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Showing 101 to 120 of 446 Records

• 1999 (3) TMI 571
  
  The Appellate Tribunal CEGAT, Mumbai allowed the appeals due to lack of proper notice and violation of natural justice principles. The Commissioner's order imposing duties and penalties was set aside, and a new hearing was ordered with a month's advance notice.

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• 1999 (3) TMI 568
  
  Issues:
  1. Determination of the date for change of annual capacity under Hot re-rolling Annual Capacity Determination Rules, 1997.
  
  Analysis:
  The appeal before the Appellate Tribunal CEGAT, Mumbai involved the question of determining the date from which the change of the annual capacity of the hot rolling mills of the appellant should be considered under the Hot re-rolling Annual Capacity Determination Rules, 1997. The rules required manufacturers to intimate any proposed changes in machinery that could affect capacity to the Commissioner and obtain written approval before making the change. The Commissioner would then determine the effective date of the capacity change. Additionally, if the determined annual capacity was less than the actual production in a specific year, it would be deemed as the actual production for that year. The rules were essential to implement Notification 31/97, which specified the duty payable on certain hot rolled products based on production capacity. Section 3(a) of the Act empowered the Government to specify goods for duty determination based on factors such as annual production capacity.
  
  The appellant had requested a change in the nominal centre distance of the parameter rollers in August 1997, but faced delays in obtaining approval from the Commissioner. Despite repeated communications, the Commissioner only ordered the capacity change after a team of experts verified it on 29th December 1997. The appellant argued that the change should be effective from 8th November 1997, the date they proposed the change, as they had complied with the rules and should not be penalized for delays caused by the Commissioner's office. On the other hand, the Departmental Representative contended that no change could occur without the Commissioner's permission and expert verification.
  
  The Tribunal observed that the rules required the Commissioner to promptly act on change requests, with the expectation that necessary verifications and approvals would be completed within a month of the request. In this case, the appellant's letters did not receive timely responses, indicating a lack of action from the Commissioner's office. While the change could not be solely based on the team of experts' verification date, the Tribunal found the appellant's claim of a change on 8th November 1997 unsubstantiated. However, a communication between the appellant and the Superintendent confirmed a change on 24th November 1997, leading the Tribunal to accept this date as the effective change date.
  
  Consequently, the Tribunal allowed the appeal, setting aside the previous order. The Commissioner was directed to determine the duty payable based on the revised capacity and inform the appellant accordingly.

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• 1999 (3) TMI 567
  
  Issues:
  1. Import of polyester filament yarn under a specific import license for speciality yarn.
  2. Determination of whether the imported goods qualify as speciality yarn.
  3. Assessment of redemption fine and penalty imposed on the importer.
  4. Consideration of the importer's intention and profit margin in the importation process.
  
  Issue 1 - Import of Polyester Filament Yarn:
  The appellant imported polyester filament yarn (PFY) claiming clearance under an import license issued for "speciality polyester filament yarn." However, the Custom House found the imported goods did not match the specified criteria, leading to a notice proposing confiscation and penalty under Sections 111 and 112. The appellant contended the yarn was unique, made using a different process by M/s. EMS Inventa A.G., intended for market distribution to create demand for similar yarn to be manufactured in India. The appellant argued against the confiscation and penalty, claiming potential import under Open General License (OGL).
  
  Issue 2 - Qualification as Speciality Yarn:
  The Collector determined that the imported yarn did not meet the criteria for speciality yarn, as it lacked micro denier or profile cross-section features. The Collector emphasized that PFY was importable only by actual users or authorized letter holders, not for profit-making purposes. The Tribunal concurred, stating that the goods failed to demonstrate characteristics of speciality yarn based on tests and correspondence with the licensing authority, leading to the confirmation of confiscation under Section 111(d).
  
  Issue 3 - Redemption Fine and Penalty Assessment:
  Regarding the redemption fine, the Collector set it at 10% of the consignment value, which the appellant disputed citing incurred import expenses resulting in a loss and potential profit as a letter of authority holder. Various legal precedents were cited during arguments, emphasizing that the quantum of redemption fine should consider the totality of circumstances, with bona fide actions not warranting a full waiver but influencing the fine amount. The Tribunal highlighted the need to wipe out any profit from illegal importation through redemption fines, indicating the absence of bona fide could justify a higher fine than the profit margin.
  
  Issue 4 - Intention and Profit Margin:
  The Collector's presumption of the appellant's profit-seeking motive due to yarn shortage was challenged, with the Tribunal finding the Collector's reasoning speculative. While acknowledging the appellant's failure to establish the goods as speciality yarn, the Tribunal declined to limit the fine to the profit margin. The penalty imposed for misdeclaration of the goods as speciality yarn was set aside, considering the appellant's application for a license for such goods as indicative of belief in their speciality nature.
  
  In conclusion, the Tribunal partially allowed the appeal, setting aside the penalty but upholding the confiscation and redemption fine, emphasizing the need to consider the circumstances and intent behind importation in determining fines and penalties.

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• 1999 (3) TMI 566
  
  The appellate tribunal in New Delhi considered whether affixing the words 'KEB' on R.C.C. Poles makes them branded and ineligible for a certain benefit. The tribunal found that as the poles were not sold by KEB and there was no trading involved, the brand name requirement was not met. Therefore, the appeal by Revenue was rejected.

