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2000 (3) TMI 939
Issues:
Quashing of proceedings under section 482 of the Code of Criminal Procedure, 1908 - Accused facing a charge under section 138 of the Negotiable Instruments Act, 1881 - Resignation of the petitioner from the board of directors - Liability of the petitioner as an ordinary director - Interpretation of section 141 of the Negotiable Instruments Act - Invocation of section 141 against all directors - Disputed questions of fact in a petition under section 482.
Analysis:
The petition sought the quashing of proceedings in a criminal case where the petitioner, as accused No. 5, faced a charge under section 138 of the Negotiable Instruments Act, 1881. The complainant, a company, alleged that the accused defaulted on payments related to a hire-purchase agreement and issued a cheque that bounced due to insufficient funds. The complainant then served a notice under section 138 demanding payment, which the accused failed to comply with, leading to the filing of the complaint.
The petitioner contended that he had resigned from the board of directors before the cheque was presented and argued that the criminal proceedings against him should be quashed. The respondent, however, argued that the resignation and the petitioner's role in the company were questions of fact to be determined during the trial, indicating that the proceedings should not be quashed at that stage.
The court noted the positions held by the accused within the company, with the petitioner being an ordinary director. It observed that in cases involving a managing director and executive directors, it was unlikely for an ordinary director to be in charge of the company's affairs. The court highlighted the importance of ascertaining the facts before invoking section 141 against directors, cautioning against routinely implicating all directors without proper inquiry.
While acknowledging the seriousness of the matter, the court emphasized that disputed questions of fact could not be resolved in a petition under section 482. Consequently, the court dismissed the petition at that stage but directed that the petitioner's personal attendance during the trial was dispensable, allowing representation by his advocate.
In conclusion, the judgment underscored the need for a thorough examination of facts before invoking legal provisions against directors and highlighted the limitations of addressing disputed factual issues in a petition under section 482 of the Criminal Procedure Code.
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2000 (3) TMI 936
Whether in view of the relevant clause in the contract between the parties the Court at Bombay alone had jurisdiction and the jurisdiction of the Courts at Madras where the suit was instituted was barred?
Held that:- Appeal dismissed. Whether Principal City Civil Judge, Bangalore has jurisdiction in the matter or not is still pending with him which proceedings were filed earlier in time than the execution application by the appellant in the District Court at Raichur. The award had not attained finality. In these circumstances the Principal District Judge, Raichur should not have entertained the application for execution and ordered attachment of movable properties of the respondents. The High Court referred to the concession by both the parties that all the applications under the Act had to be treated as original suits and if the Court finds that it had no jurisdiction to entertain, it cannot dismiss the suit but has to return the same for the presentation to the proper Court. Whatever may be the concession of the parties in the circumstances of the present case Principal District Judge, Raichur should have stayed his hands and should not have entertained the execution application by the appellant. High Court took a correct view of the matter and rightly set aside the impugned orders.
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2000 (3) TMI 934
Issues Involved:
1. Validity of the sale of assets by the Andhra Pradesh State Financial Corporation (APSFC) during the pendency of winding-up proceedings.
2. Requirement for APSFC to deposit the sale proceeds with the Official Liquidator.
3. Obligation of APSFC to provide documentation of the sale and remaining assets.
4. Rights of secured creditors and the implications of Sections 529 and 529A of the Companies Act.
5. The impact of Section 29 of the State Financial Corporation Act (SFC Act) on the sale of assets during winding-up proceedings.
Detailed Analysis:
1. Validity of the Sale of Assets by APSFC:
The Official Liquidator argued that the sale of the company's assets by APSFC during the pendency of winding-up proceedings is illegal and void under Section 537 of the Companies Act. This section states that any sale of the properties of the company without the leave of the Court during winding-up proceedings is void. The sale in question took place on 30-4-1997, and the winding-up order was passed on 23-7-1998. The sale was conducted under Section 29 of the SFC Act, which allows Financial Corporations to sell assets without court intervention. However, the Court held that the sale by APSFC without the leave of the Court is void under Section 537 of the Companies Act.
2. Requirement for APSFC to Deposit Sale Proceeds:
The Court directed APSFC to make the sale proceeds of Rs. 50.50 lakhs available for the claims of the workmen and other secured creditors. This is in line with the decision in A.P.S. Financial Corpn's case, where it was held that the sale proceeds must be kept ready for the claims of the workmen and other secured creditors until the Court orders otherwise.
3. Obligation of APSFC to Provide Documentation:
The Court directed APSFC to furnish a copy of the panchanama prepared at the time of taking possession of the assets, a list of assets disposed of, and a list of assets remaining unsold. This is to ensure transparency and accountability in the sale process.
4. Rights of Secured Creditors and Implications of Sections 529 and 529A:
Sections 529 and 529A of the Companies Act provide that workmen's dues and debts due to secured creditors have priority over other debts. The Court noted that the rights of the Financial Corporation under Section 29 of the SFC Act are circumscribed by the pari passu charge in favor of workmen's dues. The Court held that any sale by a Financial Corporation must be conducted in association with the Official Liquidator to ensure that the workmen's dues are protected.
