Supreme Court

The State Of Madhya Pradesh vs. Sew Infrastructure Limited

MANU/SC/1512/2022

18.11.2022

Arbitration

Rights and duties of the parties to the contract subsist or perish in terms of the contract itself

Present appeal is against the decision of the High Court in an Arbitration Revision under Section 19 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 whereby the award of the Arbitral Tribunal was upheld. By Award, the Arbitrator accepted the claim raised by the Contractor and awarded an amount of Rs. 5,51,03,040 with 9% interest in favour of the Contractor. The revision filed by the State against the Award under Section 19 of the Adhiniyam was dismissed by the order impugned herein. The High Court rejected arguments of the State and allowed the claim of the Contractor.

Determination of the claim for escalation depends on the construction of Clause 3.11(A) of the contract, which provides that the claim for escalation will not be entertained unless there exist circumstances beyond the control of the contract. Further, the claim is admissible only upon the written order of the Superintending Engineer in charge of the work. Both conditions are satisfied. In the first instance, the inspection report dated 31.10.2002 clearly indicates that the original quarry is depleted of the sand and therefore an alternative quarry is necessary for the execution of the contract. Secondly, this is a circumstance which is certainly beyond the control of the Contractor. Further, the permission granted by the Superintending Engineer dated 12.11.2002 is in complete satisfaction of the requirement of the clause. The claim for escalation is in full satisfaction of the terms of the contract.

A contractual clause which provides for the finality of rates quoted by the Contractor and disallows any future claims for escalation is conclusive and binding on the parties. If the clause debarring future claims permits escalation subject to certain conditions, no claim is admissible if the conditions are not satisfied. However, if the conditions are satisfied, the Contractor will have a right to claim escalation. This is a contractual right. The right originates and subsists by virtue of the contract itself. It is the duty of the Court, while interpreting the contract to decipher the true and correct meaning the parties intended and enforce the rights arising out of the contract. Officers administering the contract will not have any discretion whatsoever to admit or deny escalation after the conditions specified in a contract are satisfied.

The rights and duties of the parties to the contract subsist or perish in terms of the contract itself. Even if a party to the contract is a governmental authority, there is no place for discretion vested in the officers administering the contract. Discretion, a principle within the province of administrative law, has no place in contractual matters unless, of course, the parties have expressly incorporated it as a part of the contract. It is the bounden duty of the court while interpreting the terms of the contracts, to reject the exercise of any such discretion that is entirely outside the realm of the contract.

The Arbitrator was justified in granting the claim for escalation as the conditions precedent for raising a plea for escalation are admittedly satisfied by the inspection report dated 31.10.2002 followed by the letter of the Superintending Engineer dated 12.11.2002. There are no errors of jurisdiction or acts of misconduct or events of invalidity or impropriety in the conduct of proceedings by the Arbitrator. High Court has rightly refrained from exercising its revisional jurisdiction under Section 19(2) of the Adhiniyam by not interfering with the award passed by the Arbitral Tribunal. Appeal dismissed.

Tags : Agreement Award Legality

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Supreme Court

Polyflex (India) Pvt. Ltd. vs. The Commissioner of Income Tax and Ors.

MANU/SC/1505/2022

17.11.2022

Direct Taxation

Assessee is manufacturing polyurethane foam, assessee shall not be entitled to deduction claimed under Section 80-IB of the IT Act

Appellant – assessee is having a manufacturing unit at Pune in which the Appellant – assessee is manufacturing ‘polyurethane foam,’ which is ultimately used as automobile seat. The assessee filed its return of income for the assessment year 2003-04 and claimed deduction under Section 80-IB of the Income Tax Act (‘IT Act’). The assessing officer disallowed the deduction under Section 80-IB of the IT Act by observing that the nature of the business of the assessee is “manufacturer of polyurethane foam seats” which falls under entry 25 to the Eleventh Schedule of the IT Act and therefore the Assessee shall not be entitled to deduction under Section 80-IB of IT Act. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals) against the assessment order. The CIT(A) upheld the order of the assessing officer.