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• 1999 (3) TMI 565
  
  Issues:
  1. Duty demand on vegetable oils used for manufacturing bakery shortening.
  2. Classification under Heading 15.08 versus Heading 15.04.
  3. Barred by limitation - Suppression of facts.
  4. Money Credit Scheme applicability.
  5. Penalty imposition.
  
  Analysis:
  
  1. Duty Demand on Vegetable Oils:
  The appellants contested the duty demand of Rs. 27,33,676 on vegetable oils used for producing "Roshni" brand bakery shortening. The Commissioner confirmed the demand by denying money credit, citing classification under Heading 15.08. However, the appellants argued that their products were classified under CET sub-heading 1504.00, which was regularly approved, and they had not suppressed any information regarding the classification.
  
  2. Classification Dispute:
  The dispute arose regarding the classification of the bakery shortening under Heading 15.08 or 15.04. The appellants consistently described their products using brand names like Rath, Sunbeam, and Roshni, claiming classification under CET sub-heading 1504.00. Both the appellants and the Department shared the view that bakery shortening fell under CET 1504.00, as evidenced by the approval of classification by the Assistant Collector and the regular permissions obtained from the Vegetable Oil Products Directorate for manufacturing.
  
  3. Limitation and Suppression Allegation:
  The show cause notice was issued beyond the normal six-month limitation period, covering the period from 1-5-1990 to 24-7-1991. The appellants argued that they had not suppressed any facts, as they consistently applied for permissions and declarations under Rule 57-O, believing their products were classifiable under CET sub-heading 1504.00. The Adjudicating authority acknowledged this belief and held that there was no intent to evade duty payment, leading to the conclusion that the demand was time-barred.
  
  4. Money Credit Scheme Applicability:
  The Money Credit Scheme under Notification No. 45/89-C.E. was a crucial aspect of the case. The appellants contended that the scheme applied to vegetable oils used for manufacturing products falling under Heading 15.04, supporting their claim for money credit. The consistent approval of classification under CET sub-heading 1504.00 further strengthened their argument regarding the applicability of the scheme to their products.
  
  5. Penalty Imposition:
  The penalty of Rs. 50,000 imposed on the appellants was set aside along with the duty demand, as the Tribunal found that the demand was time-barred and the Department had not sustained its claim for a longer period. The decision to set aside the penalty was in line with the conclusion that there was no suppression of facts or intent to evade duty payment, warranting the invoking of the extended period of limitation.
  
  In conclusion, the Tribunal ruled in favor of the appellants, setting aside the duty demand and penalty on the grounds of being time-barred, without delving into the merits of the classification dispute.

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• 1999 (3) TMI 564
  
  Issues:
  1. Whether commission paid to a selling agent should form part of the assessable value for duty calculation.
  2. Whether the extended period for recovery of duty under Section 11A applies.
  3. Whether Rule 9(2) applies to a case of clandestine removal.
  4. Whether the transactions between the manufacturer and the selling agent constitute a sale or agency relationship.
  5. Whether the transactions conform to the definition of sale under Section 2(h) of the Act.
  
  Analysis:
  1. The case involved a dispute regarding the inclusion of commission paid to a selling agent in the assessable value for duty calculation. The appellant sought recovery of duty based on commission payments made to a selling agent, Polyequip Ltd., for goods sold by the assessee. The notice invoked the extended period under the proviso to Section 11A and Rule 9(2) for duty recovery.
  
  2. The Collector initially held that the extended period under Section 11A did not apply as the department was aware of the facts. However, the Tribunal disagreed, stating that the department's awareness was not established. The Tribunal found that the assessee, a small-scale unit, did not file a price list and that the extended period for duty recovery was justified based on the lack of identical pricing evidence in the invoices.
  
  3. The Tribunal determined that Rule 9(2)'s applicability to clandestine removal cases was not necessary to consider. It emphasized that demands for duty must be made under Section 11A. The Tribunal disagreed with the Collector's finding that the department was aware of the situation, highlighting the lack of conclusive evidence in the invoices regarding identical goods pricing.
  
  4. The Tribunal examined the nature of transactions between the manufacturer and Polyequip Ltd. It found that the transactions were not of agency but of outright sale and purchase. The invoices indicated that Polyequip Ltd. purchased and resold the goods, establishing a direct sale relationship rather than an agency arrangement as described in the agreement.
  
  5. Regarding the definition of sale under Section 2(h) of the Act, the Tribunal addressed the contention that there was no transfer of possession of goods to Polyequip Ltd. However, the Tribunal noted that goods were sent to Polyequip Ltd., and gate passes listed Polyequip Ltd. as the consignee, indicating possession transfer. The Tribunal dismissed the appeal, concluding that the transactions aligned with the requirements of the Act and declined to interfere with the Collector's decision.
  
  In conclusion, the Tribunal upheld the Collector's decision, emphasizing the lack of evidence supporting the department's awareness of the situation and the nature of the transactions as direct sales rather than agency relationships. The Tribunal found that the transactions complied with the legal definition of sale, dismissing the appeal and declining to interfere with the Collector's ruling.

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• 1999 (3) TMI 562
  
  The Appellate Tribunal CEGAT in New Delhi allowed the application for restoration of appeal due to a mix-up of appeal numbers. Appeal numbers E/3217/90-D and E/2339/91-D are scheduled for a hearing on 10-5-1999.

