20 March 2017


Judgments

Supreme Court

Imax Corporation v. M/s E-City Entertai (I) Pvt. Ltd.

MANU/SC/0263/2017

10.03.2017

Arbitration

Place of arbitration determines law applicable to arbitration and related matters

Appellant-Imax Corporation has challenged interim order passed by High Court of Judicature at Bombay, by which High Court held that, petition under Section 34 of Arbitration and Conciliation Act, 1996 filed by Respondent against two partial final awards and third final award was maintainable. Appellant had objected to maintainability of petition under Section 34 of Arbitration Act on ground that, arbitration clause excluded applicability of Part-I which contains the said section. On 28.09.2000, Appellant entered into an agreement with the respondent for a supply of large format projection systems for cinema theatres to be installed in theatres all across India. On 16.06.2004, Appellant filed a request for arbitration with the ICC, and claimed damages. On 08.10.2004, ICC i.e. the chosen arbitral forum fixed London as the place of arbitration i.e. the juridical seat of arbitration, after consulting parties. Question that arises for consideration is whether challenge to award made by Respondent under Section 34 of Arbitration Act is maintainable before a court in India.

Clause 14 of Arbitration clause provides that any dispute arising out of this agreement or concerning the rights, duties or liabilities of parties shall be settled by arbitration. Arbitration shall be pursuant to ICC Rules of Arbitration. Parties shall invoke ICC Rules of Arbitration in case a dispute arises between them concerning their rights, duties or liabilities. Intention is to have dispute settled by and in accordance with ICC Rules of Arbitration. International Court of Arbitration decided inter alia that London, United Kingdom will be juridical seat of the arbitration in view of Article 14(1) of the ICC Rules and, therefore, proceeded on the basis of the Part-I of English Arbitration Act, 1996.

In present case, seat of arbitration has not been specified at all in the arbitration clause. There is however an agreement to have the arbitration conducted according to the ICC rules and thus, a willingness that the seat of arbitration may be outside India. In any case, the parties having agreed to have the seat decided by the ICC and the ICC having chosen London after consulting the parties and the parties having abided by the decision, it must be held that upon the decision of the ICC to hold the arbitration in London, the parties agreed that the seat shall be in London for all practical purposes. Therefore, there is an agreement that the arbitration shall be held in London and thus Part-I of the Act should be excluded.

The construction that the parties agreed to exclude the applicability of Part-I of the Act and generally to have the entire agreement governed not according to Indian law is also apparent from the express provision that, “this agreement shall be governed by and construed according to laws of Singapore and parties attorn to jurisdiction of the Courts of Singapore”.

Place of arbitration determines the law that will apply to the arbitration and related matters like challenges to the award etc, see Eitzen Bulk A/S. Significant determinant in each case is agreement of parties as to the place of arbitration and where in fact arbitration took place. If in pursuance of arbitration agreement, arbitration took place outside India, there is a clear exclusion of Part-I of Arbitration Act. In present case, parties expressly agreed that, arbitration will be conducted according to ICC Rules of Arbitration and left place of arbitration to be chosen by the ICC. ICC in fact, chose London as the seat of arbitration after consulting the parties. Arbitration was held in London without demur from any of parties. All awards i.e. the two partial final awards, and the third final award, were made in London and communicated to the parties.

Therefore, there is no doubt that, Part-I has no application because parties chose and agreed to arbitration being conducted outside India and the arbitration was in fact held outside India. High Court committed an error in observing that, seat of arbitration itself is not a decisive factor to exclude Part-I of Arbitration Act. Judgment of High Court set aside and petition filed by Respondent under Section 34 of the Arbitration Act before the Bombay High Court dismissed and present appeal allowed.

Tags : Award Jurisdiction Maintainability

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High Court of Bombay

Shri Chhatrapati Sahakari Sakhar Karkhana Limited. A Cooperative Sugar Factory v. Shri Janu Gajaba Zagade And Ors.

