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2007 (1) TMI 636
Issues involved: Delay in filing application for setting aside the award, condonation of delay, compliance with mandatory provisions.
Summary:
Issue 1: Delay in filing application for setting aside the award
The appeal was against the order of the High Court dismissing the Civil Revision Petition due to an inordinate delay of 3320 days in filing the appeal. The High Court suggested that if the application to set aside the award is dismissed, the appellant can file an appeal under Section 39 of the Arbitration Act, 1940. The delay was not satisfactorily explained, and the High Court did not go into the merits of the delay petition.
Issue 2: Condonation of delay
The Principal Sub Judge, Thiruvananthapuram, had condoned the delay of 3320 days in filing the petition to set aside the award filed by the State of Kerala against the appellant. The Sub Judge observed that the State officers' gross negligence caused the delay and the State should not be penalized. However, the Supreme Court found this reasoning unsatisfactory and emphasized that delay cannot be condoned without a proper reason. The Court set aside the orders of the Sub Judge and the High Court, allowing the appeal.
In conclusion, the Supreme Court set aside the orders of the Sub Judge and the High Court, emphasizing the importance of complying with mandatory provisions and providing satisfactory reasons for condoning delays.
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2007 (1) TMI 635
Issues Involved:
1. Legality of Revenue Recovery Proceedings by a Government Company for unquantified damages.
2. Applicability of writ petition in contractual disputes.
3. Interpretation of contractual clauses regarding dispute resolution and jurisdiction.
4. Authority of the Chief Engineer to demand payment under the Revenue Recovery Act.
Summary:
1. Legality of Revenue Recovery Proceedings by a Government Company for unquantified damages:
The primary issue was whether Revenue Recovery Proceedings can be initiated by a Government Company to recover damages from an alleged breach of contract without adjudication. The court held that only settled and fixed dues, either admittedly due or adjudicated and settled, can be recovered through the machinery under the Kerala Revenue Recovery Act. Disputed amounts not settled or adjudicated cannot be recovered by such proceedings.
2. Applicability of writ petition in contractual disputes:
The court acknowledged that generally, writ petitions under Article 226 of the Constitution of India do not lie in purely contractual matters, especially when the dispute involves interpretation of contract terms. However, the court can interfere if there is patent illegality, irrationality, or procedural impropriety. In this case, the petitioner was not challenging the contract terms but contending that no amounts were due to KSIDC and that the termination of the contract was illegal.
3. Interpretation of contractual clauses regarding dispute resolution and jurisdiction:
The court examined Clause 31 of the contract, which stated that all disputes should be settled by the Managing Director of KSIDC, whose decision would be final and binding. However, the court noted that this clause could not be treated as an arbitration clause. The court also referred to Clause 34, which specified that disputes would be referred to civil courts in Trivandrum, and Clause 18 of the Notice inviting tenders, which excluded arbitration as a means for settling disputes.
4. Authority of the Chief Engineer to demand payment under the Revenue Recovery Act:
The court found that the Chief Engineer was not authorized to make a demand and threaten recovery under the Revenue Recovery Act without proper adjudication. The court emphasized that the amount due must be an agreed or adjudicated amount, and the Chief Engineer's demand was not based on such adjudication.
Conclusion:
The court set aside Ext. P-12 issued by the Chief Engineer, allowing the petitioner to pursue other legal remedies. The court did not express any opinion on the merits of the claim by KSIDC and allowed for the possibility of filing a separate suit or counterclaim. The original petition was allowed to the extent of setting aside the Chief Engineer's demand.
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2007 (1) TMI 634
Issues involved: Temporary bail application on humanitarian grounds due to wife's advanced pregnancy.
Summary:
Issue 1: Conviction and sentencing under Sections 489-A, 489-B, 489-C, and 489-D
The applicant was convicted for offenses u/s 489-A, 489-B, 489-C, and 489-D and sentenced to undergo R.I. for 7 years and pay a fine. Despite being on bail during the trial, he has been in jail since the date of his conviction. The applicant sought temporary bail for one month only, citing his wife's advanced pregnancy and the lack of anyone else to care for her. The police verified the situation, confirming the imminent delivery of his wife. Considering the humanitarian aspect, the applicant was granted temporary bail for one month upon release from jail, subject to previous terms and conditions, with a local surety. He must surrender after one month and report to the police station weekly during the bail period.
Issue 2: Disposal of the application
The application for temporary bail on humanitarian grounds was allowed, and the matter stands disposed of.
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2007 (1) TMI 633
Issues involved:
The issues involved in this case are the discharge of accused No.5 in a complaint alleging offenses under Sections 138/142 of the Negotiable Instruments Act, based on the contention of resignation and lack of specified involvement.
