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Showing 21 to 24 of 24 Records

• 1956 (10) TMI 24
  
  Issues Involved:
  1. Constitutionality of Section 153B of the Indian Companies Act, 1913.
  2. Bona fides of the transaction for the acquisition of shares.
  3. Fairness of the offered price for the shares.
  4. Public purpose of the transaction.
  
  Issue-wise Detailed Analysis:
  
  1. Constitutionality of Section 153B of the Indian Companies Act, 1913:
  
  The petitioners argued that Section 153B of the Indian Companies Act, 1913, which allows a majority of shareholders to compel a minority to sell their shares, is ultra vires the Constitution, specifically infringing Article 19(1)(f), which guarantees the right to acquire, hold, and dispose of property. They contended that unless it can be shown that Section 153B is in the public interest and imposes reasonable restrictions, it must be struck down. The court rejected this argument, explaining that a share is a statutory creation, and the rights and limitations attached to it are defined by the statute. The court emphasized that a person cannot claim a statutory right and simultaneously insist on exercising it free from statutory limitations. The court cited several precedents, including Borland's Trustee's case, which held that restrictions on the transfer of shares are not repugnant to absolute ownership but are inherent incidents of the shares.
  
  2. Bona fides of the transaction for the acquisition of shares:
  
  The petitioners contended that the transaction was not bona fide, alleging that the directors of Parry and Co. Ltd. obtained a large benefit by repatriating Rs. 37,50,000 to England. The court found no illegality in this operation as the money was lawfully obtained from the sale of shares and was not a secret profit. The court also addressed the concern about the directors purchasing shares in East India Distilleries, explaining that this was done transparently and in accordance with the scheme outlined in the letter from East India Distilleries dated 18th October 1955.
  
  3. Fairness of the offered price for the shares:
  
  The petitioners argued that the offered price of Rs. 5-8-0 per share did not account for the goodwill and other intangible assets of Parry and Co. Ltd. The court noted that the market price of the shares at the relevant time was Rs. 4-8-0, and the offer from East India Distilleries was one rupee above the market rate. The court cited Wynn-Parry J.'s view that the final test of the value of a thing is what it will fetch if sold, and concluded that the price offered was fair.
  
  4. Public purpose of the transaction:
  
  The petitioners argued that no public purpose was served by the transaction, claiming that it benefited East India Distilleries at the expense of Parry and Co. Ltd. The court clarified that Section 153B does not require the transaction to be in the public interest; it is sufficient if the prescribed majority of shareholders agree. The court emphasized that it is for the shareholders to decide what is beneficial for them, not the court.
  
  Conclusion:
  
  The court dismissed the application, holding that Section 153B of the Indian Companies Act, 1913, is constitutional and does not infringe Article 19(1)(f) of the Constitution. The court found no evidence of bad faith or unfairness in the transaction and ruled that the offered price was fair. The court also stated that the transaction did not need to serve a public purpose as long as the majority of shareholders agreed. The application was dismissed with costs, and an advocate's fee of Rs. 350 was awarded.

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• 1956 (10) TMI 22
  
  Issues Involved:
  1. Applicability of Section 309 of the Companies Act, 1956, to remuneration paid to a director in capacities other than as a director.
  2. Applicability of Section 309 for the calendar year 1956.
  3. Applicability of Section 309 for the period from January 1, 1956, to March 31, 1956.
  4. Applicability of Sections 348, 349, and 350 to the remuneration of managing agents for the year 1956.
  5. Applicability of Sections 348, 349, and 350 for the period from January 1, 1956, to March 31, 1956.
  6. Inclusion of the monthly salary paid to a director as a technical employee in the overall managerial remuneration limit of 11% of net profits as per Section 198(1).
  7. Applicability of the overall managerial remuneration limit for the year 1956 or any part thereof.
  8. Inclusion of remuneration paid to a technical adviser in the 10% limit laid down in Section 348.
  
  Issue-wise Detailed Analysis:
  
  1. Applicability of Section 309 of the Companies Act, 1956, to remuneration paid to a director in capacities other than as a director:
  The court examined whether the remuneration paid to a director in capacities other than as a director, such as a technical adviser, falls under Section 309. The judgment clarified that Section 309(3) refers to remuneration paid to a director in his capacity as a director managing the affairs of the company. The court observed that the language of Section 309(3) does not extend to remuneration paid to a director in any other capacity. Therefore, the Rs. 3,000 paid to the third defendant as a technical adviser does not fall under the purview of Section 309.
  
  2. Applicability of Section 309 for the calendar year 1956:
  The court stated that Section 309(1) refers to Section 198, and both sections are overriding sections concerning the remuneration to be paid to a director. Since the financial year of the company is the calendar year, Section 309 would apply to the company from January 1, 1957, as the new Act came into force in April 1956. Hence, Section 309 does not apply to the remuneration for the calendar year 1956.
  
