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M J Antony: Buyer not liable for old power bills

M J Antony/ 19 Nov 12 | 12:06 AM

The Supreme Court last week dismissed the appeal of North-East Electricity Company of Orissa demanding arrears from a company which had bought a wound-up unit that had not cleared its power bills. In this case, Raghunath Paper Mills had bought in auction Konark Paper & Industries Ltd which was in liquidation on “as is where is and whatever there is" basis.

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After buying the closed unit, Raghunath Mills applied for a new power connection. The electricity firm demanded payment of outstanding dues run up by the previous owner of the unit at the premises. The new owner refused to pay the arrears and moved the Orissa High Court. It allowed the petition and ordered a new connection.

Therefore the electricity company appealed to the Supreme Court. It held that the buyer firm was not obliged to pay the arrears as it had applied for a new connection; not a transfer of the connection given to the premises used by the earlier consumer who defaulted.

Service tax appeal dismissed

The Supreme Court has dismissed the appeal of Nagarjuna Construction Company against the judgment of the Andhra Pradesh High Court which had rejected its challenge to a 2008 circular of the central government on service tax. The circular was clarificatory and stated that “the classification of a taxable service is determined based on the nature of service provided whereas liability to pay service tax is related to receipt of consideration. Vivisecting a single composite service and classifying the same under two different taxable services depending upon the time of receipt of the consideration is not legally sustainable."

Dismissing the appeal, the Supreme Court said that the construction company having paid service tax for taxable services, namely, erection, commissioning or installation service, was not entitled to change the classification of the single composite service for the payment of service tax.

Arbitration in Florida

The Bombay High Court last week dismissed the arbitration petition of BG Strategic Advisors LLC, a Florida corporation, in its dispute with the Indian company Arshiya International Ltd as it was not maintainable. The US firm wanted an order against the India firm to deposit $ 442,666.84 and for various interim measures. However, the high court pointed out that according to the contract, it was agreed that laws of Florida would apply.

The parties had agreed further that disputes will be submitted to binding arbitration administered by the National Arbitration Forum in the US in accordance with the forum’s Code of Procedure. It has also been agreed that the arbitration will take place in West Palm Beach, Florida and arbitrator shall apply Florida substantive law. The US corporation has already invoked arbitration there, the high court said. Therefore, the provisions of Part I of the Arbitration and Conciliation Act on international arbitration will not apply.

National Aluminium snubbed

The Orissa High Court has stated that it is “shocked to note that a central government public sector undertaking is avoiding to discharge its statutory obligation on some plea or other which is not at all tenable under the law." The issue involved in this case, National Aluminium Co Ltd vs ESI Corporation, was the contribution the company had to make for contract labour employed by it through contractors. Dismissing the petitions of the PSU against the ESI demands, the court stated that “all the pleas taken by it not to discharge its statutory obligation are not legally sustainable."

The judgment further stated that the PSU had a duty cast under the Employees State Insurance Act to deposit with the ESI Corporation its share of contribution as well as the share of contribution of the employees irrespective of whether the corporation has provided full-fledged hospital or not or that the employees are willing or not to be covered under the ESI Scheme or that any kind of settlement has been entered into between the PSU and the Union of Contract Labourers.

Illegal strike or lock-out?

When there is a dispute whether the labour strike was illegal or the lock-out was illegal, the state government has discretion to refer one part of the dispute to an industrial tribunal. In this case, Eastern Medikit Ltd vs state of Haryana, there was a labour strike and a lock-out following it. The government thought it fit to refer only the allegation of lock-out to the tribunal.

This was challenged by the management, which asserted that its action as well as the strike should have been referred to the tribunal. Rejecting this contention, the Punjab and Haryana High Court stated that “no illegality has been committed by the government while referring the dispute pertaining to only the lock-out and not the strike, as is sought to be claimed by the management. The power conferred on the government under Section 10 of the Industrial Disputes Act is discretionary and administrative in nature, though subject to judicial review."

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