MANU/MH/0390/2017

10.03.2017

Service

At fag end of carrier, a party cannot be allowed to raise a dispute regarding his date of birth

Present petition filed against the judgment of Industrial Court, whereby it has confirmed the judgment of Labour Court. The learned counsel submitted that, Courts below have failed in appreciating that, application/representation submitted by Respondent No.1 at fag end of his service and more particularly, after receiving the intimation regarding his retirement was rightly rejected by Petitioner.

When best possible evidence was existing on record, there was no reason for Courts below to discard said evidence and to rely upon government gazette, for determining correct date of birth of Respondent No. 1. View taken by Courts below and reasoning given by them in holding 31st October, 1943, as correct date of birth of Respondent No.1 is wholly unconscionable and cannot be sustained. Further, inference drawn by Courts below that vide letter dated 4th July, 1981 Petitioner-Sugar factory has accepted change in the date of birth of Respondent No.1 is equally unconscionable.

. Respondent No.1 has utterly failed in proving that his correct date of birth is 31st October, 1943. Respondent No.1 has also failed in proving that he had made an application to Petitioner-Sugar factory in year 1962 for correcting his date of birth from 1st June, 1940 to 31st October, 1943. From material on record, it is clear that only after retirement notice was served upon Respondent No.1 that he made an application taking a contention therein that he had already submitted the application in year 1962 for correction in his date of birth. If it was the contention of Respondent No.1 that he had submitted an application in year 1962 for correction in his date of birth , he was under an obligation to see that change as prayed by him is effected and if same was not effected to make a grievance about same within reasonable period. Admittedly, no such material is brought on record by Respondent No.1 to show that he had pursued said application. If as claimed by Respondent No.1 he had submitted an application in 1962, he would surely had made some inquiry whether service record and Provident Fund record was accordingly corrected.

From available evidence, only inference which emerges is that Respondent No.1 for first time seeks change in his date of birth at the fag end of his service and after he was served with retirement notice. As held by Supreme Court in case of Hindustan Lever Ltd. Vs. S. M. Jadhav and Anr., at fag end of carrier, a party cannot be allowed to raise a dispute regarding his date of birth. Order passed by Labour Court, Pune in complaint and order passed by Industrial Court, thereby confirming order passed by Labour Court was set aside and quashed.

Tags : Retirement Date of birth Dispute

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High Court of Bombay

Mr. Mukesh Kothari v. State Bank of India and Ors.

MANU/MH/0391/2017

10.03.2017

Property

Transaction which is recorded in defiance of prohibitory order shall have to be branded as illegal, if not void

In facts of present case, Petitioner is objecting to decision rendered by Debts Recovery Appellate Tribunal. Petitioner is purchaser of flat. The flat was purchased by Petitioner from Respondent No. 2 through a sale-deed dated 18th November, 2006 for a sale consideration of Rs. 22.00 Lacs. According to Petitioner, Sale Agreement was duly registered on 18th November, 2006. Property has been purchased by Petitioner by obtaining housing loan from Respondent No. 3 – Allahabad Bank, in whose favour Petitioner is stated to have created equitable mortgage in respect of said flat. Petitioner claims that Respondent No. 1 – State Bank of India has taken steps under Section 13(4) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and issued a possession notice on 12th April, 2007 on the Petitioner. Petitioner claims that he is neither a Borrower nor a Guarantor in respect of the loan availed by Respondent No. 2 from Respondent No. 1 – Bank.

Contentions raised by Petitioner for resisting the proposed action under Section 13(4) of SARFAESI Act at instance of Respondent No.1 was that the Equitable mortgage created by Respondent No. 2 in favour of Respondent No. 1 – Bank is not a legal, valid and that Respondent No. 1 – Bank has no right to proceed against property in possession of Petitioner under the SARFAESI Act. Petitioner prays for declaration of the possession notice dated 12th April, 2007 as null and void; Further, contends that, Petitioner is bonafide purchaser for value, without notice of Equitable Mortgage allegedly created in favour of Respondent No. 1 – Bank.

