Arbitrator must cite the reason of the award while passing Judgment

                              Secretary, Irrigation Department, Government of Orissa & ors Vs.  G. C. Roy, AIR 1992 SC 732

                                                                                                                      

Facts: Appellant and Respondent entered into an agreement for construction works. Clause 23 of the contract states that all questions and disputes (before and after work completion) shall be referred to the sole arbitrator. The work was completed. Respondents claim was not entertained by the Government.  The Arbitrator held that the respondent was entitled to certain amount of money and in addition he was entitled to receive interest. 

Issues: (1) the Award was vitiated as it contained no reasons; and (2) the Arbitrator had no jurisdiction to award pendente lite interest.
 

Reversed Previous Land Mark Judgment:

This judgment by the Honorable Supreme Court has reversed the land mark case on this, where in it was stated that the powers of the Arbitrator to award interest for the period the dispute remained pending before him pendente lite. Since, the Court held that the Arbitrator had no jurisdiction or authority to award interest pendente lite, Bench held that neither the Interest Act 1839 nor the Interest Act 1978 conferred power on the Arbitrator for awarding interest pendente lite. Arbitrator cannot award interest during the pendency of the Suit.

The principle is that a person who has been deprived of the use of money should be compensated in that behalf. In short it is based upon the principle of compensation or restitution, as it may be called (Interest Pendente Lite).

Arguments Advanced: Shri Soli Sorabji submitted that there is no good reason why the arbitrator should be held to have no power to award interest pendente lite. Arbitrator is an alternative forum for resolution of disputes. The idea is to avoid going to Court. If so, the arbitrator must be held to possess all the powers as are necessary to do complete and full justice between the parties. If the arbitrator is held to have no power to award interest pendente lite, the party claiming such interest would still be required to go to the civil Court for such interest even though he may have obtained satisfaction in respect of his other claims from the arbitrator. Such a course is neither consistent with the concept of arbitration nor is conducive to the rule of avoidance of multiplicity of proceedings. After all, interest is nothing but another name for compensation for deprivation. Stated: it must be held that though Section 34, C.P.C. does not apply to arbitrators, its principle does.

According to opposite learned Counsel, a reading of Sections 3, 17 and 41 of the Arbitration Act goes to establish that arbitrator is denied such a power.

In the present case, interest on the amount of the award from the date of the award till the date of the decree granted. The reason is that it is an implied term of the reference that the arbitrator will decide the dispute according to existing law and give such relief with regard to interest as a court could give if it decided the dispute. 

Held: For Issue 1, The Constitution Bench held that an award is not liable to be set aside merely on the ground of absence of reasons. Court held that when agreement provides a clause that arbitrator will give reasons for award then he is bound to give reasons for his decisions. Else not. But as of 2011, this law is not applicable because of the reason that, this is based upon Arbitration Act 1940, while 1996 Act has made it mandatory for arbitrator to cite reasons for the award, unless and until it is agreed by both the parties.

For Issue 2, in the absence of agreement to the contrary, the Arbitrator has jurisdiction to award interest pendente lite. Where agreement between parties does not prohibit grant of interest and where party claims interest along with or without claim for principal amount and that dispute is referred to arbitrator, he shall power to award interest pendnte lite - he has discretion to decide such matter subject to conditions of agreement.

Analysis:

Generally, the question of award of interest by the Arbitrator may arise in respect of three different periods, namely; (i) for the period commencing from the date of dispute till the date the Arbitrator enters upon the reference; (ii) for the period commencing from the date of the Arbitrator's entering upon reference till the date of making the award; and (iii) for the period commencing from the date of making of the award till the date the award is made the rule of the court or till the date of realisation, whichever is earlier.

This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes-or refer the dispute as to interest as such-to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view.

Husband’s telephone can be disconnected if House-wife defaults to pay for her telephone

              Surjit Singh Vs Mahanagar Telephone Nigam Ltd., (AIR 2008 SC 2226) 

FACTS OF THE CASE:

The appellant and his wife are living together at their residence in Rajouri Garden, Delhi. At that residence, there is one telephone line bearing No. 5121187 in the name of appellant Surjit Singh and there is also another telephone line bearing No. 5416493 at the same residence in the name of the appellant’s wife. There is a third telephone line bearing No. 3265301 in the name of the appellant and installed at the business premises of the appellant at # 1195, Chahrahat Building, Jama Masjid, Delhi. It appears that there were arrears of telephone dues in connection with line No. 5416493 which was in the name of the appellant’s wife. For non-payment of the telephone dues in connection with this line, the other two lines in the name of the appellant bearing No. 5121187 at his residential premises and line No. 3265301 at his business premises were disconnected. 

CONTENTION:

Appellant contended that the telephone line in his own name bearing line No. 5121187 at his residence and line No. 3265301 at his business premises should not be disconnected on account of non-payment of dues in connection with the line in the name of his wife bearing No. 5416493. He contended that he and his wife are two separate legal entities and he could not be penalized for the fault of his wife. 