5. Impact of Section 29 of the SFC Act:
Section 29 of the SFC Act allows Financial Corporations to sell assets of a defaulting industrial concern without court intervention. However, the Court held that this right is not absolute and must be exercised in association with the Official Liquidator when there are workmen's dues or multiple secured creditors. The Court emphasized that the statutory rights of workmen under Sections 529 and 529A take precedence over the rights conferred by Section 29 of the SFC Act.
Conclusion:
The Court concluded that any sale of the property of a company in liquidation by a secured creditor without the leave of the Court is void under Section 537 of the Companies Act. The sale proceeds must be made available for the claims of workmen and other secured creditors. APSFC is directed to comply with these requirements and provide the necessary documentation. The Court also declared that Financial Corporations must seek the leave of the Court before selling assets of a debtor industrial concern once winding-up proceedings are initiated. The petition was disposed of accordingly.
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2000 (3) TMI 933
Issues involved:
Petition seeking quashing of criminal proceedings under section 138 of the Negotiable Instruments Act against a company based on a cheque issued by an employee.
Analysis:
The petition sought to quash criminal proceedings in a case where the petitioner-company was being prosecuted under section 138 of the Negotiable Instruments Act. The complainant had booked plots from the company, paid an initial amount, and later requested a refund due to financial difficulties. A cheque issued by an employee of the company bounced, leading to the complaint. The petitioner argued that since the cheque was issued by the employee and not the company, the company should not be held liable. The respondent contended that the employee acted in connivance with the company, making the company equally responsible.
The court noted that the complainant requested the refund through the employee and not directly from the company. However, this did not absolve the company of criminal liability under section 138 for the bounced cheque. The court emphasized that the person criminally liable for a bounced cheque is the one who issued it, regardless of any internal arrangements within the company. In this case, the cheque was issued by the employee, not on behalf of the company, making the company's liability questionable.
The court highlighted a mis-description of the company in the complaint, referring to the accused as the Branch Manager of the company. Despite this, the court held that neither the Branch Manager nor the company itself could be held liable for the bounced cheque issued by the employee. Consequently, the court allowed the petition and quashed the criminal proceedings against the petitioner-company.
In conclusion, the judgment clarified that criminal liability under section 138 of the Negotiable Instruments Act rests with the individual who issued the bounced cheque. The court emphasized that the company cannot be held liable for actions of its employees unless the cheque was issued on behalf of the company. The decision to quash the criminal proceedings was based on the lack of direct involvement of the company in the issuance of the bounced cheque by the employee.
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2000 (3) TMI 931
Issues Involved:
1. Validity of the appeal filed by respondents 3 to 15 against the BIFR order.
2. Compliance with the requirement to file a certified copy of the order with the appeal.
3. Calculation of the limitation period for filing the appeal.
Detailed Analysis:
Issue 1: Validity of the Appeal Filed by Respondents 3 to 15
The writ petition challenges the orders of the appellate authority for Industrial and Financial Reconstruction (AAIFR), New Delhi, dated 16-12-1999 and 20-1-2000, which admitted Appeal No. 166 of 1999 and granted a stay. The petitioner contends that the appeal was filed beyond the prescribed limitation period and without a certified copy of the BIFR order, rendering it invalid.
Issue 2: Compliance with the Requirement to File a Certified Copy of the Order with the Appeal
Section 25 of the Sick Industrial Companies (Special Provisions) Act, 1985, mandates that an appeal must be filed within 45 days from the date on which a certified copy of the order is issued. The procedure for filing appeals before AAIFR, as prescribed under section 13 of the Act, requires the submission of a certified copy of the order appealed against. The petitioner argued that respondents 3 to 15 did not apply for a certified copy and instead used a copy received in the normal course, misleading the appellate authority into believing it was a certified copy.
Issue 3: Calculation of the Limitation Period for Filing the Appeal
The petitioner contended that the limitation period starts from the date the order is pronounced in open court, not from the date of receiving the order in the normal course. The appellate authority's decision to treat the copy received on 21-9-1999 as a certified copy and consider the appeal filed on 4-11-1999 within the limitation period was challenged. The petitioner emphasized that the appeal should have been filed within 45 days of obtaining a certified copy, and any delay beyond 60 days could not be condoned under section 25 of the Act.
Court's Findings:
1. Mandatory Requirement for Certified Copy: The court held that section 25(1) of the Act, read with the prescribed procedure, mandates the filing of an appeal with a certified copy of the order. The appellate authority's acceptance of the appeal without a certified copy was erroneous.
2. Limitation Period: The court concluded that the limitation period for filing the appeal starts from the date of issuance of the certified copy of the order, not from the date of receipt in the normal course. The respondents' failure to apply for a certified copy immediately after the order's pronouncement and their reliance on a non-certified copy were deemed non-compliant with the statutory requirements.
3. Press Note Compliance: The court referred to a Press Note issued by the AAIFR, which clarified that parties intending to file an appeal should apply for a certified copy immediately after the order is passed and not wait for its receipt through postal channels. The respondents' actions were found to be contrary to this directive.
4. Judicial Precedents: The court cited the Division Bench judgment of the Delhi High Court in *Girdharlal M. Pittie v. Appellate Authority for Industrial & Financial Reconstruction* AIR 1988 Delhi 400, which emphasized strict adherence to the limitation period and the necessity of filing a certified copy of the order.
