A five-judge constitution Bench of the Supreme Court last week overruled an earlier decision of the court and held that a contract for manufacture, supply and installation of lifts in a building is a "works contract" and not a "contract for sale of goods". If it is a contract for sale, the entire sale consideration would be taxable under the sales tax or value-added tax enactments of the state legislatures. If it is considered as a works contract, the consideration payable or paid for the labour and service element would have to be excluded from the total consideration received and sales tax or value added tax would be charged on the balance amount. State governments, lift manufacturers and other similar traders were contesting the issue in several high courts. The Supreme Court itself had given a judgment in 2005 which had held that the transaction was one of sale. However, some Benches of the court had expressed doubts about its correctness and referred the issue to the constitution bench. It held by a majority of 4:1 in the case, Kone Elevator India Ltd vs State of Tamil Nadu, that the earlier judgment was wrong and the transaction was one of works.

Sarfaesi property sale quashed

The Supreme Court has upheld the judgment of the Karnataka High Court setting aside the sale of property of a borrower under the Securitisation Act ("SARFAESI") for non-payment of loan. The Supreme Court stated that the Security Interest (Enforcement) Rules were mandatory and were not followed in this case, Vasu Shetty vs Hotel Vandana Palace. The hotel had taken a loan from Syndicate Bank, which was not returned. Despite two auction dates and an attempt at 'one-time settlement', litigation continued in various forums. The high court ultimately set aside the sale on the ground that according to the rules, before bringing the property for sale in auction, fresh valuation by the accrued valuer should have been obtained by the bank and the 30-day notice was not given to the borrower. The buyer moved the Supreme Court claiming the property, arguing that he was a bona fide purchaser. Rejecting his appeal, the Supreme Court stated that "when there is a breach of mandatory requirement, the sale is to be treated as unconstitutional, null and void".

High court not to reopen evidence

Under the Workmen's Compensation Act, the commissioner is the final authority on the facts of the case, and a high court can only go into the legal aspects. A high court cannot re-examine the evidence and overturn the commissioner's decision on losses and injuries suffered by workers in the course of employment, the Supreme Court has declared in the case, B Lakshmanan vs New India Assurance. In this case, the driver, cleaner and a few loaders were injured in a road accident in Bellary, Karnataka. They suffered various degrees of injuries. They approached the commissioner under the Act with disability certificates from an orthopaedic surgeon. The commissioner gave awards in all the six cases according to the disability incurred. The insurance company contested it in the high court. It set aside the commissioner's award on the ground that he had not correctly assessed the evidence. The workers appealed to the Supreme Court. It stated that the commissioner had already assessed the extent of injuries and disabilities. There was no question of law involved and therefore the high court ought not to have allowed the appeal of the insurance company and quashed the commissioner's order, the judgment said.

School staff not Nalco employees

The Supreme Court last week declared that the employees of two schools set up by public sector National Aluminium Co Ltd (NALCO) are not its employees, setting aside the ruling of the Orissa High Court. Therefore, the staff of the schools set up for the benefit of company employees was not entitled to the benefits given to company staff. The judgment said that "there is no parity in the nature of work, mode of appointment, experience, educational qualifications between the NALCO staff and school employees."