Page 25 - Banking Finance July 2020

LEGAL UPDATE

eviction during lockdown. The second biggest corporate defaulters. tract with L&T as collaborator. The
wanted the government to formulate The bench observed that since the appellate tribunal upheld the tax de-
a uniform welfare scheme for lawyers petitioners claim the public sector un- mand on Samsung, but the Bombay
across the country. Both were dis- dertakings are not complying with this High Court allowed its appeal. The Su-
missed. circular, "We think you should first go preme Court dismissed the appeal of
the tax authorities observing the two-
to the ministry," said the bench.
Why aren't personal guar- men unit in Mumbai was only auxiliary
Mishra argued before the bench that office doing no core business. Holding
antees of Corporate loan the loans from a common man are re- otherwise as the authorities below did
defaulters invoked by covered through a mechanism where was "perverse", the court stated after
officials go through even the minutest going into facts of the case.
PSBs: SC detail, but promoters, chairpersons and
The Supreme Court has asked the Min- other senior level functionaries of the 'Absolute liability' for
istry of Finance to look into a plea big corporates find it convenient to get
which claimed a loss of hundreds of away by defaulting on loans. NHAI negligence
crore every day, as the public sector The bench told the petitioner's coun- The National Highway Authority of In-
banks are not invoking personal guar- sel that the Finance Ministry has al- dia (NHAI), which constructs, owns and
antees of big corporates who have ready issued a notification on this mat- controls its roads, owes a duty of care
defaulted on loans. ter, and the petitioners should seek to users. If it neglects this duty and any
A bench comprising Justice R. F. response from the ministry, and then user suffers death or injury, it is liable
Nariman and Navin Sinha asked the move the top court. Mishra submitted to pay compensation to the victim. The
petitioners, Saurabh Jain and Rahul before the bench to issue a direction Supreme Court declared so in its judg-
Sharma, who filed the PIL, to move the to the Finance Ministry to give a re- ment, NHAI vs AA Lokmanch.
Finance Ministry with a representation sponse on their representation. In this case, a woman and her daugh-
within two weeks. The top court ob- ter were driving on the Pune-Satara
served that the issue is important and 'Permanent establish-
the ministry should respond after the highway. A miner had flattened a hill
petitioner has made the representa- ment' clarified again along the road causing flooding of the
tion before it. The matter had come up A "permanent establishment (PE)" in a highway. When the women alighted
for hearing. double taxation avoidance treaty is from the car, they were washed away
"We are of the view that at page 115 one through which the business of an and drowned. Lokmanch, a public-spir-
ited organisation, took up the case
of the Writ Petition it has been made enterprise is wholly or partly carried before the Pune Bench of the National
clear that the Ministry of Finance itself on. Also, profits of the foreign enter- Green Tribunal. It directed the NHAI
has, by a Circular, directed personal prise are taxable only where it carries and the miner to pay compensation.
guarantees issued by promoters/mana- on its core business through a PE. The
gerial personnel to be invoked. Accord- maintenance of a fixed place of busi- They appealed to the Supreme Court.
ing to the petitioners, despite this Cir- ness, which is of a preparatory or aux- It affirmed the liability of both. The
cular, Public Sector Undertakings con- iliary character, will not be considered long judgment applied the principle of
tinue not to invoke such guarantees to be a PE. It is only so much of the "absolute liability" in such cases and
resulting in huge loss not only to the profits of the enterprise that may be emphasised that "a statutory corpora-
public exchequer but also to the com- taxed in the other state as is attribut- tion or local authority can be held li-
mon man", said the bench in its order. able to that PE. able in tort for injury occasioned on
Mishra contended before the bench The Supreme Court summarised the account of omission to oversee or de-
that the statistics establish the public law last week in its judgment, Direc- fective supervision of its activities con-
sector banks incurred a loss of approxi- tor of IT vs Samsung Heavy Industries, tracted out to another agency". The
mately Rs 1.85 lakh crore in a financial in a 2007-08 assessment. The South court ordered Rs. 15 lakh shall be
year, and the banks did not take action Korean firm had set up a project office utilised by the Maharashtra govern-
to invoke personal guarantees of the in Mumbai to undertake an ONGC con- ment to restore the environment. T

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