ble Judges, was beyond the powers of the
Court under Section 48.
TAXABLE EVENT OF SALE IN A WORKS
CONTRACT IS THE USE OF GOODS/MATERIALS IN THE EXECUTION OF THE CONTRACT
State of Orissa v. M/s B. Engineers
& Builders Ltd. arose from a writ petition filed by the
Respondent before the High Court, challenging certain circulars of the
Appellant whereby the benefit of reimbursement of sales tax paid during the
course of execution of the works contract by the Respondent, and granted under
a clause of the General Conditions of Contract between the parties, was sought
to be withdrawn by way of the said circulars.
The case of the Appellant was that since
the relevant clause in the GCC provided for reimbursement of Central and State
sales tax and other taxes on completed items of works as may be levied and paid
by the employer on proof of payment and production of assessment certificate,
and since the contract in question was a works contract wherein the ‘completed
item of work’ was not assessable to sales tax, the same was not reimbursable to
the Respondent.
The Court examined the Constitutional
history of Article 366(29-A)(b) whereby the concept of a deemed sale was
introduced in works contracts, thereby empowering the States to tax the sale of
goods involved in the execution of a works contract. Thus, even in the case of
the contract of the Respondent, the sales tax levied and paid by the Respondent
was reimbursable. This is because sales tax was levied and paid on the goods
involved in the execution of the works contract (as was also factually
observed). For the purposes of sales tax in a works contract, the taxable event
was the use of materials involved in the execution of the works contract.
DEDUCTION UNDER SECTION 80-O OF
THE INCOME TAX ACT: LIBERAL CONSTRUCTION NOT MERITED UNLESS THE THRESHOLD
REQUIREMENT FOR APPLICABILITY IS SATISFIED
In Ramnath & Co. v. The
Commissioner of Income Tax, the Court was called upon to examine the
claim by the Appellant for deduction, under Section 80-O of the Income Tax Act,
1961, of the income received by the Appellant in foreign exchange, for services
provided by the Appellant to foreign enterprises. It was the case of the
Revenue that the Appellant was merely an agent of the foreign company, and was
thus not entitled to a deduction.
Among others, it was the argument of the
Appellant that since the object of the said provision is to incentivise
earnings in foreign exchange, the provision ought to be liberally construed. On
facts, the Appellant relied on the terms of its agreement with the foreign
enterprise to show that the agreement required provision of an ongoing service,
and was not merely a contract whereby the Appellant was appointed as a
procuring agent in India.
The first argument was rejected by the
Court while relying on the Constitution Bench decision in Commissioner of
Customs (Import), Mumbai v. Dilip Kumar & Co. and Ors., wherein it was
held that exemption notifications are to be construed strictly. Holding that
exemptions, deductions etc. all belonged to the species of incentive, the Court
concluded that the ratio in Dilip Kumar was applicable. It was only once
the eligibility of the assessee for the incentive was satisfied, that the
provision could be construed liberally.
On facts, on a reading of the provisions
of the agreement, the Court found that the appellant merely acted as agent of
the foreign enterprise, and was thus not entitled to claim the deduction.
ELECTRICITY DUES, BEING STATUTORY
DUES CANNOT BE WAIVED- AUCTION PURCHASER IN SARFAESI AUCTION HELD LIABLE TO
CLEAR PREVIOUS DUES ON PROPERTY
In Telangana State Southern Power
Distribution Company Ltd. &Anr. v. Srigdhaa Beverages the question
was whether an auction purchaser who had purchased a unit of a debtor in an
auction conducted under the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI”) could be
saddled with the liability on account of electricity dues of the said debtor.
In the facts, the Court found that the
auction notice itself provided for sale of the property on ‘as is where us
whatever there is and without recourse basis’, and also specifically referred
to electricity dues. In case of an auction notice as in the present case, it
was incumbent upon the prospective bidder to make necessary enquiries to
ascertain the exact status of the dues.
Additionally, the Court reiterated that
electricity dues partake a statutory character and the licence or the agreement
were merely for the purpose of bringing to the notice of the consumer the terms
and conditions of supply. This being the case, they could not be held to be
waived.