  3. Applicability of Section 309 for the period from January 1, 1956, to March 31, 1956:
  Given that Section 309 would apply to the company from January 1, 1957, the court concluded that Section 309 does not apply to the remuneration for the period from January 1, 1956, to March 31, 1956.
  
  4. Applicability of Sections 348, 349, and 350 to the remuneration of managing agents for the year 1956:
  The court examined Section 348, which deals with the remuneration of managing agents, stating that the managing agent cannot receive remuneration exceeding 10% of the net profits of the company for the financial year. The court highlighted that Section 348 applies to the company from January 1, 1957. Therefore, Sections 348, 349, and 350 do not apply to the remuneration of managing agents for the year 1956.
  
  5. Applicability of Sections 348, 349, and 350 for the period from January 1, 1956, to March 31, 1956:
  As Sections 348, 349, and 350 would apply to the company from January 1, 1957, the court concluded that these sections do not apply to the remuneration for the period from January 1, 1956, to March 31, 1956.
  
  6. Inclusion of the monthly salary paid to a director as a technical employee in the overall managerial remuneration limit of 11% of net profits as per Section 198(1):
  The court considered whether the Rs. 3,000 paid to the third defendant as a technical adviser should be included in the 11% limit of net profits for managerial remuneration under Section 198. The court noted that Section 198 deals with managerial remuneration and aims to control the cost of management. It concluded that the Rs. 3,000 paid to the third defendant as a technical adviser should not be included in the 11% limit under Section 198.
  
  7. Applicability of the overall managerial remuneration limit for the year 1956 or any part thereof:
  The court clarified that Section 198 would come into operation for the company from January 1, 1957. Therefore, the overall managerial remuneration limit does not apply to the year 1956 or any part thereof.
  
  8. Inclusion of remuneration paid to a technical adviser in the 10% limit laid down in Section 348:
  The court emphasized that Section 348 clearly states that the managing agent cannot receive more than 10% of net profits, whether in the capacity of managing agent or any other capacity. Therefore, the Rs. 3,000 paid to the third defendant as a technical adviser must be included in the 10% limit laid down in Section 348. This provision would apply to the company from January 1, 1957.
  
  Conclusion:
  The court answered the questions as follows:
  1. In the negative.
  2. Does not arise.
  3. Does not arise.
  4. In the negative, after deleting sections 349 and 350.
  5. Unnecessary.
  6. In the negative. The question to stop at the words "referred to in section 198(1) of the said Act." The further question "whether in any event the said overall limit applies for the year 1956 or any part thereof and if so which?"-does not apply to the year 1956.
  7. In the negative.
  8. The remuneration of Rs. 3,000 paid to the third defendant as a technical adviser is to be included in the limit of 10% laid down in Section 348, effective from January 1, 1957.
  
  No order as to costs.

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• 1956 (10) TMI 21
  
  The High Court of Madras dismissed the appeal, stating that the investigation by the Inspector of Police, Crime Branch, C.I.D., Madras, in a case involving alleged offences under sections 406, 409, and 477A of the Indian Penal Code was not barred by section 282A of the Indian Companies Act of 1913. The Court held that the offences under the Penal Code sections were more serious than the offence under section 282A, allowing the investigation to continue.

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• 1956 (10) TMI 1
  
  Issues:
  1. Interpretation of a security bond executed in favor of the Government.
  2. Liability of the surety under the security bond for non-duty paid tobacco.
  3. Application of Central Excise Department rules to determine liability.
  4. Continuation of surety's liability beyond the period of the license.
  5. Impact of subsequent conduct of the parties on the surety's liability.
  
  Analysis:
  The judgment pertains to an appeal involving the interpretation of a security bond executed by the defendants in favor of the Government regarding storage of non-duty paid tobacco. The second defendant held a license for a bonded warehouse, and both defendants executed a bond for Rs. 5,000. The dispute arose when the Excise Department suffered a loss due to non-payment of duty on tobacco in 1946. The first defendant, a surety, claimed non-liability beyond the license period of 1943-44, while the department sought to hold him liable based on a continuing guarantee interpretation of the bond.
  
  The security bond outlined the defendants' obligations to observe Excise Duty Rules, pay dues promptly, and maintain the warehouse as per regulations. The first defendant argued that his liability was limited to the license period mentioned in the bond, citing the absence of specific duration restrictions. The court analyzed relevant rules, including Rule 155, which allows for the continuation of a bond's validity even after goods are moved to another warehouse without requiring a fresh bond. However, the court clarified that this rule does not extend the surety's liability beyond the license period.
  
  The court emphasized Rule 178, stating that licenses expire after one year and are specific to premises. The first defendant's liability could not be extended without clear provisions in the bond or rules. Despite the government's argument that the first defendant's awareness of the situation implied liability, the court found no legal basis to hold him accountable beyond the license period. The judgment concluded that the first defendant was not liable for the dues related to tobacco stored after the license period, and the appeal was allowed in his favor, resulting in the dismissal of the suit against him. Each party was directed to bear their respective costs incurred in the lower court.

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