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Showing 381 to 400 of 627 Records

• 2007 (1) TMI 271
  
  Issues Involved:
  1. Maintainability of the writ petition and territorial jurisdiction.
  2. Validity of the second review petition.
  3. Compliance with RBI guidelines and statutory requirements.
  
  Issue-wise Detailed Analysis:
  
  1. Maintainability of the Writ Petition and Territorial Jurisdiction:
  The appellant raised a preliminary objection regarding the maintainability of the writ petition on the grounds of territorial jurisdiction, arguing that the Delhi High Court should not entertain the petition as the operations were in Rajasthan. The Court rejected this contention, stating that the Appellate Authority was located in Delhi, and all hearings took place in Delhi, thereby giving the Delhi High Court jurisdiction under Article 226(2) of the Constitution of India. The Court referenced the Supreme Court judgment in the case of *Oil & Natural Gas Commission v. Utpal Kumar Basu* to support this decision, emphasizing that the cause of action, wholly or in part, arising within the jurisdiction of the Delhi High Court was sufficient to entertain the writ petition.
  
  2. Validity of the Second Review Petition:
  The appellant filed a second review petition, which was allowed by an officer different from the one who decided the appeal, directing the RBI to restore the appellant's license. The Court scrutinized the provisions of Section 22(4), (5), and (6) of the Banking Regulation Act, 1949, and held that quasi-judicial authorities cannot assume powers of review unless conferred by statute either specifically or by necessary implication. The Court relied on various judgments, including *Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji* and *State of Assam v. J.N. Roy Biswas*, to conclude that the power of review must be explicitly available and that a second review is not permissible. Thus, the impugned order passed on the second review petition was deemed non est and quashed.
  
  3. Compliance with RBI Guidelines and Statutory Requirements:
  The appellant failed to maintain the minimum paid-up capital of Rs. 5 crores as required by the RBI Guidelines, despite multiple reminders and extensions. Consequently, the RBI exercised its powers under Section 35A and Section 22 of the Act to prohibit certain activities and eventually cancel the appellant's banking license. The appellant's statutory appeal and first review petition were dismissed. The Court noted that sufficient opportunities were granted to the appellant to rectify the deficiencies, which it failed to do, thereby endangering the interest of depositors. The argument that the first review petition's irregularity should waive the objection to the second review petition was also dismissed, as the RBI had already raised an objection to the review power in its reply to the first review petition.
  
  Conclusion:
  The Court found no infirmity in the impugned judgment of the Learned Single Judge, who correctly concluded that the order dated 14-9-2004 passed by the Appellate Authority on the second review petition was non est and liable to be quashed. The appeal was dismissed, and the parties were left to bear their own costs.

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• 2007 (1) TMI 270
  
  Issues Involved:
  1. Alleged false statements in the prospectus under Sections 63 and 628 of the Companies Act, 1956.
  2. Liability under Sections 62 and 68 of the Companies Act, 1956 for misutilisation of funds and fraudulent inducement.
  3. Validity of the summoning orders.
  4. Limitation period for filing the complaints.
  5. Specific contentions regarding the responsibility of the petitioners as former directors.
  
  Detailed Analysis:
  
  1. Alleged False Statements in the Prospectus (Sections 63 and 628 of the Companies Act, 1956):
  
  The Registrar of Companies (RoC) filed complaints alleging that the petitioners promoted "Tactful Investments Ltd." and raised a public issue with a prospectus stating that the funds would be used for leasing and investment. However, the funds were allegedly misutilised in unproductive shares and securities, contrary to the prospectus, thus constituting false statements punishable under Sections 63 and 628 of the Act. The petitioners argued that the prospectus mentioned both leasing and investment as business objects, and the funds were used for one of the stated purposes. They also contended that the non-commencement of the leasing business did not amount to making false statements.
  
  2. Liability under Sections 62 and 68 of the Companies Act, 1956:
  
  Complaint No. 699/2002 alleged liability under Sections 62 and 68 for paying compensation to subscribers and for fraudulently inducing persons to invest. The petitioners contended that Section 62 prescribes only civil liability, not criminal, and that no specific averment in the complaint indicated any false statement or inducement. The court noted that Section 62 indeed raises civil liability for compensation and not criminal liability. Therefore, a criminal complaint under Section 62 by the RoC was not maintainable. For Section 68, the court found no specific allegations of inducement or complaints from shareholders, thus not attracting the provisions of Section 68.
  
  3. Validity of the Summoning Orders:
  
  The petitioners challenged the summoning orders on the grounds that they were not directors when the funds were allegedly misutilised. The court noted that the petitioners, as promoters and signatories of the prospectus, were responsible for the statements made therein. The court held that the arguments regarding their resignation and lack of control over the company were matters of defense to be proved at trial.
  
