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1985 (12) TMI 351
Issues Involved:
1. Legality of the sales tax notices issued to the petitioner.
2. Whether the services rendered by the petitioner amount to "sale" under section 2(h) of the Punjab General Sales Tax Act, 1948.
3. Applicability of the Supreme Court's judgment in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC).
Detailed Analysis:
1. Legality of the Sales Tax Notices:
The petitioner, a firm running a restaurant named Hot Millions in Chandigarh, challenged the legality of the final notice dated 26th November 1982, and two subsequent notices dated 27th December 1982, issued by the Excise and Taxation Officer-cum-Assessing Authority, Union Territory, Chandigarh. These notices were in relation to sales tax assessment for the years 1980-81, 1981-82, and 1982-83. The petitioner contended that the services provided at their restaurant did not constitute a sale of eatables and beverages, thus not subject to sales tax. The respondent, however, rejected this contention, leading to the issuance of the impugned notices.
2. Whether the Services Rendered Amount to "Sale":
The respondent argued that the services rendered by the petitioner amounted to a sale based on several grounds, including the self-service model, lack of waiter service, and the nature of the premises being a "snack-bar." The petitioner countered that the services provided were comprehensive, including sophisticated kitchen equipment, elegant furnishings, and entertainment, which catered to the bodily needs of visitors and did not constitute a sale. The court examined the nature of the services provided, noting that the essential fact was that the eatables were consumed and destroyed on the premises, aligning with the definition of service rather than sale.
3. Applicability of the Supreme Court's Judgment:
The petitioner relied on the Supreme Court's judgment in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC), which held that the service of food and beverages in a restaurant constitutes service and not a sale. The court noted that the services provided by the petitioner, including the consumption of food on the premises, did not transfer the property in goods to the customers. This was consistent with the Supreme Court's view that the essence of the transaction in a restaurant is service, not the sale of food. The court also referenced similar judgments from other High Courts, including Andhra Pradesh, Karnataka, and Delhi, which supported this interpretation.
Conclusion:
The court dismissed the preliminary objection raised by the respondents regarding the availability of an alternative remedy under the Punjab General Sales Tax Act, 1948, stating that the writ petition was admitted nearly three years ago and that the services rendered did not constitute a sale under section 2(h) of the Act. The court concluded that the services provided by the petitioner, including the service of eatables and beverages, were not exigible to sales tax. Consequently, the petition was allowed, and the impugned notices dated 26th November 1982 and 27th December 1982 were quashed. There was no order as to costs.
Separate Judgment by Karnataka High Court:
In a related case, K. Seetharama Rao v. Assistant Commercial Tax Officer, the Karnataka High Court held that the service of food and drinks in a restaurant constitutes service and not a sale, aligning with the Supreme Court's judgment in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi. The petitioner in this case was also entitled to a mandamus restraining the respondent from levying sales tax on his restaurant business turnover.
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1985 (12) TMI 350
Issues:
1. Liability of principal and agent for sales tax assessment.
2. Interpretation of Section 11 of the Sales Tax Act.
3. Assessment of tax on turnover by principal or agent.
4. Legal precedents regarding assessment of commission agents.
Analysis:
Issue 1: Liability of principal and agent for sales tax assessment
The case involved a dispute regarding the liability for sales tax assessment between a principal, Tata Oil Mills Company Limited, and its commission agent, Gekayel Enterprises. The Assistant Commissioner held the principal jointly liable for the tax, which led to the petitioner filing a writ petition challenging the assessment.
Issue 2: Interpretation of Section 11 of the Sales Tax Act
The petitioner argued that under Section 11 of the Sales Tax Act, only the agent should be assessed for tax on sales made on behalf of the principal. However, the court analyzed the provisions of Section 11 and clarified that both the principal and the agent are liable to be assessed under the Act, and their liability is co-extensive.
Issue 3: Assessment of tax on turnover by principal or agent
The court highlighted that while Section 11 provides that if an agent has paid the tax, the principal shall not be taxed again for the same transaction. However, the burden of proving that the tax has been paid by the agent lies with the principal. The court also noted that an amendment to Section 11 did not change the liability of the principal and the agent.
Issue 4: Legal precedents regarding assessment of commission agents
The court referred to previous judgments, including State of Mysore v. F.D. Malladad and Bros., to support its interpretation of Section 11. These judgments emphasized that the principal can be assessed under the Act unless there is already an assessment against the commission agent for the same turnover. The court also cited G. Pampapatheppa & Sons v. Commissioner of Commercial Taxes to reinforce the principle that principals can be assessed under the Act even if commission agents are involved in transactions.
In conclusion, the court dismissed the writ petitions, upholding the assessments made against the principal for the two periods in question. The judgment reiterated the principle that both the principal and the agent can be liable for sales tax assessments under the Sales Tax Act.
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1985 (12) TMI 349
The High Court of Madhya Pradesh ruled that seeds of dhania and matar are considered seeds of vegetables and are exempt from tax. The Tribunal's decision was upheld, and the reference was answered in the affirmative.
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1985 (12) TMI 348
Issues Involved:
1. Whether the insurance company is a "dealer" within the meaning of section 2(c) of the U.P. Sales Tax Act.
2. Whether the activities carried on by the insurance company constitute "business" as defined in section 2(aa) of the U.P. Sales Tax Act.
