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Showing 161 to 180 of 535 Records
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2002 (4) TMI 831
Issues Involved:
1. Legality of SEBI's actions and orders, including the appointment of the enquiry officer and issuance of show-cause notices.
2. Compliance with procedural requirements under SEBI regulations.
3. Jurisdictional validity of SEBI's notice dated 10-01-2002.
4. Petitioners' right to a fair hearing and access to relevant materials.
5. Adequacy of alternative remedies available to the petitioners.
Detailed Analysis:
1. Legality of SEBI's Actions and Orders:
The petitioners challenged several actions by SEBI, including the order dated 31-05-2001 appointing an enquiry officer, show-cause notices dated 17-07-2001 and 06-10-2001, the enquiry report dated 09-01-2002, and the show-cause notice dated 10-01-2002. They argued these actions were in breach of law, regulations, and ultra vires, making them illegal and without jurisdiction. The court noted that the SEBI initiated inquiries following a market crash on 02-03-2001. The Chairman of SEBI issued a ban order on 18-04-2001, which was upheld after a post-decisional hearing on 25-05-2001, pending further enquiry.
2. Compliance with Procedural Requirements:
The petitioners contended that the enquiry officer's appointment and subsequent actions did not comply with the procedural requirements under SEBI regulations, particularly regulations 7 to 11 of the FUTP Regulations, 1995. They argued that the enquiry officer's report lacked legal evidence and procedural fairness, as no witness was examined, no document was proved, and no material was provided for cross-examination. The court observed that these procedural issues could be addressed by the SEBI Board and, if necessary, by the Securities Appellate Tribunal (SAT) and the High Court under section 15Z of the SEBI Act.
3. Jurisdictional Validity of SEBI's Notice Dated 10-01-2002:
The petitioners argued that the notice dated 10-01-2002, purportedly issued under regulation 13 of the FUTP Regulations, 1995, was without jurisdiction due to non-compliance with the pre-requisite procedures in regulations 7 to 11. The court held that while SEBI had the power to issue such a notice, the alleged procedural irregularities were matters of erroneous exercise rather than a lack of jurisdiction. The SEBI Board was deemed capable of considering these objections on merits.
4. Petitioners' Right to a Fair Hearing and Access to Relevant Materials:
The petitioners claimed they were not provided with relevant materials necessary to respond effectively to the show-cause notices. Despite this, they participated in the proceedings before the enquiry officer and SEBI Board. The court acknowledged the petitioners' grievances but emphasized that these issues could be adequately addressed through the statutory appeals process.
5. Adequacy of Alternative Remedies:
The court highlighted the availability of alternative remedies, including appeals to the SAT and further appeals to the High Court under sections 15T and 15Z of the SEBI Act. Given these remedies, the court found no justification for invoking its extraordinary jurisdiction under article 226 at this stage.
Conclusion:
The court dismissed the writ petition in limine but provided specific directions to ensure the petitioners' right to a fair hearing. The petitioners were allowed to file a comprehensive additional reply to the notice dated 10-01-2002, and the SEBI Board was directed to consider all contentions objectively and in accordance with the law. Any adverse order by SEBI would be stayed for four weeks to allow the petitioners to seek further remedies. The order under section 11B dated 25-05-2001 would remain operative until the SEBI Board's decision and for four weeks thereafter if adverse to the petitioners.
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2002 (4) TMI 829
Issues Involved:
1. Whether Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, operates as a stay with respect to recovery of damages payable by the petitioner to various residents and agriculturists as directed by the Loss of Ecology (Prevention and Payment of Compensation) Authority.
Issue-wise Detailed Analysis:
1. Applicability of Section 22 of the SICA:
The petitioner argued that under Section 22(1) of the SICA, all recoveries, including damages payable pursuant to the award by the Loss of Ecology (Prevention and Payment of Compensation) Authority, are suspended or stayed. The petitioner sought a writ of mandamus to forbear the respondent from enforcing the award under the Revenue Recovery Act.
2. Nature of the Compensation:
The respondent contended that the compensation determined by the Loss of Ecology Authority is not a commercial transaction or a credit or loan outstanding but damages that the petitioner is required to pay for environmental damage. This compensation is a quasi-judicial determination towards the damages suffered by the agriculturists and residents due to the petitioner's activities.
3. Judicial Precedents:
The petitioner relied on the Supreme Court judgments in Maharashtra Tubes Ltd. v. State Industrial Investments Corpn. of Maharashtra Ltd. [1993] 2 SCC 144 and Tata Davy Ltd. v. State of Orissa [1998] 3 SCC 4621, which held that Section 22 of the SICA operates as a stay on recovery proceedings. The petitioner also cited Kiran Overseas Exports Ltd. v. CTO [2002] 2 CTC 26, where it was held that tax recovery actions are stayed under Section 22 of the SICA.
4. Argument of the Respondent:
The learned Government advocate pointed out that the individuals who sought compensation from the Loss of Ecology Authority are poor and have been deprived of their livelihood due to the petitioner's activities. The compensation awarded has not been included in the schedule of payments due before the BIFR and is not under investigation or enquiry before the BIFR.
5. Statutory Provisions:
Section 22 of the SICA provides for the suspension of legal proceedings, contracts, etc., during the pendency of an inquiry under Section 16 or any scheme under Section 17 or an appeal under Section 25. However, Section 24 of the Environment Protection Act, 1986, states that the provisions of this Act will have effect notwithstanding anything inconsistent therewith contained in any other enactment.
6. Interpretation of Conflicting Statutes:
The court noted that both the SICA and the Environment Protection Act are special enactments. The latter being of 1986, is later in point of time compared to the SICA. It is a well-settled rule of interpretation that when there are two special laws, the latter will normally prevail if it contains an overriding provision.