  4. Limitation Period for Filing the Complaints:
  
  The petitioners argued that the complaints were time-barred, as they were filed six years after the prospectus was issued, exceeding the three-year limitation period under Section 468(2) of the Code of Criminal Procedure, 1973. The court held that the limitation period would start from when the complainant became aware of the misutilisation of funds, which could be proved only by subsequent events. Therefore, the issue of limitation was a mixed question of law and fact to be decided at trial.
  
  5. Specific Contentions Regarding the Responsibility of the Petitioners as Former Directors:
  
  The petitioners contended that they had resigned as directors before the alleged misutilisation of funds. The court acknowledged this defense but stated that it needed to be established at trial. The court referred to a previous case where the change in business object and subsequent approval by the Department of Company Affairs led to the dismissal of the complaint. However, in the present case, no such material was on record, and the petitioners would have to prove their defense during the trial.
  
  Conclusion:
  
  The court dismissed the petition to quash the summoning order in Criminal Complaint No. 698/2002 under Sections 63 and 628 of the Act, allowing the trial to proceed on merits. However, the court quashed the summoning orders and dismissed Criminal Complaint No. 699/2002 under Sections 62 and 68 of the Act, as the allegations did not attract the provisions of these sections.

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• 2007 (1) TMI 269
  
  Issues Involved:
  The judgment involves a petition u/s 391(2) read with section 394 of the Companies Act, 1956 for the sanction of a scheme of amalgamation between two companies.
  
  Details of the Judgment:
  
  Issue 1: Incorporation and Details of Companies
  - The transferee company was incorporated on 4-1-1999 and became a public limited company on 25-1-1999 with a share capital of Rs. 5,00,000.
  - The transferor company was also incorporated on 4-1-1999 and became a public limited company on 25-1-1999 with an identical share capital structure.
  
  Issue 2: Merger Rationale and Benefits
  - The merger was proposed to rationalize business activities and enhance management efficiency, growth, and financial stability.
  - All assets, properties, and liabilities of the transferor company were to be transferred to the transferee company at book values as of 31-7-2006.
  - The scheme was deemed beneficial for the companies, shareholders, creditors, and stakeholders.
  
  Issue 3: Legal Compliance and Objections
  - The Regional Director raised concerns regarding the increase in authorized share capital and the valuation method used for the merger.
  - The petitioner companies defended the valuation method based on book value and cited legal precedents supporting this approach.
  
  Issue 4: Court's Decision and Sanction
  - The Court upheld the valuation method based on book value as acceptable and not illusory.
  - The Court emphasized that the valuation of assets and shares is a technical matter within the expertise of chartered accountants.
  - Sanction was granted for the scheme of amalgamation u/s 391(2) read with section 394 of the Act, leading to the dissolution of the transferor company without winding up.
  
  Issue 5: Notification and Further Directions
  - The order of sanction was to be publicly notified in specified newspapers within 30 days.
  - Interested parties were given the liberty to seek necessary directions from the Court in the matter.
  
  Conclusion:
  The judgment approved the scheme of amalgamation between the two companies, emphasizing the validity of the valuation method and compliance with legal requirements, leading to the dissolution of the transferor company.

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• 2007 (1) TMI 268
  
  Issues:
  1. Determination of whether the petitioner companies are subsidiaries of Delhi Paper Products Company Private Limited.
  2. Validity of the orders dated 15-1-2003 and 17-1-2003 blacklisting the petitioners.
  3. Compliance with principles of natural justice in issuing the blacklisting orders.
  
  Issue 1: Determination of Subsidiary Relationship:
  The petitioners challenged the blacklisting orders, arguing that the petitioner companies were not subsidiaries of Delhi Paper Products Company Private Limited as per the Companies Act, 1956. The Companies Act defines a subsidiary based on control over the Board of Directors. The court emphasized that the mere presence of a common director does not establish subsidiary status. The control and authority exercised by Delhi Paper Products Company Private Limited over the petitioner companies' boards needed examination to determine subsidiary status. The court highlighted the necessity of factual analysis to ascertain the relationship between the companies.
  
  Issue 2: Validity of Blacklisting Orders:
  The petitioners contended that the blacklisting orders were issued without notice or a hearing, depriving them of the chance to contest their classification as subsidiaries. The respondents argued that the common director and family connections justified the blacklisting. The court ruled that the lack of notice and hearing violated principles of natural justice. It emphasized that blacklisting requires a fair opportunity for the affected party to present their case. Consequently, the orders dated 15-1-2003 and 17-1-2003 were set aside due to the failure to follow natural justice principles.
  
  Issue 3: Compliance with Natural Justice:
  The court directed the respondents to issue a show-cause notice to the petitioners. The petitioners were granted two weeks to respond, followed by a personal hearing within two weeks. The authorities were instructed to pass orders within four weeks after the hearing. The court clarified that the central issue for consideration was whether the petitioner companies qualified as subsidiaries of Delhi Paper Products Company Private Limited on 30-12-2002 and thereafter. The judgment concluded by disposing of the writ petition, emphasizing the importance of adhering to natural justice principles in such matters.
  