Details of the Judgment:
1. The petitioner filed a complaint alleging that accused No.5, along with others, committed offenses under Sections 138/142 of the Negotiable Instruments Act. The complaint stated that post-dated cheques were issued for hire/lease rentals, one of which was dishonored due to insufficient funds, leading to the complaint proceedings.
2. Accused No.5 contended that he had resigned from the company before the incident, supported by certified documents filed with the Registrar of Companies. The court discharged the accused, noting the lack of evidence to prove the accused's directorship.
3. The petitioner argued that the accused was the signatory of the dishonored cheque and that the dishonor was due to insufficient funds. However, the court found no substantiation of these claims in the complaint or evidence presented, upholding the trial court's decision.
4. The court also highlighted the necessity of specifying the accused's involvement, citing a Supreme Court judgment. It stated that if the petitioner can establish the accused's involvement in the future, the trial court can invoke its powers under Section 319 Cr.P.C. accordingly.
5. Ultimately, the petition was dismissed with no costs, as the court found no grounds to interfere with the impugned order. The possibility of revisiting the case based on new evidence was left open for the trial court to consider.
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2007 (1) TMI 632
Issues involved:
The issues involved in this case are the maintainability of a writ petition under Article 227 of the Constitution of India when an appeal is available under Section 96 of the Code of Civil Procedure, and the consequences of refusing leave to defend a suit under Order XXXVII, Rule 3(5) of the Code.
Issue 1: Maintainability of writ petition under Article 227
The appellant contended that since an appeal was maintainable under Section 96 of the Code against the judgment and decree passed by the Civil Judge, the writ petition under Article 227 was not maintainable. On the other hand, the respondents argued that the writ petition was maintainable to prevent undue hardship in depositing the decretal amount as per Order XLI Rule 1 of the Code.
Issue 2: Consequences of refusing leave to defend under Order XXXVII, Rule 3(5)
The Civil Judge refused the defendants' application for leave to defend the suit under Order XXXVII, Rule 3(5) of the Code, leading to a final judgment and decree in favor of the plaintiff. The judgment highlighted the automatic nature of passing a decree when leave to defend is refused in a summary suit. The judgment also discussed the definition of "decree" and "judgment" under the Code, emphasizing that an order refusing leave is considered a judgment.
The Supreme Court set aside the impugned judgment and directed the writ petition to be converted into a first appeal. The respondents were instructed to file a certified copy of the judgment and decree, and any deficit court fee within eight weeks. The Court allowed all contentions to remain open, including the possibility of the Civil Judge granting leave to defend the suit.
This case clarifies the interplay between the availability of appeals under the Code of Civil Procedure and the jurisdiction of writ petitions under the Constitution of India, particularly in the context of refusing leave to defend a suit under Order XXXVII, Rule 3(5).
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2007 (1) TMI 631
Issues involved: Application for waiver of Service Tax amount and penalties based on the interpretation of turnover tax in relation to brokerage received by a stock broker.
In the present case, the applicant, a registered stock broker, filed an application seeking waiver of Service Tax amounting to Rs. 7,45,634/- and penalties. The core contention put forth by the applicant was that the turnover tax, payable to the recognized stock exchange, should not be considered as part of the assessable value for charging Service tax. The applicant argued that the turnover tax is distinct from brokerage or delivery brokerage received from sub-brokers, as the former is a fee payable to the stock exchange as per the Security Contracts Regulation Act, 1956. On the other hand, the Revenue contended that the amount received by the applicant from customers should be considered as brokerage or delivery brokerage, thereby making it subject to Service tax.
Upon examination, the Tribunal observed that the applicants had been transparently disclosing the turnover tax separately in the contract notes issued to clients, clarifying it as turnover tax to be deposited with the recognized stock exchange. This amount was deemed unrelated to brokerage. Consequently, the Tribunal found merit in the applicant's argument, indicating a strong case in their favor. As a result, the pre-deposit of the Service tax amount and penalties was waived, and the stay petition was allowed.
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2007 (1) TMI 630
Issues involved: Dismissal of Interlocutory Application to refer the matter to Arbitral Tribunal.
Summary:
Issue 1: Dismissal of Interlocutory Application
The suit was filed by the respondents against the revision petitioner for a declaration that the petitioner is not a partner of the firm and for an injunction. The revision petitioner sought to refer the matter to arbitration as per the Partnership Deed, but the application was dismissed by the court. The revision petitioner argued that the dispute should be settled by arbitration as per the agreement, but the respondents approached the civil court instead. The court noted that consensus of all partners is necessary to refer the matter for arbitration, and the revision petitioner expressed willingness for arbitration only after being expelled from the firm. The court also found that the relief sought for by the respondents, namely the declaration, falls under the jurisdiction of the civil court and not arbitration.