3. Whether the sale of salvage by the insurance company is exigible to sales tax.
Issue-wise Detailed Analysis:
1. Definition of "Dealer":
The primary issue is whether the insurance company qualifies as a "dealer" under section 2(c) of the U.P. Sales Tax Act. The Act defines a "dealer" as any person engaged in the business of buying, selling, supplying, or distributing goods, directly or indirectly, for cash or deferred payment or for commission, remuneration, or other valuable consideration. The insurance company argued that it does not engage in such activities and hence, should not be classified as a dealer.
2. Definition of "Business":
The second issue is whether the activities of the insurance company fall under the definition of "business" as per section 2(aa) of the Act. The Act defines "business" to include any trade, commerce, manufacture, or any adventure or concern in the nature of trade, commerce, or manufacture, whether or not carried on with a profit motive. The insurance company contended that its primary activity is to provide services and indemnify customers against loss, which is not akin to buying or selling goods.
3. Applicability of Sales Tax on Salvage Sales:
The third issue revolves around whether the sale of salvage by the insurance company is subject to sales tax. The insurance company occasionally sells salvage obtained from settled motor claims by inviting quotations. It argued that such sales are incidental and not frequent enough to be considered a business activity.
Analysis and Judgment:
1. Not a "Dealer":
The court analyzed the definitions and concluded that the insurance company does not fit the definition of a "dealer." The court referenced the Madras High Court's decision in New India Assurance Company Limited v. Deputy Commercial Tax Officer, where it was held that an insurance company selling a damaged motor car acquired through settlement of claims does not qualify as a "dealer." The court also cited the Supreme Court's decision in State of Gujarat v. Raipur Manufacturing Co. Ltd., which emphasized that occasional sales of discarded items do not constitute carrying on a business of selling goods.
2. Not Engaged in "Business":
The court concluded that the insurance company's activities do not constitute "business" as defined in section 2(aa) of the Act. The court distinguished the insurance company's activities from those of the Northern Railway in District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer, where the Supreme Court held that sales of unserviceable materials by the railway were ancillary to its commercial activities. The court emphasized that the insurance company's primary purpose is to provide services, not to engage in commerce or trade.
3. Occasional Sales Not Taxable:
The court agreed with the insurance company's argument that the sale of salvage is occasional and incidental to its main activity of providing insurance services. The court referenced the Gujarat High Court's decision in Mehsana District Shanker-4 Seeds Produce and Sale Cooperative Society Ltd. v. State of Gujarat, which held that the dominant factor in determining whether an activity is a business is whether the service rendered is the primary objective, with sales being incidental.
Conclusion:
The court concluded that the insurance company is not a "dealer" within the meaning of section 2(c) of the Act and its activities do not constitute "business" as defined in section 2(aa) of the Act. Consequently, the sale of salvage by the insurance company is not subject to sales tax. The revisions were allowed, and the order of the Tribunal was set aside, with no order as to costs.
Petitions allowed.
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1985 (12) TMI 347
Issues Involved:
1. Imposition of penalties under section 16(1)(c) of the Rajasthan Sales Tax Act, 1954.
2. Classification of urad and gram as cattle feed.
3. Bar of limitation for assessments.
4. Liability to pay purchase tax under section 5A of the Act.
5. Levy of sales tax on bardana.
6. Validity of interest levy under section 11B.
7. Validity of assessments based on returns and notices.
Issue-wise Detailed Analysis:
1. Imposition of Penalties under Section 16(1)(c):
The Board upheld the imposition of penalties on the dealer-assessee under section 16(1)(c) of the Act. The dealer-assessee contended that penalties could not be imposed without proving that there was no reasonable cause for not furnishing the prescribed returns. The court maintained the Board's finding that penalties were rightly imposed.
2. Classification of Urad and Gram as Cattle Feed:
The dealer-assessee argued that urad and gram should be classified as cattle feed and thus be exempt from sales tax under item No. 9 of the Schedule appended to the Act. The court referred to the common parlance test established in previous judgments and concluded that urad and gram are primarily used for human consumption and only incidentally as cattle feed. Therefore, these commodities do not qualify for exemption under item No. 9 of the Schedule.
3. Bar of Limitation for Assessments:
The dealer-assessee argued that the assessments were barred by time. The court noted that the Board had stated that proceedings were commenced within the 8-year limitation period as required by section 12 of the Act. The court found that the Board had not specifically addressed whether the assessments were validly made under section 10 of the Act. The court set aside the Board's findings on this issue and directed the Sales Tax Tribunal to redecide the matter.
4. Liability to Pay Purchase Tax under Section 5A:
The Board found that the dealer-assessee was liable to pay purchase tax under section 5A of the Act. The dealer-assessee contended against this liability, but the court did not find it necessary to examine this contention in detail, given the remand to the Sales Tax Tribunal for re-evaluation of the assessments.
5. Levy of Sales Tax on Bardana:
The dealer-assessee contested the levy of sales tax on bardana. The Board had upheld the Deputy Commissioner's finding that the sale of old gunny bags was subject to sales tax. The court affirmed this finding, noting that the dealer-assessee failed to show any provision exempting the sale of old gunny bags from sales tax.
6. Validity of Interest Levy under Section 11B:
The Board upheld the levy of interest by the assessing authorities. The dealer-assessee argued against the validity of this levy, but the court did not find it necessary to examine this contention in detail due to the remand for re-evaluation of the assessments.