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• 1999 (3) TMI 543
  
  Issues Involved:
  1. Jurisdiction of the Chief Judicial Magistrate under Section 630(2) of the Companies Act, 1956.
  2. Impact of pending conciliation proceedings under Section 33 of the Industrial Disputes Act, 1947 on the jurisdiction of the court.
  3. Validity of the termination and the right to retain company-allocated quarters.
  
  Detailed Analysis:
  
  1. Jurisdiction of the Chief Judicial Magistrate under Section 630(2) of the Companies Act, 1956:
  The petitioner challenged the order dated 10-3-1990 by the Chief Judicial Magistrate, Damoh, which entertained an application under Section 630(2) of the Companies Act, 1956. The petitioner was dismissed from service and directed to vacate the company-allotted quarter. The court highlighted that Section 630 provides penalties for wrongful withholding of company property and empowers the court to order the delivery of such property. The court concluded that the Chief Judicial Magistrate had jurisdiction to entertain the application under Section 630(2) for the wrongful withholding of the quarter.
  
  2. Impact of pending conciliation proceedings under Section 33 of the Industrial Disputes Act, 1947 on the jurisdiction of the court:
  The petitioner argued that during the pendency of conciliation proceedings, the employer is restrained from altering conditions of service to the prejudice of the workman without written permission from the authority handling the proceedings. The court analyzed Section 33 of the Industrial Disputes Act, which prohibits employers from altering service conditions or punishing workmen during pending conciliation proceedings. However, the court noted that the conciliation proceedings were initiated after the petitioner's dismissal and after the application under Section 630 was filed. The court referred to the Division Bench decision in L.S. Nair v. Hindustan Steel Ltd. AIR 1980 MP 106, which stated that the validity of termination is presumed until set aside by the Labour Court. The court concluded that the pendency of conciliation proceedings did not bar the jurisdiction of the Chief Judicial Magistrate under Section 630.
  
  3. Validity of the termination and the right to retain company-allocated quarters:
  The petitioner claimed victimization due to union activities and contested the termination. The respondents argued that the quarter was allotted by virtue of employment, and upon termination, the petitioner was required to vacate it. The court emphasized that the right to occupy the quarter ceased with the termination of employment. It referred to the Bombay High Court decision in Chandragupta Gupta v. Padmanabha Subramani [1989] 65 Comp. Cas. 190, which held that disputes over termination do not affect the continuation of criminal cases under Section 630. The court concluded that the petitioner had no right to retain the quarter post-termination and that the jurisdiction of the Chief Judicial Magistrate was not affected by pending conciliation proceedings.
  
  Conclusion:
  The court dismissed the petition, upholding the jurisdiction of the Chief Judicial Magistrate under Section 630(2) of the Companies Act, 1956, and ruled that the pendency of conciliation proceedings under Section 33 of the Industrial Disputes Act, 1947 did not bar the court's jurisdiction. The petitioner was required to vacate the company-allotted quarter post-termination.

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• 1999 (3) TMI 542
  
  Issues Involved:
  1. Recall of the order dated 20-3-1990 granting leave to file a suit.
  2. Whether the claim of the first respondent is within the limitation period.
  3. Suppression of material facts by the first respondent.
  4. Entitlement of the first respondent to file a claim as an unsecured creditor.
  
  Detailed Analysis:
  
  1. Recall of the Order Dated 20-3-1990 Granting Leave to File a Suit:
  
  The Official Liquidator sought to recall the order dated 20-3-1990, which granted the first respondent leave to file a suit under section 446 of the Companies Act, 1956, read with rule 9 of the Companies (Court) Rules, 1959. The first respondent, a company incorporated in England, supplied machinery to the company in liquidation (Hindustan Thermo Prints Ltd.). The first respondent had previously filed applications (C.A. Nos. 829 and 831 of 1988) seeking interim relief and restoration of machinery possession or payment of dues, which were withdrawn with liberty to move again if the claim was within time. However, the first respondent filed a fresh application (C.A. No. 7567 of 1989) without disclosing the earlier applications and their withdrawal, leading to the grant of leave to file a suit.
  
  2. Whether the Claim of the First Respondent is Within the Limitation Period:
  
  The court examined whether the first respondent's claim was within the limitation period. The machinery was supplied under a contract dated 23-12-1980, with payments to be made in installments. The first respondent claimed that payments for two installments were not made. However, the court observed that the claim for payment was barred by time on 22-12-1984, as per the order dated 20-5-1988. The first respondent argued that the title to the machinery remained with it due to non-payment, invoking clause 6 of the contract. The court rejected this argument, noting that the invoices dated 22-12-1981 and 24-12-1981 superseded the contract's clause 6, requiring payment within thirty days, thus making the suit for repossession of machinery untenable.
  
  3. Suppression of Material Facts by the First Respondent:
  
  The court found that the first respondent suppressed material facts by not disclosing the earlier applications (C.A. Nos. 829 and 831 of 1988) and the orders passed thereon in its subsequent application (C.A. No. 7567 of 1989). This suppression led to an unwarranted advantage, resulting in the grant of leave to file a suit. The court emphasized that a litigant who gains an advantage through suppression and concealment of material facts must have such an advantage withdrawn. The principle of finality of litigation cannot be used to perpetuate fraud.
  