Conclusion:
The court concluded that the appeal filed by respondents 3 to 15 was barred by limitation and non-compliant with the statutory requirements. Consequently, the orders dated 16-12-1999 and 20-1-2000 passed by the appellate authority were quashed. The writ petition was allowed, and no order as to costs was made.
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2000 (3) TMI 930
Issues Involved:
1. Validity of the amalgamation order.
2. Interest of the shareholders of AIL.
3. Non-convening of creditors' meeting.
4. Valuation of assets of AIL.
5. Non-disclosure of shareholding interests.
6. Amalgamation of profit-making companies into a loss-making company.
7. Preliminary objection regarding the existence of AIL post-amalgamation.
Issue-wise Detailed Analysis:
1. Validity of the Amalgamation Order:
The appellants challenged the order dated 6-12-1999, which sanctioned the amalgamation of Arvind Intex Ltd. (AIL), Arvind Cotspin Ltd. (ACL), and Arvind Polycot Ltd. (APL) into Arvind Products Ltd. (APRL). The learned Single Judge had considered objections from various shareholders, including the appellants, before sanctioning the scheme.
2. Interest of the Shareholders of AIL:
The appellants argued that the amalgamation was not in the interest of AIL's shareholders due to an unfavorable share exchange ratio and lack of proper information. However, the court found that the scheme had been approved by a requisite majority of shareholders. Specifically, 419 out of 440 shareholders representing shares worth Rs. 4,90,70,110 supported the scheme, while only 15 shareholders opposed it. The court presumed that shareholders are aware of their interests and would not have approved the scheme without understanding its implications.
3. Non-convening of Creditors' Meeting:
The appellants contended that no creditors' meeting was convened. In response, it was noted that the scheme was duly advertised, and institutional creditors like ICICI, UTI, and IDBI had sanctioned the scheme. No creditor objected to the scheme, indicating their approval.
4. Valuation of Assets of AIL:
The appellants questioned the valuation methods used by Chartered Accountants C.C. Chokshi & Co. and Bansi S. Mehta & Co., claiming they did not follow accepted accounting principles. The court observed that different methods are typically used for valuing different assets and found no fault in the valuation process. The appellants failed to provide an alternative valuation report to substantiate their claims.
5. Non-disclosure of Shareholding Interests:
The appellants alleged non-disclosure of Shri Sanjay Lalbhai's substantial shareholding in APRL. The court found that these details were communicated to the objectors, as noted by the learned Single Judge, and thus, there was no non-disclosure of relevant facts.
6. Amalgamation of Profit-making Companies into a Loss-making Company:
The appellants argued against merging profit-making companies (AIL, ACL, APL) into a loss-making company (APRL). The court noted that the transferee company was a shell company, and the merger was intended for synergic advantages. The shareholders had approved the scheme, and the court should not override their decision unless the scheme was found to be unconscionable, unfair, or illegal.
7. Preliminary Objection Regarding the Existence of AIL Post-amalgamation:
The respondent's counsel raised a preliminary objection, asserting that AIL no longer existed as it had already merged into APRL. The court acknowledged that it would be impossible to restore the pre-amalgamation status and thus found the appeal non-maintainable.
Conclusion:
The court concluded that the learned Single Judge had not committed any error or illegality in sanctioning the scheme. The objections raised by the appellants lacked substance, and the court should not interfere with the shareholders' decision. The appeal was rejected with no order as to costs, and the request for staying the implementation of the order was also denied, considering the amalgamation had already been executed.
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2000 (3) TMI 929
Issues Involved:
1. Maintainability of the petitions under section 111A of the Companies Act.
2. Interpretation of the term "intimation of transfer" in section 111A(2).
3. Applicability of section 111(2) and section 111(4) to public limited companies.
4. Jurisdiction of the Company Law Board (CLB) to rectify the register of members.
5. Remedies available for non-registration of transmission of shares.
Issue-wise Detailed Analysis:
1. Maintainability of the petitions under section 111A of the Companies Act:
The appellants contended that the petitions were not maintainable under section 111A as it deals only with refusal to register the transfer of shares and not the transmission of shares by operation of law. They argued that the right of appeal would have been available under section 111(2) of the Act, which now applies only to private limited companies and deemed public companies under section 43A of the Act. The respondent's only remedy, according to the appellants, was by way of a civil suit. The Court, however, found that the CLB had jurisdiction to entertain the petitions under section 111A, as the provisions of section 111A should be read in conjunction with section 111, and the inaction of the appellants in registering the transmission of shares could be treated as a deemed refusal.
2. Interpretation of the term "intimation of transfer" in section 111A(2):
The CLB had interpreted the term "intimation of transfer" in the proviso to section 111A(2) to include "intimation of transmission," considering it a drafting error. The Court disagreed with this interpretation, stating that the CLB has no jurisdiction to draft provisions and must only interpret them. The Court held that the term "intimation of transfer" should not be substituted with "intimation of transmission" and that the provisions of the Depositories Act and the Companies Act should be harmonized to give effect to the intention of the Legislature.
3. Applicability of section 111(2) and section 111(4) to public limited companies:
The Court held that the remedies of appeal and rectification under sections 111(2) and 111(4) are available to public limited companies by virtue of section 111A(7), which makes applicable the provisions of sections 111(5), (7), (9), (10), and (12) to the proceedings under section 111A. The Court emphasized that the provisions of the Depositories Act are in addition to and not in derogation of any other law for the time being in force, thus preserving the rights and remedies already available to shareholders of public companies.