  This detailed analysis of the judgment highlights the court's scrutiny of the subsidiary relationship, the necessity of fair procedures in blacklisting decisions, and the importance of providing a hearing to affected parties in compliance with natural justice principles.

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• 2007 (1) TMI 267
  
  Issues:
  Violation of sections 211 and 209 of the Companies Act, 1956 in criminal proceedings against the Managing Director of a company regarding non-disclosure of income and deposits. Interpretation of the immunity clause under the Voluntary Disclosure of Income Scheme, 1997 (VDIS) in relation to prosecution under the Income-tax Act, Wealth-tax Act, Foreign Exchange Regulation Act, and Companies Act.
  
  Analysis:
  The case involved criminal proceedings initiated against the Managing Director of a company for alleged violations of sections 211 and 209 of the Companies Act, 1956. The petitioners contended that the violations were covered by the immunity clause in the Voluntary Disclosure of Income Scheme, 1997 (VDIS). They argued that after disclosing income as per the scheme and remitting the tax, prosecution should not be pursued, as per the provisions of section 71 of VDIS. The respondent, Assistant Registrar of Companies, argued that the immunity clause only prevents the use of declarations as evidence in penalty or prosecution proceedings under the Income-tax Act, etc. The respondent claimed that independent inspection revealed non-disclosure of income and deposits, leading to the alleged violations of the Companies Act.
  
  The court analyzed the purpose of the immunity clause in section 71 of VDIS, emphasizing that its intent is to prevent prosecution for violations related to voluntary income disclosure and tax remittance. The court found that initiating prosecution after declaring income under the VDIS and incorporating details in records goes against the scheme's purpose. Therefore, the court concluded that the prosecution launched against the petitioners for violations of sections 211 and 209 of the Companies Act cannot be sustained. As a result, the criminal proceedings initiated against the Managing Director were quashed, and the petitions were allowed.
  
  This judgment clarifies the scope and application of the immunity clause under the Voluntary Disclosure of Income Scheme, emphasizing that once income is disclosed and tax is remitted as per the scheme, prosecution for related violations should not proceed. The decision highlights the importance of honoring the intent and purpose of such schemes in preventing unnecessary prosecution against individuals who have complied with voluntary disclosure requirements.

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• 2007 (1) TMI 266
  
  Issues involved:
  The judgment involves issues related to the maintainability of a winding up petition based on acknowledged debt, dispute over liability, and the sufficiency of evidence in a running account.
  
  Maintainability of Winding Up Petition:
  The respondent filed a winding up petition against the appellant company for its inability to pay acknowledged dues. The Company Judge held the petition maintainable, directing the appellant to deposit a specified sum. The appellant challenged this order in the present appeal.
  
  Acknowledged Debt and Dispute over Liability:
  The appellant acknowledged an outstanding debt in a letter but later denied liability, claiming defective goods. The Company Judge rejected the appellant's argument that the petition was not maintainable due to a running account, emphasizing the acknowledgment of debt in the letter dated 11-1-1999.
  
  Sufficiency of Evidence in Running Account:
  The appellant argued that the winding up petition was based on a running account and should be resolved through a civil suit. The respondent relied on a judgment highlighting the acknowledgment of liability in the appellant's letter. The Court dismissed the appeal, emphasizing the acknowledgment of debt and directing compliance with the Company Court's orders.

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• 2007 (1) TMI 265
  
  Issues Involved:
  1. Entitlement of the applicant to the possession of the property.
  2. Legality of the sale deed executed during the pendency of winding-up proceedings.
  3. Validity of the claim of the applicant as a bona fide purchaser.
  4. Applicability of sections 531, 531A, and 536 of the Companies Act regarding the sale transaction.
  
  Issue-Wise Detailed Analysis:
  
  1. Entitlement of the Applicant to the Possession of the Property:
  The applicant, a third party and unsecured creditor of Nirup Synchrome Limited, sought possession of Flat No. 804, Paigah Plaza, Basheer Bagh, Hyderabad. The applicant claimed possession since 31-7-2000, but the Official Liquidator locked and sealed the premises on 1-11-2000. The applicant firm argued that it was a bona fide purchaser and unaware of the liquidation proceedings. However, the court found no merit in the applicant's claim of possession since 1998, as the registered office of the company was at the premises until 21-7-2000. The applicant failed to provide evidence supporting its claim of possession or the pressures exerted on the company to execute the sale deed.
  
  2. Legality of the Sale Deed Executed During the Pendency of Winding-Up Proceedings:
  The sale deed dated 31-7-2000 was executed during the pendency of the winding-up petition, which commenced on 4-4-1996. The Official Liquidator argued that the transaction was void under section 536 of the Companies Act, as it was executed without the court's leave. The court agreed, stating that any transfer without the liquidator's sanction after the commencement of winding-up proceedings is void.
  