Issue 2: Compliance with Arbitration Clause
The court held that the revision petitioner did not comply with the mandatory provision of filing the Original Arbitration Agreement or a certified copy thereof. The court also referred to a previous judgment stating that the mere existence of an arbitration clause does not prevent the civil court from proceeding with the suit, especially if the dispute involves serious questions of law or complicated facts requiring detailed evidence. The court emphasized that the right to invoke the court's protection is inherent, and the civil court can refuse to refer the matter to arbitration in certain circumstances, such as when serious allegations of fraud or misrepresentation are made.
Conclusion:
The court dismissed the Civil Revision Petition and the connected Miscellaneous Petition, finding no illegality or irregularity in the dismissal of the Interlocutory Application. No costs were awarded in the case.
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2007 (1) TMI 629
Issues involved:
The issues involved in the judgment are the validity of taking cognizance of an offence based on suspicion without any material evidence, the importance of material implicating the accused before taking cognizance, and the necessity of quashing the order of cognizance when there is a lack of material evidence.
Validity of Taking Cognizance:
The appeal was filed against the judgment of the Jharkhand High Court regarding a Criminal Complaint filed by Suresh Chandra Sinha, which led to the Police instituting an FIR against the appellants under Sections 302, 201, 328, and 120-B IPC. The FIR alleged that the son of the informant was murdered by the accused persons, including the wife of the deceased having an illicit relationship with another accused. However, upon careful review of the record, the Supreme Court found no material evidence against the appellants to support the allegations. The Court emphasized that cognizance cannot be taken merely on suspicion and there must be some material basis for it. The Court highlighted the lack of evidence or material implicating the accused, leading to the quashing of the order taking cognizance.
Importance of Material Evidence:
The Court stressed the necessity of having at least some material indicating the guilt of the accused before taking cognizance, citing various legal precedents. In this case, the Court found a complete absence of material implicating the accused persons. While acknowledging that adequacy of evidence is not required at the stage of taking cognizance, the Court emphasized the need for some material to implicate the accused. Taking cognizance based solely on suspicion, as done in this case, was deemed inappropriate and could result in the harassment of individuals. The Court highlighted that allegations and suspicions alone cannot form the basis for conviction, emphasizing the importance of concrete material evidence in criminal proceedings.
Quashing of Cognizance Order:
Due to the lack of material evidence implicating the accused, the Supreme Court quashed the order dated 12.4.2005 taking cognizance of the offence. Consequently, the impugned judgment of the High Court was set aside, and the appeal was allowed. The Court's decision to quash the order of cognizance was based on the fundamental principle that cognizance cannot be taken solely on suspicion without any material basis. This ruling serves as a reminder of the importance of substantial evidence in legal proceedings to prevent unjust harassment and ensure fair treatment of the accused.
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2007 (1) TMI 628
Issues Involved:
1. Applicability of Building Bye-Laws
2. Necessary Parties in the Writ Petition
3. Estoppel and Equitable Relief
4. Power to Relax Building Rules
Summary:
1. Applicability of Building Bye-Laws:
The auction for the plot took place on 14.2.1996, and the sale deed stipulated a floor area ratio (FAR) of 1.0. The purchaser later sought to increase the FAR to 1.75 based on the new Building bye-laws of 2000. However, bye-law 19.8 of the Jaipur Development Authority (Jaipur Region) Building Bye-Laws of 2000 specified that "for the plots sold in the auction, parameters will remain the same as specified at the time of auction." The Supreme Court held that the relevant date for fixing the parameters is the date of auction, and the FAR of 1.0 as specified at that time must prevail.
2. Necessary Parties in the Writ Petition:
The High Court had granted relief to the purchaser without the Jaipur Development Authority being a party to the writ petition. The Supreme Court noted that the High Court's direction fettered the statutory power of the Jaipur Development Authority and compelled it to sanction a particular FAR without examining the claim in light of the bye-laws of 2000. The Court held that the Jaipur Development Authority was a necessary party.
3. Estoppel and Equitable Relief:
The purchaser argued that the State was estopped from denying the increased FAR based on the sale deed's clause. The Supreme Court found no merit in the plea of estoppel, stating that the sale deed did not prevent the State from relying on bye-law 19.8. The Court emphasized that Building Regulations are in public interest and the plea based on alleged equity could not be accepted.