7. Supreme Court Observations:
The Supreme Court in Maharashtra Tubes Ltd.'s case held that the SICA deals with post-sickness situations, and its provisions would ordinarily prevail in cases of sick industrial undertakings. However, the court also emphasized that the purpose and policy underlying the conflicting enactments must be considered.
8. Conclusion:
In the present case, the court concluded that the Environment Protection Act, being a later enactment with an overriding effect, prevails over the SICA. The recovery of compensation for environmental damage is given more preference than the rehabilitation of a sick company. Thus, the contentions advanced by the petitioner were rejected.
Judgment:
The writ petition was dismissed, and the connected W.P.M.P. was also dismissed. The court emphasized the need to prioritize the recovery for individuals who have suffered environmental damage over the proceedings for the rehabilitation of the petitioner company.
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2002 (4) TMI 827
Issues involved:
1. Jurisdiction of the Court under Section 391 of the Companies Act, 1956.
2. Classification of creditors for the purpose of voting on the scheme.
3. Validity and fairness of the scheme of arrangement.
4. Allegations of fraud and mismanagement.
5. Public and commercial morality of the scheme.
6. Impact of pending legal proceedings on the scheme.
7. Approval of the scheme by the requisite majority.
Detailed Analysis:
1. Jurisdiction of the Court under Section 391 of the Companies Act, 1956:
The objectors argued that the company, being a 'Relief Undertaking' under the Bombay Relief Undertaking Act, could not invoke the jurisdiction of the Court under Section 391. The Court held that there was no express or implied bar under the BRU Act to a petition under Section 391. The Court noted that the protection under Section 391(6) of the Companies Act would follow once the scheme is examined and approved, and the company could pursue proceedings under Section 391 even during the subsistence of the notification under the BRU Act.
2. Classification of creditors for the purpose of voting on the scheme:
The objectors contended that foreign currency lenders should have been constituted as a separate class of secured creditors. The Court found that all secured creditors, whether lending in foreign or Indian currency, had been treated alike and no distinction was made. The Court referred to various judgments to conclude that classification of creditors should be based on the terms offered under the scheme. Since the same terms were offered to all secured creditors, the foreign currency lenders did not constitute a separate class.
3. Validity and fairness of the scheme of arrangement:
The scheme was supported by the requisite majority of creditors. The Court noted that the statutory requirements under Section 391(2) were met, as the scheme was approved by 85.36% in number and 88.68% in value of the secured creditors present and voting. The Court emphasized that the scheme was floated and supported by the creditors themselves, indicating it was fair and reasonable.
4. Allegations of fraud and mismanagement:
The objectors alleged that the scheme sought to legitimize fraudulent transactions, including sale and leaseback transactions and the spin-off of the garment division. The Court found no evidence of fraud or mismanagement. It noted that the transactions were scrutinized by a Sub Committee and approved by the Steering Committee and GBIFR. The Court held that the scheme did not operate as a cloak to cover up any fraud and was not intended to shield the directors from any investigation.
5. Public and commercial morality of the scheme:
The objectors argued that the scheme offended public and commercial morality as it did not provide for the payment of dues to the State Government. The Court found that the scheme excluded the State Government's dues to avoid requiring sacrifice from the State Government. The Court emphasized the larger public interest, noting that the scheme would benefit over 10,000 employees and their families, and indirectly support many others. The Court concluded that the scheme was not against public or commercial morality.
6. Impact of pending legal proceedings on the scheme:
The objectors contended that the scheme would negate their legal remedies in pending proceedings in the English Court. The Court held that the pendency of the suit could not come in the way of considering the scheme, as the scheme aimed to protect the interests of the majority of creditors and put the company on sound financial footing. The Court clarified that the sanction of the scheme would be subject to the outcome of the pending legal proceedings.
7. Approval of the scheme by the requisite majority:
The objectors argued that the scheme was not approved by the requisite majority as required under Section 391(2). The Court found that the scheme was approved by the requisite majority of secured creditors, with 85.36% in number and 88.68% in value voting in favor. The Court dismissed the objections regarding the invalidity of certain votes, noting that conditional votes could not be counted.
Conclusion:
The Court sanctioned the scheme of compromise and arrangement for restructuring the debts of the company, subject to the outcome of pending civil and criminal proceedings. The Court emphasized that the scheme was fair, reasonable, and in the larger public interest, benefiting the company, its creditors, and its employees.
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2002 (4) TMI 826
Issues:
Challenge to order passed by Debts Recovery Appellate Tribunal modifying order of Debts Recovery Tribunal - II in original application under Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Analysis:
1. The revision petitioner challenged an order passed by the Debts Recovery Appellate Tribunal modifying the order of the Debts Recovery Tribunal - II in an original application filed by a bank under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The petitioner claimed no knowledge of the original application until April 2000 and alleged that no notice or summons were served on him by the Debts Recovery Tribunal, resulting in an ex parte order against him. The petitioner filed an application to set aside the ex parte order, which was resisted by the bank, claiming mala fide intentions on the part of the petitioner and seeking to uphold the ex parte decree due to the petitioner's insolvency proceedings involvement.
2. The Debts Recovery Tribunal-II set aside the ex parte order on the condition that the petitioner and other respondents deposit Rs. 3 lakhs within five weeks. The petitioner, aggrieved by this condition, appealed to the Debts Recovery Appellate Tribunal, which modified the condition to deposit Rs. 1 lakh within six weeks. The petitioner further challenged this modified order, arguing that it was illegal and based on a wrong address for notice, and that his absence was not deliberate but due to lack of service of notice.
3. The High Court examined the jurisdiction under Article 227, emphasizing that it does not act as an appellate court but reviews whether the tribunal had the authority and followed procedural norms. Referring to legal precedents, the court highlighted that interference under Article 227 is limited to cases of serious dereliction of duty or violation of fundamental legal principles. The court noted that the Appellate Tribunal's discretion in modifying the deposit condition was not arbitrary and did not warrant interference.