4. Jurisdiction of the Company Law Board (CLB) to rectify the register of members:
The Court held that the CLB has jurisdiction to rectify the register of members under section 111A(3) for all shares, whether held in depositories or in the form of share certificates. The CLB's jurisdiction is not limited to transfer matters but also includes transmission and other issues such as bad delivery, loss, theft, or forgery of shares. The Court overruled the CLB's conclusion in the case of Shashi Prakash Khemka, which had restricted the remedy of rectification to transfer matters only.
5. Remedies available for non-registration of transmission of shares:
The Court held that the absence of the term "intimation of transmission" in the proviso to section 111A(2) does not mean that no remedy of appeal is available for non-registration of transmission of shares. The Court interpreted the provisions in a manner that includes "intimation of transmission" by necessary implication, ensuring that the rights and remedies available to shareholders of public companies are preserved. The Court emphasized that the interpretation should harmonize the text of the proviso with the context of the whole statute, giving effect to the intention of the Legislature.
Conclusion:
The Court dismissed the appeals, upholding the CLB's direction to transmit the shares held by the deceased in the name of the respondent as per his entitlement in terms of the succession certificate dated 20-3-1997. The Court, however, overruled the CLB's reasoning regarding the "drafting error" and clarified the interpretation of the relevant provisions to ensure the preservation of shareholders' rights and remedies.
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2000 (3) TMI 927
Issues Involved:
1. Validity of the order permitting the respondent to transfer assets under section 536(2) of the Companies Act, 1956.
2. Allegation of mala fide intent behind the transfer of assets.
3. Impact on the rights of the appellant bank as a creditor.
4. Adequacy of the price and method of transfer.
5. Interim relief and status quo order by the Debts Recovery Tribunal.
Detailed Analysis:
1. Validity of the order permitting the respondent to transfer assets under section 536(2) of the Companies Act, 1956:
The appellant bank challenged the order dated 2-3-2000 by the learned Company Judge allowing the respondent to transfer its Pellet Division assets to Higrade Pellets Ltd. under section 536(2) of the Companies Act, 1956. The respondent sought this permission to restructure its financial position amidst financial difficulties. The court noted that the decision to transfer the Pellet Division was made long before the winding-up petition was filed, thus indicating no intent to defraud creditors.
2. Allegation of mala fide intent behind the transfer of assets:
The appellant argued that the transaction was not bona fide, citing that book entries were made on 31-3-1999 after receiving a statutory notice from the appellant. However, the court found clear evidence that the decision to transfer the Pellet Division was made at the Twentieth Annual General Meeting on 24-9-1996, well before the appellant invoked the guarantee. Therefore, the court concluded that the transfer decision was not made with a view to defraud the appellant or defeat its claim.
3. Impact on the rights of the appellant bank as a creditor:
The appellant contended that the transfer destroyed the rights of unsecured creditors to recover amounts by realizing the assets. However, the court observed that the respondent's financial condition and the intention behind the transfer-to raise funds for effective and efficient working-were taken into account by the learned Company Judge. The court emphasized that the judicial discretion under section 536(2) ensures that transactions beneficial to the company are not unduly hampered, provided they are not intended to defraud creditors.
4. Adequacy of the price and method of transfer:
The appellant argued that the transfer was not made by inviting public offers, which would have reflected the true worth of the assets, and no valuation data was provided. The court referred to the Supreme Court's decision in Navalkha & Sons v. Ramanya Das, noting that the context of public auction sales under rule 273 of the Companies (Court) Rules, 1959, did not apply to the current case under section 536(2). The court found that the decision to transfer the assets was made in good faith and was necessary for restructuring the respondent's business.
5. Interim relief and status quo order by the Debts Recovery Tribunal:
The appellant had filed an application under section 19 of the Recovery of Debts due to Banks & Financial Institutions Act, 1993, before the Debts Recovery Tribunal, seeking a decree against the principal debtor and the respondent for the amount due. The Tribunal had issued an interim order for maintaining the status quo regarding the respondent's immovable properties described in Exhibit-N. The court noted that the question of interim relief was still pending before the Tribunal, and the appellant had pursued the statutory remedy available under the law.
Conclusion:
The court concluded that the learned Company Judge was correct in granting permission under section 536(2) for the proposed transfer, as it was not intended to defraud creditors and was necessary for the respondent's financial restructuring. The appeal was summarily dismissed, and the request for a stay order was rejected.
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2000 (3) TMI 926
Issues:
Quashing of charge under section 7 of the Essential Commodities Act, 1955 based on incorrect blend composition markings on cloth samples.
Analysis:
1. Background and Allegations:
The complaint filed by the Textile Commissioner alleged that a company incorrectly marked blend compositions on cloth samples. The samples were collected, tested, and found to have discrepancies in blend percentages compared to the manufacturer's markings.
2. Legal Violations:
The accused company, a manufacturer under the Cotton Textile (Control) Order, was accused of violating provisions leading to an offense under section 7 of the Essential Commodities Act, 1955. The petitioner, as the executive president, was held responsible for the company's actions during his tenure.
3. Legal Proceedings:
The Metropolitan Magistrate summoned the accused for trial under section 7. Despite challenges through revisions, the Additional Sessions Judge upheld the order, holding the petitioner accountable for the offense due to his position in the company.