Against the order of the CIT(A), the Assessee filed an appeal before the Income Tax Appellate Tribunal ( ‘ITAT’). The ITAT set aside the assessment order as well as the order passed by the CIT(A) and allowed the appeal filed by the assessee. The order passed by the ITAT has been set aside by the High Court, by the impugned judgment and order specifically observing that what is manufactured by the assessee is polyurethane foam in different sizes/designs and there is no further process undertaken by the assessee to convert it into automobile seats and therefore what is manufactured by the assessee is polyurethane foam falling in entry 25 to Eleventh Schedule and therefore the assessee shall not be entitled to deduction claimed under Section 80-IB of the IT Act. Consequently, the High Court has allowed the appeal preferred by the revenue and has quashed and set aside the order passed by the ITAT and has restored the assessment order denying the deduction claimed under Section 80- IB of the IT Act.

By the impugned judgment and order, the High Court has specifically observed and held that what is manufactured and sold by the assessee is polyurethane foam which is manufactured by injecting two chemicals, namely, Polyol and Isocyanate and the polyurethane foam which is manufactured by the assessee is used as ingredient for manufacture of automobile seats. The assessee is manufacturing polyurethane foam and supplying the same in different sizes/designs to the assembly operator, which ultimately is being used for car seats. The assessee is not undertaking any further process for end product, namely, car seats. The polyurethane foam which is supplied in different designs/sizes is being used as ingredient by others, namely, assembly operators for the car seats.

Merely because the assessee is using the chemicals and ultimately what is manufactured is polyurethane foam and the same is used by assembly operators after the process of moulding as car seats, it cannot be said that the end product manufactured by the assessee is car seats/automobile seats. There must be a further process to be undertaken by the very assessee in manufacturing of the car seats. No further process seems to have been undertaken by the assessee except supplying/selling the polyurethane foam in different sizes/designs/shapes which may be ultimately used for end product by others as car seats/automobile seats.

When the articles/goods which are manufactured by the assessee, namely, polyurethane foam is an article classifiable in the Eleventh Schedule (entry 25), considering Section 80- IB(2)(iii), the assessee shall not be entitled to the benefit under Section 80-IB of the IT Act. The High Court has rightly set aside the order passed by the ITAT and has rightly restored the order passed by the assessing officer denying the deduction/benefit claimed under Section 80-IB of the IT Act. Present Court is in complete agreement with the view taken by the High Court and that of the assessing officer, confirmed by the CIT(Appeals). Appeal dismissed.

Tags : Assessment Deduction Denial

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High Court of Delhi

Pr. Commissioner Of Income Tax-1 vs.AT And T Communication Services (India) Private Limited

MANU/DE/4612/2022

17.11.2022

Direct Taxation

Section 220(2) of IT Act does not empower the revenue to demand interest relating back to a set aside order, when a fresh assessment order has been passed thereafter

The Assessee is engaged in the business of network design, management, communication, connectivity services and related products. The Assessee filed its return of income for the relevant year on 30th October, 2004 declaring an income of Rs.29,30,15,180, however, the income of the Assessee was assessed at Rs. 32,15,72,740 by the Assessing Officer ('AO') vide original assessment order. The issue arising in the present appeal is, whether interest can be charged under Section 220(2) of the Income Tax Act, 1961 (IT Act) from the date of the original assessment order, if the original additions are reiterated by the AO on remand in the reframed assessment order?

The relevant date for charging interest under Section 220(2) of the IT Act, in the facts of this case, is to be determined as per the date of demand notice raised pursuant to the fresh assessment order i.e. 29th March, 2016.

The liability of Assessee to pay interest under Section 220(2) of the IT Act can be levied only after expiry of the time limit prescribed in the fresh demand notice issued by the AO in pursuance to the fresh reframed assessment order dated 29th March, 2016. The reframed order is the subsisting assessment order in the facts of this case.

The contention of the Revenue that the Assessee is liable to pay interest in relation to the demand issued pursuant to the original assessment order, if on a remand, the addition remained under the same head has no basis in law. Section 220(2) of the IT Act does not contemplate a levy of interest which relates back to the date of the passing of original order (which was subsequently set aside by appellate authorities) or applies to pendency of proceedings. Therefore, the AO was not justified in levying the interest of Rs. 1,75,74,756 under Section 220(2) of the IT Act.