4. The court found that the notice issue had been considered by the lower tribunals, which were satisfied with the bank's attempts to serve notice. The court upheld the Appellate Tribunal's decision, declining to interfere under Article 227. Extending the time for depositing Rs. 1 lakh by eight weeks, the court dismissed the civil revision petition, with parties bearing their respective costs.
In conclusion, the High Court dismissed the civil revision petition, upholding the Appellate Tribunal's decision and extending the time for depositing the required amount. The court emphasized limited interference under Article 227 and upheld the tribunal's discretion in setting conditions for setting aside an ex parte order.
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2002 (4) TMI 825
Issues Involved:
1. Violation of Section 18(2) by changing the terms of payment of the bill from D.P. to D.A.
2. Whether reasonable steps were taken by the exporter.
3. Whether the availability of funds in the pipeline system would amount to reasonable steps.
4. Burden of proving reasonable steps and the legal presumption under Section 59.
5. Admissibility and reliance on statements made under Section 40.
6. Payments made by one non-resident to another non-resident on the instruction of a resident violating Section 9(1)(a).
Detailed Analysis:
1. Violation of Section 18(2) by changing the terms of payment of the bill from D.P. to D.A.:
The court found that the exporter had contravened Rule 9 of the Foreign Exchange Regulation Rules by changing the terms of payment from D.P. (Documents against Payment) to D.A. (Documents against Acceptance) without the permission of the RBI. This change allowed the importer to clear the goods without making payment, leading to non-realization of export proceeds. The court noted that the practice of continuous exports from 1978 to 1983 without corresponding payments indicated a clear violation of Section 18(2).
2. Whether reasonable steps were taken by the exporter:
The court rejected the exporter's claim that reasonable steps were taken to realize the export proceeds. The court found no evidence of reasonable steps being taken from 1978 to 1983, except for a claim of deposit in local currency after the receipt of the show-cause notice. The court emphasized that changing the terms of payment from D.P. to D.A., accepting a lesser amount in local currency, and failing to repatriate any amount till date did not constitute reasonable steps under Section 18(3).
3. Whether the availability of funds in the pipeline system would amount to reasonable steps:
The court dismissed the exporter's argument that the remittance of export value in local currency and the pipeline system in Sierra Leone absolved them of liability. The court found no factual basis for the claim that the amounts were available in the pipeline. The RBI's letter indicated that the payment in local currency was far less than claimed by the exporter, and the court held that the exporter's actions were detrimental to the country's foreign exchange interests.
4. Burden of proving reasonable steps and the legal presumption under Section 59:
The court held that the burden of proving reasonable steps lay with the exporter, and they failed to discharge this burden. The court criticized the Board for not applying the legal presumption under Section 59 in favor of the department, leading to an illegal and perverse finding.
5. Admissibility and reliance on statements made under Section 40:
The court found that the statements made by Shri K.A. Sekar, an officer of Punjab National Bank, under Section 40 were admissible and reliable. The court noted that these statements provided evidence of the exporter's failure to realize export proceeds and their involvement in unauthorized transactions.
6. Payments made by one non-resident to another non-resident on the instruction of a resident violating Section 9(1)(a):
The court concluded that the payment made by H.A. Farag & Sons Ltd., Banjul to Toufic Huballa, another non-resident, on the instructions of the exporter without RBI's permission, violated Section 9(1)(a). The court highlighted that such payments were made at the instance of the exporters, constituting a clear contravention.
Conclusion:
The court allowed the appeals, finding that the exporters violated Sections 18(2) and 9(1)(a) of the Act. The exporters failed to take reasonable steps to realize export proceeds, and their actions were detrimental to the country's foreign exchange interests. The court imposed exemplary costs on the exporters and directed the appellants to proceed against them in accordance with the law.
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2002 (4) TMI 823
The petitioners seek quashing of proceedings in STC No. 21 of 1998 for failure to pay dividends within 42 days. Financial institutions' letters caused delay, protected under Companies Act. Court rules in favor of petitioners, proceedings quashed.
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2002 (4) TMI 821
Issues:
1. Application filed under Companies Act, 1956 for leave to remain out of winding-up proceedings and realize dues under State Financial Corporation Act, 1951.
2. Dispute regarding applicant's obligation to pay security expenses and determination of debt against the company in liquidation.
Analysis:
1. The application was filed by Rajasthan State Industrial Development & Investment Corpn. Ltd. under Companies Act, 1956 seeking permission to stay out of winding-up proceedings and recover dues under State Financial Corporation Act, 1951. The company in liquidation was ordered to be wound up by the Court under the Sick Industrial Companies (Special Provisions) Act, 1985. The Official Liquidator raised objections regarding the delay in filing the application and non-payment of security expenses by the applicant. The applicant argued that the State Financial Corporation Act provisions override those of the Companies Act, allowing the applicant as a secured creditor to opt out of winding-up proceedings and realize its dues independently.
2. The Official Liquidator contended that the applicant must first determine its debt through specific procedures before seeking recovery. The applicant responded by stating that it is not bound by the Banks and Financial Institutions Act and provided details of its secured creditor status and mortgage agreements. The Court considered the submissions and referred to the Central Bank of India v. Hilmot Engg. Co. case, emphasizing the protection of assets during winding-up. The Court acknowledged the applicant's secured creditor status and allowed the application, subject to conditions. The applicant was permitted to stay out of winding-up proceedings, submit its claim to the Official Liquidator, and proceed with the sale of assets under Court supervision.
3. The Court directed the applicant to report progress on asset sales to the Official Liquidator, involve relevant financial institutions in the sale process, and keep sale proceeds in a separate account. The Court mandated that no withdrawals could be made without Court approval and required the submission of sale proceeds details and expenses to the Official Liquidator. The Official Liquidator was instructed to hand over possession of the company's assets to the applicant. The application was disposed of with no costs awarded.
This detailed analysis covers the issues raised in the judgment, outlining the arguments presented by the parties and the Court's decision on each matter.