  4. Entitlement of the First Respondent to File a Claim as an Unsecured Creditor:
  
  The court permitted the first respondent to file its claim as an unsecured creditor before the Official Liquidator. The first respondent could prove that the company was indebted to it, and if the claim was proved, it would be paid out of the amount set apart for unsecured creditors, subject to equitable distribution and the orders of the Company Judge.
  
  Conclusion:
  
  The order dated 20-3-1990, which granted the first respondent leave to file a suit, was recalled. The first respondent was allowed to file its claim as an unsecured creditor before the Official Liquidator, subject to proving the company's indebtedness and equitable distribution amongst unsecured creditors. The court emphasized the importance of coming to court with clean hands and the consequences of suppressing material facts.

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• 1999 (3) TMI 541
  
  Issues:
  Winding up of the company based on loss of substratum and just and equitable grounds, appointment of Official Liquidator as provisional Liquidator.
  
  Winding up based on loss of substratum and just and equitable grounds:
  The petitioner, a shareholder of the company, sought winding up due to the company selling its entire business to a sister concern and not engaging in any business activities since 18-9-1995. The petitioner argued that the company had lost its substratum as it could no longer achieve its main objective. The company's financial statements showed no income from business activities but only interest income. The company opposed the winding up, stating it had funds to continue business activities and was considering voluntary winding up. The court noted that the company had indeed sold its plant and machinery, ceased its main objective activities, and was considering voluntary winding up. However, the petitioners, holding 1/3rd of the equity shares, opposed voluntary winding up as it would adversely affect their interests. The court found that the petitioners had made out a prima facie case for winding up based on lack of returns on equity shares and the company not conducting business activities. The court also noted that even if wound up, the company could still contest pending income-tax assessments.
  
  Appointment of Official Liquidator as provisional Liquidator:
  The court determined that as of 31-3-1996, there was no urgency to appoint a Liquidator as the company was not conducting any business activities, reducing the risk of asset dissipation. The court found no grounds to appoint a provisional Liquidator based on the available material. The court rejected the interim relief for the appointment of a provisional Liquidator.
  
  In conclusion, the court allowed the petition for winding up based on loss of substratum and just and equitable grounds, as the company had ceased its main objective activities and the petitioners had a prima facie case for winding up. However, the court rejected the appointment of the Official Liquidator as provisional Liquidator due to the lack of urgency and the absence of grounds for such an appointment based on the available material.

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• 1999 (3) TMI 540
  
  Issues Involved:
  1. Whether the applicant constitutes a distinct class of unsecured creditors requiring a separate meeting.
  2. The adequacy and accuracy of the explanatory statement and other documents provided by the company (not pressed at this stage).
  
  Detailed Analysis:
  
  Issue 1: Distinct Class of Unsecured Creditors

  Leave under rule 19(3) of the Companies (Court Rules), 1959 granted to the petitioners to take out a Judge's summons. The learned counsel for the respondents waive service. By consent, Judge's summons made returnable and heard forthwith.

  The applicant, a non-banking finance company, has given machinery/equipment on lease to the respondent-company. The applicant received a notice from the respondent-company for a meeting of unsecured creditors to sanction a scheme of amalgamation. The applicant requested copies of certain documents and clarification on the classification of creditors, which the company failed to provide. The applicant contended that non-banking financial companies are a separate and distinct class of unsecured creditors and should have a separate meeting.

  The company argued that the applicant does not constitute a distinct class from other unsecured creditors and that the notice period was abridged as per court order. The company also pointed out that the applicant is the only non-banking financial institution among the unsecured creditors and that their interests are not distinct from other unsecured creditors.

  The court examined whether the applicant can be treated as a distinct class by themselves. Section 391 of the Companies Act, 1956 provides for meetings of creditors or classes of creditors for compromise or arrangement. The court noted that a class must be homogeneous in character with special characteristics distinguishing them from others. The applicant must show that their interests are distinct from other unsecured creditors to be considered a separate class.

  The court referred to the judgments in Sovereign Life Assurance Co. v. Dodd and D. A. Swamy v. India Meters Ltd., which discussed the criteria for determining distinct classes of creditors. The court concluded that the applicant, being a non-banking financial company with machinery leased to the company, does not have interests distinct enough from other unsecured creditors to constitute a separate class. The court also noted that the scheme of arrangement does not provide for different treatment of the applicant compared to other unsecured creditors.

  Therefore, the court rejected the applicant's request for a separate meeting of non-banking financial companies.

  Issue 2: Adequacy and Accuracy of Explanatory Statement

  The applicant raised concerns about the adequacy and accuracy of the explanatory statement and other documents provided by the company. However, the applicant did not press this contention at this stage and sought liberty to raise it during the hearing of the scheme of amalgamation.

  In view of this, the court granted liberty to the applicant to raise the matter at the hearing of the scheme of amalgamation if they are entitled to do so in law.

  Conclusion:

  The court rejected the application for a separate meeting of non-banking financial companies, concluding that the applicant does not constitute a distinct class of unsecured creditors. The court granted liberty to the applicant to raise concerns about the explanatory statement during the hearing of the scheme of amalgamation.

  No order as to costs. Application rejected.