4. Legal Argument and Decision:
The petitioner sought to quash the charge, arguing that his senior position did not make him liable under section 10 of the Act. However, the court rejected this argument, stating that the offense was established in the complaint, and the petitioner's liability could be determined during trial. The charge was upheld, and the petition was dismissed.
5. Judicial Precedents and Conclusion:
The court cited legal precedents emphasizing that proceedings can only be quashed if no offense is constituted based on the complaint. As the allegations in the complaint established the offense, the charge was deemed valid. The court directed the case to be expedited for resolution within four months.
In conclusion, the court dismissed the petition, upholding the charge against the petitioner under section 7 of the Essential Commodities Act, 1955. The decision emphasized that the petitioner's liability would be determined during trial, and the case was directed to be resolved promptly.
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2000 (3) TMI 925
Issues:
1. Approval of the scheme of amalgamation between two companies.
2. Transfer of property, rights, and powers from transferor-company to transferee-company.
3. Transfer of liabilities and duties from transferor-company to transferee-company.
4. Continuation of pending proceedings by or against the transferor-company.
5. Allotment of shares in the transferee-company to entitled members of the transferor-company.
6. Dissolution of the transferor-company and registration process.
Analysis:
1. The High Court of Allahabad, after considering the petition and relevant documents, approved the scheme of amalgamation between the petitioner-company and Gangeshwar Limited. The scheme was approved by a majority of equity shareholders, and no objections were received. The court declared the scheme binding on all members of both companies.
2. The court ordered the transfer of all property, rights, and powers of the transferor-company to the transferee-company without further act or deed. This transfer was to be done in accordance with Section 394(2) of the Companies Act, 1956, ensuring the vesting of all estate and interest in the transferee-company, subject to existing charges.
3. All liabilities and duties of the transferor-company were directed to be transferred to the transferee-company without the need for additional formalities. This transfer was also mandated under Section 394(2) of the Companies Act, 1956, making the liabilities and duties of the transferor-company now the responsibility of the transferee-company.
4. The court ruled that all ongoing legal proceedings involving the transferor-company should be continued by or against the transferee-company. This provision ensured the seamless continuation of legal actions without disruption due to the amalgamation process.
5. The transferee-company was instructed to allot shares to entitled members of the transferor-company as per the approved Scheme of Amalgamation. This allotment process was to be completed without the need for further applications, streamlining the transition for shareholders of both companies.
6. Within 30 days of the court order, the transferor-company was required to deliver a certified copy of the order to the Registrar of Companies for registration. Upon registration, the transferor-company would be dissolved, and all relevant documents would be consolidated and filed accordingly. Interested parties were granted the liberty to seek necessary directions from the court in this matter, ensuring transparency and compliance with legal procedures.
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2000 (3) TMI 924
Issues:
Approval of Scheme of Amalgamation between two companies under Companies Act, 1956.
Analysis:
The High Court of Allahabad heard a petition regarding the Scheme of Amalgamation proposed between a company and Triveni Engineering & Industries Limited. The Court noted the unanimous approval of the scheme by preference and equity shareholders. Reports from the Regional Director and Official Liquidator indicated no prejudicial conduct in the affairs of the companies. Consequently, the Court sanctioned the scheme of Amalgamation, declaring it binding on all members of both companies. The order specified the transfer of property, rights, powers, liabilities, and duties from the Transferor Company to the Transferee Company as per section 394(2) of the Companies Act, 1956. It was directed that ongoing proceedings would continue with the Transferee Company, and shares in the Transferee Company would be allotted to entitled members of the Transferor Company. The Transferor Company was required to deliver a certified copy of the order to the Registrar of Companies for dissolution, after which related documents would be consolidated. The order allowed any interested party to seek necessary directions from the Court in this matter. The office was instructed to formalize the order in the prescribed form with modifications if needed.
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2000 (3) TMI 922
Issues Involved:
1. Jurisdiction of the High Court to issue directions to the Court Receiver for suits where the Court Receiver was appointed before 16th July 1999.
2. Empowerment of the High Court to direct the Court Receiver regarding properties in custody until the DRT/Central Government sets up an alternate infrastructure.
Issue-wise Detailed Analysis:
Issue 1: Jurisdiction of the High Court to Issue Directions to the Court Receiver
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993, aims to expedite the adjudication and recovery of debts due to banks and financial institutions. Under Section 2(c), the 'appointed day' refers to the day the Tribunal is established, which in this case is 16-7-1999. Section 31(1) mandates that every suit or proceeding pending before any court before the establishment of the Tribunal, which would fall under its jurisdiction if it arose after the establishment, shall stand transferred to the DRT. This includes all suits, execution proceedings, and interim applications.
The Court Receiver, High Court, Bombay, was appointed to manage properties custodia legis, and the management of these properties is an ongoing process requiring continuous directions from the High Court. The Court Receiver's duties flow from the order appointing them, and these duties do not cease merely because the main suit is transferred to the DRT. The High Court concluded that all suits and pending proceedings, including those involving the Court Receiver, stand transferred to the DRT. The Court Receiver shall continue to manage the properties until the DRT appoints its own receiver.