4. Power to Relax Building Rules:
The High Court had relied on bye-law 19.5, which permits relaxation of conditions. The Supreme Court clarified that the power to relax is an exception and must be used with caution. The Court held that the High Court's reasoning was unsustainable and that the parameters at the time of auction should prevail.
Conclusion:
The Supreme Court allowed the appeal, setting aside the decisions of the Division Bench and the Single Judge, and dismissed the writ petition filed by the respondents. The Court directed the parties to bear their respective costs.
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2007 (1) TMI 627
Issues Involved:
1. Whether the Tribunal was justified in disallowing the claim for set off of business loss by applying section 43(5) of the IT Act, 1961 and treating the same as speculative loss due to non-payment of transportation charges.
Summary:
Issue 1: Application of Section 43(5) of the IT Act, 1961
The appeal concerns the Tribunal's order disallowing the set off of business loss of Rs. 2,54,068 for the assessment year 1990-91, treating it as speculative loss u/s 43(5) of the IT Act, 1961. The assessee, a cotton merchant, engaged in 22 transactions of cotton bales, which the AO deemed speculative as there was no actual delivery of goods. The AO's decision was based on the absence of transportation charges, indicating no physical delivery.
Facts and Tribunal's Findings:
The assessee purchased and sold cotton bales through commission agents. The Tribunal upheld the AO's decision, emphasizing that physical delivery was not taken by the assessee or his agents. The Tribunal inferred this from the lack of transportation charges in the accounts, concluding that transactions were settled without actual delivery, thus speculative.
Legal Interpretation:
Section 43(5) defines a speculative transaction as one settled otherwise than by actual delivery. The Court noted that the statute does not require the assessee or his agent to take physical delivery. The focus should be on whether the transactions were ultimately settled by actual delivery of goods.
Court's Analysis:
The Court found that the transactions resulted in actual delivery to the ultimate buyer, M/s Oswal Cotton Company, through the commission agents. The delivery was a direct result of the transactions initiated by the assessee. The Court held that the absence of transportation charges does not determine the nature of the transaction. The actual delivery of goods to the buyer in pursuance of the transactions negates the speculative nature.
Conclusion:
The Court concluded that the Tribunal erred in law by treating the transactions as speculative. The transactions were settled by actual delivery of goods, thus not speculative u/s 43(5). The loss arising from these transactions should be considered a business loss and set off against regular business profits. The appeal was allowed, and the orders of the Tribunal, CIT(A), and AO were set aside. The AO was directed to recompute the profits and gains of business accordingly.
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2007 (1) TMI 626
Issues Involved:
1. Jurisdiction for filing appeals against certain respondents.
2. Imposition of penalty under Section 112 of the Customs Act, 1962.
3. Allegations of manipulation and abetment in obtaining advance licenses.
4. Procedural violations and principles of natural justice.
5. Evidentiary support for allegations of manipulation.
6. Remand for fresh adjudication and consideration of new evidence.
Detailed Analysis:
1. Jurisdiction for Filing Appeals Against Certain Respondents:
The Tribunal addressed the jurisdictional issue regarding appeals filed against Respondents 2 and 3. It was argued that the Commissioner lacked specific directions from the Member, CBEC, to file appeals against these respondents. The Tribunal found that treating them as "others" without specific directions was impermissible, rendering the appeals against them without jurisdiction and hence not maintainable.
2. Imposition of Penalty Under Section 112 of the Customs Act, 1962:
The Tribunal examined the Revenue's appeal confined to imposing a penalty under Section 112. It was noted that the review ordered by the Board related only to the charges in notices covered by Groups III and IV, involving imports against transferable advance licenses. The allegations and charges in Groups I and II, which related to export document manipulation, were no longer in dispute.
3. Allegations of Manipulation and Abetment in Obtaining Advance Licenses:
The Tribunal considered the charge against Respondent 1 of conspiring with exporters to fraudulently obtain advance licenses using manipulated Export Promotion (EP) copies of shipping bills. The Commissioner had dropped the conspiracy charge, and the Board's review did not challenge this but sought to invoke a charge of abetment under Section 112. The Tribunal found that since abetment was not initially charged in the show cause notice, it could not be sustained in the review order.
4. Procedural Violations and Principles of Natural Justice:
The Tribunal highlighted procedural lapses, including the absence of personal hearings and the denial of opportunities to inspect original records. It was argued that these violations contravened the principles of natural justice, necessitating a remand for fresh adjudication.