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2002 (4) TMI 819
Issues:
1. Maintainability of the application under rule 9 of the Companies (Court) Rules, 1959.
2. Delay and latches in approaching the Court.
3. Authority of the official liquidator to sell the disputed land.
4. Interpretation of section 446(2)(d) of the Companies Act, 1956.
5. Application of inherent powers of the Court under rule 9.
6. Ownership and possession of the disputed land.
7. Abuse of the court process by the applicants.
Analysis:
1. Maintainability of the application under rule 9 of the Companies (Court) Rules, 1959:
The applicants filed an application seeking to quash a letter dated 30-7-1984, including disputed land, and requested exclusion of the land from the auction sale. The respondents contended that the application was not maintainable under section 446(2)(d) of the Companies Act, 1956, and raised objections regarding delay and lack of documentary evidence proving ownership. The judge analyzed the provisions of rule 9 of the Companies (Court) Rules, 1959, and determined that since section 446(2)(d) specifically addressed the issues raised, the application under rule 9 was deemed not maintainable.
2. Delay and latches in approaching the Court:
The judge highlighted a significant delay of 13 years in approaching the Court after the auction sale of the disputed land in 1984. Emphasizing the importance of timely action, the judge noted that the applicants failed to explain the delay adequately. The possession of the land had already been transferred to the auction purchaser, and the judge concluded that the application deserved dismissal on grounds of delay and latches.
3. Authority of the official liquidator to sell the disputed land:
The applicants argued that the official liquidator had no authority to sell the land in question as it did not belong to the company in liquidation. However, the judge observed that the land had been auctioned in 1984, and the possession was transferred to the respondent No. 2. The applicants' failure to challenge the revenue record entries further weakened their claim, leading the judge to dismiss the application.
4. Interpretation of section 446(2)(d) of the Companies Act, 1956:
Section 446(2)(d) of the Companies Act, 1956, was crucial in determining the jurisdiction of the Court to entertain questions related to the winding up of a company. The judge explained that the specific provision under this section addressed the issues raised in the application, indicating that the remedy available to the applicants lay within the framework of the Companies Act rather than under rule 9 of the Companies (Court) Rules, 1959.
5. Application of inherent powers of the Court under rule 9:
The judge clarified that the inherent powers of the Court under rule 9 were applicable only when specific provisions were lacking for adjudication. In this case, since section 446(2)(d) provided a mechanism to address the dispute regarding the ownership of the land, the inherent powers under rule 9 were considered unnecessary, leading to the dismissal of the application.
6. Ownership and possession of the disputed land:
The judge noted that the disputed land had been auctioned in 1984, and possession had been transferred to the respondent No. 2. The applicants failed to establish their right, title, or interest in the land, and the entries in the revenue record supported the respondent's ownership claim. The judge concluded that interference by the Court was not warranted as the applicants had not challenged the relevant records.
7. Abuse of the court process by the applicants:
In the final analysis, the judge determined that the applicants had attempted to abuse the court process by filing the application without sufficient evidence of ownership or valid grounds. Consequently, the application was dismissed with costs imposed on the applicants, to be divided equally between the respondents.
This detailed analysis of the judgment provides a comprehensive overview of the key issues addressed by the Court and the rationale behind the decision to dismiss the application.
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2002 (4) TMI 817
Issues:
Application under section 456 of the Companies Act, 1956 for recovery of dues from the respondent-Board.
Analysis:
The applicant filed an application under section 456 of the Companies Act, 1956, seeking recovery of dues amounting to Rs. 20,84,824 along with interest from the respondent-Board, a trade debtor of the company in liquidation. The ex-directors of the company submitted a statement of affairs showing the debt owed by the respondent. The official liquidator claimed the amount from the Board through notices and reminders. The respondent's reply stated that the company owed them a larger sum, pending in a suit filed prior to the winding-up proceedings. The respondent argued that the suit cannot proceed without court leave post-winding up, as per section 446(1) of the Companies Act, 1956.
The court noted that the respondent failed to file a reply despite multiple opportunities and non-appearance. It was emphasized that the respondent's suit for recovery against the company in liquidation cannot proceed without court leave as per the law. The court found merit in the applicant's claim and rejected the respondent's argument that the suit pending before the Bombay High Court justified non-payment of the debt to the company in liquidation.
The court held that the respondent's suit against the company was not decreed and cannot proceed without court leave post-winding up. Any dues against the company in liquidation must be presented to the Official Liquidator for scrutiny and adjudication. As the respondent failed to lodge a claim or prove it before the Official Liquidator, the court allowed the applicant's application for recovery of dues.
In the final judgment, the court directed the respondent-Board to pay the dues of Rs. 20,84,824 along with interest to the Official Liquidator within one month. Additionally, the respondent was ordered to pay the costs of the application amounting to Rs. 5,000 to the Official Liquidator of the company in liquidation.
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2002 (4) TMI 804
Issues:
- Alleged contravention of Central Excise Rules and Notifications
- Denial of benefit of SSI Exemption
- Imposition of penalty under Central Excise Rules
Alleged Contravention of Central Excise Rules and Notifications:
The case involved a show cause notice issued to an assessee alleging contravention of various provisions of the Central Excise Rules, 1944, along with specific notifications. The notice claimed that the assessee had manufactured and removed a certain quantity of Narrow Woven Fabrics elastic tape without paying the appropriate duty. The proposed actions included the denial of certain exemptions, recovery of Central Excise duty, and imposition of penalties as per the rules.
Denial of Benefit of SSI Exemption:
The assessee, a Small Scale Industries (SSI) unit, responded to the show cause notice by arguing that they were entitled to the benefit of SSI Exemption under specific notifications. They manufactured branded elastic tapes used as components in Hosiery Goods and contended that the brand names on their products did not disqualify them from the exemption. They cited circulars and past approvals to support their claim, emphasizing that their products were not traded in the open market but used as components in the manufacturing process. The assessee highlighted that their goods were made to order for specific manufacturers and were not sold independently in the market.