7. Validity of Assessments Based on Returns and Notices:
The dealer-assessee argued that the assessments were invalid due to improper returns and notices. The court reviewed the provisions of sections 7(1), 7A, 10(1)(a), 10(1)(b), 10(2), and 10B of the Act and noted that the Board had not specifically addressed these issues. The court set aside the Board's findings and directed the Sales Tax Tribunal to re-evaluate the assessments in light of the relevant provisions.
Conclusion:
The court maintained the findings that urad and gram are not cattle feeds and that sales tax is payable on the sale of gunny bags. The direction regarding ajwain, sua, and methi, and the setting aside of penalties under section 7AA were also maintained. The court remanded the case to the Sales Tax Tribunal to redecide the seven revisions filed by the dealer-assessee against the orders of the Deputy Commissioner, focusing on the validity of the assessments under the relevant provisions. The applications under section 15 of the Act, considered as revisions under section 13(10) of the Amendment Act, were disposed of accordingly, with each party bearing its own costs.
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1985 (12) TMI 346
Issues Involved:
1. Appointment of a provisional liquidator u/s 450 of the Companies Act, 1956.
2. Allegations of misconduct and mismanagement against respondent No. 2.
3. Financial status and viability of the respondent company.
4. Counter-allegations by respondents against the petitioners.
Summary:
1. Appointment of a Provisional Liquidator:
The petitioners filed I.A. No. 1264 of 1985 u/s 450 of the Companies Act, 1956, seeking the appointment of a provisional liquidator. The court held that the appointment of a provisional liquidator is a "drastic measure" and should not be resorted to unless absolutely necessary. The court emphasized that such an appointment is generally not made before the hearing of the petition for winding up unless the company is insolvent or the petition is unopposed. The court concluded that it is not just and equitable to appoint a provisional liquidator at this stage.
2. Allegations of Misconduct and Mismanagement:
The petitioners alleged that respondent No. 2 acted in a manner detrimental to the company, defrauded shareholders, and committed various illegalities, leading to the company's financial distress. The petitioners claimed that respondent No. 2 misused his fiduciary capacity, resulting in a loss of confidence in the company's management. The court noted these allegations but also considered the counter-allegations made by the respondents.
3. Financial Status and Viability of the Respondent Company:
The petitioners argued that the company is heavily indebted, with liabilities amounting to Rs. 21,50,201, and that the business has come to a standstill. The respondents, however, contended that they are taking steps to revive the company and hope to make it profitable within a couple of years. The court referred to the decision in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd., which held that trading losses do not destroy a company's substratum unless there is no reasonable prospect of future profit.
4. Counter-Allegations by Respondents:
The respondents accused petitioner No. 5 of unscrupulous means and deception, claiming that the petitioners' actions contributed to the company's current state. They argued that the petitioners filed the petition with an ill-motive to save their skin. The court acknowledged these counter-allegations and noted that the truth of the allegations and counter-allegations is yet to be determined.
Conclusion:
The court directed respondent No. 2 to submit quarterly statements of accounts and progress reports, maintain detailed accounts, and furnish a list of assets and liabilities. The respondents were also restrained from alienating or disposing of the company's assets until further orders. The application, I.A. No. 1264 of 1985, was disposed of with these observations.
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1985 (12) TMI 345
Issues Involved:
1. Whether there is a clear and undisputed debt owing to the petitioner company from the respondent company.
2. Whether the petitioner's claim is barred by limitation.
3. Validity of the respondent's opposition to the winding-up petition.
4. Impact of arbitration proceedings on the winding-up petition.
5. Opposition to winding-up by creditors and workmen.
Detailed Analysis:
1. Existence of Clear and Undisputed Debt
The petitioner, Indian Turpentine and Rosin Co. Ltd. (ITR), sought the winding up of the respondent, M/s. Pioneer Consolidated Co. of India Ltd. (PCC), under section 433, clauses (e) and (f), read with section 439, of the Companies Act, 1956, claiming a debt of Rs. 43,57,198.31. This amount included:
- Principal amount: Rs. 28,41,571.70 (debit balances of PCC's branches after adjusting a security deposit of Rs. 2,00,000).
- Interest: Rs. 4,40,443.61 from September 1, 1979, to August 31, 1980.
- Incidental charges: Rs. 10,70,000 realized by PCC from customers.
The respondent disputed the incidental charges, arguing that the petitioner had agreed to revised rates in a letter dated September 26, 1979. The court found reasonable basis for some dispute on this account. However, the court noted clear admissions by the respondent of substantial liabilities to the petitioner, including an affidavit filed on October 7, 1982, acknowledging a debt of Rs. 21,83,162.50, and further admissions in February 1984.
2. Barred by Limitation
The respondent argued that the petitioner's claim was barred by limitation as the sales agency agreement ended on August 31, 1979, and the suit for recovery should have been filed within three years. The court noted that the plea of limitation is relevant only at the date of presentation of the winding-up petition. The court overruled this plea, following the Division Bench decision in Diwan Chand Kapoor v. New Rialto Cinema P. Ltd. [1987] 62 Comp Cas 810 (Delhi), which held that the relevant date for limitation purposes is the date of presentation of the petition, not the date of the winding-up order. The court also found that the respondent's acknowledgments in 1982 and 1984 extended the limitation period under section 18 of the Limitation Act, 1963.