Respondent No. 1 – Bank presented proceedings before the Debts Recovery Tribunal Karnataka at Bangalore under provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and order of injunction restraining Respondent No. 2 from transferring, alienating or dealing with disputed property has been issued on 16th April, 2001 and said order of injunction is subsisting. Respondent No. 2 was aware of issuance of order of injunction and in breach of restraining order he has entered into sale transaction with Petitioner. Respondent No. 2 has not come forward to deny creation of Equitable mortgage concerning the disputed property with Respondent No. 1 – Bank.

The transaction of mortgage entered into between Respondent No. 1 – Bank and Respondent No. 2 is disputable by parties to transaction and since Respondent No. 2 has preferred not to question transaction, it would be a matter of serious doubt as to whether Petitioner who has purchased property during operation of prohibitory order of injunction issued against Respondent No. 2 is entitled to question the same. Petitioner prima facie does not have entitlement to question validity of Equitable mortgage created in favour of Respondent no. 1 – Bank by Respondent No. 2 especially when Respondent No. 2 who is a party to transaction has preferred not to question the same and accepted it.

Alienation made by Respondent No. 1 – Bank in favour of Petitioner in defiance of restraint order passed by Debts Recovery Tribunal Karnataka at Bangalore has to be treated as having not taken place at all for its purposes. In light of decision in case of Surjit Singh and others V/s Harbans Singh and others and in case of Keshrimal Jivji Shah and another V/s Bank of Maharashtra and others, transaction which is recorded in defiance of prohibitory order shall have to be branded as illegal, if not void. In matter of Ghanshyam Sardam V/s Shashikant Jha, Director, M/s. J. K. Jute Mills Company Limited and Others, Supreme Court has considered the question of effect of transfer or alienation in violation of prohibitory order and has observed that, “legal consequences of what has been done in breach of or in violation of the order of stay or injunction can be undone and the parties could be put back to the same position as they stood immediately prior to such order of stay or injunction.”

As has been recorded in aforesaid judgment as well as in matter of Keshrimal Shah that the transaction may bind parties but such transaction may not override entitlement or right of any other party in whose favour prohibitory order came to be issued. Transaction of sale entered into between Respondent No. 2 and Petitioner during operation of the prohibitory order may bind the parties but the said transaction will not have any effect on prior claim of Respondent No. 1 – Bank as against Respondent No. 2 on the basis of creation of a prior mortgage in favour of Respondent No. 1 – Bank by Respondent No. 2.

The illegal transaction entered into between Respondent No. 2 and Petitioner will not bind or affect entitlement of Respondent No. 1 – Bank. Parties to transaction more particularly Respondent No. 2 shall be deemed to have accepted the same since he had not questioned the transaction. Petitioner who is purchaser of property during operation of prohibitory order of injunction is not entitled to question transaction when Respondent No. 2 who is the author of said mortgage transaction does not dispute the same and moreover in circumstance, when the subsequent transaction of sale between Petitioner and Respondent No. 2 is illegal.

Since, Respondent No. 2 who has created equitable mortgage has not questioned the same, transaction which is otherwise validly entered into cannot be nullified on technical plea raised by Petitioner who himself is staking claim on basis of an illegal transaction. There are three requirements of Mortgage Deed by deposit of Title Deed (i) Debt, (ii) Deposit of Title Deeds; and (iii) an intention that the Deeds shall be the security for the debt [K. J. Nathan V/s S.V.Maruthi Rao]. All ingredients of the valid mortgage transaction do find place in instant matter.

There is a valid mortgage in favour of Respondent No. 1 – Bank created by Respondent No. 2 and that such transaction is not at all been questioned by Respondent No. 2 – creator of mortgage and as such Respondent No. 1 – Bank has entitlement to proceed under Section 13 (4) of SARFAESI Act. Transaction entered into by Petitioner with Respondent No. 2 being illegal one, cannot be recognised and Petitioner does not have any right to question the measures taken by Respondent No. 1 Bank under the SARFAESI Act. It would be open for Petitioner to proceed against Respondent No. 2 for redressal of his grievance.

