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2007 (6) TMI 561
Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956.
2. Letting out company property at a nominal rent.
3. Exclusion of the petitioner from the affairs of the company.
4. Non-receipt of notices for AGMs and Board meetings.
5. Misappropriation of funds and allegations against the petitioner.
Issue-wise Detailed Analysis:
1. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956:
The petitioner alleged acts of oppression and mismanagement in the affairs of the company by the respondents. The petitioner, holding 35% shares, claimed that the company's property was let out at a nominal value, causing oppression and prejudice to the petitioner and other shareholders. The respondents argued that the petition is not maintainable as no case of oppression and mismanagement, as defined under Sections 397 and 398, was made out. The court found the respondents' contention correct and noted that the petitioner did not come with clean hands, considering his conduct in other proceedings.
2. Letting out company property at a nominal rent:
The petitioner alleged that the company's asset was let out at a nominal rent of Rs. 12,500/- per month, whereas the market rental value was Rs. 3 lakhs per month, causing damage to the petitioner's interest. The court observed that the property, Teesta House, was built with the funds of the firm K & Co., and a lower rent was agreed upon. The firm was using only a small portion of the building, and the rent was revised to Rs. 30,000/- per month upon increased usage. The court found no case of mismanagement as the rent was fixed with the consultation of the directors, including the petitioner.
3. Exclusion of the petitioner from the affairs of the company:
The petitioner claimed exclusion from the company's affairs and non-receipt of notices for AGMs and Board meetings since 2000-2001. The court noted that directorial complaints cannot be entertained under Sections 397/398. The petitioner's exclusion and non-receipt of notices were not sufficient grounds for invoking these provisions.
4. Non-receipt of notices for AGMs and Board meetings:
The petitioner alleged not receiving any notice of AGMs and Board meetings since 2000-2001. The court held that non-maintenance of statutory records and non-furnishing of statements to the ROC, as pointed out by the petitioner, cannot be termed as oppressive. The court emphasized that illegal acts per se, even if established, cannot be grounds for invoking Section 397 unless they are also unjustified and oppressive.
5. Misappropriation of funds and allegations against the petitioner:
The respondents alleged that the petitioner misappropriated funds worth Rs. 100 crores from the partnership concern, K & Co., and that these allegations were pending adjudication before the Sole Arbitrator. The court considered the petitioner's conduct in other proceedings and found that the petitioner did not come with clean hands, affecting the maintainability of the petition.
Conclusion:
The court dismissed the petition, finding no justification to allow it. The allegations of letting out the property at a nominal rent and exclusion from the company's affairs were not substantiated. The court emphasized that the petitioner failed to establish any acts of oppression or mismanagement as required under Sections 397 and 398 of the Companies Act, 1956. All interim orders were vacated, and the petition was dismissed with no order as to cost.
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2007 (6) TMI 560
Issues involved: Duty demand u/s Section 11D of the Central Excise Act 1944.
Issue 1: Duty demand under Section 11D
The appellant, a public sector oil company, faced duty demand for allegedly realizing more excise duty than remitted. The Tribunal noted a previous dispute where they ruled in favor of the appellant. The Tribunal found that Section 11D was not applicable as the appellant had not collected any amount representing excise duty from buyers, only charging a composite price under the administered pricing mechanism. Consequently, the impugned order was set aside, and the appeal was allowed based on the lack of a crucial ingredient to attract Section 11D.
Conclusion:
The judgment by the Appellate Tribunal CESTAT, New Delhi, in the case involving duty demand u/s Section 11D of the Central Excise Act 1944 favored the appellant, a public sector oil company, as it was found that the appellant had not collected any amount representing excise duty from buyers, leading to the dismissal of the duty demand.
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2007 (6) TMI 559
Issues Involved:
1. Legislative competence of the State to levy tax on lotteries.
2. Validity of Section 6 of the Act concerning extra-territorial operation.
3. Vagueness and enforceability of the statute.
4. Levy of tax in advance of the draw.
5. Allegation of the Act being a colorable legislation.
6. Discrimination and arbitrariness in the increase of tax rate.
7. State's authority to legislate on lotteries of other States.
Summary:
1. Legislative Competence of the State to Levy Tax on Lotteries:
The petitioners challenged the legislative competence of the State to levy tax on lotteries, arguing that the subject is covered by Central legislation u/s Entry 40 of List I of the 7th Schedule to the Constitution of India. The court referred to the Supreme Court decision in M/S.B.R.ENTERPRISES V. STATE OF U.P. (AIR 1999 SC 1867), which classified lottery as "gambling." The court upheld that tax on lottery is covered by Entry 62 of the State List, which authorizes the State to levy taxes on "gambling." The court concluded that the impugned Act is a valid piece of legislation enacted under Entry 62 of the State List.
