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Showing 81 to 100 of 493 Records
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1998 (2) TMI 540
Issues:
1. Applicability of Chapter VA of the Narcotic Drugs and Psychotropic Substances Act, 1985 to the appellant.
2. Violation of principles of natural justice in the freezing order issued by the Competent Authority.
Detailed Analysis:
1. The appellant contested the applicability of Chapter VA of the NDPS Act to her, arguing that she is neither a detenu nor an associate of the detenu, thus her properties should not be forfeited. The Competent Authority contended that the frozen properties were acquired from illegal earnings of the detenu and Nitin Khimji Bhanushali, standing in their names. The Tribunal found that if a nexus between the detenu's illegal earnings and the appellant's properties is established, Chapter VA would apply. The Tribunal rejected the appellant's contention, stating that the provisions of Chapter VA could be applicable based on evidence linking the appellant's properties to the detenu's illegal activities.
2. The appellant raised concerns about the violation of natural justice principles as she was not given an opportunity to defend herself before the freezing order was issued. The Competent Authority argued that no specific notice provision existed under section 68F but maintained that the appellant had the chance to show cause against forfeiture under section 68H. The Tribunal emphasized the integrated procedure outlined in sections 68E, 68F, 68G, and 68H, providing for identification, investigation, freezing, and forfeiture of illegally acquired properties. It held that the Competent Authority adequately provided the appellant with an opportunity to be heard through the notice included in the impugned order, in line with principles of natural justice. The Tribunal cited a Supreme Court case to support its stance on natural justice and concluded that there was no violation of such principles in this case.
In conclusion, the Tribunal dismissed the appeal, directing the Competent Authority to expedite the proceedings without unnecessary delays. The Tribunal upheld the High Court's direction regarding the seal removal and occupation of the property, subject to the final outcome of the inquiry. The appeal was deemed unsuccessful, and the impugned order was upheld.
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1998 (2) TMI 539
Issues Involved:
1. Validity of the Commissioner of Income-tax's invocation of section 263.
2. Whether the Tribunal's decision was based on factual evidence or involved a referable question of law.
Issue-wise Detailed Analysis:
1. Validity of the Commissioner of Income-tax's invocation of section 263:
The Revenue sought to refer a question to the High Court regarding the Tribunal's decision that the Commissioner of Income-tax was not justified in cancelling the order of the Assessing Officer by invoking section 263. The Commissioner had issued a notice under section 263, stating that the Assessing Officer's order was erroneous and prejudicial to the interests of the Revenue because it allowed benefits under rule 6DD(j) for cash payments exceeding Rs. 10,000, which should have been disallowed under section 40A(3). The Commissioner directed the Assessing Officer to verify the genuineness of these payments and record satisfaction for each transaction exceeding Rs. 10,000.
The Tribunal, however, cancelled the Commissioner's order, restoring the original assessment order. The Tribunal observed that the assessment order, although brief, indicated that the Assessing Officer had conducted proper inquiries and test-checked the accounts. The Tribunal noted that the Deputy Commissioner of Income-tax had verified the cash payments during the assessment proceedings, and all material facts were brought on record and discussed, even though the satisfaction was not recorded in the body of the assessment order.
2. Whether the Tribunal's decision was based on factual evidence or involved a referable question of law:
The Tribunal concluded that the assessment order was not erroneous or prejudicial to the interests of the Revenue, as it was based on proper inquiries and verification. The Tribunal emphasized that an assessment order cannot be set aside solely because it is non-detailed or cryptic if it is valid in law and does not prejudice the Revenue's interests. The Tribunal's decision was based on the factual evidence available on record, including the sequence of events and the Deputy Commissioner's report.
At the reference stage, there was a difference of opinion between the Members of the Tribunal. The Accountant Member held that the Tribunal's decision was based on appreciation of factual evidence and did not involve a referable question of law. He emphasized that human minds might differ on the reliability of evidence, but the decision of the final fact-finding authority is conclusive by law.
The Judicial Member, however, believed that a question of law did arise, as the Assessing Officer had not verified the bills and confirmations with the books of account, and some certificates had glaring mistakes. He cited Supreme Court decisions in Rampyari Devi Saroogi v. CIT and Tara Devi Aggarwal (Smt.) v. CIT to support his view.
The matter was referred to the President for the opinion of a third Member, who agreed with the Accountant Member. The third Member noted that the Tribunal's decision was based on the facts and evidence on record, and the reference application filed by the Revenue was rightly rejected as the question was one of fact, not law. The third Member emphasized that the Tribunal should be guided by the facts recorded in its order rather than the statement of facts submitted by the Revenue.