3. Validity of Respondent's Opposition
The respondent's opposition was based on claims of inflated and unreasonable demands by the petitioner and the potential for the company's revival. Affidavits from creditors and workmen opposed the winding-up, citing the company's valuable assets and potential for rehabilitation. However, the court found these affidavits unconvincing, noting the lack of concrete proposals for financial reconstruction and the company's inability to meet its liabilities, including the court-directed payments.
4. Impact of Arbitration Proceedings
The respondent argued that arbitration proceedings under section 20 of the Arbitration Act were pending, which should preclude the winding-up order. The court found that the arbitration proceedings had been effectively stayed and were not a valid ground to oppose the winding-up petition. The respondent had not sought a stay of the winding-up petition under section 34 of the Arbitration Act or leave under section 446 of the Companies Act to continue the arbitration.
5. Opposition by Creditors and Workmen
Several creditors and workmen opposed the winding-up, arguing that it would harm their interests and that the company had potential for revival. The court acknowledged the workers' right to be heard but found that the opposition was primarily from persons related to the management, with no substantial evidence of the company's ability to revive. The court noted that the company had been unable to meet its expenses and had no concrete plan for financial recovery.
Conclusion:
The court concluded that the respondent company (PCC) should be wound up, appointing the official liquidator to take charge of the assets and proceed with the winding-up process. The court directed immediate communication of the winding-up order to the Registrar of Companies, Delhi.
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1985 (12) TMI 344
Issues:
1. Winding up petition filed under sections 433(e) and (f), 434 and 439 of the Companies Act.
2. Company's inability to pay debts and just and equitable grounds for winding up.
3. Dispute over outstanding amounts and security deposit.
4. Contention regarding neglect to pay debts within the specified time period.
5. Liability disputed by the respondent based on limitation and set-off.
Detailed Analysis:
1. The petitioner filed a winding-up petition under relevant sections of the Companies Act, alleging the respondent company's inability to pay debts. The petitioner claimed amounts due on the grounds of an agency agreement, deductions for damaged goods, freight, and expenses. A demand notice was served, but the respondent disputed the claim, asserting a set-off and contending that the claim was barred by time.
2. The petitioner argued that the respondent's neglect to pay within the specified time period indicated an inability to pay debts, citing legal precedents. However, the court noted that previous decisions relied upon involved admitted liabilities, unlike the present case where the liability was disputed. The court emphasized the need for a prima facie proof of facts supporting the defense in cases of disputed liabilities.
3. The respondent contested the liability based on limitation and set-off. Regarding the limitation defense, the court found that an alleged acknowledgment did not constitute a fresh start of limitation. The respondent's set-off claim against the security amount was supported by the supply of goods worth a specific amount, which the petitioner did not dispute, implying an admission of the debt.
4. The petitioner's claim for interest on the security amount was challenged by the respondent, questioning the authority of officers who issued the credit note supporting the claim. The court highlighted the need for prima facie proof of authorization for such acknowledgments. As the respondent established a prima facie defense, the court ruled in favor of the respondent, dismissing the petition without costs.
In conclusion, the court dismissed the winding-up petition as the respondent had contested the liabilities on grounds of limitation and set-off, establishing a prima facie defense. The court emphasized the importance of prima facie proof in disputed liability cases and ruled that the petitioner was not entitled to recover any amount based on the security deposit or damages, leading to the dismissal of the petition.
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1985 (12) TMI 343
Issues Involved:
1. Maintainability of the petition under Section 439(4) of the Companies Act, 1956.
2. The effect of the petitioners giving up the claim for winding up.
3. Jurisdiction of the court to order the purchase of shares under Section 443(1)(d) of the Companies Act, 1956.
Detailed Analysis:
1. Maintainability of the petition under Section 439(4) of the Companies Act, 1956:
The first contention raised by the respondents was based on the language of Section 439(4) of the Companies Act, 1956, which stipulates that a contributory shall not be entitled to present a petition for winding up a company unless the shares in respect of which he is a contributory were originally allotted to him, have been held by him and registered in his name for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder. The respondents argued that the petitioners, being legal representatives of the deceased shareholder and not having their names registered in the company's register, did not meet the requirements.
The court, however, observed that petitioners Nos. 2 to 6 are contributories even though the shares on the basis of which the petition has been filed are fully paid-up shares and even though they stand in the name of the deceased shareholder, S.P. The court rejected the interpretation that the six-month holding period applies to legal representatives, as it would result in an inequitable situation where the legal representatives, despite being liable as contributories, would be unable to exercise their rights. The court emphasized that a legal representative should be able to file a winding-up petition even if their name has not been entered on the register of members.
2. The effect of the petitioners giving up the claim for winding up:
The second principal ground raised by the respondents was that the petitioners had specifically given up their claim for the winding up of the company, and therefore, there was nothing further left in the petition to argue. The respondents contended that the court could not admit the petition to the limited extent of determining the price at which the petitioners' shares should be purchased by the respondents.
The court, however, disagreed with this contention. It held that the relief by way of winding up is to be granted only as an ultimate necessity where it is in the best interests of all creditors and contributories. The court has the jurisdiction under Sections 443(1)(d) and 443(2) to pass an order other than winding up that would effectively resolve the disputes between the parties. The court emphasized that the powers conferred on it under the Companies Act are very wide and allow it to explore alternatives to winding up, such as directing the purchase of shares by one group of shareholders from another.