  3. Validity of the Claim of the Applicant as a Bona Fide Purchaser:
  The applicant claimed to be a bona fide purchaser for valuable consideration, asserting that the sale deed was executed due to pressures exerted on the company. However, the court found no evidence of any legal proceedings or other actions by the applicant to recover the debt. Additionally, the sale consideration of Rs. 4,90,000 was allegedly adjusted against the debt, but the figures did not tally with the statement of affairs filed by the ex-directors, which showed a debt of Rs. 37,31,554.41. The court concluded that the applicant's claim lacked merit and evidence.
  
  4. Applicability of Sections 531, 531A, and 536 of the Companies Act Regarding the Sale Transaction:
  The court examined the transaction under sections 531, 531A, and 536 of the Companies Act. Under section 536, any transfer without the liquidator's sanction after the commencement of winding-up proceedings is void. Section 531 deems any transfer within six months before the commencement of winding-up as a fraudulent preference, and section 531A voids any transfer not made in the ordinary course of business within one year before the winding-up petition. The court found that the sale was effected after the commencement of winding-up proceedings and was not in the ordinary course of business, making it void under these provisions.
  
  Conclusion:
  The court dismissed the application, concluding that the sale effected in favor of the applicant was a fraudulent action and void under the provisions of the Companies Act. The applicant was not entitled to any relief or possession of the property.

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• 2007 (1) TMI 264
  
  Issues:
  Petition seeking direction to set apart funds from sale proceeds for employees' dues under SARFAESI Act.
  
  Analysis:
  The writ petitions were filed by a trade union and an employee requesting the bank to allocate Rs. 3 crores from the sale proceeds of a company's assets towards the employees' dues. The notice issued by the bank under section 13(4) of the SARFAESI Act specified the dues recoverable from the company, including amounts owed to various departments and workers. The petitioners claimed that their dues should be given priority over the bank's recovery. Additionally, an individual worker filed a separate petition to secure his dues from the sale proceeds.
  
  The court considered the provisions of the SARFAESI Act, emphasizing that the sale by the authorized officer is not solely for the bank's benefit but aims to secure assets pledged for the bank's dues. Section 13 outlines the sale procedure, and sections 13(7), (9), and (10) detail the distribution of sale proceeds. The Act mandates that costs and expenses incurred by the bank should be paid first, followed by the bank's dues, with the remaining amount distributed according to stakeholders' rights.
  
  The court clarified that the sale proceeds should be distributed as per the Act's provisions, and the bank cannot prioritize its dues over the workers' entitlements. The bank assured that the workers' dues would be settled after collecting the funds. Consequently, the court dismissed the petitions, directing the bank to disburse the amount in accordance with the SARFAESI Act, without awarding costs to any party.

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• 2007 (1) TMI 263
  
  Issues involved:
  The judgment involves the interpretation of provisions of the Companies Act, 1956, specifically u/s 391, 394, 94, 94A, 95, and 97, regarding the sanction of a scheme of arrangement for amalgamation of companies and the requirement of increasing authorized share capital post-amalgamation.
  
  Judgment Details:
  
  Issue 1: Scheme of Amalgamation Approval
  The appeals were filed against the order approving the scheme of amalgamation of a transferor Company with a transferee Company. The Court admitted the Company Petition and directed publication as per Companies (Court) Rules, 1959. The Official Liquidator supported the merger for efficient resource utilization. However, objections were raised by the Regional Director of the Department of Company Affairs, particularly regarding Clause 10 of the Scheme, which proposed clubbing the authorized share capital of both companies. The Court accepted the Scheme with the condition that Clause 10 would not be part of the approved scheme.
  
  Issue 2: Interpretation of Sections 94 to 97
  The question arose whether amalgamation necessitates the transferee Company to increase its authorized share capital u/s 94 to 97 of the Act. The appellants argued that section 394 of the Act is independent and not controlled by section 97. They contended that no notice under section 97 is required post-amalgamation as assets are transferred, and merger is certified by the Court. Previous judgments supported this view, emphasizing that amalgamation results in a new entity and not a mere bilateral arrangement.
  
  Judgment Outcome
  The Court, aligning with previous decisions and the Delhi High Court judgment, held that amalgamation leads to the formation of a new entity and does not mandate an increase in share capital. Therefore, the order disallowing Clause 10 of the Scheme was set aside in one appeal, while the other appeals were dismissed. The Company Petitions were referred back to the Single Judge in light of the judgment outcomes.