In conclusion, the Tribunal's decision to cancel the Commissioner's order under section 263 was based on factual evidence, and no referable question of law arose. The reference application filed by the Revenue was dismissed.
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1998 (2) TMI 538
Issues Involved:
1. Jurisdiction of the Assessing Officer to issue notice u/s 148.
2. Validity of reopening assessment based on a change of opinion.
3. Interpretation of "escaped assessment" u/s 147.
Issue-wise Summary:
1. Jurisdiction of the Assessing Officer to issue notice u/s 148:
The petitioners challenged the notices dated March 29, 1996, issued by the Assistant Commissioner of Income-tax, proposing to reopen the completed assessment for the assessment year 1991-92. The respondent argued that the notice was issued after recording reasons, which are reflected in the order sheet, and that the computation of capital gains was shown by the assessee in the return for the assessment year 1993-94. The court held that the Assessing Officer had a reason to believe that the income chargeable to tax had escaped assessment and thus had the jurisdiction to issue the notice u/s 148.
2. Validity of reopening assessment based on a change of opinion:
The petitioner contended that the notice was issued on a mere change of opinion and that all relevant details were placed on record during the original assessment. The court held that if the Assessing Officer discovers or finds that the taxable income has escaped assessment, it would amount to having a reason to believe that such income had escaped assessment. The court emphasized that the word "assessment" means the ascertainment of the amount of taxable income and of the tax payable thereon. If the Assessing Officer had overlooked something during the original assessment, there can be no question of a mere change of opinion when the income is actually taxed as it ought to have been under the law.
3. Interpretation of "escaped assessment" u/s 147:
The court interpreted the term "escaped assessment" to cover cases where an error of fact or law is discovered later, justifying the belief that income had escaped assessment. The court noted that the provisions of section 147 require that the Assessing Officer should have a reason to believe that any income chargeable to tax has escaped assessment. The court held that the Assessing Officer's belief is an administrative decision and does not determine anything at the initial stage. The court concluded that the initiation of proceedings u/s 147 cannot be assailed on the ground that it was without jurisdiction, and the proper remedy for the assessee would be to go up in appeal under the provisions of the Act.
Conclusion:
The court found no merit in the petitions and rejected them, discharging the rule with no order as to costs. The court emphasized that the Assessing Officer has the jurisdiction to reopen assessments within four years if there is a reason to believe that income has escaped assessment, and such actions cannot be challenged on the ground of mere change of opinion.
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1998 (2) TMI 537
Issues Involved:
1. Interpretation of sections 40(c) and 40A(5) of the Income-tax Act, 1961.
2. Applicability of the ceiling limit on remuneration paid to directors stationed outside India.
3. Determination of permissible expenditure for employee-directors.
Detailed Analysis:
1. Interpretation of Sections 40(c) and 40A(5) of the Income-tax Act, 1961:
The core issue was whether remuneration paid to directors stationed outside India should be excluded from the ceiling limit of Rs. 72,000 as per sections 40(c) and 40A(5)(a) of the Income-tax Act, 1961. The relevant provisions were analyzed to determine if the remuneration paid to employee-directors for their employment outside India should be considered within the prescribed ceiling limits.
2. Applicability of the Ceiling Limit on Remuneration Paid to Directors Stationed Outside India:
The respondent-assessee, a civil construction company, paid substantial remuneration to its directors, including those stationed outside India. The Income-tax Officer disallowed the amount exceeding Rs. 72,000 per director as per sections 40(c) and 40A(5)(a). The assessee contended that the remuneration paid to directors for their employment outside India should not be included in the ceiling limit calculation.
The Commissioner of Income-tax modified the Income-tax Officer's order, agreeing with the assessee that remuneration for employment outside India should not be considered within the ceiling limit. The Tribunal upheld this decision, and the High Court affirmed it, leading to the present appeals.
3. Determination of Permissible Expenditure for Employee-Directors:
The Supreme Court examined the legislative history and judicial precedents regarding sections 40(c) and 40A(5). Section 40(c) deals with the remuneration, benefits, or amenities provided to directors and sets a ceiling of Rs. 72,000 for such expenditure. Section 40A(5) relates to expenditure on salaries and perquisites for employees, including directors, and also prescribes a ceiling.
The Court noted that both sections 40(c) and 40A(5) apply to employee-directors. Previous judgments, including CIT v. Indian Engineering and Commercial Corporation Pvt. Ltd. and CIT v. Synpol Products Pvt. Ltd., established that the higher of the two ceilings should be applied when a person is both an employee and a director.