Imposition of Penalty under Central Excise Rules:
During a personal hearing, the assessee reiterated their arguments and referenced relevant case laws in their favor. The Commissioner carefully reviewed the submissions, documents, and discussions. After examining the facts and legal provisions, the Commissioner found that the branded elastic tapes manufactured by the assessee were not traded independently but were tailored to specific manufacturing needs. Drawing parallels with previous judgments, the Commissioner concluded that the brand name provision did not apply in this case, as the products were not directly traded in the market. Consequently, the Commissioner ruled in favor of the assessee, dropping the proceedings due to the lack of grounds for sustaining the demand, penalty, and interest.
This judgment highlights the importance of understanding the specific circumstances of manufacturing processes and the intended use of goods in determining eligibility for exemptions under Central Excise Rules and Notifications.
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2002 (4) TMI 801
Issues Involved:
1. Jurisdiction of the Debt Recovery Tribunal (DRT) versus the High Court for execution of a foreign decree.
2. Definition and scope of 'debt' under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
3. Applicability of Section 44A of the Code of Civil Procedure (CPC) for execution of foreign decrees.
4. Powers and procedural differences between DRT and Civil Courts.
5. Conflict between special laws and general laws.
Detailed Analysis:
1. Jurisdiction of the Debt Recovery Tribunal (DRT) versus the High Court for execution of a foreign decree:
The primary issue was whether the decree obtained by the plaintiff, Bank of India, could be executed under Section 44A of the Code of Civil Procedure, 1908, or if it must be executed in accordance with the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The court noted that the execution application was initially filed before the constitution of the DRT, but with the establishment of the DRT, the jurisdiction to entertain and decide applications for recovery of debts due to banks shifted to the DRT as per Section 17 of the Act.
2. Definition and scope of 'debt' under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:
The court examined whether the amount claimed by the Bank of India under a decree from a foreign court constituted a 'debt' under Section 2(g) of the Act. It was argued that the claim under a foreign decree does not fall within the definition of 'debt'. However, the court clarified that Section 44A of the CPC treats a decree from a superior court of a reciprocating territory as if it were passed by a District Court in India, thus making it a 'debt' as per the Act.
3. Applicability of Section 44A of the Code of Civil Procedure (CPC) for execution of foreign decrees:
The court held that Section 44A allows a foreign decree to be executed in India as if it had been passed by a District Court, thereby integrating it into the Indian legal framework for execution purposes. The court referred to precedents, including the principle stated by Lord Asquith and adopted by the Supreme Court of India, that a legal fiction must be given full effect for all purposes.
4. Powers and procedural differences between DRT and Civil Courts:
The judgment discussed the procedural powers of the DRT under Section 22 of the Act, which are not bound by the CPC but guided by principles of natural justice. The court emphasized that the DRT has extensive powers, including those of a civil court, and can entertain objections to the execution of a foreign decree on grounds enumerated in Section 13 of the CPC.
5. Conflict between special laws and general laws:
The court addressed the contention that Section 44A of the CPC, being a special law for execution of foreign decrees, should prevail over the general provisions of the Act. The court rejected this argument, stating that both the CPC and the Act are special laws, and the later enactment (the Act) must prevail in case of conflict. The court cited the Supreme Court's decision in Solidaire India Ltd. v. Fairgrowth Financial Services Ltd., which held that the later special law prevails over the earlier one.
Conclusion:
The court concluded that the execution of a foreign decree where the decree holder is a bank or financial institution must be entertained by the DRT under the provisions of the Act. The DRT is empowered to exercise all the powers of a District Court under the CPC while considering an application under Section 44A. Consequently, the execution application must be transferred to the DRT. The Chamber Summons was dismissed, and the prayer for a stay of the order was rejected.
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2002 (4) TMI 799
Issues Involved:
1. Winding up of the respondent-company.
2. Sale of assets and settlement of liabilities.
3. Net worth and financial viability of the respondent-company.
4. Application for recalling the winding-up order.
5. Rights and claims of secured and unsecured creditors.
Issue-wise Detailed Analysis:
1. Winding up of the respondent-company:
The respondent-company was ordered to be wound up by the High Court on 2-5-1991, following the recommendation of the Board for Industrial & Financial Reconstruction (BIFR) and the dismissal of an appeal by the appellate authority on 8-2-1991. An official liquidator was appointed to conduct the winding-up proceedings. However, a writ petition was filed challenging the orders of BIFR and AAIFR, leading to the winding-up order being kept in abeyance by the Court on 2-11-1994.
2. Sale of assets and settlement of liabilities:
The respondent-company entered into an agreement to sell land and disposed of other assets to clear liabilities. The Court initially prohibited further sales without permission. The company settled dues with United Commercial Bank (UCO Bank) and Uttar Pradesh Financial Corporation (UPFC) through one-time settlements. UCO Bank's claim for additional interest was rejected, and a special appeal was pending.
3. Net worth and financial viability of the respondent-company:
The company filed an application (A-63) claiming positive net worth and seeking to drop winding-up proceedings. An audited balance sheet showed assets exceeding liabilities, indicating financial recovery. The official liquidator's report confirmed the company's ability to meet its liabilities, with a surplus of assets over liabilities.
4. Application for recalling the winding-up order:
The Court considered the improved financial condition and subsequent developments, including the sale of non-productive assets and settlements with creditors. The Court referred to precedents where improved financial conditions led to reconsideration of winding-up orders. The Court found that winding up was no longer in the interest of shareholders, creditors, or public interest.
5. Rights and claims of secured and unsecured creditors:
The Court directed the official liquidator to retain a sum claimed by UCO Bank pending a special appeal. The remaining amount was to be returned to the respondent-company after deducting valid expenses. The decision did not affect the rights of unsecured creditors, workmen, the State Government, and others to recover their dues in accordance with the law.