Relevant

Surjit Singh and others V/s Harbans Singh and others and Keshrimal Jivji Shah and another V/s Bank of Maharashtra and others; Ghanshyam Sarda V/s Shashikant Jha, Director, M/s. J. K. Jute Mills Company Limited and Others; K. J. Nathan V/s S.V.Maruthi Rao

Tags : Deed Transaction Validity

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High Court of Delhi

Khalsa Gymnastic Works v. Union of India

MANU/DE/0679/2017

16.03.2017

Contract

A bidder who, submits a bid being fully aware of tender conditions, cannot after award of tender, seek a modification therein

Petitioner impugns the directions of Respondent in banning Petitioner for a period of three years from entering into any business dealings with Respondent-Sports Authority of India and all its Regional Centres / Sub-Centres /Academic Institutions / SAG / SYC Centres etc. under administrative control of Sports Authority of India. Petitioner is aggrieved by banning order as well as 0period of three years for which the petitioner has been banned.

Admittedly, condition of tender invited by Respondent was that supplies had to be made within four days. Said condition was reiterated in Notification of Award as well as the Contract Agreement. Petitioner who had submitted a bid consequent to tender conditions was aware that if tender were awarded to Petitioner, the supplies would have to be made within a period of four days. Admittedly, Petitioner did not make supplies within period of four days. On contrary, Petitioner immediately on award of contract requested for alteration in delivery schedule for extending the period from four days to 40 to 60 days.

A bidder who, submits a bid being fully aware of tender conditions, cannot after award of tender, seek a modification therein. Respondent had invited tender on 24th January, 2014 and Petitioner had submitted the bid on 31st January, 2014. Notification of award and the Contract Agreement were issued on 12th February, 2014. Petitioner who had submitted the bid on 31st January, 2014, being fully aware that, supplies had to be made within four days of award, cannot be permitted to contend that it is humanly impossible to make supplies within stipulated period of four days. If Petitioner was not in a position to make supplies within stipulated period of four days, Petitioner should not have submitted bid.

Fact that the petitioner sought a variation in delivery schedule from four days to 40-60 days, immediately on award, shows that Petitioner was not having sufficient capacity and ability to make supplies within stipulated period of four days. It clearly shows that Petitioner had submitted the bid being fully aware that Petitioner would not be in a position to make the delivery of the tendered quantity. Respondents have clearly stated that time was of essence of the contract. Even wording of the Notice Inviting Tender and the Notification of Award as well as the Contract Agreement show that period of delivery was of essence. It is further stated that, tender was floated on an urgent basis, as goods were required urgently.

In view of very wording of bidding document as well as Notification of Award, it is clear that Petitioner was aware of the urgency and the fact that time was of essence of the contract. Petitioner fully knowing well that, supplies had to be made within stipulated period of four days clearly defaulted in not making supplies within stipulated period thereby causing embarrassment and loss to Respondents.

Present is a commercial matter, where as Petitioner is not a victim of circumstances but was aware, at time of submitting bid, that he does not have the capability to even perform the contract. Despite knowing that he did not have the capacity or capability to perform the contract, he submitted his bid and on award of contract, immediately requested for change in the delivery schedule. No indulgence can be shown to such a Petitioner.

Tags : Directions Ban Validity

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High Court of Delhi

Britania Industries Limited v. ITC Limited

MANU/DE/0626/2017

10.03.2017

Intellectual Property Rights

In a passing off case, it is the goodwill which is sought to be misappropriated

Instant appeal is against order passed by a learned single Judge, by virtue of the impugned order, granted an interim injunction against Britannia. ITC had filed said suit seeking an injunction restraining Appellant / defendant (Britannia Industries Limited) from violating its purported rights in the packaging / trade dress of its product “Sunfeast Farmlite Digestive – All Good” biscuit by allegedly using a deceptively and confusingly similar trade dress for its “Nutri Choice Digestive Zero” biscuit. An injunction was sought for restraining Britannia from, inter alia, passing off ITC’s alleged rights in trade dress / packaging / label and dilution of the mark etc.