The demand for interest raised by the AO is contrary to the Circular issued by CBDT as well as the mandate of Section 220(2) of IT Act. The Section 220(2) of IT Act does not empower the revenue to demand interest relating back to a set aside order, when a fresh assessment order has been passed thereafter. The facts of the present case are clearly covered by para 2.1 of the said CBDT circular which anticipates the situation that has arisen in the present proceedings and therefore, the CIT(A) and the ITAT have correctly held that the levy of interest by the AO relating back to the set aside assessment order, was incorrect and have correctly ordered the same to be deleted. Appeal dismissed.

Tags : Interest Deletion Legality

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Central Administrative Tribunal

Ashwani Kumar vs. General Manager N C Rly

MANU/CA/0822/2022

17.11.2022

Service

Compassionate appointment is not a Rule and cannot be sought as a matter of right

In facts of present matter, Applicant was minor at the time of death of his mother. Respondents have paid the retiral dues and also granted family pension w.e.f. 12.12.2011 in favour of the applicant, as per registered adoption deed. He is receiving pension @ 14,087 per month from the respondents. Applicant moved an application for grant of compassionate appointment, when he attained majority but the respondent No. 3 has rejected the case of the applicant for granting compassionate appointment.

As per dictums of Hon'ble Apex Court, it is settled position of law that compassionate appointment is granted to meet the sudden crisis on account of death of breadwinner while in service. While considering the claim for compassionate appointment, financial condition of family of deceased employee must be taken into consideration. The object to grant compassionate appointment is to provide immediate help to the dependents of deceased employee, so that they may not die in starvation.

It is also settled position of law that compassionate appointment is not a Rule and cannot be sought, as a matter of right. The compassionate appointment is a concession and exception to public appointment provided under Articles 14 and 16 of the Constitution of India, therefore, to seek a concession of compassionate appointment, claimant must prove his financial condition and must prove that in the event of non grant of compassionate appointment, claimant would face financial crisis.

In the case of State of J&K and others Vs. Sajad Ahmed Mir, it is observed that "Once it is proved that in spite of death of bread earner, the family survived and substantial period is over, there is no need for compassionate appointment." In the case of State Bank of India and another Vs. Raj Kumar, the Hon'ble Apex Court further reiterated that "Compassionate Appointment is not a source of recruitment. It is an exception to general rule, that recruitment to public services should be on the basis of merit, by open invitation providing equal opportunity to all eligible person to participate in the selection process."

The Hon'ble Apex Court once again in the case of Union of India and Another Vs. Shashank Goswami and another has been pleased to observe that "Appointment on compassionate ground cannot be claimed as a matter of right and the same is based on the premises that the applicant was dependant on the deceased employee. Strictly such a claim cannot be upheld on the touch stone of Article 14 or 16 of Constitution of India. However, such claim is considered as reasonable and permissible on the basis of sudden crisis occurring in the family of such employee who has served the State and dies while in service."

In the instant case, the deceased employee Devi had adopted the applicant from her daughter Smt. Shanti Devi and son-in-law just before one month and twenty one days before her death. She had not given information about the adoption to the department during her life time. Substantial period (More than 10 years) is over after the death of the deceased. It appears that respondents have rightly observed that, there is no financial crises to the family. Grant of payment of family pension to the applicant will not be sufficient to give him compassionate appointment. Application dismissed.

Tags : Compassionate appointment Eligibility Right

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High Court of Bombay

Kishorsingh Kisansingh Chungde Vs. State of Maharashtra and Ors.

MANU/MH/3965/2022

15.11.2022

Criminal

Previous sanction for prosecution of the public servant is necessary whether the act or omission for which the accused is charged, has a reasonable nexus with discharge of official duty

Present is an application under Section 482 of the Code of Criminal Procedure, 1973 ('CrPC') seeking discharge. The applicant (accused No. 13) has initially applied to the learned Magistrate for discharge, however, the said application was rejected vide order. Being aggrieved, the applicant has filed criminal revision. However, it was dismissed vide order, which is impugned herein.