The Court further analyzed section 40A(5)(b), which excludes certain expenditures, including those for employment outside India, from the ceiling limit. The Court held that this exclusion applies to employee-directors as well. Therefore, remuneration paid to directors for their employment outside India should not be included in the ceiling limit calculation under sections 40(c) and 40A(5)(a).
The Court emphasized that the purpose of these provisions is to prevent excessive remuneration but also to allow reasonable expenditures, such as those for employment outside India. The Court concluded that sections 40(c) and 40A(5) should be read together, and the exclusions under section 40A(5)(b) should apply to employee-directors.
Conclusion:
The Supreme Court affirmed the High Court's decision, holding that remuneration paid to directors for their employment outside India should be excluded from the ceiling limit under sections 40(c) and 40A(5)(a). The appeals were dismissed with costs, and the question was answered in favor of the assessee.
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1998 (2) TMI 536
Issues involved: Interpretation of exemption notifications under Central Excise law.
In the present case, two appeals were filed by the Revenue challenging a common order-in-appeal passed by the Collector of Central Excise (Appeals), New Delhi. The appeals involved the classification of goods manufactured by M/s. Singh Plastic and M/s. Thermopack Industries under Chapter Heading Nos. 39.23, 39.24, and 39.26 of the Tariff, and the applicability of duty exemptions under Notification No. 53/88-C.E., dated 1-3-88.
Analysis:
1. The respondents had paid duty under Sl. No. 40 of the exemption notification and claimed Modvat credit for inputs used in manufacturing the goods. The Revenue argued that the goods fell under Sl. No. 39 of the Table and duty should have been paid accordingly.
2. Upon review, it was found that the exemption under Sl. No. 39 was conditional, and if conditions were not met, duty was to be assessed under Sl. No. 40. The Tribunal noted that the assessees had the option to choose the applicable exemption notification when two were equally relevant. In this case, since Sl. Nos. 39 and 40 differed in wording, the assessees were within their rights to pay duty and not claim full exemption subject to conditions.
3. The Collector of Central Excise (Appeals) had correctly determined that the benefit of Sl. No. 40 could not be denied to the manufacturers based on the circumstances of the case. The Tribunal upheld this view and found no fault in the Collector's decision. Consequently, both appeals by the Revenue were dismissed, and the decision of the Collector of Central Excise (Appeals) was affirmed.
This judgment clarifies the principles of interpreting exemption notifications and upholds the right of manufacturers to choose the applicable duty exemption when multiple options are available under the law.
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1998 (2) TMI 535
The appellant filed 30 price lists claiming a 2% discount for immediate/advance payment. The Superintendent approved the lists but directed deduction only if passed on to the buyer. Appellant filed 30 separate appeals, but missed filing against a common order-in-appeal. After delays, the Tribunal allowed the appeal, stating the discount should be deducted regardless of buyer's action. The Superintendent's condition was set aside.
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1998 (2) TMI 533
The Appellate Tribunal CEGAT, New Delhi allowed the appeal filed by the appellants regarding the classification of copper castings under Notification 149/86. The Tribunal held that the addition of Tin or Lead is a technological necessity and the appellants are entitled to the notification. The demands confirmed earlier were set aside, and the appeal was allowed.
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1998 (2) TMI 532
Issues: Valuation of goods under Central Excise (Valuation) Rules based on job work agreement; Comparison of goods for assessable value determination; Interpretation of Rule 6(b)(i) and Rule 6(b)(ii) of Valuation Rules.
Analysis:
Issue 1: Valuation of goods under Central Excise (Valuation) Rules based on job work agreement
The case involved a small scale industry firm that had an agreement with a company for the manufacture and sale of 'Horlicks' brand biscuits. Initially, the firm declared prices based on raw materials and job charges. Subsequently, a revised agreement shifted the responsibility of supplying raw materials to the company. The dispute arose regarding the correct valuation of goods, with the firm claiming valuation based on raw material cost and job charges, while the Revenue insisted on using the wholesale selling price of the company. The Commissioner (Appeals) upheld the Revenue's valuation method. The Tribunal analyzed the terms of the agreement and concluded that the firm's declared value based on raw materials and job charges was the correct assessable value, in line with the Supreme Court's principles on job work basis valuation.
Issue 2: Comparison of goods for assessable value determination
The Revenue argued that the goods manufactured by the firm were comparable to those sold by the company in the wholesale market, justifying the use of Rule 6(b)(i) for valuation. However, the Tribunal disagreed, stating that identical goods cannot be compared in the valuation process. The Tribunal referenced previous judgments and highlighted that Rule 6(b) should not apply when goods are manufactured on job work basis and returned to the raw material supplier. The Tribunal emphasized that the relationship between the firm and the company did not indicate a principal-agent dynamic, supporting the firm's valuation method based on raw materials and job charges.