2. Validity of Section 6 of the Act Concerning Extra-Territorial Operation:
The petitioners contended that the levy of tax on the "draw" taking place outside the State is beyond the State's territorial jurisdiction. The court examined Sections 2(l), 6, and 7 of the Act and concluded that the activity attracting tax is the conduct of lotteries, which involves the sale of lottery tickets within the State. The court held that the Act does not have extra-territorial operation and rejected this contention.
3. Vagueness and Enforceability of the Statute:
The petitioners argued that the provisions of the Act are vague and incapable of implementation. The court noted that the second petitioner had taken registration as a promoter and paid tax for two years, demonstrating that the statute is free from vagueness. The court rejected this contention.
4. Levy of Tax in Advance of the Draw:
The petitioners contended that the tax is levied in advance of the draw, which is unauthorized. The court held that the draw is only the method for selecting the winner, and the gambling activity starts with the sale of tickets. The court concluded that the provision for advance collection of tax is valid and rejected this argument.
5. Allegation of the Act Being a Colorable Legislation:
The petitioners argued that the Act is a colorable legislation to levy tax on the sale of lottery tickets. The court noted that the Act levies tax on every draw at a specific rate, unrelated to the sale of lottery tickets. The court rejected this contention.
6. Discrimination and Arbitrariness in the Increase of Tax Rate:
The petitioners alleged discrimination and arbitrariness in the increase of the tax rate from Rs. 2.5 lakhs to Rs. 5 lakhs per draw. The court found that the Kerala State Lottery Department complied with the statutory provisions and paid the tax. The court concluded that the revised tax rate is acceptable and rejected the allegation of discrimination.
7. State's Authority to Legislate on Lotteries of Other States:
The petitioners argued that the State cannot make any law on lotteries of other States and that its executive power under Article 298 of the Constitution does not extend beyond its territorial jurisdiction. The court held that the tax on lotteries is a tax on gambling and does not regulate or interfere with the right of another State to conduct lottery business. The court concluded that the State law can authorize tax on State-lottery and dismissed this argument.
Conclusion:
In view of the above findings, the Writ Petition is dismissed.
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2007 (6) TMI 558
Issues Involved:
1. Investigation into the affairs of the respondent company under Section 237 of the Companies Act, 1956.
2. Allegations of financial irregularities and mismanagement by the respondent company.
3. Delays and latches in filing the petition.
4. Connections and transactions between the respondent company and related entities.
5. Validity and scope of the petitioner's claims and evidence.
6. Appropriate remedies and orders under Section 237 of the Companies Act, 1956.
Detailed Analysis:
1. Investigation into the Affairs of the Respondent Company:
The petitioner, Bank of Rajasthan Ltd., sought an investigation into the affairs of Rajasthan Breweries Limited (RBL) under Section 237 of the Companies Act, 1956. The bank alleged that RBL had committed defaults in repayment of loans, leading to the appointment of an auditor and subsequent legal proceedings, including a recall notice and actions before the Debt Recovery Tribunal (DRT).
2. Allegations of Financial Irregularities and Mismanagement:
The petition highlighted several financial irregularities, including:
- Conversion of loans into equity and subsequent cancellation of shares.
- Sale of the Beer Plant without proper valuation or permission from DRT.
- Writing off debts and advances without adequate details or recovery efforts.
- Transactions with interconnected companies, leading to losses and mismanagement.
The BIFR's order dated 16-7-2002 noted several discrepancies, such as the dubious sale of shares of ACIL and the unexplained increase in expenses despite a drop in sales.
3. Delays and Latches in Filing the Petition:
The respondents argued that the petition was barred by latches, as it was filed four years after the bank became aware of the financial irregularities. However, the Board found this preliminary objection untenable, stating that the provisions of the Limitation Act, 1963, do not apply to the proceedings of this quasi-judicial authority. The Board emphasized that there were no latches justifying the dismissal of the petition at the threshold.