From interim injunction order, it is evident that Britannia has been restrained from using colour blue in packaging for the “Digestive Zero” variant of biscuits, while it has been permitted to retain the colour – yellow. Entire controversy in present appeal centres around use of blue and / or its variants in packaging. It is, therefore, clear that in case the appellant / Britannia uses same packaging, but substitutes the blue with any other colour, which is not a variant of blue, then there would be no case for passing off. It further follows that, all other elements of packaging other than combination of yellow with blue do not, at this prima facie stage, make out a case of passing off vis-à-vis the trade dress/get-up.

It is evident that a passing off action has to be examined from the standpoint of three factors: (1) goodwill and reputation; (2) misrepresentation / possibility of deception; and (3) likelihood of damage. Goodwill and reputation do not refer to the same thing though, there could be some degree of overlap. There may be a reputation and yet there may not exist any goodwill. As an example, a particular mark may have a reputation worldwide. But, there may be no sales under that mark in a particular territory, say, India. Thus, although mark would have a reputation worldwide, including India, it would not have a goodwill attached to it in India. It is not just the reputation, but the goodwill which constitutes property as it represents a link between business and the customer.

It is evident that in a passing off case, it is the goodwill which is sought to be misappropriated. It is this misappropriation which provides a cause of action at common law. Thus, before a passing off action can succeed, the plaintiff must establish that a goodwill attaches to the goods he supplies in the mind of the purchasing public by association with the identifying get-up under which particular goods or services are offered to the public. The connection between get-up must be such that it is recognized by public as distinctive specifically of Plaintiff’s goods or services. In facts of present case, ITC, in order to succeed at this stage, must establish, at least prima facie, that combination of yellow and blue that is used in its packaging for its “Sunfeast Farmlite Digestive – All Good” biscuit has become distinctive specifically of its goods. Whenever a possible customer sees a packaging for digestive biscuits using the combination of yellow and blue, it is immediately recognized as being sourced from Plaintiff and not from anyone else. It is well-settled that each case turns upon its own facts. Combination of yellow and blue as used by ITC for its “Sunfeast Farmlite Digestive – All Good” biscuits – has not become so identified with its goods as to become a “badge of its goodwill”.

Appropriation of and exclusivity claimed vis-à-vis a get-up and particularly a colour combination stands on a different footing from a trade mark or a trade name because colours and colour combinations are not inherently distinctive. It should, therefore, not be easy for a person to claim exclusivity over a colour combination particularly when the same has been in use only for a short while. It is only when it is established, may be even prima facie, that colour combination has become distinctive of a person’s product that an order may be made in his favour. Court felt that present is not such a case. When the first element of passing off, is not established, there is no need to examine the other elements of misrepresentation and likelihood of damage.

Tags : Trade-dress Injunction Validity

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Central Information Commission

K. Kashinathan v. The Director, Institute of Rural Management

MANU/CI/0125/2017

09.03.2017

Right to Information

Burden to show that a body is owned, controlled or substantially financed by appropriate Government is on applicant seeking information

Complainant filed an application under Right to Information Act, 2005 (RTI Act) on 7th April 2014 with CPIO, Institute of Rural Management (IRMA), seeking information regarding Written Test (Online) on 'Issues of Social Concern'. CPIO vide letter provided para wise information to complainant. Not satisfied with response of CPIO, complainant filed a complaint before Commission. Complainant was not present despite notice. Respondent submitted that, present proceedings arise from complaint of complainant. Respondent submitted that basic issue to be adjudicated in present matter is whether IRMA is a Public Authority as per Section 2(h) of RTI Act, 2005.