Issue 3: Interpretation of Rule 6(b)(i) and Rule 6(b)(ii) of Valuation Rules
The Tribunal examined the application of Rule 6(b)(i) and Rule 6(b)(ii) in determining the assessable value of goods. It noted that Rule 6(b) should not be used when goods are manufactured on a job work basis and returned to the raw material supplier. The Tribunal emphasized the Supreme Court's guidance on job work basis valuation and concluded that the firm's declared value based on raw materials and job charges aligned with the principles set forth in the Ujagar Prints case. The Tribunal set aside the Commissioner (Appeals) order and allowed the firm's appeal, determining the correct assessable value as per the firm's declared value methodology.
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1998 (2) TMI 531
Issues:
- Clubbing of production and clearances for exemption eligibility
- Distinction between two separate entities
- Allegations of common management and machinery usage
- Financial transactions and separate operations
- Onus of proof regarding distinct units
- Application of legal precedents in determining clubbing provisions
- Imposition of penalty on separate entities
Analysis:
The case involved appeals against the order of the Additional Collector of Central Excise, Bombay, regarding the clubbing of production and clearances for exemption eligibility under certain notifications. The appellants, two separate entities engaged in manufacturing printed cartons, labels, etc., were denied exemption benefits by the Department due to combined production exceeding prescribed limits. The appellants argued that they were distinct units with separate premises, accounts, and tax registrations, emphasizing their legal independence. They contended that the Department's presumption of unity based on shared resources and common employees was unfounded, citing legal precedents that using one firm's machinery does not warrant clubbing provisions.
The Department alleged interdependence between the units, emphasizing shared facilities and common interests, leading to the conclusion that they functioned as a single unit. The Department relied on the Collector's findings and cited relevant case law to support the clubbing of production for assessment purposes. The Department argued that the extended period for demanding duty and imposing penalties was justified due to undisclosed facts and inter-relationship between the units.
Upon consideration, the Tribunal noted that the Department had successfully demonstrated commonality in control, management, and manufacturing processes between the so-called distinct units. The Tribunal emphasized that the totality of facts and circumstances, including financial and commercial relationships, was crucial in determining unity. Despite the appellants' arguments about separate registrations and declarations, the Tribunal found that the units operated as a single entity in practice, warranting the clubbing of production for assessment.
The Tribunal upheld the Collector's decision to demand duty but found fault with the penalty imposition on each entity separately. The Tribunal ruled that since there was only one organization in reality, the penalty should be imposed on the organization as a whole, halving the penalty amount to be paid by one of the entities. The Tribunal concluded that the entire production of both entities should be considered collectively for assessment purposes, emphasizing the need to look beyond superficial legal distinctions when organizational unity is established.
In summary, the Tribunal confirmed the demand for duty based on the clubbing of production but modified the penalty imposition to reflect the unity of the entities in practice. The judgment underscored the importance of considering the substantive operational unity of entities over formal legal distinctions in determining liability for duty and penalties.
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1998 (2) TMI 530
Issues involved:
The issues involved in this case are the inclusion of loading charges in the assessable value for duty calculation and the bar of limitation for a show cause notice dated 19-1-90.
Inclusion of Loading Charges in Assessable Value:
The appellant, engaged in manufacturing PCC Poles, entered into contracts for supply to U.P. State Electricity Board, where loading charges were to be paid by the buyer if loading was done by the appellant. The Additional Collector held that loading charges should be included in the assessable value regardless of actual payment. The appellant contended that as there were no written instructions from the buyer, loading charges were not incurred. The appellant argued that the cost of loading was already included in the assessable value due to regular staff being used without extra remuneration. The Tribunal decided to remand the matter for the appellant to prove this contention with documentary evidence.
Bar of Limitation for Show Cause Notice:
The show cause notice dated 19-1-90 alleged suppression of facts with intent to evade duty for the period 1984 to October 1988. The appellant argued that the notice was barred by time, but the Tribunal found that the contractual terms, including the price variation clause, were known to the department and not concealed by the appellant. The Tribunal held that the provisionality of the price lists, due to the price variation clause, meant that the period of limitation under Section 11A(1) of the Act did not apply. Therefore, there was no bar of limitation for the show cause notice.