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• 1999 (3) TMI 539
  
  Issues:
  1. Company indebted to petitioners for financial assistance.
  2. Company ceased business activities, assets sold, approached BIFR for revival.
  3. Petition pending before Madhya Pradesh High Court, company seeks stay on winding up.
  4. Interpretation of the effect of pending petition on winding up proceedings.
  
  Analysis:
  
  1. The petitioners claimed that the company owed them a significant sum of money, including principal and overdue interest, as financial assistance in the form of a loan. The company had not disputed this claim, indicating its indebtedness.
  
  2. The company had stopped its business operations since 1987, leading to the sale of its movable and immovable assets by the Court receiver. Despite approaching the Board for Industrial and Financial Reconstruction (BIFR) for revival, the company faced challenges in functioning smoothly.
  
  3. The company had a pending petition before the Madhya Pradesh High Court, seeking a stay on the winding-up proceedings. However, the High Court held that the pendency of a petition in another court should not prevent the Company Court from proceeding with the winding-up process.
  
  4. The High Court referred to a previous judgment by the Apex Court in a similar case, emphasizing that a mere stay order did not prevent the Company Court from exercising jurisdiction to wind up a company. The High Court concluded that, given the company's discontinued operations and the unavailability of assets for business activities, the petition for winding up was justified.
  
  In light of the company's ceased operations, the absence of a defense, and the disappearance of the company's substratum, the High Court deemed it appropriate to wind up the company. The Court made the petition absolute in favor of the petitioners, disregarding the pending writ petition before the Madhya Pradesh High Court.

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• 1999 (3) TMI 538
  
  Issues:
  Appeal against District Consumer Forum order alleging misconduct of Forum members and seeking an inquiry. Appellant challenging the powers of Forum members and pointing out irregularities and illegalities.
  
  The judgment in this case dealt with an appeal against an order passed by the District Consumer Forum, where the appellant had filed a complaint against the Executive Engineer. The appellant alleged that there was a conspiracy by the Forum members regarding the judgment in Case No. 128 of 1993. The appellant requested the case to be handed over to CBI for an inquiry and transferred to another District Forum. The District Forum rejected the appellant's application, stating that it was not the proper forum for such cases and advised seeking remedy through a writ or a civil suit. The State Commission noted that the appellant's appeal did not seek relief as a consumer but rather challenged the powers of the Forum members and highlighted irregularities. The Commission emphasized that matters of alleged misconduct of Forum members cannot be decided in appeal under the Consumer Protection Act, 1986. Since the appeal did not seek relief as a consumer and aimed at remedial action against the alleged misconduct of the Forum members, the State Commission found the appeal not maintainable. Therefore, the State Commission dismissed the appeal and upheld the District Consumer Forum's order dated 9-12-1993.
  
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• 1999 (3) TMI 535
  
  Issues:
  1. Whether the defence of a company in litigation should be conducted by its elected board of directors or by a special officer.
  
  Analysis:
  The primary issue in this appeal revolved around the question of who should conduct the defence of a company in litigation - whether it should be the elected board of directors or a special officer. The case stemmed from a suit filed by a shareholder against a company, where disputes had arisen between shareholders leading to the supersession of the board of directors. A special officer was appointed to handle the company's affairs until a new board was constituted. The respondent, a shareholder and former managing director, challenged the constitution of the new board and the authority of the special officer.
  
  The respondent contended that the special officer's tenure had ended with the dismissal of the appeal, and the board was improperly constituted as one member was deceased and another was not a valid shareholder. The respondent argued that the company's interest was not adequately represented, and the appeal was a delay tactic. The appellants, majority shareholders, sought to conduct the company's defence, citing legal precedents allowing shareholders to step in when directors act against the company's interest.
  
  The court analyzed relevant legal provisions and precedents, emphasizing the importance of ensuring the company's rights to a proper defence. Referring to past judgments, the court concluded that in cases where directors act against the company's interest, shareholders can intervene to protect the company. The court found that no valid defence was in place for the company in the ongoing suit, leading to the decision to allow the appeal, setting aside the previous order, and granting the appellants the right to conduct the company's defence in the suit.
  
  In a comprehensive analysis, the court addressed the appealability of the order, the validity of the board's constitution, the role of the special officer, and the rights of majority shareholders to defend the company's interests in litigation. The judgment highlighted the need to safeguard the company's rights and ensure proper representation in legal proceedings, ultimately allowing the appeal and granting the appellants the authority to conduct the company's defence in the ongoing suit.

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• 1999 (3) TMI 515
  
  Issues Involved:
  1. Confiscation of silk yarn under Section 111(d) of the Customs Act, 1962.
  2. Imposition of penalties on the appellants.
  3. Legality of the silk yarn's importation and subsequent movement.
  4. Discrepancies in the statements and documents provided by the appellants.
  5. Burden of proof regarding the smuggled nature of the goods.
  
  Issue-wise Detailed Analysis:
  
  1. Confiscation of Silk Yarn:
  The impugned order involved the absolute confiscation of silk yarn valued at Rs. 21,64,000 under Section 111(d) of the Customs Act, 1962. The Central Excise Officers seized 1183.000 kgs of silk yarn from the premises of Md. Sammi Alam, who was not present at the time. His brother, Md. Salahuddin, stated that the yarn belonged to Md. Sammi Alam and was not in the house in the morning of the seizure. The yarn was identified as of foreign origin by local exporters. Md. Sammi Alam later claimed the yarn was received from three different units, producing documents to support his claim.
  