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• 2007 (1) TMI 262
  
  Issues Involved:
  1. Service of Statutory Notice
  2. Limitation Period for Debt Recovery
  3. Acknowledgement of Debt and Part Payments
  4. Bona Fide Dispute and Defense by Respondent
  5. Admission and Payment of Debt
  6. Appointment of Provisional Liquidator
  
  Issue-wise Detailed Analysis:
  
  1. Service of Statutory Notice:
  The respondent contended that the statutory notice dated 2-9-2002 was not served at their registered office. However, the court found that the notice was sent by speed post and returned with an endorsement of refusal. The petitioner also sent copies to the directors, and the registered AD cards confirmed receipt. The court rejected the respondent's plea, concluding that the statutory notice was properly served and the respondent failed to rebut this.
  
  2. Limitation Period for Debt Recovery:
  The respondent argued that the claim was barred by limitation as the last transaction occurred in 1997. The court noted that the respondent acknowledged the debt on multiple occasions, including a letter dated 19-5-1997 and minutes of a meeting on 9-10-1998. These acknowledgements extended the limitation period under Section 18 of the Limitation Act, 1963. The court held that the part payments made by the respondent further extended the limitation period.
  
  3. Acknowledgement of Debt and Part Payments:
  The court examined several acknowledgements by the respondent, including letters and minutes of meetings, which admitted the debt. The respondent's part payments from November 1998 to 21-3-2000 were also considered acknowledgements, extending the limitation period. The court cited previous judgments to support that part payments and acknowledgements in writing reset the limitation period.
  
  4. Bona Fide Dispute and Defense by Respondent:
  The respondent claimed that Rs. 75 lakh was paid, but failed to provide evidence. The court found that the respondent did not substantiate their claims of payment despite opportunities to file affidavits and documents. The court concluded that the disputes raised by the respondent were not bona fide and the defense was not substantial or likely to succeed.
  
  5. Admission and Payment of Debt:
  The respondent admitted a debt of Rs. 2,18,93,858 as of 31-3-1997 but failed to prove the alleged payment of Rs. 75 lakh. The court noted that the respondent did not produce any documents to show subsequent payments. The court inferred that the admitted debt remained unpaid and the respondent was unable to pay its debts.
  
  6. Appointment of Provisional Liquidator:
  The court determined that the respondent was unable to pay its debt, which amounted to Rs. 2,32,56,914.32, including principal and interest. The court deferred the appointment of a provisional liquidator for one month, giving the respondent a final opportunity to make the payment with interest. If the payment was not made within this period, the Official Liquidator would be appointed, and citations would be issued.
  
  Conclusion:
  The court admitted the winding-up petition, concluding that the respondent company was unable to pay its debts. The court deferred further orders for one month to allow the respondent to settle the debt with interest, failing which a provisional liquidator would be appointed.

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• 2007 (1) TMI 261
  
  Issues Involved:
  1. Signature authenticity on the balance sheet.
  2. Expert opinion on signature verification.
  3. Ignoring documents showing fund diversion.
  4. Restoration of appellant as Director.
  5. Validity of appointment of respondents as Directors.
  6. Acts of oppression and mismanagement.
  7. Minority shareholding and relief.
  8. Direction to sell shares to respondents.
  
  Detailed Analysis:
  
  1. Signature Authenticity on the Balance Sheet:
  The core issue was whether the signature on the balance sheet for the year ended 31-3-2001 was that of the first appellant. The Company Law Board (CLB) examined the signature with a magnifying lens and concluded that the balance sheet for the year 31-3-2001 contained the genuine signature of the first appellant and not a scanned signature. This conclusion was based on the impression of the signatures and the absence of pixels around the disputed signatures, which are typical of scanned signatures.
  
  2. Expert Opinion on Signature Verification:
  The appellants contended that the CLB should have sought expert opinion to verify the signature. However, the CLB relied on its own examination and comparison of the signatures using a magnifying lens, finding no need for an external expert opinion.
  
  3. Ignoring Documents Showing Fund Diversion:
  The appellants alleged that the second respondent diverted funds for personal gain. The CLB noted that the foreign inward remittances were reflected in the company's books and that there was no evidence of misappropriation. The CLB did not find substantial evidence to support the allegations of fund diversion by the second respondent.
  
  4. Restoration of Appellant as Director:
  The first appellant claimed wrongful removal as Director. The CLB noted that the first appellant was reappointed multiple times until the 11th Annual General Meeting (AGM). However, no reappointment occurred thereafter. The CLB found that the first appellant's term ended with the 11th AGM, and he was not reappointed, thus his removal was not wrongful.
  
  5. Validity of Appointment of Respondents as Directors:
  The appellants challenged the appointment of the third and fourth respondents as Directors. The CLB found inconsistencies in the records, such as unsigned minutes and lack of evidence for the meetings. Despite these procedural irregularities, the CLB held that the democratic exercise of appointing Directors by the majority shareholders could not be termed as oppression.
  
