Page 17 - Banking Finance MAY 2017

LEGAL UPDATE

LEGAL

CASES
CASES
CASES
CASES
CASES

Court can appoint arbitrator apart from the contract
SME's cannot file for tax
The Supreme Court has ruled that even if an arbitrator has been specified in the
exemption just because contract, the court can appoint another in certain cir-
of industrial area tag cumstances. If there is a reasonable apprehension in the
mind of a party that he would not act independently or
Small-scale units located in panchayats impartially or if he is not available, the aggrieved party
stated as can approach the chief justice of the high court and ask
industrial him/her to nominate a person different from the one
area can- named in the agreement, the Supreme Court said in the
not file for judgment, Union of India vs Besco Ltd.
tax ex-
emption The judge must give reasons for departure from the agreement. This was an
simply be- exceptional case in which the government did not nominate its arbitrator within
the prescribed time. Therefore, the aggrieved company approached the Delhi
cause the area has been declared as
chief justice for appointment of an arbitrator. It did so. The government chal-
such by the state government. There lenged it in the Supreme Court. The appeal was dismissed. The agreement had
should be another notification under
specified that it will be governed by the General Conditions and Special Condi-
the Article 243(Q) of the Constitution, tions of Contracts. According to these, there is no insistence that a railway of-
which mandates setting up of local au- ficer should act as arbitrator; any qualified person can be named. The govern-
thorities. ment forfeited its right to appoint arbitrator within the time limit and, there-
In this case, MGR Industries Associa- fore, the chief justice rightly named an arbitrator, the judgment said.
tion Vs state of UP, members of the
association demanded tax exemption Allahabad HC appoints its own arbitrator
as it was an industrial area as de- The Allahabad High Court appointed an arbitrator in place of the Central Public
clared by the state government. Works Department (CPWD) officer named in the contract
But the government maintained that because "nearly three years have expired and the officer
though the area has been declared arbitrator has not even issued a letter acknowledging the
claims raised before him. During approx last three years
as an industrial area under the UP In-
while this petition remained pending, the CPWD or the
dustrial Area Development Act, no
arbitrator named never showed any inclination to adjudicate claim of nonpay-
notification having been issued as in-
ment," the court stated in its judgment, Argee Engineers Co vs Era Engineering
dustrial township within the meaning
of Article 243Q(1), the local authori- Ltd. The court concluded that the arbitrator named by designation has failed to
ties are entitled to realise tax and the perform his function. This was especially so because after the amendment to
the Arbitration and Conciliation Act, the proceedings should be completed within
units cannot claim exemption.
12 months and the officer must be able to devote sufficient time to it.
BANKING FINANCE | MAY | 2017 | 17

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