  2. Imposition of Penalties:
  Penalties of Rs. 1.00 lakh were imposed on each of the four appellants. The Commissioner of Central Excise, Patna, did not accept the appellants' submissions that the yarn was legally imported and given to Md. Sammi Alam for weaving purposes. Consequently, the yarn was confiscated, and penalties were imposed.
  
  3. Legality of the Silk Yarn's Importation:
  Md. Sammi Alam disclosed that the yarn was received from M/s. Gemini Silk Mills, M/s. Annapurna Silk Yarn Fabrics, and M/s. Ridhi Sidhi Textiles Ltd. He provided documents showing the importation and movement of the yarn. However, the adjudicating authority rejected this defense due to discrepancies in the statements and documents. For instance, Md. Salahuddin's statement suggested the yarn was not in the verandah on the morning of the seizure, conflicting with the challans showing earlier receipt. Additionally, the courier services denied delivering the consignment to Md. Sammi Alam.
  
  4. Discrepancies in Statements and Documents:
  The adjudicating authority pointed out several discrepancies:
  - Md. Salahuddin's statement conflicted with the challans' dates.
  - Md. Sammi Alam's delayed appearance was seen as an attempt to procure documents.
  - The courier services denied involvement, and the condition of the yarn (loose vs. bales) did not match the invoices.
  
  The appellants argued these discrepancies were explainable. Md. Sammi Alam's delayed appearance was due to jaundice, supported by a medical certificate. Md. Salahuddin's statement did not explicitly state the yarn was absent from the house. The condition of the yarn could change after reaching the master weaver's premises. The appellants also highlighted that the adjudicating authority doubted the courier services' statements due to potential fear of legal entanglement.
  
  5. Burden of Proof:
  The appellants argued that the burden of proof to establish the smuggled nature of the goods lay with the Department, especially since silk yarn is not a notified item under Section 123 of the Customs Act. The Department failed to provide positive evidence of smuggling. The appellants' documents and statements from the suppliers supported the legality of the yarn's procurement.
  
  Conclusion:
  The Tribunal found that the discrepancies pointed out by the adjudicating authority were satisfactorily explained by the appellants. The statements and documents provided by the appellants were corroborative. The expert opinions used by the Department were not disclosed to the appellants, violating principles of natural justice. The difference in weight was attributed to net vs. gross weight. The burden of proof was on the Department, which it failed to discharge. Consequently, the Tribunal set aside the impugned order and allowed the appeals with consequential reliefs to the appellants.

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• 1999 (3) TMI 514
  
  Issues:
  Quantum of Modvat credit on picture tubes for television sets manufactured by the appellant.
  
  Analysis:
  The appeal before the Appellate Tribunal CEGAT, Mumbai involved the consideration of the Modvat credit taken on picture tubes for television sets manufactured by the appellant. The Department discovered discrepancies in the stock of goods on 29-2-1992, including excesses and shortages. Additionally, the Department found that the appellant had claimed insurance on picture tubes that were damaged or broken, leading to a proposal to deny credit as these tubes were deemed unusable in television set manufacturing.
  
  The appellant's advocate argued that the balance in the accounts records as of 29-2-1992 should be the primary consideration, as this was the date when the stock was checked by the officers. The advocate highlighted discrepancies in the book balance on subsequent dates, questioning the necessity of amending the balance after the initial stock check. Despite these contentions, the Tribunal noted that the appellant's argument did not significantly impact the case, as the figures for picture tubes remained consistent, with shortages falling within the scope of the notice issued by the Department.
  
  Another issue raised was the calculation method used to determine shortages in 20" picture tubes, suggesting a clerical error led to incorrect entries regarding tube sizes. The Tribunal rejected this method, emphasizing the importance of considering the physical stock of broken and damaged color picture tubes. Reference was made to a previous decision to illustrate the inappropriateness of setting off shortages and excesses against each other as a general practice in factory discrepancies.
  
  Regarding the Modvat credit taken on unsuitable picture tubes, the Collector demanded duty equal to the credit taken on tubes deemed unfit for television set manufacturing. The appellant contended that many tubes had minor damages and were repairable for use in manufacturing. However, the Tribunal found insufficient evidence to support this claim, ultimately upholding the Collector's decision on this matter.
  
  Furthermore, discrepancies in the duty rates applicable to color picture tubes during the relevant period were raised. The Collector's application of Rule 9A(4)(iii) was deemed incorrect, with the Tribunal emphasizing the need for the correct recovery of duty paid on goods used as credit. The recovery process should align with Rule 57I(2) to address the amount actually taken as credit on inputs not utilized as per the rules.
  
  In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and directing a reassessment of the recoverable amount of credit once the appellant regains access to the seized documents for proper determination.

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• 1999 (3) TMI 500
  

  Whether certain sales of commodities other than the goods relating to the main business could also be included in the turnover?