5. Evidentiary Support for Allegations of Manipulation:
The Tribunal scrutinized the evidence, including statements and hotel records, to determine the involvement of the respondents in the alleged manipulation. The Commissioner found no direct evidence implicating the CHA or its employees in tampering with the EP copies of shipping bills. The Tribunal noted that the Revenue failed to rebut these findings with credible evidence, affirming the Commissioner's decision to extend the benefit of doubt and drop penal proceedings.
6. Remand for Fresh Adjudication and Consideration of New Evidence:
The Tribunal observed that both the appellants and the department presented new facts and figures not previously considered by the lower authorities. Given the extensive new evidence and the need for a fresh examination of the issues, the Tribunal remanded the appeals of certain appellants (M/s. P.A. International, M/s. Sharan Exports, Shri Rajkumar Hasija, and Shri Ashok B. Rajani) to the Commissioner for fresh adjudication. The appeals filed by the Revenue seeking enhancement of penalties and imposition of penalties on CHAs were dismissed.
Separate Judgments:
A divergence in opinions between Member (Judicial) and Member (Technical) led to a reference to a third member. The third member concurred with the Member (Judicial), resulting in the dismissal of the Revenue's appeals and the remand of specific appellants' cases for fresh adjudication.
Majority Order:
The appeals of M/s. P.A. International, Ashok Rajani, Blend Syntec, Rajkumar Hasija, M/s. Sharan Exports, and M/s. Santosh Textile were allowed, and the appeals filed by the Revenue were dismissed.
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2007 (1) TMI 625
Issues involved: Appeal by Department against Order of Commissioner (Appeals) regarding penalty imposition under various sections of the Finance Act, 1994.
Summary:
Issue 1: Duty demand and penalty imposition
The appellants provided security services and a duty of &8377; 1,68,442/- was demanded for a specific period. The Asstt. Commissioner confirmed the duty demand and imposed penalties under sections including &8377; 1,68,442/- u/s. 76 and another &8377; 1,68,442/- u/s. 78 of the Finance Act, 1994. The Commissioner (Appeals) found reasonable grounds for the failure to submit the Return of Service Tax and delay in payment, granting waiver of penalty u/s. 80 of the Finance Act, 1994. He noted the absence of evidence of intention to evade Service Tax and reduced the penalty u/s. 76 to &8377; 25,000/- from &8377; 1,68,442/-.
Issue 2: Valid grounds for penalty enhancement
The department failed to provide valid grounds for enhancing the penalty beyond what was upheld by the Commissioner (Appeals).
Conclusion:
The appeal by the Department was rejected, affirming the decision of the Commissioner (Appeals) regarding the penalty imposition under various sections of the Finance Act, 1994.
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2007 (1) TMI 624
Application of the doctrine of prospective overruling in service matters - Government of Kerala framed rules for the employees of Kerala Government Presses Subordinate Services - Government order, rule framed amended prescribing a ratio of 1 : 1 for the purpose of promotion between diploma-holders and certificate- holders - whether the law declared by the Full Bench would have a prospective operation or not - HELD THAT:- The conflict in the decisions was noticed and eventually referred to a Full Bench in the Subaida Beevi [2004 (11) TMI 623 - KERALA HIGH COURT] by another Division Bench of the said Court. By a judgment dated 04.11.2004, the Full Bench held that the amended special rules for the Government Presses Subordinate Services Rules were not suffering from any infirmity and fixation of ratio of 1 : 1 for promotion to higher posts between diploma-holders and certificate-holders needs no interference.
The Full Bench of the High Court indisputably did not say that the promotions which had already been granted would not be disturbed. The judgment of the Full Bench attained finality as special leave petition filed thereagainst was dismissed. Rules as amended by the State of Kerala on 01.07.1980 and 30.08.1984 were upheld.
The doctrine of prospective over-ruling which is a feature of American jurisprudence is an exception to the normal principle of law, was imported and applied for the first time in L.C. Golak Nath and Ors. v. State of Punjab[1967 (2) TMI 95 - SUPREME COURT] and Anr. In Managing Director, ECIL, Hyderabad and Ors., v. B. Karunakar and Ors.[1993 (10) TMI 310 - SUPREME COURT], the view was adopted. Prospective over-ruling is a part of the principles of constitutional canon of interpretation and can be resorted to by this Court while superseding the law declared by it earlier. It is a device innovated to avoid reopening of settled issues, to prevent multiplicity of proceedings, and to avoid uncertainty and avoidable litigation. In other words, actions taken contrary to the law declared prior to the date of declaration are validated in larger public interest. The law as declared applies to future cases.
In service matters, this Court on a number of occasions have passed orders on equitable consideration. But the same would not mean that whenever a law is declared, it will have an effect only because it has taken a different view from the earlier one. In those cases it is categorically stated that it would have prospective operation.