The applicant is a Government Auditor. He has been arraigned as accused No. 13 in Crime registered for the offence punishable under Sections 406, 409, 420, 120B, 166, 167, 217 and 218 read with Section 34 of the Indian Penal Code, 1860 (IPC). The prosecution was initiated at the instance of report lodged by one of the depositor.

Both the Courts below have held that the applicant has supported co-accused in their illegal activities by not filing the Police Report and therefore, the said cannot be termed to be within the discharge of his official duty. In case of Indra Devi Vs. State of Rajasthan and others, it has been ruled that the previous sanction for prosecution of the public servant is necessary whether the act or omission for which the accused is charged, has a reasonable nexus with discharge of official duty. The very purpose of Section 197 of the CrPC is to protect officer from unnecessary harassment when the act or omission is committed in discharge of official duty. The act of filing a Police Report is certainly a part of official duty of the Government Auditor. The term act includes "omission". There is no justification in saying that the alleged omission the on part of the applicant cannot be a part of his official duty. Therefore, the prosecution against the applicant on said sole count is not maintainable.

It is well settled that at the time of framing charge, it is permissible to sift the available material to limited extent to find out whether the case is made out to proceed further. The reply is totally silent to satisfy regarding existence of material even to make out a case of strong suspicion about commission of offence. Thus, the prosecution is not tenable for want of statutory sanction as well as in absence of sufficient material. The continuation of prosecution amounts to abuse of the process of Court. Both Courts' below erred in rejecting discharge application. Impugned order passed in Criminal Revision is quashed and set aside.Application allowed.

Tags : Discharge Entitlement Sanction

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High Court of Delhi

Dr. Dilip Kumar vs. Indian Council Of Agricultural Research And Ors.

MANU/DE/4426/2022

14.11.2022

Service

If an issue is related to payment or refixation of pay or pension, relief can be granted in spite of delay as it does not affect the rights of third parties

Petitioner impugns order whereby the original application of the Petitioner impugning order was dismissed. Petitioner is also aggrieved by order whereby the original application filed by the petitioner seeking a declaration that he is entitled to retirement pension has been dismissed on the ground of limitation.

The Tribunal in the impugned order has held that, Petitioner took voluntary retirement from service on 22nd January, 1994 and the Petitioner thereafter filed an application in 2015 seeking grant of pension which was rejected on the ground of delay.

In Union of India and Ors. vs. Tarsem Singh, the Supreme Court has held that normally a belated service-related claim would be rejected on the ground of delay and laches, however, one of the exceptions to the rule is cases relating to continuing wrong. The Supreme Court has held that where a service-related claim is based on the continuing wrong relief can be granted even if there is a long delay in seeking remedy with reference to the date on which the continuing wrong commenced. The Supreme Court further mentioned a caveat in the form of an exception to the exception i.e if the grievance is in respect of any order or administrative decision which related to or affected several others then reopening the issue would affect the settled rights of third parties. In those circumstances applying the exception to exception the claim would not be entertained. As an example, the Supreme Court stated that if an issue related to payment or refixation of pay or pension, relief may be granted in spite of delay as it does not affect the rights of third parties. The Supreme Court thereafter directed that in such cases the consequential relief of recovery of arrears would be restricted normally to a period of three years prior to the date of filing of the writ petition.

The claim of the Petitioner is for grant of pension on account of the alleged qualifying service rendered by the Petitioner. No doubt, there is a gross unexplained delay on account of the petitioner in approaching the Tribunal, however, since the grant of pension is a continuing wrong and cause of action accrues on a month to months basis, the Tribunal should have at least considered the claim of the petitioner on merits and not rejected it solely on the ground of limitation. Since the case of the petitioner is with regard to payment of pension it also does not fall within the category of exception to the exception as carved out by the Supreme Court. The impugned orders are set aside. The original application of the Petitioner is restored to its original number. The Tribunal shall consider the case of the Petitioner on merits. Petition allowed.

Tags : Pension Delay Entitlement

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