3. Jurisdiction of the court to order the purchase of shares under Section 443(1)(d) of the Companies Act, 1956:
The court addressed the respondents' argument that the purchase of shares can only be done in accordance with the procedure prescribed in Section 77 or as incidental to a petition under Sections 397 and 398. The court clarified that the winding-up court has full jurisdiction under Sections 443(1)(d) and 443(2) to pass orders that effectively resolve the disputes between the parties, including ordering the purchase of shares.
The court noted that the relief of winding up is not an automatic remedy available for the asking and that the court can consider whether some relief short of winding up can meet the situation. The powers of the court in this regard are plenary and are expressed in very wide terms in Section 443(1)(d). The court can mould the relief to the circumstances of the particular case before it, and it is not limited to only dismissing the petition or ordering winding up.
Conclusion:
The court overruled the objections raised by the respondents and declined to dismiss the company petition at this stage. The court held that the petitioners, being legal representatives of the deceased shareholder, are competent to file the petition and that the court has the jurisdiction to consider alternatives to winding up, including the purchase of shares. The petition was listed for hearing on January 29, 1986.
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1985 (12) TMI 319
Issues Involved:
1. Legality of the withdrawal of Company Application No. 78 of 1985 by the official liquidator.
2. Allegations against the official liquidator for acting in collusion with Bank of India.
3. The necessity for Port Authorities to obtain leave under section 446 of the Companies Act.
4. The propriety of the Port Authorities' actions in arresting and selling the trawlers.
5. The validity of Company Applications No. 282 of 1985 and No. 237 of 1985.
Issue-wise Detailed Analysis:
1. Legality of the Withdrawal of Company Application No. 78 of 1985:
Mr. Viswanath argued that the withdrawal of Company Application No. 78 of 1985 by the official liquidator was illegal, arbitrary, and mala fide. He contended that the withdrawal led to the Port Authorities not needing to apply to the court for leave to sell the trawlers, thus bypassing several necessary inquiries. However, the court found that the official liquidator's actions were based on legal advice and in the best interest of the company. The prayers in Company Application No. 78 of 1985 were interim and could not be granted, making the application defective and misconceived.
2. Allegations Against the Official Liquidator for Acting in Collusion with Bank of India:
Mr. Viswanath alleged that the official liquidator deferred taking possession of the trawlers at the behest of Bank of India, a secured creditor, and withdrew Company Application No. 78 of 1985 to protect the bank's interests. The court examined the minutes of various meetings and found no evidence supporting these allegations. The official liquidator's actions, including the withdrawal of the application, were found to be conscientious and based on independent legal advice.
3. Necessity for Port Authorities to Obtain Leave Under Section 446 of the Companies Act:
The court clarified that the arrest and sale of the trawlers by the Port Authorities were under section 64 of the Major Port Trusts Act, 1963, which provides the power of arrest and sale emanating from the statute itself. There was no need for the Port Authorities to obtain leave under section 446 of the Companies Act as they were not commencing or continuing any legal proceedings against the company.
4. Propriety of the Port Authorities' Actions in Arresting and Selling the Trawlers:
The court found that the Port Authorities acted within their statutory rights under section 64 of the Major Port Trusts Act, 1963. The arguments presented by Mr. Viswanath regarding the Port Authorities' delay in selling the trawlers and their obligations as bailees were found to be without merit. The court noted that the official liquidator's withdrawal of Company Application No. 78 of 1985 was appropriate and not against the company's interests.
5. Validity of Company Applications No. 282 of 1985 and No. 237 of 1985:
Company Application No. 282 of 1985 was taken out questioning the propriety and legality of the official liquidator's withdrawal of Company Application No. 78 of 1985. The court found this application to be an abuse of the process of the court, aimed at reviving the subject matter of the withdrawn application. Consequently, Company Application No. 282 of 1985 was dismissed with costs awarded to the respondents. Similarly, Company Application No. 237 of 1985, which adopted the arguments of Company Application No. 282 of 1985, was also dismissed with costs.
Conclusion:
Both Company Applications No. 282 of 1985 and No. 237 of 1985 were dismissed. The official liquidator's actions, including the withdrawal of Company Application No. 78 of 1985, were found to be legally sound and in the best interest of the company. The allegations of collusion with Bank of India were unsubstantiated, and the Port Authorities' actions were within their statutory rights.
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1985 (12) TMI 318
The High Court allowed the application for substitution of petitioners as creditors in a winding-up petition against M/s. Stepan Chemicals Ltd. The court held that permission can be granted even after the main petition is dismissed if another creditor wishes to pursue the case. The petitioners were directed to file the amended petition by January 31, 1986.
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1985 (12) TMI 317
Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956.
2. Validity of share allotments and board meetings.
3. Appointment and role of Shri Deshpande as arbitrator or commissioner.
4. Amendments to the original petition and replies.
5. Allegations of bias and misconduct against the arbitrator.
6. Scope and validity of the reference to arbitration.
7. Procedural and jurisdictional challenges.
Issue-wise Detailed Analysis:
1. Allegations of Oppression and Mismanagement:
The petitioners (P-1 and P-2) filed a company petition under Sections 397 and 398 of the Companies Act, 1956, alleging acts of oppression and mismanagement against the respondents (R-2, R-3, and R-4) in the affairs of Saz International Pvt. Ltd. The petitioners claimed that the respondents took steps to deprive them of their majority shareholding and managing directorship, mismanaged the company's affairs, and diverted its funds.