Moreover, the judgment of the Full Bench has attained finality. The special leave petition has been dismissed. The subsequent Division Bench, therefore, could not have said as to whether the law declared by the Full Bench would have a prospective operation or not. The law declared by a court will have a retrospective effect if not otherwise stated to be so specifically. The Full Bench having not said so, the subsequent Division Bench did not have the jurisdiction in that behalf.
We, therefore, do not find any merit in these appeals, which are dismissed accordingly.
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2007 (1) TMI 623
Issues Involved:
1. Jurisdiction of the Additional Labour Commissioner (ALC) under Section 6H of the U.P. Industrial Disputes Act, 1947.
2. Applicability of the U.P. Cooperative Societies Act, 1965 versus the U.P. Industrial Disputes Act, 1947.
3. Validity of the agreement dated 23.01.2001 for ex-gratia payment.
4. Powers of the Registrar under Section 128 of the U.P. Cooperative Societies Act.
5. Finality and binding nature of the Registrar's orders under Section 128.
6. Res judicata concerning previous High Court directions.
7. Legality of ex-gratia payments under Regulation 42 of the U.P. Cooperative Societies Employees Service Regulations, 1975.
Issue-wise Detailed Analysis:
1. Jurisdiction of the Additional Labour Commissioner (ALC) under Section 6H of the U.P. Industrial Disputes Act, 1947:
The Supreme Court held that the ALC's jurisdiction was wrongly invoked and his order dated 15.03.2003 under Section 6H of the U.P. Industrial Disputes Act, 1947 was without jurisdiction, null, and void. The Court emphasized that the U.P. Cooperative Societies Act, 1965, being a special enactment, prevails over the U.P. Industrial Disputes Act, 1947.
2. Applicability of the U.P. Cooperative Societies Act, 1965 versus the U.P. Industrial Disputes Act, 1947:
The Court reiterated the principle that a special enactment (U.P. Cooperative Societies Act, 1965) should prevail over a general enactment (U.P. Industrial Disputes Act, 1947). The Court cited several precedents to support this view, including "The Co-operative Central Bank Ltd. v. The Additional Industrial Tribunal, Andhra Pradesh" and "R.C. Tiwari v. M.P. State Co-operative Marketing Federation Ltd."
3. Validity of the agreement dated 23.01.2001 for ex-gratia payment:
The Court found that the agreement dated 23.01.2001 was not a valid settlement under the law. It was not signed by the Secretary (CEO) of the Cooperative Society as required under Section 31(2)(d) of the U.P. Cooperative Societies Act and did not comply with the requirements of Section 2(t) of the Industrial Disputes Act or the U.P. Industrial Dispute Rules. The agreement was also contrary to the repeated orders of the Registrar under Section 128 disapproving ex-gratia payments.
4. Powers of the Registrar under Section 128 of the U.P. Cooperative Societies Act:
The Registrar has the power to annul any resolution passed by the Committee of Management or the general body of any cooperative society if it contravenes the provisions of the Act, rules, or bye-laws. The Registrar's orders dated 07.03.2001, 19.03.2001, and 22.06.2001, requiring the Board of Directors to reconsider and annulling the resolutions for ex-gratia payments, were statutory and binding.
5. Finality and binding nature of the Registrar's orders under Section 128:
The Court emphasized that the Registrar's orders under Section 128 are final and binding as no appeal was filed under Section 98 of the U.P. Cooperative Societies Act, and no arbitration reference was made under Sections 70 and 71. The ALC and the High Court wrongly disregarded these statutory orders.
6. Res judicata concerning previous High Court directions:
The Court noted that the High Court had previously directed the ALC to reconsider the matter in light of the Registrar's annulment order. The workmen did not object to the propriety or legality of the Registrar's order at that time, thus barring them from doing so later under the principle of res judicata.
7. Legality of ex-gratia payments under Regulation 42 of the U.P. Cooperative Societies Employees Service Regulations, 1975:
Regulation 42 requires the Registrar's permission for any pecuniary incentive or allowance to be given to employees. The ex-gratia payments made without such permission were illegal. The Court concluded that the ex-gratia payments were not enforceable under the U.P. Industrial Disputes Act, 1947, as they were governed by the U.P. Cooperative Societies Act, 1965, and the relevant regulations.
Conclusion:
The Supreme Court set aside the impugned judgment of the High Court and allowed the appeals filed by the bank and the State of U.P. The Court held that the employees are not entitled to ex-gratia payments from now onwards, although payments already made need not be recovered.
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2007 (1) TMI 622
The High Court of Bombay admitted an appeal based on substantial questions of law regarding the confirmation of duty and clubbing of clearances of two units. The matter was scheduled for further hearing on 15th February, 2007.