Decision:
The Tribunal set aside the impugned order and remanded the case for the appellant to prove that loading work was done by regular salaried staff, not hired laborers. The appellant was granted an opportunity to produce evidence and a personal hearing. The appeal was allowed, and the cross-objection was dismissed.
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1998 (2) TMI 525
Issues:
- Petition filed by State Bank of Patiala seeking leave to prosecute original application before Debts Recovery Tribunal
- Default in repayment by company in liquidation leading to legal action by the bank
- Requirement of permission from the company court under section 446 of the Companies Act
- Consent of respondents and official liquidator for granting permission
- Exercise of discretion by the company court in granting permission
- Jurisdiction of the company court to grant permission at any stage
Analysis:
The State Bank of Patiala filed a petition seeking permission under section 446(1) of the Companies Act to prosecute an original application before the Debts Recovery Tribunal against a company in liquidation. The company had defaulted in repaying the loan amounts, leading the bank to seek recovery through legal means. The petition detailed the financial assistance provided to the company and the involvement of various directors, guarantors, and financial institutions in the loan agreements. The bank claimed a specific sum in its application before the Debt Recovery Tribunal, which was filed before the winding-up order of the company. The official liquidator was appointed, and the bank needed permission from the company court to continue the recovery proceedings.
The company court's discretion under section 446 of the Companies Act is crucial in granting permission for legal actions against a company in liquidation. In this case, all respondents, including the official liquidator, did not oppose the bank's request for permission. The court emphasized the need to protect the company's assets while ensuring the expeditious disposal of legal proceedings. The court cited the absence of legal impediments and the prima facie due amount in the bank's claim as reasons for granting permission. The court highlighted a previous judgment to support its decision, emphasizing the bank's obligation to seek permission despite the timing of the winding-up order.
Ultimately, the court granted permission to the bank to proceed with its application before the Debts Recovery Tribunal, subject to certain conditions. The court directed that any decree or recovery certificate issued by the Tribunal should not be executed against the company's assets without specific permission from the court. The decision was made to allow the bank to continue its legal action while safeguarding the interests of the company in liquidation. The court concluded the judgment by stating that there would be no order as to costs, indicating the resolution of the matter without any additional financial burden on the parties involved.
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1998 (2) TMI 520
Issues:
Jurisdiction of City Civil Court under Code of Civil Procedure and Companies Act, 1956 for matters related to loss of equity shares and issuance of duplicate share certificates.
Detailed Analysis:
1. The appeal challenged the order of the City Civil Court at Calcutta, which rejected the application under Order 39, Rules 1 and 2, read with Section 151 of the Code of Civil Procedure, citing that the matter concerning loss of equity shares and consequential reliefs falls under the exclusive jurisdiction of the High Court as per Section 84 of the Companies Act, 1956, and the City Civil Courts Act.
2. The plaintiff-appellant claimed to have purchased 2,000 equity shares of a company and sent them for transfer, suspecting the shares were lost in transit or wrongfully possessed. The plaintiff sought a declaration of ownership and issuance of duplicate share certificates.
3. The legal provisions, including Section 84(4) of the Companies Act and Rule 4(3) of the Companies (Issue of Share Certificates) Rules, were examined. The court noted that while rules prescribe the manner of issuing duplicate share certificates, the Act lacks a mechanism for adjudicating disputes related to such issues.
4. The interpretation of Section 2(11) and Section 10 of the Act was crucial in determining the jurisdiction. The court emphasized that the Act does not entirely exclude the jurisdiction of civil courts for matters not specified to be adjudicated by the Court under the Act.
5. A Division Bench decision highlighted that not all matters under the Act are exclusively within the jurisdiction of the Court mentioned in Section 10, supporting the argument that civil courts may have jurisdiction in certain cases.
6. The court rejected the argument that all defendants residing in Bombay deprived the City Civil Court of jurisdiction, as part of the cause of action, particularly the issuance of duplicate share certificates, arose in Calcutta. The duty of the defendant company to deliver the shares to the plaintiff at Calcutta was emphasized.
7. The court concluded that the City Civil Court had jurisdiction to decide the matter, and the civil court's jurisdiction under Section 9 of the Code was not ousted by the Companies Act. The appeal was allowed, setting aside the City Civil Court's order and directing it to proceed with the injunction application.
8. The judgment clarified the territorial jurisdiction issue raised by the respondents, affirming that part of the cause of action indeed arose in Calcutta, granting jurisdiction to the City Civil Court for further proceedings.
This detailed analysis covers the jurisdictional aspects and legal interpretations crucial to the judgment delivered by the High Court of Calcutta.