  6. Acts of Oppression and Mismanagement:
  The appellants alleged various acts of oppression and mismanagement. The CLB referred to the Supreme Court's decision in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd., stating that procedural irregularities alone do not constitute oppression. The CLB found no continuous acts of oppression or mismanagement that would warrant relief under section 397 of the Companies Act.
  
  7. Minority Shareholding and Relief:
  The appellants argued that their minority shareholding should not preclude them from relief. The CLB noted that the mere fact of being a minority shareholder does not justify granting relief unless there is evidence of oppression or mismanagement. The CLB found no such evidence in this case.
  
  8. Direction to Sell Shares to Respondents:
  The CLB directed the appellants to sell their shares to the respondents, valuing the shares as of 31-3-2003. This decision was based on the irreconcilable differences between the parties and the need for equitable relief to ensure the smooth functioning of the company. The valuation was to be determined by a Chartered Accountant, and the appellants were given an opportunity to present their objections.
  
  Conclusion:
  The CLB's order was upheld, dismissing the appeal and confirming that the appellants had not made out a case for oppression or mismanagement. The procedural irregularities noted did not amount to oppression, and the democratic process of appointing Directors by the majority shareholders was upheld. The direction for the appellants to sell their shares to the respondents was deemed an appropriate equitable relief.

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• 2007 (1) TMI 260
  
  Issues:
  Petition under sections 391 and 394 of the Companies Act, 1956 for sanctioning the scheme of amalgamation between multiple companies.
  
  Detailed Analysis:
  
  1. Background of Companies:
  The petitioners, including a transferee company and six transferor companies, were engaged in various businesses such as hydro mechanical equipment, steel fabrication, real estate projects, and more. The companies were listed at the Bombay Stock Exchange and had specific objects detailed in their Memorandum of Association.
  
  2. Scheme of Amalgamation:
  The petitioners sought approval for a scheme of amalgamation to achieve operational efficiencies due to significant overlaps in business plans and overheads. The Bombay Stock Exchange issued a no objection certificate, and all companies involved approved the scheme in their respective Board meetings.
  
  3. Court Proceedings:
  The companies filed a company application before the High Court of Rajasthan, which directed meetings of shareholders, secured creditors, and unsecured creditors. After unanimous approval in these meetings, the petition for approving the scheme of amalgamation was filed.
  
  4. Legal Considerations:
  The Regional Director raised concerns regarding the clause related to the enhanced authorized share capital in the scheme. Citing relevant judicial precedents, the court found that no additional fees or stamp duty were required as the combined authorized capital did not exceed certain limits.
  
  5. Judgment:
  After considering submissions and affidavits, the court sanctioned the scheme of amalgamation, subject to the condition of enhancing the authorized capital following the procedures under the Companies Act. The court allowed the prayers made in the petition and ordered the petitioner to pay costs to the Official Liquidator. The judgment required filing a certified copy with the Registrar of Companies within a specified timeframe.

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• 2007 (1) TMI 259
  
  Issues:
  Petition under section 391(2) read with section 394 of the Companies Act, 1956 for sanction of Scheme of Amalgamation between two companies.
  
  Analysis:
  1. Incorporation and Capital Structure: The transferee-company and transferor-company were incorporated on the same date and later became public limited companies with the same authorized and paid-up share capital. Both companies are closely-held public limited companies under the same management and wholly owned subsidiaries of another company.
  
  2. Purpose of Amalgamation: The merger is aimed at rationalizing business activities, corporate restructuring, and achieving benefits like better management, development, growth, synergies, financial base, economies of scale, and reduced overheads. The board of directors of both companies approved the Scheme as beneficial for shareholders, creditors, and stakeholders.
  
  3. Consent and Meetings: Equity shareholders and creditors of the companies had given their consent to the Scheme, and the Court dispensed with the requirement of convening their meetings.
  
  4. Reports and Objections: The Official Liquidator reported no prejudicial conduct in the affairs of the transferor-company. However, the Regional Director raised concerns regarding the increase in authorized share capital, valuation method, and discrepancy in the appointed date and balance sheet date.
  
  5. Valuation and Legal Validity: The petitioner relied on legal precedents to support the valuation based on the book value method and argued that objections regarding market value ascertainment were not valid. The Court agreed that book value method is an accepted valuation concept, and the exchange ratio was determined by experienced chartered accountants using a known method.
  
  6. Court's Decision: The Court held that objections raised by the Regional Director were not substantial, as the valuation method was valid, and the Scheme of Amalgamation was a comprehensive process. The Court granted sanction to the Scheme, allowing the transferor-company to dissolve without winding up and directed public notification of the order.
  
  7. Final Disposition: Any interested party could seek further directions from the Court, and the petition was disposed of in accordance with the order granting sanction to the Scheme of Amalgamation.
  
  This detailed analysis covers the incorporation details, purpose of amalgamation, consent procedures, reports, objections, valuation methods, legal validity, court's decision, and final disposition of the petition under the Companies Act, 1956.