Conclusion:
The company petition was disposed of with specific directions to the official liquidator regarding the retention and disbursement of funds. The writ petition was also disposed of with no order as to costs. The Court emphasized that the winding-up order was no longer justified due to the company's improved financial condition and subsequent developments.
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2002 (4) TMI 797
Issues:
1. Appeal under section 15 of the Consumer Protection Act, 1986 against a District Forum order.
2. Failure to issue dividend, bonus shares, and refund excess amount.
3. Disputed facts regarding share transfers and renunciation.
4. Jurisdiction of redressal agencies under the Act to adjudicate complex factual issues.
Analysis:
1. The appellant filed an appeal under section 15 of the Consumer Protection Act, 1986 against a District Forum order dated 7-11-2001. The appellant, Mrs. Manju Bansal, claimed non-receipt of dividend, bonus shares, and refund of an excess amount from Unit Trust of India (UTI). She sought redressal for financial loss and harassment due to the alleged actions of the respondents.
2. The respondents contested the appellant's claims, stating no deficiency in service and detailing share transfers to other individuals. The District Forum advised the appellant to seek redressal in a Civil Court due to the complexity of the factual disputes. Feeling aggrieved, the appellant appealed the decision under section 15 of the Act.
3. The State Commission, after hearing the appellant's counsel and reviewing the records, noted that the Act does not intend to resolve complex factual issues requiring extensive evidence. Citing precedents, the Commission emphasized that redressal agencies should handle simple issues related to product quality or service deficiencies. The Commission found the appellant's case involved intricate questions of fact, such as share ownership and transfers, beyond the scope of a redressal agency's jurisdiction.
4. Consequently, the Commission upheld the District Forum's decision, stating that the appeal lacked merit and dismissing it without costs. The Commission highlighted the need for redressal agencies to refer parties to civil suits for cases involving intricate factual disputes beyond their purview. The judgment underscores the limited jurisdiction of redressal agencies under the Consumer Protection Act, 1986 in adjudicating complex and contested factual matters.
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2002 (4) TMI 796
Issues Involved:
1. Legality of the transfer of shares under SEBI Regulations.
2. Maintainability of the writ petition.
3. Applicability of SEBI Regulations, 1997.
4. Exemption under Regulation 3 for promoters.
5. Availability of alternative remedy under the Companies Act.
6. Delay and latches in filing the writ petition.
Issue-wise Detailed Analysis:
1. Legality of the transfer of shares under SEBI Regulations:
The petitioner challenged the transfer of Rs. 9.76 lakhs shares in Fenoplast Ltd. to respondents 4 to 8 (Haridass family) as illegal and violative of Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The petitioner argued that compliance with Regulation 10 was mandatory, and non-compliance rendered the transaction void. The petitioner sought restoration of the shares to his family.
2. Maintainability of the writ petition:
The respondents contended that the writ petition was not maintainable, arguing that the petitioner should have pursued remedies under Section 111A of the Companies Act, 1956, or continued proceedings before the Company Law Board (CLB). The court examined the scope of writ of mandamus, noting that it is typically used to address wrongful inaction by public authorities. The court emphasized that the existence of alternative remedies does not preclude seeking a writ of mandamus if a legal provision is violated.
3. Applicability of SEBI Regulations, 1997:
The court confirmed that the SEBI Regulations, 1997, were applicable to the transaction in question, as the transfer occurred in March and May 1997, after the regulations came into force on 20-2-1997. Regulation 10 mandates that an acquirer of 15% or more of the voting rights in a company must make a public announcement. The Haridass family, who acquired more than 15% of the voting rights, did not make such an announcement.
4. Exemption under Regulation 3 for promoters:
The respondents argued that the transfer was among existing shareholders and promoters, exempting it from Regulation 10 under Regulation 3(e). The court noted that respondents 3 to 8 were promoters along with the petitioner's family. Regulation 3 exempts inter se transfer of shares among promoters from the requirement of making a public announcement. The court found that the transfer was indeed among promoters, making Regulation 10 inapplicable.
5. Availability of alternative remedy under the Companies Act:
The court highlighted that the Companies Act provides a detailed mechanism for addressing grievances related to the transfer of shares under Section 111A. The petitioner had previously filed a company petition before the CLB but withdrew it. The court questioned the appropriateness of resolving the matter through a writ petition when a specialized agency under the Companies Act was available.
6. Delay and latches in filing the writ petition:
The court observed that the transfer of shares occurred in 1997, the MOU was from 1996, and the writ petition was filed in 2001. The court noted that Section 111A allows applications to be filed within 30 days of the transfer. The delay in filing the writ petition and the absence of any averment that the petitioner and his family had not received the consideration under the MOU were factors against granting discretionary relief. The court emphasized that granting the relief would result in the petitioner retaining the consideration while also reclaiming the shares, highlighting the petitioner's conduct.
Conclusion:
The court dismissed the writ petition, holding that the petitioner had not made a case for the relief claimed. The court found that the transfer of shares was exempt under Regulation 3, the petitioner had alternative remedies under the Companies Act, and the delay and conduct of the petitioner were significant factors against granting relief. No costs were awarded.
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2002 (4) TMI 795
Issues Involved:
1. Setting aside impugned orders dated 20-12-1999, 6-6-2000, and 13-6-2000.
2. Determination of whether the company was 'sick' under SICA.
3. Compliance with principles of natural justice.
4. Validity of accounting practices and financial manipulations.
5. Right to file subsequent references under SICA.
Issue-Wise Detailed Analysis:
1. Setting aside impugned orders dated 20-12-1999, 6-6-2000, and 13-6-2000:
The petitioners sought to set aside the impugned orders passed by BIFR and AAIFR, claiming violations of natural justice and improper consideration of the company's financial status. The High Court examined the findings of both BIFR and AAIFR, concluding that the orders were based on substantial evidence and proper legal procedures.
