We are delighted to share this month's AKP Dispute Resolution Monthly Digest. Please feel free to write to us with your feedback at info@akandpartners.in.
1. Company Law
1.1. Trading Services
1.1.1. Supreme Court reaffirms that court must look beyond legal formalities to protect shareholders
In a landmark ruling on oppression and mismanagement, the Supreme Court examined a dispute where a majority shareholder holding over 98 per cent (ninety eight per cent) of a company's equity was systematically ousted from her role. The controversy stemmed from her alleged resignation and the transfer of her entire shareholding to her mother-in-law via a gift deed, which she contended was procured through fraud and coercion amid marital discord. While the National Company Law Tribunal ("NCLT") initially ruled in her favour, the National Company Law Appellate Tribunal (NCLAT) overturned this decision, citing its lack of jurisdiction to adjudicate complex fraud matters. On appeal, the Supreme Court restored the NCLT's order, holding that a pattern of actions such as convening board meetings without proper notice or quorum and relying on dubious share transfer documents amounted to oppressive conduct intended to dispossess the appellant. The judgment underscores the judiciary's readiness to look beyond procedural compliance and intervene where shareholder rights are undermined through coercive or fraudulent mechanisms.
2. Taxation Law
2.1. Mining
2.1.1. Supreme Court upholds Coal India's interim pricing policy and rejects claims of refund
The Supreme Court settled a long-standing dispute over an Interim Coal Policy notified by Coal India Ltd. ("CIL") on December 15, 2006. The policy was introduced after the Court struck down the previous e-auction system for coal pricing in its Ashoka Smokeless judgment. The interim policy increased the price of coal by 20 per cent (twenty per cent) for "non-core sector" industries, which challenged the hike, arguing that CIL had no authority to frame such a policy and that the price rise was arbitrary and discriminatory. The Calcutta High Court had ordered CIL to refund the excess amount charged. The Supreme Court considered CIL's appeal and upheld the Interim Coal Policy and dismissed any refund claims. The court held that CIL had the authority to regulate prices following deregulation in 2000; the interim increase in price was a legitimate action to ensure the continued viability of its operations, which is in the "public interest" to keep a steady supply of an essential natural resource.
3. Property Law
3.1. Real Estate and Infrastructure
3.1.1. Supreme Court rules 'an agreement to sell' does not confer title
The Supreme Court clarified the legal standing of documents such as an Agreement to Sell and a General Power of Attorney ("GPA") in conferring ownership. The plaintiff had filed a suit for possession of a property originally owned by his father, claiming title based on an Agreement to Sell, a GPA, a receipt, and a registered Will, all dated 16.05.1996. The defendant, his brother, who was in possession, challenged the authenticity of these documents. The trial court and the High Court had ruled in favour of the plaintiff. The Supreme Court, in its verdict, permitted the appeal and set aside the orders of the lower courts, rejecting the plaintiff's suit for possession. According to Section 54 of the Transfer of Property Act, 1882, the Court reiterated that title to an immovable property worth more than INR 100 (Indian Rupees One Hundred only) can be transferred only by a registered sale deed. An Agreement to Sell does not create any interest in the property itself; it merely gives the holder a right to seek specific performance of the contract. Similarly, a GPA does not transfer title. The Court also found that the Will was not proven per the law, as the mandatory requirement of examining an attesting witness was not fulfilled.
4. Electricity Law
4.1. Power and Energy
4.1.1. Supreme Court upholds pro-rata apportionment of linkage coal costs among beneficiary states
The Supreme Court resolved a complex dispute between a power generator, GMR Kamalanga Energy Limited ("GKEL"), and the power distribution companies ("DISCOMS") of Haryana, Odisha, and Bihar over the apportionment of additional costs arising from a "Change in Law". GKEL was supplying power to all three states from its plant in Odisha. When a shortfall in domestic "firm linkage" coal forced GKEL to use more expensive alternate coal that is imported and available in the open market, the Central Electricity Regulatory Commission ("CERC") allowed it to recover these extra costs from the DISCOMS. The Haryana and Odisha DISCOMS argued that the cheaper firm linkage coal should be exclusively allocated to them, and the other states should bear the higher costs of alternate coal based on the specific terms of their respective Power Purchase Agreements ("PPAs"). The Supreme Court rejected the appeals of the Haryana and Odisha DISCOMS in its ruling. The Court accepted the concurrent findings made by the CERC and the Appellate Tribunal for Electricity ("APTEL"), concluding that coal allocation from Coal India Limited is made for the whole power plant, not the PPA. Therefore, the cheaper linkage coal and the costs of the alternate coal must be apportioned pro-rata based upon the fraction of the total power supplied to each viable beneficiary state.
5. Insurance Law
5.1. Automobile and Motor Vehicles
5.1.1. Supreme Court rules income evaluation should represent actual earning capacity
In a recent case related to a claim involving a motor accident, the Supreme Court deliberated over the important issue of calculating a just income for a deceased victim who was self-employed and where decisive documentary evidence is not present. The case related to the family of a 43 (forty-three only) year old pharmacist holding a diploma in pharmacy who passed away in a road accident in 2010. Whereas the Motor Accidents Claims Tribunal ("MACT") had estimated his monthly income at INR 6,000 (Indian Rupees Six Thousand only), the High Court, without giving any reasons, cut it down to INR 5,500 (Indian Rupees Five Thousand Five Hundred only). In its judgment the Supreme Court found the High Court's reduction to be arbitrary and set a more realistic income benchmark. The Court observed that based on its own precedent from 2004, even an unskilled coolie would have earned INR 7,500 (Indian Rupees Seven Thousand Five Hundred only) per month in 2010. Considering the deceased's qualifications and business activities, the Supreme Court held that an assessed monthly income of INR 12,000 (Indian Rupees Twelve Thousand only) was fair and reasonable. The Supreme Court held that tribunals should not be overly technical and can use prevailing wage rates as a baseline to ensure compensation is just and reflects a person's likely earning capacity. The total compensation was accordingly enhanced to INR 20.8 Lakh (Indian Rupees Twenty Lakh Eighty Thousand only).
6. Contract Law
6.1. Mining and Infrastructure
6.1.1. Supreme Court dismisses rejection of bid for non-submission of document not explicitly required in tender
In a recent judgment the Supreme Court addressed the fairness of rejecting a technical bid on grounds not explicitly stated in the tender document. The case involved a bid submitted by Maha Mineral Mining & Benefication Pvt. Ltd. for a coal beneficiation tender issued by Madhya Pradesh Power Generating Co. Ltd. The appellant's bid was rejected because it did not submit the Joint Venture ("JV") agreement of a past project to prove its experience, even though it had provided a work execution certificate from a state entity that clearly certified its share and successful performance. The High Court upheld this rejection. The central issue before the Supreme Court was whether a bid could be rejected for the non-submission of a document that was not an explicit mandatory requirement under the Notice Inviting Tender ("NIT"), and whether a court could introduce new grounds for disqualification. The Supreme Court held that the rejection was improper. The Court clarified that tendering authorities cannot disqualify bidders based on ambiguous interpretations of a clause; if a specific document like a JV agreement is essential, it must be clearly listed as mandatory. The judgment also curbed the scope of judicial review, holding that a court cannot travel beyond the reasons for rejection cited by the tender committee.
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