As per Supreme Court's decision in case of Thalappalam Service Cooperative Bank Limited v. State of Kerala, burden to show that a body is owned, controlled or substantially financed by the appropriate Government is on the applicant who seeks information. Therefore, onus is on complainant in present case to assert that IRMA is owned, controlled or substantially financed by appropriate Government.

IRMA was established by Society as an educational institution for imparting education in the field of Rural Management. Society has its Memorandum of Association and Rules for its internal functioning, which reveals that the Board of Governors of the Society is not at all dominated by public sector as sought to be suggested by the complainant. Merely because a representative each from Central Government, State Government and the National Dairy Development Board (NDDB) is nominated to Board of Governors of the Society which has a total strength of 17 members, it cannot be said that there is an over-dominance of public sector in Board of Governors of the Society. Further, representation of Central Government and State Government on Board of Governors of Society in form of a representative each is there as Society opted for it by a making a provision for the same in its Rules. Thus, it is not on account of any right vested in either the Central or State Government. Similarly, representation of co-operative sector is confined to only 3 members in the 17-member Board of Governors of the Society. Thus, 3 members on the Board of Governors of the Society falling in the category of co-operative sector in generic term are representing a particular group of the members of the Society. Besides this, in definition of the term 'Public Authority' under Section 2(h) of the RTI Act, there is nothing to indicate that presence of co-operative sector in setup of any body is of any consequence for holding such body as Public Authority there under. Supreme Court in case of Thalappalam has held that merely because a body is registered as a co-operative society under the relevant statute, such body would not ipso facto become the Public Authority under the RTI Act. Thus, when a body which falls under the category of co-operative sector is not per se a Public Authority for purpose of the RTI Act, it is indeed not possible to appreciate as to how the presence of such co-operative sector in the setup of another body would render such body as Public Authority.

As per definition of the term "Public Authority" under Section 2(h) of the RTI Act, a body has to be controlled by either the Central Government or the State Government in order to be declared as Public Authority thereunder. However, representation of aforesaid nature from the Central Government and State Government in the Board of Governors of the Society does not convey that the Society and IRMA are controlled by either Central Government or State Government or both. Also, control referred to by Section 2(h) of the RTI Act has to be deep and pervasive control. Therefore, mere presence of a representative each from Central Government and the State Government on 17-member Board of Governors of Society on account of the same having been voluntarily opted by the Society in its Rules cannot imply any control by either Central Government or State Government.

Supreme Court in Thalappalam case held that funding cannot be termed substantial unless records show that the funding was so substantial to the body that it practically runs from that funding and would struggle to exist without the said funding. However, in present case, grants received by IRMA from Governmental agencies are for specific purposes. Also, income from initial corpus received from NDDB is excluded from income-expenditure statement of IRMA as the same has to be utilized for the purposes stated in Note on Item No. 14 on the agenda of the 40th Board meeting of NDDB. These purposes include providing IRMA's services to NDDB free of cost, except operation cost such as those of boarding, lodging, materials and supplies. Further, IRMA does not charge any tuition fee from the managers/officers sponsored by NDDB for attending IRMA's Post Graduate Programme in Rural Management. The respondent further submitted that IRMA can survive without these grants because at present it charges lesser fees from students as compared to the fees charged by similarly placed counterpart institutes of management and the fees could be raised in order to fill any deficit that arises. Hence, there is no funding of substantial nature by the appropriate Government to IRMA and accordingly, the parameter of substantial funding is also not satisfied.

As per the Hon'ble Supreme Court's Decision in case of Thalappalam, onus is on complainant to establish that IRMA is either owned, controlled or substantially financed by appropriate Government in order to satisfy Section 2(h)(d)(i) of the RTI Act. However, onus was not discharged conclusively by complainant. In view of this, Commission is of the opinion that it would not be judicious to adjudicate upon the issue relating to declaration of IRMA as a Public Authority. Complaint is disposed of.

Relevant

Thalappalam Service Cooperative Bank Limited v. State of Kerala

Tags : Information Public Authority Determination

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