2. Determination of whether the company was 'sick' under SICA:
The company, incorporated in 1970, faced severe financial difficulties due to market conditions and other factors, leading to its classification as 'sick' under SICA. BIFR, after an inquiry, found that the company had manipulated its accounts and did not genuinely seek revival, dismissing the reference under section 15(1) of SICA. AAIFR upheld this decision, noting significant financial manipulations and diversion of funds by the promoters.
3. Compliance with principles of natural justice:
The petitioners argued that the orders were passed without proper hearings and without considering subsequent financial losses. The High Court noted that both BIFR and AAIFR provided ample opportunities for the petitioners to present their case. The AAIFR's decision to not allow further replies to sur-rejoinders was deemed justified, as the process cannot continue indefinitely.
4. Validity of accounting practices and financial manipulations:
BIFR and AAIFR found several discrepancies in the company's accounting practices, including:
- Manipulation of depreciation and accounting policies.
- Improper capitalization and subsequent write-off of interest.
- Conversion of fixed assets to stock-in-trade without justification.
- Unexplained prior period adjustments and extraordinary items.
- Diversion of funds to group companies and subsequent write-offs.
These findings led to the conclusion that the company's accounts were unreliable, and the promoters had engaged in dishonest practices.
5. Right to file subsequent references under SICA:
The petitioners contended that AAIFR's order barred them from filing references for subsequent years. The High Court clarified that the AAIFR's order did not permanently bar future references but emphasized that any new references must correct the anomalies identified. The court cited the Division Bench's decision in Madhumilan Syntex Ltd., stating that future references should be considered based on corrected accounts and relevant aspects.
Conclusion:
The High Court upheld the findings of BIFR and AAIFR, dismissing the writ petition. It emphasized that the petitioners must correct the identified accounting malpractices before filing any future references under SICA. The court also noted that the conduct of the company's directors, involving account manipulations and lack of probity, disqualified them from seeking discretionary relief under Article 226. The petitioners were ordered to pay costs of Rs. 10,000 to the Delhi State Legal Aid Authority.
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2002 (4) TMI 793
Issues:
Claim for delivery of preference shares certificates.
Analysis:
The judgment involves a claim made by the official liquidator of a company in liquidation for the delivery of 66059 preference shares certificates. The company in question, Maharaja Kishangarh Mills Ltd., was leased out initially and later incorporated as Maharaja Kishangarh Mills Co. Ltd. The dispute arose from the winding-up petition filed against the new company, leading to claims by the old company, including one for dividend on accumulated preference shares. The official liquidator rejected this claim initially, leading to subsequent appeals and court decisions. Various appeals and cases were filed over the years, addressing different aspects of the dispute, but the issue of the preference shares certificates had not been raised until later. The official liquidator requested the return of the certificates for cancellation after certain disputes were resolved, but the respondent refused, claiming the shares were already cancelled as per the court order. The court noted the lack of opposition from the respondents and the uncontroverted averments in the application, leading to the allowance of the application. The respondents were directed to deliver the certificates within a month from the date of the order.
This judgment highlights the legal process involved in resolving disputes related to company liquidation and the rights of the official liquidator to claim assets on behalf of the company. It underscores the importance of following court directives regarding the surrender and cancellation of company assets, such as share certificates, to prevent misuse. The court's decision to allow the application emphasizes the obligation of respondents to comply with such directives and deliver the requested certificates within the specified timeframe.
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2002 (4) TMI 791
Issues Involved:
1. Maintainability of the appeal against the Company Law Board (CLB) order.
2. Jurisdiction and applicability of the Companies Act, 1956 versus the Arbitration and Conciliation Act, 1996.
3. Interpretation of Section 8 of the Arbitration Act, 1996.
4. Interpretation of Section 37 of the Arbitration Act, 1996.
5. Legislative intent and statutory interpretation.
Detailed Analysis:
1. Maintainability of the Appeal:
The primary issue was whether the appeal against the CLB order dated 8th December 2000 was maintainable. The appellants argued that the appeal should be maintainable under Section 10F of the Companies Act, 1956, while the respondents contended that the Arbitration Act, 1996, excluded such an appeal.
2. Jurisdiction and Applicability:
The appellants claimed that the CLB exercised its powers under the Companies Act, 1956, and thus the appeal should be governed by the same Act. They argued that the Arbitration Act, 1996, was merely procedural. However, the court determined that the CLB, when deciding the application under Section 8 of the Arbitration Act, 1996, acted as a 'judicial authority' under the Arbitration Act, 1996. Therefore, the remedy must be sought within the provisions of the Arbitration Act, 1996.
3. Interpretation of Section 8 of the Arbitration Act, 1996:
The court examined whether the CLB's order under Section 8 of the Arbitration Act, 1996, was final or whether it could be appealed. The appellants argued that since Section 11(7) of the Arbitration Act, 1996, expressly provided finality for decisions made by the Chief Justice, the absence of such language in Section 8 implied that orders under Section 8 were not final. However, the court found that the legislative intent was to minimize judicial intervention in arbitration matters.
4. Interpretation of Section 37 of the Arbitration Act, 1996:
Section 37(1) of the Arbitration Act, 1996, lists specific orders that are appealable. The court concluded that the term 'orders' in Section 37(1) refers to orders passed under Part I of the Arbitration Act, 1996, and since an order under Section 8 is not included in Section 37, it is not appealable. The court emphasized the words "and from no others" to indicate that the list of appealable orders is exhaustive.
5. Legislative Intent and Statutory Interpretation:
The court referred to the statement of objects and reasons of the Arbitration Act, 1996, and concluded that the Act was intended to be an exhaustive and comprehensive code, consolidating and amending the law relating to arbitration. Section 5 of the Arbitration Act, 1996, further emphasized the exclusivity of the Act by limiting judicial intervention to what is expressly provided within the Act.