Issue 2: Empowerment of the High Court to Direct the Court Receiver Regarding Properties in Custody
Despite the transfer of jurisdiction to the DRT, the High Court retains the authority to issue directions to the Court Receiver regarding the properties in custody until the DRT establishes the necessary infrastructure. The DRT lacks the current infrastructure to manage properties worth Rs. 2,000 crores, which are in the custody of the Court Receiver, High Court, Bombay. The Court Receiver, an establishment of the High Court, is responsible for protecting these properties and maintaining accounts of royalties and expenses.
The High Court emphasized that the properties would remain custodia legis with the Court Receiver until the DRT appoints its receiver. The Court Receiver's authority continues until they are formally discharged by the High Court, and there is no need for a fresh application to the DRT for the appointment of a receiver. The High Court can issue directions to the Court Receiver regarding the management and protection of assets until the DRT appoints its receiver.
The Supreme Court judgments in United Bank of India v. DRT and State Bank of Bikaner & Jaipur v. Ballabh Das & Co. support the view that all suits and proceedings stand transferred to the DRT, and the High Court should not ascertain the legality of debts before transfer. The Court Receiver's role continues until the DRT appoints its receiver, ensuring the protection and management of properties during the transitional period.
Conclusion
The High Court has jurisdiction to issue directions to the Court Receiver for suits where the Court Receiver was appointed before 16-7-1999. The High Court is also empowered to direct the Court Receiver regarding properties in custody until the DRT/Central Government sets up an alternate infrastructure. The properties will remain custodia legis with the Court Receiver until the DRT appoints its receiver, ensuring the protection and management of assets during the transitional period.
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2000 (3) TMI 920
Issues Involved:
1. Inability to pay debts.
2. Disputed debt and counter-claim.
3. Financial status and viability of the respondent company.
4. Procedural aspects of winding up petition.
Summary:
1. Inability to pay debts:
The Tata Iron and Steel Co. Ltd. filed Company Petition No. 134 of 1999 for winding up of Micro Forge (India) Ltd. u/s 433(e) of the Companies Act, 1956, due to the latter's inability to pay debts arising from the breach of the agreement for the sale of 1500 metric tons of non-alloy steel billets. The petition was admitted, and the publication of the advertisement was directed, but the request for the appointment of a provisional liquidator was rejected.
2. Disputed debt and counter-claim:
Micro Forge Co. contended that the contract was changed from High Seas sale to Ex-Kandla sale, and thus, they paid customs duty and clearing charges on behalf of Tata company. They also raised a counter-claim for the non-supply of goods, which allegedly caused them a loss of Rs. 64 lakhs. The company argued that it is a profit-making entity with substantial shareholders and employees, disputing the debt and raising a set-off claim.
3. Financial status and viability of the respondent company:
The financial documents of Micro Forge Co. for the last three years showed good profitability, turnover, reserves, and surpluses. The court noted that winding up would result in the loss of employment for 105 employees and affect the larger interest of society. The court emphasized that winding up is a measure of last resort and should not be used as a means to recover disputed debts.
4. Procedural aspects of winding up petition:
The court highlighted that winding up petitions are not a legitimate means of enforcing the payment of a bona fide disputed debt. The petition should not be aimed at pressurizing the company or abusing the court's process. The court found that there were many disputed questions of fact, including the nature of the contract (High Seas sale or Ex-Kandla sale) and the liability for customs duty, which should be resolved in a civil court.
Conclusion:
The court quashed the order of admission for the winding up petition and resultant directions, dismissing O.J. Appeal No. 1 of 2000 and allowing O.J. Appeal No. 5 of 2000. The interim order restraining the respondent-company from disposing of its assets was extended for ten weeks to enable the petitioning-company to avail further remedy.
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2000 (3) TMI 917
Issues Involved:
1. Possession of the premises by the Official Liquidator.
2. Lease termination and subsequent legal actions.
3. Role and rights of the Saraswat Co-operative Bank.
4. Appointment and scope of the Court Receiver's authority.
5. Applicability of Section 457 of the Companies Act, 1956.
6. Relevant Supreme Court judgments and their applicability.
7. Interim orders and their finality.
Issue-wise Detailed Analysis:
1. Possession of the premises by the Official Liquidator:
The application seeks an order directing the Official Liquidator to hand over vacant and peaceful possession of the premises, which includes non-agricultural land and an old factory shed, to the applicant. The applicant, an 88-year-old man, leased the property to the company under liquidation and has been attempting to regain possession for 19 years.
2. Lease termination and subsequent legal actions:
The premises were leased to the company on 27-11-1975 for ten years. The lease was terminated on 27-2-1981 due to non-payment of rent, leading to Civil Suit No. 223 of 1981, which was resolved by a consent order on 20-9-1983. The company defaulted again, prompting another notice on 3-10-1985 and Civil Suit No. 163 of 1986. The lease expired in 1985 by efflux of time.
3. Role and rights of the Saraswat Co-operative Bank:
The Bank, claiming the company owed it Rs. 60 lakhs, sought to be a party in Suit No. 163 of 1986, which was rejected. The Bank's application for various reliefs, including the appointment of a Court Receiver, was partially successful. The Bank's claim was restricted to tenancy rights, not ownership or mortgage of the land and factory.
4. Appointment and scope of the Court Receiver's authority:
The Co-operative Court appointed a Special Recovery Officer as Court Receiver on 11-12-1992, who took possession of the premises. The Appellate Court modified this order on 15-6-1993, limiting the receiver's authority to movable property. However, the Division Bench's order on 29-9-1993 reinstated the receiver's role over the tenancy rights of the immovable property.