2. Validity of Share Allotments and Board Meetings:
The petitioners disputed the validity of board meetings held on December 28, 1984, January 1, 1985, and January 31, 1985, during which significant decisions were made, including the allotment of shares to R-2, R-4, and P-2, and the appointment of R-2 as the managing director. The petitioners claimed these meetings were improperly convened and that the share allotments were not in accordance with the approvals granted by the Reserve Bank of India.
3. Appointment and Role of Shri Deshpande:
The court appointed Shri Deshpande to determine the shareholding of the parties and the validity of the disputed board meetings. The respondents later contested his role, arguing that he was acting beyond his jurisdiction and alleging bias. The court clarified that Shri Deshpande was appointed as an arbitrator, not merely a commissioner, to decide the main controversy regarding the shareholdings.
4. Amendments to the Original Petition and Replies:
The petitioners sought to amend their petition to correct an averment regarding the shareholding of P-2, which implied acceptance of the disputed share allotments. The respondents also sought to amend their reply to challenge the validity of the allotment of 2,498 shares to P-1 in 1978. The court allowed both amendments, emphasizing the need for a comprehensive adjudication of all disputes.
5. Allegations of Bias and Misconduct Against the Arbitrator:
The respondents alleged bias and misconduct against Shri Deshpande, claiming that his decisions indicated partiality. The court found no basis for these allegations, noting that the proceedings before Shri Deshpande were conducted fairly and that the respondents' objections appeared to be tactics to delay the arbitration process.
6. Scope and Validity of the Reference to Arbitration:
The court addressed the respondents' contention that disputes under Sections 397 and 398 cannot be referred to arbitration. The court held that its wide powers under these sections included the ability to refer specific issues to arbitration, especially with the parties' consent. The order dated May 22, 1985, constituted a valid reference of the controversy regarding the shareholdings to arbitration.
7. Procedural and Jurisdictional Challenges:
The court dismissed procedural challenges raised by the respondents, including applications to stay the proceedings before the arbitrator and to dismiss the company petition. The court affirmed the continuation of the arbitration process, directing Shri Deshpande to resume proceedings and file his award within four months.
Conclusion:
The court's judgment addressed multiple complex issues, including the validity of share allotments and board meetings, the appointment and role of the arbitrator, amendments to the petition and replies, and allegations of bias. The court upheld the arbitration process, allowing amendments to ensure a comprehensive resolution of all disputes, and dismissed procedural challenges aimed at delaying the proceedings. The judgment emphasized the court's broad powers under Sections 397 and 398, including the ability to refer specific issues to arbitration with the parties' consent.
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1985 (12) TMI 316
Issues:
- Winding-up order sought against respondent company in three company petitions.
- Respondent company's defense based on assets being taken over under Textile Undertakings Act.
- Arguments regarding the interest of creditors and majority creditors' stance.
- Legal principles governing winding-up orders based on creditor interests.
Analysis:
In the judgment delivered by Justice Parekh of the High Court of Bombay, three company petitions seeking winding-up orders against the respondent company, Shri Laxmi Traders Limited, were considered. The first petition, No. 366 of 1983, involved a debt owed by the respondent company to the petitioners, leading to the petitioners seeking a winding-up order. The respondent company argued that its assets were wrongfully taken over under the Textile Undertakings (Taking Over of Management) Act, 1983, rendering it unable to meet its commitments. The court rejected this defense, emphasizing that the existence of assets and outstanding debts warranted a winding-up order, regardless of the company's claims regarding asset control.
Regarding the respondent company's argument that a winding-up order should not be made if it does not benefit creditors or if a majority of creditors oppose it, the court referred to legal precedents. The court distinguished the present case from the cited precedents, highlighting that the respondent company had assets and multiple creditors seeking their dues, with no evidence of majority creditors opposing the winding-up. Therefore, the court dismissed the argument that creditor interests would not be served by a winding-up order.
In the second petition, No. 142 of 1984, similar circumstances arose where the respondent company defaulted on payments despite agreeing to installment terms. The respondent company reiterated its defense based on asset control issues under the Textile Undertakings Act. The court rejected this defense, stating that the company's ability to function and meet liabilities upon asset retrieval did not negate the need for a winding-up order, as assets and debts were still present.
Lastly, in Petition No. 388 of 1985, mirroring the arguments in the previous petitions, the court admitted the petition due to the consistent defense raised by the respondent company. The final ruling made Petition No. 142 of 1984 absolute, appointing the official liquidator as the liquidator of the respondent company and directing the advertisement of the winding-up order. Petitions No. 366 of 1983 and 388 of 1985 were dismissed in light of the order passed in Petition No. 142 of 1984, allowing the petitioners to pursue their claims with the official liquidator.
