Page 16 - BANKING FINANCE November 2015 ONLINE
P. 16
LEGAL UPDATE
Govt to compensate for ONGC, foreign partners lose tax appeal
officers' negligence. The Supreme Court had recently dis- are not covered by the exemption no-
missed a large number of appeals, moved tification. It is only agreements for as-
The government must pay for the by Oil and Natural Gas Commission sociation and participation that get
negligence of its officers and it can- (ONGC) on behalf of its foreign partners, exemption, the Supreme Court stated
not claim "sovereign immunity" like seeking exemption from surtax in re- while upholding the judgment of the
in the old days, the Supreme Court spect of agreements for prospecting, ex- Uttarkhand high court.
has stated while imposing compen- traction and production of mineral oils.
sation on the authorities who failed The Supreme Court explained that
to register three fishing vessels, caus- The government corporation invoked there was nothing to prevent the gov-
ing loss to owners. in vain a 1983 notification granting ernment to grant exemption to both
power to the central government to kinds of contracts. But it chose to
The vessels were bought by grant tax exemption to foreign compa- grant the benefit only to those which
Sancheta Food Products in an auc- nies in certain cases. The SC had stated had direct association or participation
tion. They had to be registered un- that agreements to provide services with the government or ONGC.
der the Merchant Shipping Act for
taking them to the high seas for fish- Ceiling on insurance of bank deposit
ing. However, the officers were tak-
ing contrary stands regarding the Courts cannot ask the official liquidator of a failed bank to disburse all deposits
rules applicable to the vessels, caus- to the account holders ignoring the limits set by the
ing heavy loss to the firm. Banking Regulation Act and the priority given to the
Deposit Insurance and Credit Guarantee Corporation of
It sued the government in the India, the Supreme Court stated last week while quash-
Calcutta high court. It imposed com- ing an order of the Madras High Court. A cooperative
pensation on the government for its bank in Tamil Nadu was wound up and an official liqui-
"contradictory and dilatory" stands.
The government appealed to the Su- dator was appointed. The depositors were paid Rs 1 lakh each, which was the
preme Court, which upheld the high maximum they were entitled to according to law.
court judgment. It elaborated on
the "vicarious liability" of the state Though some of them settled their disputes with the liquidator, others moved
for the actions of its officers and di- the high court for refund of their full deposits. The high court asked the liquida-
luted the immunity of the govern- tor to pay them within a time limit. The corporation moved the SC claiming
ment in negligence cases. that it was entitled to the balance of the amount with the liquidator after pay-
ing up to Rs 1 lakh to the account holders. Allowing the appeal of the corpora-
Rejecting the claim of immunity of tion, the Court stated that Section 21 of the Act "not only makes it obligatory
the government, the present judg- on the part of the liquidator to repay the amount to the corporation, but it also
ment reiterated that "no legal or clarifies that there shall not be any other preferential creditor."
political system today can place the
state above law as it is unjust and Similar brand names, different use, no trade mark in-
unfair for a citizen to be deprived of fringement
his property illegally by negligent act
of officers without any remedy. The The high court rejected the contention of Indchemie stating its
court also rejected the government's product was for therapeutic purposes, on doctor's recommen-
plea that it has taken action against dation, while that of Intas was covered by the Food Safety Act
the officer concerned. The liability of and not under the Drugs Act. Though both products may be
the government did not end with available at the chemists, they are dispensed by qualified per-
action against its officers, the judg- sonnel. Therefore there was no likelihood of confusion.
ment emphasized.
Indchemie markets 'Cheri', recommended by physicians for iron deficiency. It
objected to Intas selling a multivitamin dietary supplement with the name 'Multi
Cherry', recommended by dieticians. Indchemie alleged that since the names
are similar it will confuse the consumers. Intas countered that cherry is a ge-
neric name and its varied spellings would not make it otherwise.
16 | 2015 | NOVEMBER | BANKING FINANCE
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