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1998 (2) TMI 519
The Punjab National Bank filed a petition under section 446 of the Companies Act, 1956 to continue execution proceedings for recovery of Rs. 34,16,808.65 against Vedson Engineers Pvt. Ltd. The bank, a secured creditor, was granted leave to pursue execution proceedings before the Debt Recovery Tribunal at Jaipur, subject to the sanction of the company court. The Supreme Court allowed the bank to continue execution proceedings, and the matter was disposed of accordingly.
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1998 (2) TMI 518
Issues Involved:
1. Leave to continue and proceed with suits filed in City Civil Court, Hyderabad, and High Court of Mumbai.
2. Appointment of receiver to remain in possession of mortgaged assets.
3. Objections raised by the second respondent regarding the enforcement of personal guarantees.
4. Verification of claims from workmen/employees and other secured creditors.
5. Conditions imposed for granting leave under section 446(1) of the Companies Act.
Issue-wise Detailed Analysis:
1. Leave to Continue and Proceed with Suits:
The applications were filed under section 446(1) of the Companies Act seeking leave of the court to continue and proceed with the suits filed in the City Civil Court, Hyderabad, and the High Court of Mumbai. The court granted leave for the continuance of the suits instituted by the applicants before the winding-up order was passed. It was noted that all the secured creditors having first and second charges over the properties were before the court, and none objected to proceeding with the suits. The court found no material indicating other secured creditors and deemed it unnecessary to withdraw the suits or involve the official liquidator in pursuing the legal proceedings.
2. Appointment of Receiver:
In C.A. No. 241 of 1994, the applicants sought relief to allow the receiver appointed by the Mumbai High Court to remain in possession of the mortgaged assets to recover dues. The High Court of Mumbai had already appointed a court receiver to take charge of the immovable and movable properties of the respondent-company and granted an injunction restraining the company from dealing with the properties. The court found no impediment in allowing the receiver to remain in possession as it would not harm any party involved.
3. Objections by the Second Respondent:
The second respondent contended that the applicants could not proceed against respondents Nos. 2 to 4 without first realizing dues from the hypothecated/mortgaged properties of the company, alleging that the suit was instituted to enforce personal guarantees. The court dismissed this objection, stating it lacked relevance to the present application and did not deserve serious consideration.
4. Verification of Claims from Workmen/Employees and Other Secured Creditors:
The official liquidator was directed to call for claims from workmen/employees via advertisement and local publication. The liquidator reported no claims from workmen and no indication of other secured creditors from the statement of affairs submitted by the ex-directors. The court emphasized the need to protect the interests of all secured creditors and workmen, referencing the Supreme Court's guidelines on the matter.
5. Conditions for Granting Leave:
The court imposed several conditions while granting leave under section 446(1) to ensure transparency and protection of all parties' interests:
- The official liquidator must be apprised of the suit's stages at six-month intervals.
- The official liquidator shall have custody of the company's account books and records.
- The official liquidator is allowed to inspect the company's properties and take inventory.
- Certified copies of judgments and decrees must be provided to the official liquidator without delay.
- The official liquidator must be informed of the proposed sale dates of properties.
- Permission from the court is required before confirming or finalizing the sale of properties.
- The official liquidator can obtain information on amounts realized from sales.
- Applicants must deposit money with the official liquidator to discharge workmen/employees' dues pari passu before confirming the sale.
- The official liquidator can seek directions from the court if workmen's claims arise.
- The official liquidator must file a list of secured creditors before finalizing the sale.
- Any surplus after satisfying secured creditors and workmen's dues must be made available to the official liquidator for distribution according to the Companies Act and Rules.
The company applications were disposed of with no costs.
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1998 (2) TMI 517
Issues Involved:
1. Validity of the suspension and expulsion of the petitioner by the Bhubaneswar Stock Exchange.
2. Legality of the auction of the petitioner's membership.
3. Compliance with the principles of natural justice.
4. Vires of the Articles of Association and Bye-laws of the Bhubaneswar Stock Exchange.
5. Jurisdiction of the Securities and Exchange Board of India (SEBI).
Issue-wise Detailed Analysis:
1. Validity of the Suspension and Expulsion:
The petitioner, a registered stock broker, challenged the suspension and expulsion by the Bhubaneswar Stock Exchange (opposite party No. 1). The petitioner alleged that the opposite party No. 1 and its council of management indulged in mischievous activities to recruit their own nominees by suspending and expelling bona fide members. The petitioner's membership was suspended under article 158 of the Articles of Association, and he was subsequently expelled without a proper inquiry, branding him a defaulter. The court noted that the petitioner was a defaulter and had conceded his inability to clear the liabilities. The Articles of Association and Bye-laws supported the cancellation of membership for defaulting members. Therefore, the suspension and expulsion were found to be valid and in compliance with the Articles and Bye-laws.