4. Connections and Transactions Between the Respondent Company and Related Entities:
The petitioners argued that RBL had been managing its affairs to defraud creditors with the aid of interconnected companies. The respondents countered that there was no connection between RBL and the other entities mentioned. However, the Board found that the transactions and the involvement of common directors indicated a close connection and potential misconduct.
5. Validity and Scope of the Petitioner's Claims and Evidence:
The respondents contended that the petitioner had not provided all relevant documents, such as the agreement dated 20-1-1995 and the auditor's report. They also argued that the bank had misrepresented facts and failed to establish connections between the respondent companies. The Board, however, found that the petitioner's case was strong, with specific instances of misconduct and irregularities substantiated by the BIFR's findings.
6. Appropriate Remedies and Orders under Section 237 of the Companies Act, 1956:
The Board concluded that the conditions for ordering an investigation under Section 237(b) were met. The facts and circumstances demonstrated that the business of the company was conducted for fraudulent and unlawful purposes, with the management guilty of fraud and misconduct. The Board ordered an investigation by the Central Government under Section 237(b) to uncover the true state of affairs.
The petitioner's request to supersede the Board of Directors and appoint an Administrator was deemed beyond the scope of Section 237. The investigation was seen as an exploratory measure to establish the facts and not a judgment.
Conclusion:
The petition was allowed, and an investigation under Section 237(b) of the Companies Act, 1956, was ordered to be carried out by the Central Government. This decision was based on the prima facie evidence of financial irregularities, mismanagement, and fraudulent conduct by the respondent company, as substantiated by the petitioner's claims and the BIFR's findings.
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2007 (6) TMI 557
Issues involved:
The appeal challenges the judgment of the Rajasthan High Court dismissing the appellant's appeal against conviction u/s 302 IPC for rigorous imprisonment for life and a fine. The key issue is the applicability of Section 84 IPC regarding the accused's alleged unsoundness of mind at the time of the offense.
Prosecution Version:
The incident involved the accused carrying the chopped head of the deceased with a blood-stained sickle, leading to his arrest. Witness testimonies and police investigation supported the prosecution's case.
Defense Plea and Arguments:
The defense argued that the accused's unsoundness of mind, due to a family history of insanity, should have been considered under Section 84 IPC. However, the trial court and High Court rejected this plea.
Legal Test of Responsibility:
Section 84 IPC defines unsoundness of mind as a ground for exoneration from liability if the accused was incapable of knowing the nature of the act or that it was wrong or contrary to law. The burden of proving unsoundness of mind rests on the accused.
Types of Mental Disorders:
The judgment discusses different types of mental disorders like idiocy, lunacy, and madness, emphasizing the distinction between legal and medical insanity in criminal responsibility.
Application of Section 84 IPC:
The accused's behavior, treatment history, and conduct during and after the offense were considered to determine the applicability of Section 84 IPC. The judgment concludes that in this case, the protection under Section 84 IPC cannot be applied.
Conclusion:
The appeal was dismissed as without merit, affirming the conviction under Section 302 IPC. The judgment suggests immediate treatment for the accused if required by jail authorities at a reputable mental hospital.
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2007 (6) TMI 556
Issues Involved:
1. Allegations of oppression and mismanagement u/s 397 and 398 of the Companies Act, 1956.
2. Misappropriation and diversion of funds.
3. Legality of the appointment of directors.
4. Maintainability of the petition under Sections 397 and 398.
5. Allegations of criminal activities and defamation.
Summary:
1. Allegations of Oppression and Mismanagement u/s 397 and 398:
The petitioners alleged that the respondents conducted the business of the respondent company in a manner oppressive to the petitioners and prejudicial to their interests. The petitioners held 48% of the paid-up equity capital, while the respondents diverted the business and funds to H.K. Goods Transport Pvt. Ltd., a company floated by R-2 with his wife and son as directors. The respondents argued that the petition under Sections 397 and 398 is maintainable only if the company is carrying on its functions and doing business at the time of filing the petition. They contended that the company had not been doing any business since November 1999.
2. Misappropriation and Diversion of Funds:
The petitioners accused R-2 of making unwarranted cash withdrawals and diverting funds to H.K. Goods Transport Pvt. Ltd. The respondents denied these allegations, stating that the business came to a standstill due to the petitioner's actions, including writing letters to freeze the company's bank accounts. The Division Bench of the Hon'ble High Court of Delhi had previously found no documentary evidence to show that funds were diverted from Pindi Road Links Pvt. Ltd. to H.K. Goods Transport Pvt. Ltd.