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1985 (12) TMI 315
The High Court of Delhi allowed the appeal in a case where a company petition was dismissed because the debt had become time-barred. The court held that a petition for winding up remains maintainable even if the debt is time-barred at the time of the order. The court can still grant relief based on the facts of the case. No costs were awarded in this decision. (Case citation: 1985 (12) TMI 315 - HIGH COURT OF DELHI)
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1985 (12) TMI 290
Issues Involved:
1. Maintainability of complaints against all directors.
2. Definition and liability of "officer in default".
3. Requirement of specific averment in the complaint.
4. Impact of serving notices on directors.
5. Absolute liability of the company.
Detailed Analysis:
1. Maintainability of complaints against all directors:
The preliminary objection raised was that prosecution cannot be launched against all directors for failure to comply with the provisions of the Companies Act but should be filed only against the company and those directors who are in default as defined under the Act. The trial Magistrate upheld this objection and dismissed the complaints. The High Court, however, held that the complaints cannot be rejected in limine and must be examined with evidence to determine if the directors can be considered officers in default.
2. Definition and liability of "officer in default":
Section 162 of the Companies Act, 1956, states that the company and every officer of the company who is in default shall be punishable for non-compliance with sections 159, 160, or 161. The term "officer in default" is defined under section 5 as any officer who is knowingly guilty of the default. The High Court emphasized that whether a particular director is an officer in default is a matter of evidence and cannot be decided at the threshold without a proper inquiry.
3. Requirement of specific averment in the complaint:
The complaint must specifically aver which officers are in default. The Calcutta High Court in Ajit Kumar Sarkar v. Assistant Registrar of Companies highlighted that the prosecution must fix the liability with respect to the particular "officer in default" and there should be a specific averment to that effect in the complaint. The High Court in this case found that the absence of such specific averments rendered the complaints initially unsustainable.
4. Impact of serving notices on directors:
The High Court noted that notices had been served on all directors before the prosecution was launched, and none of the directors had responded. This, prima facie, indicated that all directors could be deemed officers in default. The Court held that it was open to the directors to rebut this presumption by providing evidence that they were not officers in default.
5. Absolute liability of the company:
The High Court clarified that the company's liability is absolute once the default is proved, and no question of "knowingly committing default" arises for the company itself. The Court emphasized that the company must be included as an accused for the prosecution to be valid, and only if the company is convicted can the officers in default be convicted.
Conclusion:
The High Court allowed the revision petitions, set aside the trial Magistrate's order, and directed that the complaints be taken on file and disposed of according to law. The Court held that the complaints, filed after issuance of notice to all directors, were maintainable and that the liability of each director as an officer in default must be determined based on evidence during the trial.
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1985 (12) TMI 289
Company – Incorporation of, Membership of, Shares – Allotment of , Shares warrants and entries in register of members, Shares warrants and entries in register of members, Transfer to shares – Power to refuse registration and appeal against refusal, Share capital - Further issue of, Meetings and proceedings - Annual General Meeting, Extra Ordinary General Meeting, Removal of Director, Oppression and mismanagement, Principles for interpretation of statutes, Regulation of export and transfer of securities, Restrictions on establishment of place of business in India, Supplemental provisions
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1985 (12) TMI 274
The appeal was transferred to the Appellate Tribunal CEGAT, New Delhi from the Central Government. The case involved the imposition of additional duty of excise on imported acrylic fibre. The Tribunal confirmed the demand for short levy and rejected the appeal based on a previous similar case.
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1985 (12) TMI 272
Issues:
1. Grant of rebate of duty on excess production of sugar under Notification No. 108/78-C.E.
2. Validity of the Review Show Cause Notice issued by the Government of India.
3. Admissibility of the miscellaneous application for amending the Review Show Cause Notice.
4. Time limitation for demanding recovery of excess rebate.
5. Consideration of exports made by the respondent in relation to the rebate claim.
Analysis:
1. The case involved a dispute regarding the grant of rebate of duty on excess production of sugar under Notification No. 108/78-C.E. The respondent firm had availed excess rebate on sugar exported without payment of duty. The Government of India issued a Review Show Cause Notice challenging the Appellate Collector's decision, stating that only the quantity cleared on payment of duty was eligible for rebate.
2. The validity of the Review Show Cause Notice was contested by the appellant. The Government argued that the exported quantity ineligible for duty payment should not be included in the rebate calculation. The Principal Collector sought to amend the notice to recover an additional amount from the respondent based on the total quantity exported.
3. The admissibility of the miscellaneous application to amend the Review Show Cause Notice was questioned. The Tribunal noted that the amendment sought exceeded the original notice and the time lag between the original notice and the amendment was significant. Consequently, the application for amendment was rejected.
4. The issue of time limitation for demanding recovery of excess rebate was crucial. The department claimed that the extended period applied due to the respondent's failure to disclose exports. However, the respondent argued that exports were conducted under supervision and with departmental knowledge, negating the claim of wilful suppression.
5. The Tribunal deliberated on the exports made by the respondent in relation to the rebate claim. It was observed that the exports were conducted under bond and with departmental oversight. As the department was aware of the exports and the necessary documentation was filed, the plea of suppression by the respondent was deemed unsustainable. Therefore, the extended period for recovery was not applicable, leading to the rejection of the miscellaneous application and the appeal.