JUDGMENT OF THE COURT:

The Hon’ble Division bench of the Apex Court while pronouncing the judgement observed that such an interpretation would be in the teeth of the language used in Rule 443 read with Rule 2 (pp) of the Telegraph Rules, 1951, which defines “subscriber”. But in such a case the literal interpretation rule has to give way to the purposive construction rule. The intention of Rule 443 obviously was that payment of telephone dues should be made promptly, otherwise the telephone department will suffer. The interpretation which effectuates and furthers the intention of Rule 443, i.e., the telephone bills should be paid in time has therefore to be adopted. The word ‘subscriber’ has therefore to be widely constructed. Hence the telephone line in the name of another person who is economically dependent on the former can be disconnected for non-payment of bills in connection with the telephone line in the name of the latter. Such an interpretation would effectuate the intention of Rule 443. It would make no difference whether the telephone line is at the residence or at the business premises, even of the two are entirely separate. Further the Apex court deeply regretted that these principles have rarely been used in Indian Courts.

    

ANALYSIS:

The decision of the Apex Court intended to interpret the Statute and the word ‘subscriber’ has to be widely constructed. When two relatives are living in the same house a distinction has to be drawn between a telephone line in the name of a person who is economically dependent on another (who may be the husband, father etc.), and the telephone line in the name of a person who has an independent source of income from which he is paying the telephone bills. In the case of the former, i.e., a person who is economically dependent on another who is paying his telephone bills, the telephone line in the name of such other relative on whom the subscriber is dependent can be disconnected for non-payment of the telephone bills of the nominal subscriber.     

The Concept of Fair Rent: IT Perspective

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Fair Rent is the municipal valuation of the accommodation, or rent which a similar accommodation would realize in the same locality, whichever is higher. However, it cannot exceed the standard rent, if any, fixed or determine under a Rent Control Act. If the employer hires the accommodation, Fair Rent Value is the actual rent paid for the accommodation.

It has been observed in Raval & Co. v. K.G. Ramchandran, (MANU/SC/0416/1973) relevant at page 326 para 25 (end) that it was most realistic to peg fair rent to the level of rents prevailing during the previous 12 months.

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From an Income-Tax (“IT”) Perspective

The IT Act, 1961, while levying tax on immovable properties, takes into consideration the fair value of the immovable properties. The IT law insofar as income from house property is concerned revolves round the concept of fair rent. Tax is levied on the basis of the fair rent which is supposed to be the prevailing rent for an identical property in the same locality. However, one has to pay tax on the actual rent if it exceeds the fair rent. The fair rent according to the IT Act is “the sum for which the property might reasonably be expected to be let from year to year.”

The apex court's admonition in a couple of cases that where standard rent has been fixed under the rent control law, the fair rent cannot exceed the standard rent has somewhat checked the vagueness of the explanation mentioned above, but giving rise to further questions as to how is the fair rent determined in a scenario where there is no standard rent? The confusion is not unjustified since not all States have rent-control laws and even where there is one; it does not target all cities and towns in a State. In the absence of a mechanism or an authority to fix the fair rent, an assessee could and often does face considerable harassment.

Innovation and its types...

The term “Innovation” suddenly seems to be in everyone’s vocabulary these days, while some use it as a layman term, the people belonging to science and law fraternity would actually know what it means beyond its simple definition. Innovation happen everywhere, some big some small but can you categorize it? This question lingered in my mind while I was sitting in the IP Management class. The answer to this question is yes and this blog is all about types of innovation with examples.

Now, in terms of IP, innovation can be broadly categorized into 3 parts:

1. Product zone

2. Customer intimacy Zone

3. Operational excellence Zone

Product Zone- innovations of this zone are most talked about and well known and can be further classified into following:

a. Disruptive Innovation- can be broadly termed as breakthrough technology, which revolutionizes that particular field in which the innovation is made. It displaces the existing technology and helps to create new market. For example- Mobile phones and Xerox machines.

This invention helped people to communicate with their loved ones from any part of the world. Gradually the size decreased and now everyone from a businessman to a vegetable vendor owns one.

b. Application innovation- it provides new market for the old products by finding unexploited use of them, for example- use of fault tolerant computers to run an ATM.

c. Platform innovation- these are the ones that leads to the practical application of fundamental innovations. Example- Qualcomm repositioning its CDMA technology from a product differentiating ingredient in its own product to an enabling element for 3G wireless telephony.
 

Customer intimacy Zone

a. Line- extension innovation- it makes structural modification to existing product to create a new sub category with an aim to capture the attention of new customer base, for example- introduction of minivan and SUV in automobile sector.

b. Enhancement innovation- this type of innovation focuses only on one particular property or application of an existing product with an aim to making it finer by each improvement. For example- ice makers in refrigerators.

Operational excellence Zone-

a. Value engineering innovation- such types of innovation focuses on substituting material or a method with a less expensive alternative without compromising on the functionality. For example- TV, PC etc.

b. Integration innovation- this type of innovation seeks to combine the existing innovations into a single centrally managed system. For example- mobiles with camera and FM radio.

for further reading please refer scpd.stanford.edu/dtu/pdf_courses/.../CHAPTER4.pdf

Idea Mobile Communication vs. C.C.E & C. Cochin. (4th August, 2011), SC

The case is extension of the well known case of BSNL v Union of India. The Supreme Court noted following.

1. The SIM Card has no intrinsic value in regard to the Sales tax. The SIM forms a part and parcel of the activation and the charges obtained while providing SIM to customer is an activation charges.

2. No separate Sales Tax can be levied on the SIM as the same is not at all good.

3. The SIM charges should be included in the service tax domain and same can’t be double taxed under Sales Tax as well.

4. The remittance of tax to the parties on the view that it was wrongly paid doesn’t absolve the party to pay it again once it is found that she was taxable on Goods/Service.