  Held that:- Appeal dismissed. Port Trust is not involved in any activity of “carrying on business” and that unclaimed and unserviceable goods are sold in discharge of various statutory charges, items, etc., and the sales of these items are also an infinitesimal part of the Port Trust’s main activities or services. No doubt, the sales of goods are in connection with, or incidental or ancillary to the main “non-business” activities, but they cannot be treated as “business” without any plea by the State of Tamil Nadu that the Port Trust had an independent intention to carry on business in the sale of unserviceable/unclaimed goods. That is not the case of the department in the show cause notice. Further from the counter-affidavits filed in the High Court it is clear that it is not the case of the State that there is any separate intention on the part of the Port Trust, to carry on business in the unserviceable and unclaimed goods. Its contention has been that the main activities of the Port Trust amounted to “carrying on business” and that these sales, even if they were incidental, fell within the meaning of the word “business”. The argument fails in view of our finding that the main activity is not one amounting to “carrying on business”.

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• 1999 (3) TMI 494
  
  Issues Involved:
  1. Alleged misuse of blank transfer forms and breach of trust.
  2. Validity of the share transfer process and compliance with statutory requirements.
  3. Capacity of the third respondent (Brilliant Investments Private Limited) to pay consideration.
  4. Authority of appellant T.G. Veera Prasad to dispose of shares.
  5. Compliance with book closure period and stock exchange regulations.
  6. Jurisdiction of the Company Law Board (CLB) and the nature of proceedings under Section 111 of the Companies Act.
  
  Issue-wise Detailed Analysis:
  
  1. Alleged Misuse of Blank Transfer Forms and Breach of Trust:
  The appellants alleged that the second respondent misappropriated shares by transferring them to the third respondent without consideration. The shares were initially entrusted for pledging to raise finances. The respondents denied these allegations, asserting that the transfers were legitimate and for consideration. The CLB noted contradictions in the respondents' replies and the need for oral evidence to resolve these issues.
  
  2. Validity of the Share Transfer Process and Compliance with Statutory Requirements:
  The appellants contended that the share transfer violated Section 108(1A) of the Companies Act, 1956, and Section 13 of the Securities Contracts (Regulation) Act, 1956. The respondents argued that the transfer instruments were proper and accompanied by share certificates. The CLB did not conclusively determine whether the statutory procedures were followed, suggesting that these complex factual questions required a detailed examination beyond summary proceedings.
  
  3. Capacity of the Third Respondent (Brilliant Investments Private Limited) to Pay Consideration:
  The appellants questioned the financial capacity of Brilliant to purchase the shares, claiming it lacked funds. The CLB recognized this as a significant issue that needed to be examined, potentially through the company's balance sheet and other financial records.
  
  4. Authority of Appellant T.G. Veera Prasad to Dispose of Shares:
  The appellant TMTL disputed the authority of T.G. Veera Prasad to transfer its shares, alleging that the resolution authorizing him was fabricated. The respondents presented resolutions and letters purportedly authorizing the transfers. The CLB suggested that the authenticity of these documents and signatures needed verification, possibly through handwriting analysis.
  
  5. Compliance with Book Closure Period and Stock Exchange Regulations:
  The appellants argued that the share transfer was invalid as it occurred during the book closure period and should have been conducted through the stock exchange. The CLB acknowledged these concerns but did not provide a definitive ruling, indicating that these procedural compliance issues required further investigation.
  
  6. Jurisdiction of the Company Law Board (CLB) and the Nature of Proceedings under Section 111 of the Companies Act:
  The CLB dismissed the applications, stating that the issues were too complex for summary proceedings and suggested that the appellants pursue civil suits. The High Court referenced the precedent set in Ammonia Supplies Corpn. (P.) Ltd. v. Modern Plastic Containers (P.) Ltd., emphasizing that rectification proceedings under Section 111 are summary in nature. The High Court directed the CLB to reconsider whether the cases fell within the scope of Section 111, to treat affidavits as examination-in-chief, and to allow cross-examination and expert analysis as needed.
  
  Conclusion:
  The High Court remanded the cases to the CLB for a fresh decision, directing it to determine whether the cases qualified for rectification under Section 111. The CLB was instructed to expedite the proceedings, considering the detailed observations and legal principles outlined by the High Court. The appeals were thus partly allowed, with costs as incurred.

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• 1999 (3) TMI 493
  
  Issues Involved:
  
  1. Maintainability of the petition under section 107 of the Companies Act, 1956.
  2. Alleged variation of equity shares without notice.
  3. Compliance with section 81 of the Companies Act, 1956.
  4. Requirement of approval from the Board of Industrial & Finance Reconstruction (BIFR).
  
  Issue-wise Detailed Analysis:
  
  1. Maintainability of the petition under section 107 of the Companies Act, 1956:
  
  The court examined whether the petition filed under section 107 of the Companies Act, 1956 was maintainable. The petitioner contended that the increase in equity shares was illegal and violated the company's constitution and the provisions of the Act. However, the court clarified that issuance of further equity shares does not amount to a variation of the rights of shareholders within the meaning of section 106 of the Act. It was held that a variation affecting the enjoyment of rights without modifying the rights themselves does not constitute a variation under section 106. Therefore, the petition under section 107 was deemed not maintainable.
  
  2. Alleged variation of equity shares without notice:
  
  The petitioner argued that the increase in the number of equity shares from 1,50,000 to 2,30,500 was done without his knowledge or notice, which he claimed was illegal. The court observed that the increase in shares was decided through a special resolution passed at an extraordinary meeting of the members on 10-11-1998. The Board of Directors subsequently allotted 80,500 shares to Sanjay Jain in lieu of an unsecured loan. The court found that the petitioner's father, who was the chairman of the meeting, was aware of the decision, and thus, the claim of lack of notice was unfounded.
  