5. Applicability of Section 457 of the Companies Act, 1956:
The applicant argued that under Section 457, the Official Liquidator does not require the premises for the company's beneficial winding-up, as no business has been conducted there since 1992. The Supreme Court's interpretation in Ravindra Ishwardas Sethna v. Official Liquidator was cited, emphasizing that the Liquidator can only carry on the business if necessary for the beneficial winding-up.
6. Relevant Supreme Court judgments and their applicability:
The Supreme Court's judgment in Ravindra Ishwardas Sethna was deemed applicable, establishing that the Liquidator's powers under Section 457 are limited to actions necessary for beneficial winding-up. The Bank's reliance on Union Bank of India v. Official Liquidator was found inapplicable as it involved different circumstances, including a subsisting lease and a different section of the Act (Section 535).
7. Interim orders and their finality:
An interim order dated 23-7-1999 directed certain actions but did not constitute a final resolution of the Official Liquidator's report. The Court clarified that this order was not final and proceeded to dispose of the report, directing the Receiver to hand over possession to the Official Liquidator.
Conclusion:
The application was allowed, directing the Receiver to hand over possession of the premises to the Official Liquidator, who would then return it to the applicant. The Official Liquidator's report was also made absolute in these terms, ensuring the applicant's ownership rights were upheld.
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2000 (3) TMI 916
Issues Involved:
1. Maintainability of the complaint.
2. Jurisdiction of Indian courts over alleged offences committed outside India.
3. Whether the allegations constitute offences under sections 60, 63, 68, and 68A of the Companies Act, 1956.
Detailed Analysis:
1. Maintainability of the Complaint:
The petitioners argued that the complaint is not maintainable on the grounds that they are citizens of the United States of America (U.S.A.) and thus not governed by the Companies Act of India. They contended that even if the facts alleged in the complaint are true, they cannot be tried under the Companies Act as it does not apply to them. The court examined the petitioners' status and noted contradictory statements regarding their citizenship. The petitioners were of Indian origin, and there was no clear evidence of a change in their citizenship status. The court held that the objection to the maintainability of the criminal case on the grounds of citizenship cannot be sustained in these proceedings.
2. Jurisdiction of Indian Courts Over Alleged Offences Committed Outside India:
The petitioners argued that the alleged offences were committed outside Indian territory, and therefore, Indian courts do not have jurisdiction. The court referred to Article 245(2) of the Constitution of India, which declares that no law made by Parliament shall be deemed invalid on the ground of extra-territorial operation. Section 4(2) of the Code of Criminal Procedure (the Code) mandates that all offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions. Section 188 of the Code deals with offences committed outside India and asserts jurisdiction over Indian citizens committing offences abroad. The court noted that the petitioners' exact citizenship status needed to be established, and if they were Indian citizens, the Indian law could be enforced against them. Additionally, the court found that one of the elements of the alleged crime was situated in India, thus bringing the case within Indian jurisdiction.
3. Whether the Allegations Constitute Offences Under Sections 60, 63, 68, and 68A of the Companies Act, 1956:
The court examined whether the allegations in the complaint, if accepted as true, would constitute offences under the Companies Act. The allegations were that the petitioners issued a prospectus inviting investment in the Indian company without appropriate authority and due process. The court noted that all documents supporting the complaint were not placed before it, and only select documents were available. The court emphasized that it could not conclude whether the offences were made out without examining all the documents, which could only be done after appropriate proof. The court further stated that it would not appreciate or assess the sufficiency of evidence in the exercise of jurisdiction under section 482 of the Code.
Conclusion:
The court concluded that it was inappropriate to quash the case against the petitioners at this stage. The allegations, if ultimately proved, could constitute a violation of the law. Therefore, the criminal petition was dismissed, and the proceedings in C.C. No. 24 of 1999 would continue in the Court of the Special Judge for Economic Offences at Hyderabad.
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2000 (3) TMI 914
Issues Involved:
1. Prejudicial effect on workmen of BSL.
2. Compliance with section 393(1)(a) of the Companies Act, 1956.
3. Disclosure of shareholding and valuation of shares.
4. Compliance with section 391(2) of the Companies Act, 1956.
Issue-wise Detailed Analysis:
1. Prejudicial Effect on Workmen of BSL:
The appellant argued that the scheme negatively impacted the workmen of BSL by not providing sufficient protection for their interests. Upon reviewing clauses 3.8.1 to 3.8.5 of the scheme, it was determined that the conditions of service for BSL employees would remain unchanged, and their employment terms would not be interrupted or broken. Employees had the option to be absorbed by BSIL or continue with BSL. The court found no provision in the scheme that would adversely affect the workmen's conditions of service. The appellant's concern about the potential reduction in BSL's profitability and employment was deemed hypothetical and not within the court's purview. The issuance of a notice under section 9A of the Industrial Disputes Act, 1947, was considered an independent act and not part of the scheme.
2. Compliance with Section 393(1)(a) of the Companies Act, 1956:
The appellant contended that the explanatory statement did not disclose that some directors would gain controlling interest in BSIL. The court clarified that section 393(1)(a) requires disclosure of any material interest a director has in the scheme, which is different from the shareholders' interest. The appellant failed to provide evidence of any director having such a material interest. The alleged non-disclosure of a director's shareholding was also dismissed, as this information could be obtained from the Register of Members. The court found no contravention of section 393(1)(a).
