2002 (6) TMI 587 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Court.
2. Liability of G.T.B. to pay Rs. 74 crores to K.F.S.L.
3. Nature of liability of G.T.B.
4. Assignment of debt and equitable assignment.
5. Validity of the agreement of sub-lease.
6. Suppression of material documents.
7. Legal position of D.M.L. vis-a-vis arrangement between K.F.S.L. and K.N.L.
8. Nature of transaction between V.B.L. and K.N.L.
9. Prematurity of the application.
10. Abuse of the process of law.

Summary:

1. Jurisdiction of the Court:
The Court held that it has jurisdiction to entertain the application as D.M.L. is a notified party and must move the Special Court. The Court cannot advise on the framing of the application, and the pleadings indicate that the Special Court alone can take cognizance.

2. Liability of G.T.B. to pay Rs. 74 crores to K.F.S.L.:
The Court found that G.T.B. was not liable to pay Rs. 74 crores simultaneously with the execution of the sub-lease agreement. The agreement of sub-lease was a consequence of the M.O.Us, and the consideration for the sub-lease was the adjustment of liabilities, not an immediate cash payment.

3. Nature of liability of G.T.B.:
The Court held that no liability to pay arises by mere signing of the sub-lease agreement. The right to recover Rs. 74 crores, if any, is not a debt but a claim for damages for breach of contract.

4. Assignment of debt and equitable assignment:
The Court concluded that the right to recover Rs. 74 crores is not assignable and is not assigned in equity. The mandate issued by K.F.S.L. to G.T.B. does not create any interest in favor of K.N.L. or D.M.L.

5. Validity of the agreement of sub-lease:
The agreement of sub-lease was found to be void and non-est as it was in violation of the Court's order dated 18.8.2001, which restrained K.N.L. and its group companies from disposing of their assets.

6. Suppression of material documents:
The Court found no suppression of material documents by G.T.B. However, it noted that the applicants suppressed material facts regarding how K.N.L. went out and K.F.S.L. came in.

7. Legal position of D.M.L. vis-a-vis arrangement between K.F.S.L. and K.N.L.:
The Court held that there is no privity of contract between D.M.L. and G.T.B., and D.M.L. has no cause of action against G.T.B.

8. Nature of transaction between V.B.L. and K.N.L.:
The Court did not delve into the nature of the transaction between V.B.L. and K.N.L., as V.B.L. was not a party to the proceedings.

9. Prematurity of the application:
The application was found to be premature as K.F.S.L. was not in a position to grant the sub-lease and perform its part of the contract on the date of the application.

10. Abuse of the process of law:
The Court concluded that the application was intended to delay the execution and amounted to an abuse of the process of law. The applicants were found to be guilty of suppression of material facts and were attempting to frustrate the execution proceedings.

Final Order:
The application was dismissed with costs of Rs. 3 lakhs to be paid by the applicants, with 2/3rd to be paid to G.T.B. and 1/3rd to the Custodian. The draft amendments sought by the applicants were also rejected.