2. Legality of the Auction of Membership:
The petitioner contended that the auction of his membership was foreign to the provisions of the relevant statutes and regulations. He argued that neither the Articles of Association nor the Bye-laws permitted such an auction. The court found that the auction was conducted to recover the petitioner's liabilities during settlement No. 5 of 1993. Opposite party No. 4, Megha Finance India Ltd., purchased the membership card in the auction. The court held that the auction was not prohibited by any provisions and was conducted following the principles of natural justice. The auction was deemed legal and valid.
3. Compliance with the Principles of Natural Justice:
The petitioner alleged that the suspension and expulsion were carried out without following due process and without a proper inquiry. The court noted that the petitioner was given a notice to show cause regarding the default, and he had replied to the notice. The court found that the principles of natural justice were complied with, as the petitioner was given an opportunity to respond before the suspension and expulsion were finalized.
4. Vires of the Articles of Association and Bye-laws:
The petitioner challenged the vires of articles 158, 159, and 167 of the Articles of Association and bye-laws 315, 347, and 348, claiming they were ultra vires the Companies Act, 1956, and the Securities and Exchange Board of India Act, 1992. The court examined the provisions and found that the Articles and Bye-laws did not infringe the provisions of the Companies Act or the 1992 Act. The court held that the Articles and Bye-laws were valid and enforceable.
5. Jurisdiction of the Securities and Exchange Board of India (SEBI):
The petitioner argued that the suspension and expulsion of his membership were within the domain of SEBI and not the stock exchange. Opposite party No. 3, SEBI, supported the stock exchange's actions, stating that the membership of a stock exchange is different from the registration of brokers with SEBI. The court held that the stock exchange had the right and power to expel the petitioner in terms of its Articles, Bye-laws, and regulations. The expulsion did not affect the registration with SEBI, as the registration was contingent upon the continuity of membership with the stock exchange.
Conclusion:
The court dismissed the writ petition, holding that the suspension, expulsion, and auction of the petitioner's membership were valid and in compliance with the relevant Articles, Bye-laws, and statutory provisions. The court found no merit in the constitutional challenges raised by the petitioner and upheld the actions of the Bhubaneswar Stock Exchange and SEBI. The petitioner's request for relief was denied, and the auction sale of the membership was confirmed.
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1998 (2) TMI 515
Issues:
Jurisdiction of civil court under section 111 of the Companies Act, 1956.
Analysis:
The appellant challenged the trial court's order stating it lacked jurisdiction to entertain the suit regarding a resolution passed at the company's AGM. The trial court relied on section 111 of the Companies Act, 1956, to oust its jurisdiction. The appellant argued that section 111 does not apply to the respondent company, a limited company. The appellant contended that section 111A, which applies to public limited companies, does not provide the remedy sought in the civil suit. The respondent argued that section 111, before amendment, applied to both private and public limited companies. However, the court found that post-amendment in 1995, section 111 applies only to private limited companies, not the respondent company.
The court analyzed the provisions of section 111 and highlighted that appeals to the CLB were provided against refusal to register share transfers and wrong entries in the register of members. The court noted that section 111A was enacted for public limited companies, limiting the right of appeal to transfer of shares only, omitting the broader appeal right under sub-section (4) of section 111. The court emphasized that the Legislature's conscious exclusion of the wider appeal right in section 111A indicates no right of appeal for public limited companies regarding share allotment. Therefore, the plaintiff could not seek remedies through section 111A as it does not cover challenges to share allotment decisions.
In conclusion, the court allowed the appeal, setting aside the trial court's order, and held that the civil court has jurisdiction to entertain the civil suit. The trial court was directed to proceed with the suit and any related applications following the law.
This judgment clarifies the scope of jurisdiction under section 111 of the Companies Act, distinguishing between private and public limited companies regarding appeals to the CLB. It emphasizes the legislative intent behind section 111A and the limitations on remedies available to public limited companies, specifically concerning share allotment disputes.
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1998 (2) TMI 513
Issues:
Petition for winding up under sections 433 and 434 of the Companies Act, 1956 due to non-payment of debts by the respondent-company.
Analysis:
The petitioner, General Engineering Works, filed a petition seeking winding up of Apex Cables P. Ltd. for non-payment of dues amounting to Rs. 48,265.20, along with a dishonored cheque issued by the respondent-company towards part payment. The respondent-company failed to clear its liability despite statutory notices and court orders. The court, after due consideration of the facts, admitted the petition and ordered its publication in newspapers and gazettes. Despite the publication and service of notices, the respondent-company did not oppose the petition.