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2007 (1) TMI 621
Issues involved:
The issues involved in the judgment are the application filed by a former director of a company (in liquidation) to come on record in a case related to the sale of land and building, the conformity of the sale procedure followed by Karnataka State Financial Corporation (KSFC), and the objections raised regarding the sale confirmation process.
Application by Former Director:
The former director of the company (in liquidation) filed an application to come on record, alleging that the sale conducted by KSFC was not in accordance with Companies (Court) Rules, 1959. He argued that the property was sold below market value and requested the court to set aside the sale and reauction it. Citing a Supreme Court judgment, he contended that the sale should have been conducted under the supervision of the Company Court and that he, as a necessary party, had the right to be involved in the proceedings.
KSFC's Submission:
KSFC argued that the Supreme Court judgment cited by the applicant was not applicable to the present case. They maintained that the sale was conducted after obtaining permission from the court and in compliance with SFC Rules. KSFC contended that the former director's objections were baseless as no injustice was caused to him, and even if he was considered a proper party, his grievances should not affect the sale confirmation process.
Contention of R-3:
R-3, the auction purchaser, defended the sale process, stating that it was conducted transparently with wide publicity and multiple bidders participating. They highlighted that the property was in a dilapidated condition, and the offer made by R-3 exceeded the reserve price set by KSFC. R-3 clarified that the auctioned rights were leasehold, and the sale would involve clearing dues to KEB and KIADB.
Court's Decision:
The court noted that the former director was given opportunities to present a better buyer but failed to do so. Despite being considered a proper party, the court rejected his objections for various reasons. It emphasized that KSFC had followed the court's permission to conduct the sale, and the highest offer made by R-3, exceeding the reserve price, should be accepted. Consequently, the court allowed the sale confirmation in favor of R-3 and permitted KSFC to hand over possession to R-3.
Conclusion:
In conclusion, the court allowed the application filed by KSFC for sale confirmation, directed the possession transfer to R-3, and overruled the objections raised by the former director regarding the sale confirmation process. The court also instructed KSFC to deposit the sale proceeds with the OL within a specified timeframe.
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2007 (1) TMI 620
Case: Supreme Court Citation: 2007 (1) TMI 620 - SC
Judges: Mr. Ashok Bhan and Mr. V.S. Sirpurkar, JJ.
Decision: Delay condoned. Civil Appeals dismissed.
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2007 (1) TMI 619
Issues Involved:
1. Allotment of shares to IOC.
2. Non-registration of 155 million shares transferred by WBIDC to the petitioners.
3. Refusal of WBIDC/GoWB to transfer the balance shares to the petitioners.
4. Non-handing over of the management to the petitioners.
5. Appointment and continuance of the 16th respondent as the Managing Director.
Issue-Wise Detailed Analysis:
1. Allotment of Shares to IOC:
The petitioners challenged the allotment of shares to IOC on multiple grounds including non-disclosure of certain understandings between IOC and WBIDC/GoWB, inducement by misrepresentation, and violation of Article 47 of the Articles of Association (AoA) of HPL. The court found that the allotment was approved by the EOGM and that the terms proposed to IOC and agreed to by IOC alone came up for approval. The court held that the non-disclosure of discussions between WBIDC and IOC was not fatal to the resolution as the shareholders were considering only the terms approved by the Board. It was also determined that the circular resolution route should have been avoided, and the matter should have been discussed in a regularly convened meeting of the Board. However, the court upheld the allotment of shares to IOC, noting that the petitioners' consent was obtained by misrepresentation that they were the owners of 155 million shares.
2. Non-Registration of 155 Million Shares Transferred by WBIDC to the Petitioners:
The court examined whether the issue of non-registration of 155 million shares was in the affairs of the company. It was found that the company was directly involved in the matter as it had sought approval from IDBI for the registration of transfer and had discussed the matter in board meetings. The court held that the transfer of 155 million shares was concluded on 8th March 2002, and the petitioners had legitimate expectations to seek registration of the shares in their names. The court directed the petitioners to pay the balance consideration of Rs. 125 crores to WBIDC, and upon payment, the shares would be deemed to have been dematerialized and transferred in the name of the 4th petitioner.
3. Refusal of WBIDC/GoWB to Transfer the Balance Shares to the Petitioners:
The court found that the transfer of the balance shares held by WBIDC was in the affairs of the company. It was noted that GoWB/WBIDC had committed to transfer their shares by a letter dated 17.12.2004 and the agreement dated 14.1.2005. The court observed that the decision to defer the disinvestment was due to the petitioners' insistence that no shares should be allotted to IOC. The court held that the petitioners had the right to require WBIDC/GoWB to disinvest their 520 million shares in favor of the petitioners, especially when the IOC allotment was upheld. The price payable for the 520 million shares would be the fair price determined by an independent valuer or Rs. 28.80 per share, whichever is higher.