3. Disclosure of Shareholding and Valuation of Shares:
The appellant argued that the scheme did not disclose the method of share valuation, leading to a lack of informed consent by the shareholders. The court noted that the scheme involved a unique situation where ISD was spun off into BSIL, and shareholders received BSIL shares in lieu of cash compensation for the reduction in BSL's capital. The valuation was based on book value, and the scheme was overwhelmingly approved by 99.98% of shareholders and financial institutions. The court found no issue with the valuation method or the scheme's fairness.
4. Compliance with Section 391(2) of the Companies Act, 1956:
The appellant claimed that the Chairman's report did not disclose the number of persons present and voting separately. The court examined the affidavit and found that 266 shareholders participated, representing Rs. 13,19,36,810 in share value. Section 391(2) and Rule 78 of the Company Court Rules require reporting the number of persons present and voting. The court held that the Chairman's report complied with these requirements, as the critical factor was the total shareholding supporting the scheme.
Conclusion:
The court found no merit in the objections raised by the appellants. The scheme was approved by an overwhelming majority of shareholders and financial institutions. The court emphasized that its role was not to nitpick the scheme but to ensure statutory compliance and fairness. The appeals were dismissed, and costs of Rs. 15,000 were imposed on the appellants for impeding the company's business. The ad interim order was vacated, and the application for stay of the judgment was refused.
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2000 (3) TMI 884
The Appellate Tribunal CEGAT, Mumbai allowed the appeal, setting aside the order confirming the demand for differential duty on machinery manufactured by the appellant. The Tribunal ruled that there was no evidence to show a nexus between the interest-free advances taken by the appellant and a depression in the price of the goods. Previous decisions by the Tribunal supported this reasoning.
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2000 (3) TMI 883
The Appellate Tribunal CEGAT, New Delhi rejected a Reference application by the Revenue against an order that was not passed under Section 35C of the Central Excise Act. The Tribunal found the application not maintainable as the order did not fall under the relevant section for reference to the High Court as per Section 35G.
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2000 (3) TMI 882
Issues:
1. Classification of yarn spun out of glass fibre under Notification No. 52/86
2. Re-opening of approved classification list by the Revenue after a prolonged litigation
3. Time-barring of demands raised by the department
4. Applicability of exclusion clause in the Notification to the benefit of the assessee
5. Justification of demands raised by the Assistant Commissioner
Classification of Yarn Spun out of Glass Fibre under Notification No. 52/86:
The case involved a dispute over the classification of yarn spun out of glass fibre under Notification No. 52/86. The Assistant Commissioner had initially rejected the classification list filed by the appellants, but after multiple appeals and remands, finally accepted the classification list on 17-5-85. Subsequently, the Government amended the Notification, excluding continuous filament yarn from the exemption. The Revenue sought to re-open the approved classification list, leading to a legal battle over the classification and benefit under the amended Notification.
Re-opening of Approved Classification List by the Revenue:
After a prolonged litigation and the final approval of the classification list in 1985, the Revenue initiated proceedings to re-open the approved classification list in 1991. The Assistant Commissioner modified the classification list, leading to demands being raised for the period 1-3-86 to 13-11-90. The appellants argued that there was no change in the manufacturing process, suppression of facts, or review by the department, thus contending that the demands should be prospective only. The Commissioner (Appeals) set aside the order confirming the demands, which the Revenue appealed against.
Time-Barring of Demands Raised by the Department:
The appellants contended that the demands raised by the department were time-barred, as the manufacturing process remained unchanged, and there was no suppression of facts. The Assistant Commissioner confirmed the demands without delving into the legal aspects, prompting the appeal to the Commissioner (Appeals) who ruled in favor of the appellants. The Revenue challenged this decision, arguing that the demands were not time-barred and that the exclusion clause in the Notification did not affect the benefit to the assessee.
Applicability of Exclusion Clause in the Notification to the Benefit of the Assessee:
The case also revolved around the applicability of the exclusion clause in the Notification to the benefit of the assessee. The Revenue attempted to deny the benefit of the Notification by modifying the classification list, which the appellants contested based on the lack of changes in the manufacturing process and the long-standing approval of the classification list. The Commissioner (Appeals) sided with the appellants, leading to the Revenue's dissatisfaction and subsequent appeal.
Justification of Demands Raised by the Assistant Commissioner:
The Assistant Commissioner's issuance of show-cause notices to revise the classification list and deny the benefit of the Notification was challenged by the appellants. They argued that the demands were not justified due to the absence of any changes in the manufacturing process and the lack of review by the department. The Tribunal found in favor of the appellants, dismissing the Revenue's appeal and granting consequential relief to the assessee respondents, emphasizing the importance of approved classification lists in determining the prospective applicability of demands.
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2000 (3) TMI 869
The Revenue appealed against the order-in-appeal by the Commissioner of Central Excise (Appeals) regarding entitlement to a specific notification. The appeal was rejected by the Appellate Tribunal CEGAT, New Delhi as new grounds were raised in the appeal not mentioned in the show cause notice. The Tribunal found no merit in the appeal.
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