Subsequently, the court examined the documents and the previous order dated 8-8-1997, which clearly indicated the respondent-company's intentional default and inability to pay its admitted debts. The court found no other option but to direct the winding up of the respondent-company. The official liquidator attached to the Court was appointed to take over the assets, statutory books, and records of the respondent-company immediately.
In conclusion, the petition for winding up was allowed, and the respondent-company, Apex Cables P. Ltd., was ordered to be wound up in accordance with the law. The official liquidator was tasked with the responsibility of taking over the company's assets and records promptly.
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1998 (2) TMI 510
Issues Involved:
- Barred by Limitation
- Entitlement to Claimed Amount
- Cash Payment Dispute
- Relief
Analysis:
Barred by Limitation:
The petition under section 446(2) read with section 468 of the Companies Act, 1956, was filed by the petitioner-company for the recovery of Rs. 19,500 from the respondent-company. The respondent raised a preliminary objection regarding limitation, arguing that the cause of action had become barred by time. However, the court held that the petition was within the prescribed period of limitation as per section 458A of the Companies Act. The court determined that the company was entitled to the benefit of exclusion of the period from the date of the winding-up petition till the passing of the winding-up order, allowing the petition to be filed within the specified timeline.
Entitlement to Claimed Amount:
The petitioner-company, through the official liquidator, presented evidence to support its claim. The managing director and an assistant from the office of the official liquidator testified, and various documents were submitted. The court noted that the statement of affairs filed with the official liquidator showed the amount due from the respondent-company. The respondent's conflicting statements and failure to provide substantial evidence to refute the claim led the court to rule in favor of the petitioner. The court accepted the petition and ordered the respondent to pay the claimed amount of Rs. 19,500 with interest.
Cash Payment Dispute:
Regarding the disputed cash payment of Rs. 500 made on November 20, 1988, the court found that even if the payment was not accepted, the petition was still within the limitation period. The court accepted the petitioner's assertion that the payment was received, as it was duly recorded in the company's books of account. The respondent's failure to provide convincing evidence to counter this claim further weakened their position.
Relief:
The court granted the relief sought by the petitioner, ordering the respondent to pay Rs. 19,500 with interest at the rate of 18 per cent per annum from a specified date. Despite the respondent's objections and conflicting statements, the court found in favor of the petitioner based on the evidence presented and the lack of substantial rebuttal by the respondent.
In conclusion, the court ruled in favor of the petitioner-company, holding the respondent liable to pay the claimed amount along with interest. The judgment highlighted the importance of maintaining accurate records, burden of proof, and adherence to statutory limitations in company-related matters.
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1998 (2) TMI 509
Issues:
Permission to present and prosecute an application under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunal, Jaipur.
Analysis:
The High Court of Punjab and Haryana heard a petition filed by Punjab National Bank seeking permission to present and prosecute an application under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, before the Debt Recovery Tribunal, Jaipur, against the respondents. The respondents, including the company and its directors, had defaulted on a loan provided by the bank, resulting in a substantial amount due and payable to the bank. The company was ordered to be wound up, and the official liquidator was appointed. The bank sought permission to pursue recovery of the outstanding amount before the Debt Recovery Tribunal. The court noted that there was no legal impediment to granting the bank permission to proceed with the application.
The court emphasized the duty of the company court to protect the assets of the company while ensuring the expeditious disposal of suits and proceedings. It was highlighted that granting permission to the bank to prosecute the case before another forum, as provided under the statute, should not face impediments. The court referred to a detailed judgment in a similar case to support its decision. Ultimately, the court allowed the petition, granting the bank leave under section 446 of the Companies Act to present the proposed petition before the Debt Recovery Tribunal in Jaipur. However, the grant of leave was made conditional, stating that any recovery certificate or decree passed by the Tribunal should not be executed against the assets of the company without specific leave from the court.
In conclusion, the petition was allowed, and the bank was permitted to pursue the proposed application before the Debt Recovery Tribunal, subject to the conditions set by the court. The judgment highlighted the importance of balancing the protection of company assets with the efficient resolution of legal proceedings, ultimately granting the bank the opportunity to seek recovery through the designated forum.
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1998 (2) TMI 480
Clauses of the contracts - Held that:- There is no reason whatsoever to conclude, as was urged, that Goel’s case [1988 (10) TMI 106 - SUPREME COURT OF INDIA] was not properly decided and that it requires reconsideration.
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