4. Non-Handing Over of the Management to the Petitioners:
The court did not specifically address this issue separately, but it was implied that with the acquisition of the shares held by WBIDC, the petitioners would gain control of the management of the company. The court directed that the petitioners would take control of the day-to-day management of the company upon payment of the consideration for the 155 million shares.
5. Appointment and Continuance of the 16th Respondent as the Managing Director:
The court found no scope to interfere in the appointment of the 16th respondent as the Managing Director. It was noted that the appointment was unanimously approved by the board, including the nominees of the petitioners, and the petitioners had not objected to his functioning as the MD for a long time. The court held that a person who is a party to a decision cannot later seek to impugn the decision as being illegal or void in a petition under Sections 397/398 of the Act.
Reliefs Granted:
1. The allotment of 150 million shares to IOC was upheld.
2. The transfer of 155 million shares by WBIDC to the petitioners at Rs. 10 per share was confirmed.
3. WBIDC/GoWB was directed to transfer 520 million shares held by them in HPL to the petitioners.
4. The price payable for the 520 million shares would be the fair price determined by an independent valuer or Rs. 28.80 per share, whichever is higher.
5. The petitioners were directed to purchase the 271 million preference shares held by GoWB/WBIDC at par.
6. The petitioners were to pay a sum of Rs. 125 crores to WBIDC towards the balance consideration for the 155 million shares by 28th February 2007.
7. The petitioners were to lodge an irrevocable bank guarantee in favor of WBIDC for Rs. 50 crores and a comfort letter for Rs. 1500 crores by 28th February 2007.
8. The consideration for the 520 million shares was to be paid within 45 days of the date of the valuation report or within 60 days if GoWB/WBIDC did not desire valuation.
9. Upon receipt of the consideration, WBIDC/GoWB was to transfer the 520 million shares to the petitioners.
10. The petitioners were to comply with all stipulations in the CDR package in relation to the shares.
11. There was to be a lock-in period of 3 years for all shares.
12. The composition of the Board was to remain unchanged until the petitioners acquired the 520 million shares, after which they could change the composition subject to certain conditions.
13. If the petitioners failed to pay the consideration and acquire the shares within the stipulated period, WBIDC was at liberty to encash the bank guarantee and had the option to purchase the shares held by the petitioners at Rs. 28.80 per share or the fair price determined by the valuer, whichever was higher.
14. Liberty was given to apply in case of any difficulty in implementing the terms.
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2007 (1) TMI 618
Issues involved: Admission of winding up petition, company's inability to pay debts, dispute over equipment servicing, discretion in passing winding up order, secured creditor's right to seek winding up.
Admission of winding up petition: The court admitted the petition for winding up of the company after being satisfied that the company was unable to pay its debts, and the petitioner's claim was indisputable. The company was given an opportunity to pay off the debt in monthly installments, but no payment was made, leading to the decision to wind up the company.
Dispute over equipment servicing: The company claimed that it faced financial difficulties due to heavy capital expenditures and market conditions, which affected its ability to pay for the equipment. The company also argued that the petitioner did not service the equipment as agreed, further hindering its operations and revenue generation. Despite these claims, the court found that the agreement did not obligate the petitioner to ensure servicing and that the company had missed payment deadlines.
Discretion in passing winding up order: The court highlighted the exercise of discretion in passing a winding up order, even if the debt is indisputable and the company is insolvent. Various factors, such as other creditors' opposition, workers' interests, and commercial viability, can influence the decision to refuse a winding up order despite the company's financial difficulties.
Secured creditor's right to seek winding up: The court clarified that secured creditors have the right to seek winding up of a company, relinquishing their security interest to claim a proportionate share of the company's assets in liquidation. The court dismissed the argument that being a secured creditor should prevent the petitioner from seeking winding up, as secured creditors have equal rights in such proceedings.
Final decision: The court ordered the winding up of the company in accordance with the Companies Act, 1956, directing the official liquidator to take possession of assets and control transactions. The application for a provisional liquidator was disposed of, and a stay of operation was granted pending a deposit of a specified amount with the official liquidator.
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2007 (1) TMI 617
The Supreme Court of India granted leave and ordered the requisition of original records. Notice was issued on the prayer for interim relief. (Citation: 2007 (1) TMI 617 - SC)
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