  3. Compliance with section 81 of the Companies Act, 1956:
  
  The petitioner claimed that the allotment of shares to Sanjay Jain deprived him of his right to receive a proportionate share, violating section 81(1) of the Act. However, the court noted that section 81(1A) permits the allotment of shares to any person if a special resolution is passed. In this case, such a resolution was adopted on 10-11-1998, making the allotment valid. The court also found that the petitioner had notice of the meeting but chose not to participate.
  
  4. Requirement of approval from the Board of Industrial & Finance Reconstruction (BIFR):
  
  The petitioner contended that the resolution to allot shares required BIFR approval as the company was under a rehabilitation scheme. The court examined section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and concluded that BIFR approval was necessary only if the management of the company was taken over or changed under a sanctioned scheme. Since there was no evidence of such a change in management, the approval from BIFR was not required for the resolution.
  
  Conclusion:
  
  The court dismissed the petition, finding it not maintainable and lacking bona fide intent. The petitioner had suppressed material facts and attempted to obstruct the company's efforts to raise further capital as required by the rehabilitation package. The interim stay granted on 2-2-1999 was vacated.
  
  Final Order:
  
  The company petition was dismissed, and the interim stay was vacated.

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• 1999 (3) TMI 491
  
  Issues Involved:
  1. Whether a decree can be passed against defendant No. 1 in the absence of an application for leave to defend.
  2. Whether the suit against defendant Nos. 2 and 3 falls under Order 37 of the Code of Civil Procedure.
  3. Whether the resolution, receipt, and undertaking constitute a written agreement and if the receipt is properly stamped.
  4. Whether the guarantee given by defendant Nos. 2 and 3 is properly stamped and if plaintiffs can rectify the defect by paying fines.
  5. Whether the guarantee given by defendant Nos. 2 and 3 was in their personal capacity or as directors.
  6. Whether notice served on defendant No. 3 was as required by the guarantee.
  7. Whether defendants are entitled to unconditional leave to defend due to delay in moving Summons for Judgment.
  8. Whether the suit against defendant No. 1 is maintainable under section 446(2) of the Companies Act.
  
  Issue-wise Detailed Analysis:
  
  1. Decree Against Defendant No. 1 Without Leave to Defend:
  The court held that a decree can be passed against defendant No. 1 in the absence of an application for leave to defend if the suit is maintainable as a summary suit. The court found that there was a written agreement between the parties, consisting of a board resolution, a receipt, and an undertaking. The receipt was properly stamped, thus admissible in evidence. Consequently, the suit against defendant No. 1 was maintainable as a summary suit, and a decree could be passed.
  
  2. Suit Against Defendant Nos. 2 and 3 Under Order 37:
  The court examined whether the suit fell under Order 37 of the Code of Civil Procedure, which applies to suits based on written contracts or guarantees. The court found that the documents constituted a written agreement, making the suit maintainable under Order 37. However, the claim for interest at a compounded rate was not supported by the guarantee terms, which only mentioned additional or penal interest. Therefore, the suit against defendant Nos. 2 and 3 could not be maintained as a summary suit for the interest claimed.
  
  3. Written Agreement and Proper Stamping:
  The court concluded that the resolution, receipt, and undertaking together constituted a written agreement. The receipt was properly stamped as per the Bombay Stamp Act, making it admissible in evidence. Therefore, the suit against defendant No. 1 was maintainable as a summary suit.
  
  4. Proper Stamping of Guarantee:
  The guarantee was executed on a stamp paper of Rs. 10, which was the correct stamp duty under article 37 of the Bombay Stamp Act. Therefore, the guarantee was properly stamped, and the plaintiffs could sue based on it. The court rejected the defendants' contention that the guarantee was not properly stamped.
  
  5. Personal Capacity or as Directors:
  The court found that defendant Nos. 2 and 3 had signed the guarantee in their personal capacity, as indicated by the resolution and the guarantee document. Therefore, the guarantee was binding on them personally.
  
  6. Notice to Defendant No. 3:
  The court noted that the notice invoking the guarantee was not sent to the address specified in the guarantee but was received at the office of defendant No. 1. The court held that failure to give notice at the specified address must show prejudice. Since there was no evidence of personal receipt by defendant No. 3, this defense had to be considered while deciding on leave to defend.
  
  7. Delay in Moving Summons for Judgment:
  The court rejected the contention that defendants were entitled to unconditional leave to defend due to the delay in moving Summons for Judgment. The court emphasized that leave to defend should be based on the defenses disclosed in the affidavit, not merely on procedural delays.
  
  8. Suit Maintainability Under Section 446(2) of the Companies Act:
  The court held that the suit was maintainable as it was filed before the appointment of the provisional liquidator. Permission under section 446(2) was not required since the suit was initiated before the winding-up order or the appointment of the liquidator.
  
  Order:
  (i) The suit was decreed against defendant No. 1 in terms of the prayer for the principal amount and interest.
  (ii) Defendant Nos. 2 and 3 were given unconditional leave to defend the suit and granted 12 weeks to file a written statement.
  (iii) The suit was transferred to the list of Commercial Causes for further proceedings.

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