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1985 (12) TMI 271
Issues:
1. Review of excess rebate granted to a sugar mill.
2. Recovery of excess rebate by the Central Excise department.
3. Allegation of suppression of facts by the sugar mill.
4. Time limitation for recovery of excess rebate.
Analysis:
1. The case involved a review of the excess rebate sanctioned to a sugar mill for the production of sugar during a specific period. The Government issued a show cause notice to the sugar mill for reviewing the order passed by the Appellate Collector of Central Excise, Madras. The sugar mill had been granted rebate on excess sugar production, but discrepancies were found in the duty paid and the rebate amount, leading to an excess rebate of Rs. 1,46,016.42.
2. The Central Excise department contended that the sugar mill had enjoyed an exemption exceeding the duty paid, leading to an erroneous refund that could be recovered within the extended time limit. On the other hand, the sugar mill argued that they had not concealed any information and had complied with all formalities to obtain the rebate. They disputed the department's claim of excess rebate and argued that the demand for recovery was time-barred.
3. The Tribunal considered the submissions from both sides regarding the suppression of facts by the sugar mill. The show cause notice issued by the department did not specifically allege suppression of facts, and the Tribunal emphasized that suppression needed to be both alleged and proven for the extended recovery period to apply. The Tribunal noted discrepancies in the department's claims regarding the duty amount to be recovered, indicating inconsistencies in the department's case.
4. Ultimately, the Tribunal agreed with the Appellate Collector that there was no basis for the department to claim suppression of facts by the sugar mill. The Tribunal rejected the appeal, ruling that the recovery demand was time-barred and that the department's contentions regarding suppression of facts were not substantiated. The Tribunal emphasized the importance of proving suppression and adhering to the criteria for applying the extended recovery period, ultimately siding with the sugar mill in this case.
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1985 (12) TMI 270
Issues Involved:
1. Whether the appellants and the 'Buyers' (Ciba-Geigy of India Ltd.) are 'related persons' within the meaning of Section 4(4)(c) of the Central Excises and Salt Act, 1944.
2. Whether the show cause notice issued by the Assistant Collector was without jurisdiction.
Detailed Analysis:
Issue 1: Whether the appellants and the 'Buyers' (Ciba-Geigy of India Ltd.) are 'related persons' within the meaning of Section 4(4)(c) of the Central Excises and Salt Act, 1944.
The department issued a show cause notice to the appellants on 6-8-1976, questioning why the prices charged by the 'Buyers' to their customers should not be taken as the assessable value for excise duty purposes. The Assistant Collector confirmed this notice on 2-7-1977, and subsequent appeals were dismissed by the Appellate Collector on 17-10-1978.
The appellants argued that the lower authorities made their decision based on two grounds: (i) the appellants sold their entire S.D. 24 dyes to the 'Buyers', and (ii) the appellants and the 'Buyers' were interconnected undertakings under Section 2(g) of the MRTP Act, 1968. Section 4(4)(c) of the Central Excises and Salt Act, 1944, defines "related person" as someone who is so associated with the assessee that they have interest directly or indirectly in each other's business.
The appellants clarified that they had a 10% shareholding in the 'Buyers', while the latter had no shareholding in the appellants. There were no common directors, and the appellants sold their products to other buyers as well. The sales to the 'Buyers' were at arm's length, with no extra-commercial considerations.
The agreements between the appellants and the 'Buyers' contained standard commercial terms, safeguarding interests and maintaining secrecy of technical know-how, which did not indicate any clandestine arrangement to evade duty. The sales were commercial transactions at arm's length, and the 'Buyers' were bulk buyers, receiving normal trade discounts.
The Tribunal referred to several rulings, including the Supreme Court's decision in 1984 (17) E.L.T. 323 (Union of India & Others v. Atic Industries Ltd.), which emphasized that mutual interest in each other's business is essential to be considered "related persons." The Tribunal concluded that the appellants and the 'Buyers' did not have mutual interest in each other's business, and the 'Buyers' were not given any special treatment beyond normal trade discounts.
The Tribunal also addressed the argument that interconnected undertakings under the MRTP Act do not automatically become "related persons" under the Central Excises and Salt Act, as per rulings in 1979 (4) E.L.T. (J 513) (Atic Industries Ltd., Bulsar v. Union of India and Others) and 1980 (6) E.L.T. 197 (S.M. Chemicals & Electronics and Another v. R. Parthasarathy and Others).
Issue 2: Whether the show cause notice issued by the Assistant Collector was without jurisdiction.
Shri Soli Sorabjee argued that Rule 10 of the Central Excise Rules, 1944, was deleted on 6-8-1977, making the show cause notice issued on 6-8-1976 lapse. However, the Tribunal referred to 1984 (17) E.L.T. 331 (Atma Steels (Pvt.) Ltd. and Others v. Collector of Central Excise, Chandigarh and Other), which stated that proceedings could continue based on the provisions existing at the time of the notice issuance.
Shri Sorabjee also contended that the Assistant Collector had no power to review his own order and direct the appellants to amend the classification list, citing several rulings, including AIR 1966 S.C. 641 (Harbhajan Singh v. Karam Singh), which held that in the absence of express power, review is not permissible.
The Tribunal agreed that the Assistant Collector's action was effectively a review of the earlier order, which the statute did not authorize. Therefore, the show cause notice was not permissible in law.
Conclusion:
The Tribunal set aside the impugned orders, concluding that the appellants and the 'Buyers' were not "related persons" under the Central Excises and Salt Act, and the show cause notice issued by the Assistant Collector was without jurisdiction. The appeals were allowed.
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