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• 2007 (1) TMI 258
  
  Issues:
  1. Winding up of stock exchange company for failure to refund security deposit.
  2. Arbitration agreement between member and stock exchange.
  3. Claim barred by limitation.
  4. Utilization of security deposit by stock exchange.
  5. Member's conduct post cessation of membership.
  6. Refund of specific amounts to the petitioner.
  
  Winding up Petition for Non-Refund of Security Deposit:
  A former member sought winding up of the stock exchange company due to alleged failure to refund the security deposit totaling Rs. 10.5 lakhs. The petitioner argued that upon ceasing to be a member, the entire security deposit should have been returned. The stock exchange claimed to have utilized Rs. 7.5 lakhs towards a crisis in 2001, contending it was permissible under its bye-laws. The petitioner's claim was supported by correspondence indicating the stock exchange's acknowledgment of the deposit.
  
  Arbitration Agreement and Limitation Issue:
  The stock exchange raised defenses based on an arbitration agreement and the statute of limitations, asserting that disputes should be resolved through arbitration and the claim was time-barred. However, the court rejected these arguments, emphasizing that the arbitration agreement does not preclude seeking winding up and that the letter from the stock exchange constituted an acknowledgment of the debt, thus overcoming the limitation challenge.
  
  Utilization of Security Deposit and Member's Conduct:
  Regarding the utilization of the security deposit, the court found the stock exchange's defense weak, highlighting that the bye-laws did not permit forfeiture of a non-defaulting member's deposit for another member's default. The petitioner's conduct of continuing transactions post-membership cessation was noted, impacting the assessment of the case.
  
  Refund of Specific Amounts:
  The court ruled in favor of the petitioner for the refund of Rs. 3 lakhs with interest, held in fixed deposits, as the turnover tax had been paid. However, the refund of Rs. 7.5 lakhs, part of the security deposit, was subject to further evidence and argument, directing the petitioner to pursue this claim through a separate suit.
  
  Conclusion and Order:
  The court admitted the petition for Rs. 3 lakhs refund with interest, staying the proceedings if the amount was refunded within a specified period. In case of default, the petition would be advertised, and the petitioner was restrained from filing a suit for the remaining amount for a specific duration. The judgment aimed to balance the immediate refund with the need for detailed adjudication on the larger sum, ensuring fairness to both parties.
  
  This detailed analysis of the judgment encapsulates the key issues, arguments, and conclusions, providing a comprehensive overview of the legal intricacies involved in the case.

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• 2007 (1) TMI 257
  

  Dishonour of cheque for insufficiency of funds - Held that:- No other option but to hold that the allegations made in the complaint petitions even if are taken to be correct in their entirety do not disclose any offence as against the appellant herein. The proceedings against him, thus, should have been quashed by the High Court. The impugned judgment, therefore, cannot be sustained which is set aside accordingly. The appeal is allowed.

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• 2007 (1) TMI 256
  
  Issues Involved:
  1. Whether the Company Law Board (CLB) erred in not passing a final order based on the valuation report.
  2. Whether the majority shareholders can object to the valuation report after agreeing to it.
  3. The enforceability of the CLB's orders under section 634A of the Companies Act.
  
  Summary:
  
  1. Error in Not Passing Final Order Based on Valuation Report:
  The appellant contended that the CLB committed an error by not passing a final order based on the valuation report submitted by M/s. Billimoria and Company, Chartered Accountants. The appellant argued that the CLB was legally bound to pass orders on the valuation report as per the orders dated 3-2-1998 and 5-2-1998, which fall u/s 402(b) of the Companies Act and are enforceable u/s 634A of the Companies Act. The Court agreed with the appellant, stating that the CLB should have passed final orders based on the valuation report and cannot abdicate its statutory duty.
  
  2. Objection to Valuation Report by Majority Shareholders:
  The respondents (majority shareholders) contended that they were not accepting the valuation report and thus, the CLB should hear the application u/s 397 of the Act. They argued that the orders dated 3-2-1998, 5-2-1998, and 11-3-1998 lost their value due to a subsequent offer by the minority shareholders to sell their shares for Rs. 30 lakhs. The Court rejected this argument, stating that after agreeing to purchase the minority shares based on the valuation report, the majority shareholders cannot wriggle out of their agreement.
  
  3. Enforceability of CLB's Orders u/s 634A:
  The Court emphasized that the CLB has wide powers u/s 402 to pass appropriate orders to bring about an amicable settlement of disputes. The Court referred to several precedents, including the Supreme Court's decision in Manish Mohan Sharma v. Ram Bahadur Thakur Ltd., which held that consent orders can be executed by the CLB u/s 634A. The Court concluded that the orders passed by the CLB on 3-2-1998 and 5-2-1998 are final orders in terms of section 402(b) and are executable u/s 634A.
  