Conclusion:
The court dismissed the appeal as not maintainable, concluding that the Arbitration Act, 1996, is an exhaustive code and that Section 37 excludes the remedy of appeal against an order passed under Section 8. The court directed the parties to appear before the CLB for further proceedings.
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2002 (4) TMI 790
Issues Involved:
1. Petition for winding up the respondent-company under Section 45MC of the Reserve Bank of India Act, 1934.
2. Non-compliance with the RBI Directions of 1998.
3. Failure to repay depositors and complaints from the public.
4. Prohibitory order from RBI and subsequent legal actions.
5. Appointment of provisional liquidator and advertisement of winding up petition.
6. Respondent-company's request to recall the winding up order.
7. Applications from depositors and employees for repayment.
8. Scheme framed by the Company Law Board (CLB) for repayment.
9. Deliberate failure of the respondent-company to file a reply and submit details of assets.
Detailed Analysis:
1. Petition for Winding Up:
The petitioner filed a company petition under Section 45MC of the Reserve Bank of India Act, 1934, seeking to wind up the respondent-company, appoint an official liquidator, and issue an ad interim injunction to restrain the respondent from encumbering or disposing of its assets.
2. Non-Compliance with RBI Directions:
The respondent-company, a Non-Banking Financial Company (NBFC), was bound by the RBI Directions of 1998. Despite being denotified from its 'NIDHI' status in 1999, it continued to operate without obtaining a Certificate of Registration, violating Section 45IA of the Act. The RBI's inspection revealed non-compliance with Chapter IIIB of the RBI Act and the Directions.
3. Failure to Repay Depositors:
The company failed to repay amounts due to depositors, leading to numerous complaints from the public. The balance sheet showed total assets and liabilities of Rs. 194.02 crores as of 31-3-1998.
4. Prohibitory Order and Legal Actions:
On 5-4-1999, the RBI issued a prohibitory order restraining the company from accepting deposits. The company challenged this order and the denotification in Civil Misc. Writ Petition No. 16458 of 1999. Additionally, the RBI filed a complaint against the company and its directors for violating the Act, which is pending before the Chief Judicial Magistrate, Meerut.
5. Appointment of Provisional Liquidator:
Notices issued on 27-10-1999 were returned undelivered. The court directed advertisements in newspapers, and the official liquidator was appointed as provisional liquidator to take possession of the company's assets. An injunction was issued restraining the company from dealing with its assets without court permission.
6. Respondent's Request to Recall Order:
The respondent-company, through its advocate, requested to recall the winding up order, citing the directors' judicial custody and lack of knowledge about the proceedings. The court allowed time to submit a detailed counter-affidavit, but the company failed to comply, leading to the rejection of the adjournment request.
7. Applications from Depositors and Employees:
Several applications were filed by depositors and employees seeking repayment of their deposits. These applications highlighted discrepancies in the company's handling of deposits and the need for the court to ensure repayment.
8. Scheme by CLB:
The CLB had framed a repayment scheme for the respondent-company, categorizing deposits and scheduling repayments in phased instalments. However, the company did not adhere to this scheme, selectively paying chosen depositors.
9. Failure to File Reply and Submit Asset Details:
The respondent-company deliberately failed to file a reply and submit details of its assets despite several adjournments. The court found no intention from the company to comply with the legal requirements.
Conclusion:
The court allowed the petition filed by the RBI, directing the winding up of the respondent-company. The official liquidator was appointed to take charge of the company's properties and assets, ensuring compliance with the Companies (Court) Rules, 1959. The directors were required to file a statement of affairs and submit a report to the court.
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2002 (4) TMI 789
Whether a person who violates the provisions of the FEMA to a large extent can be detained under the preventive detention Act, namely, COFEPOSA Act?
Held that:- Appeal allowed. The order passed by the High Court holding that what was considered to be the criminal violation of FERA has ceased to be criminal offence under FEMA, the detention order cannot be continued after 1-6-2000, cannot be justified.
Considering the fact that detention order was passed in February, 2000 and the fact that the impugned judgment was passed by the High Court in November, 2000, this would not be a fit case for directing the detenu to surrender to undergo the remaining period of detention.
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2002 (4) TMI 788
Issues:
- Interpretation of settlement agreement for valuation of shares
- Enforcement of Company Law Board order under section 634A
- Validity of the settlement agreement and obligations of the parties
Interpretation of Settlement Agreement for Valuation of Shares:
The case involved an appeal under section 10F of the Companies Act, 1956 against an order passed by the Company Law Board. The respondent had filed a petition under sections 397-398 of the Act, challenging the company's proposal to issue shares. A settlement was reached for the sale of shares, with valuation to be determined by Price Waterhouse and Co. Later, the valuer was changed to S.R. Batliboi & Co., whose valuation report was rejected by both parties. The Board found that the settlement agreement required the sale and purchase of shares, and parties could not raise objections contrary to the settlement's intent. The issue remaining was the fair price determination of shares.
Enforcement of Company Law Board Order under Section 634A:
The appellant contended that the order dated 28-5-1998 was not a decree and, therefore, the application under section 634A was not maintainable. The respondent argued that section 634A allowed enforcement of Board orders like decrees. The Court held that the order could be enforced under section 634A, rejecting the appellant's argument that the order was facilitatory and not final. The Madras High Court's judgment in a similar case was cited to support the enforceability of the order.
Validity of Settlement Agreement and Obligations of the Parties:
The settlement agreement's clause 5 prevented raising technical objections against the settlement's intent. The Court emphasized that parties were bound by the settlement terms, and attempting to avoid obligations would be unjust. The appellant's attempt to avoid complying with the settlement terms was likened to attempting fraud on the tribunal. The Court dismissed the appeal, stating that the obligations imposed by the settlement agreement must be upheld, and technical objections contrary to the settlement's intent were impermissible.
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