  Conclusion:
  The appeal was allowed, and the order passed by the CLB on 3-5-2000 was set aside. The CLB was directed to pass orders on the valuation report after hearing all parties, and such an order is executable u/s 634A of the Companies Act.

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• 2007 (1) TMI 255
  
  Issues involved: Appeal u/s 35 of FEMA against penalty reduction u/s FERA for alleged contravention of section 8(3) and 8(4) of FERA read with section 49(3) and 49(4) of FEMA.
  
  Summary:
  
  Background: The appellant, a partnership firm, imported Chloramphenicol from China using foreign exchange acquired under FERA in 1998. Customs warehoused the goods, but due to financial difficulties, two consignments were not cleared and auctioned in 2002.
  
  Appellate Tribunal's Decision: Tribunal upheld that foreign exchange was used for intended purpose but penalized for not clearing warehoused goods, presuming non-use of foreign exchange. Reduced penalty from Rs. 6 lakhs to Rs. 2 lakhs.
  
  Legal Analysis: Section 8(4) of FERA requires goods to be brought into India within a reasonable time, matching the value, quality, and quantity specified during foreign exchange acquisition. Failure to do so presumes non-use of foreign exchange for intended purpose.
  
  Court's Decision: Court held that goods were indeed brought into India, and failure to clear all consignments does not negate the use of foreign exchange for intended purpose. Refusal to accept that goods must be personally cleared by appellant. Upheld appeal, set aside penalty, and directed refund of Rs. 2 lakhs to the appellant.
  
  Conclusion: The court ruled in favor of the appellant, stating that the foreign exchange was used for its intended purpose, and there was no violation of section 8(4) of FERA. Penalty was set aside, and the appellant was directed to be refunded the deposited amount.

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• 2007 (1) TMI 254
  

  Recovery of sales tax arrears - due in respect of a company from its directors - Directors resigned from the directorship - Proceedings u/s 8 of the Revenue Recovery Act - Powers of u/s 19A - HELD THAT:- It is well-settled that a company is a legal entity by itself and it can sue or can be sued as a legal entity and any dues from the company has to be recovered only from the company and not from its directors. Section 19A of the Act cannot be taken assistance by the respondent for sustaining the order, which provides for the liability to tax of partitioned Hindu family, dissolved firm. Even section 19B of the Act, which provides for liability to tax private company on winding up, cannot be invoked.

  Thus, I am of the view that the impugned order is liable to be set aside and it is accordingly set aside. The writ petitions are allowed.

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• 2007 (1) TMI 253
  

  Whether the auction sale should be confirmed or not?

  Held that:- Appeal allowed. In the peculiar facts and circumstances of this case, it is difficult to accept the submission of the learned counsel for the respondents that the bid was accepted finally, but only possession was to be taken by the purchasers at their own risk. The acceptance of the bid herein was subject to order of this Court which, in our opinion, thus, by reason of the order of the Special Court or otherwise did not result in a concluded contract. The deposit was to be made within sixty days from the date of grant of sanction which would mean final acceptance of the bid, which was to depend upon the ultimate order which was to be passed by this Court.

  Matter is remitted to the learned Judge, Special Court for consideration of the matter afresh in the light of the observations made hereinbefore.

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• 2007 (1) TMI 252
  
  Issues involved: Application u/s 439 of the Companies Act, 1956 for winding up the respondent-company.
  
  Judgment Summary:
  
  Issue 1: Service of Notice and Non-Appearance of Respondent
  The petitioner filed a winding-up petition against the respondent-company, which was served notice but did not appear in court despite being duly informed through registered post. The court directed advertisement of the petition in newspapers as per the Companies (Court) Rules, 1959. The respondent continued to abstain from the proceedings.
  
  Issue 2: Default in Payment and Legal Notices
  The respondent-company failed to repay a financial accommodation received from the petitioner, leading to dishonored cheques and legal notices demanding payment. The respondent did not respond to these notices or make the required payments, prompting the petitioner to seek winding up of the company.
  
  Issue 3: Company's Inability to Pay Debts
  The petitioner argued that the respondent-company's inability to pay its debts was evident from the facts presented, meeting the criteria u/s 433(e) and 434 of the Companies Act, 1956. The court noted the uncontested nature of the petitioner's claims and the lack of response from the respondent.
  
  Issue 4: Maintainability of Winding-Up Petition
  The court considered the maintainability of the petition in light of a pending proceeding u/s 138 of the Negotiable Instruments Act, 1881. It was clarified that the two legal remedies were distinct, with the criminal proceeding not serving as an alternative to the civil action sought in the winding-up petition.
  
  Final Decision
  Based on the established facts and legal provisions, the court granted the petition for winding up the respondent-company under the relevant provisions of the Companies Act, 1956. Despite acknowledging the potential adverse effects on the company, the court found it necessary to order the winding up in light of the circumstances. No costs were awarded in this matter.

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