3. Legality of the Appointment of Directors:
The petitioners challenged the appointment of R-3 as a director, arguing that it was illegal and void. They claimed that P-1 was fraudulently shown as having vacated the office of Director u/s 283(1)(g) of the Act. The respondents maintained that the appointment was in accordance with the law.
4. Maintainability of the Petition under Sections 397 and 398:
The respondents raised preliminary objections regarding the maintainability of the petition, arguing that the company had not been carrying on any business for more than five years. They cited various judgments to support their contention that past acts which have come to an end cannot be challenged under Sections 397 and 398. The Board, however, found that the continuity of oppression and mismanagement could not be denied, as the business was allegedly continuing in the name of H.K. Goods Transport Pvt. Ltd.
5. Allegations of Criminal Activities and Defamation:
The respondents accused the petitioner of indulging in criminal activities, including the illegal sale of company assets. They also pointed out that the petitioner had been restrained by the Hon'ble High Court of Delhi from writing defamatory letters against the respondents. The Board found that the respondents had not come with clean hands and that the diversion of assets and goodwill to H.K. Goods Transport Pvt. Ltd. was established.
Order:
i. R-2 and R-3 were directed to restore the siphoned-off funds to the R-1's account forthwith.
ii. R-1 was directed to appoint an independent auditor to render proper accounts from 1.4.99 till date.
iii. The induction of R-3 on the Board was declared null and void, and status quo ante was restored.
iv. P-1 was restored as Director on the Board until he leaves R-1 upon payment of the value of his shares, to be determined by an independent valuer.
v. The parties were given liberty to apply in case of any difficulty in implementing the order.
With these directions, the Company Petition No. 32/2002 was allowed, all interim orders were vacated, and all CAs were disposed of with no order as to cost.
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2007 (6) TMI 555
Issues Involved:
1. Mental health of the respondent before marriage.
2. Allegations of harassment for dowry.
3. Applicability of the Protection of Women from Domestic Violence Act, 2005 to female respondents.
4. Recording of the respondent's statement by the Magistrate.
5. Requirement of a report from the Protection Officer.
6. Relief of penalizing the petitioners.
Summary:
Issue 1: Mental health of the respondent before marriage
The petitioners claimed that the respondent was mentally sick before marriage, which was not disclosed. They argued that the application u/s 12 of the Protection of Women from Domestic Violence Act, 2005 was filed to create pressure, following a failed reconciliation in divorce proceedings initiated by petitioner No. 1. The court held that the truthfulness of these claims cannot be decided in summary proceedings u/s 482 of Cr.PC and must be determined by the Magistrate after due inquiry.
Issue 2: Allegations of harassment for dowry
The petitioners contended that the respondent did not mention the harassment for dowry in her application u/s 9 of the Hindu Marriage Act, thus claiming the grounds were false. The court reiterated that the veracity of these allegations should be examined by the Magistrate and not in summary proceedings u/s 482 of Cr.PC.
Issue 3: Applicability of the Protection of Women from Domestic Violence Act, 2005 to female respondents
The petitioners argued that u/s 2(q) of the Act, the application u/s 12 cannot be filed against female respondents (petitioner Nos. 3 and 4). The court agreed, stating that the definition of "respondent" under the Act refers to an adult male person, and thus the application against petitioner Nos. 3 and 4 is not maintainable.
Issue 4: Recording of the respondent's statement by the Magistrate
The petitioners challenged the recording of the respondent's statement by the Magistrate before issuing notice, which is not required u/s 12 of the Act. The court acknowledged this but held that it cannot be a ground for quashing the proceedings, as the Magistrate is allowed to lay down its own procedure for disposal of an application u/s 12 of the Act.
Issue 5: Requirement of a report from the Protection Officer
The petitioners argued that no report from the Protection Officer was called before issuing notice. The court clarified that it is not obligatory for the Magistrate to call for such a report before issuing notice; the report must be considered before passing any final order on the application.
Issue 6: Relief of penalizing the petitioners
The petitioners contended that the application's prayer for penalizing them was beyond the Act's provisions. The court noted that while such a relief was unnecessary at this stage, it cannot be a ground to quash the proceedings; unnecessary reliefs can be negated.
Conclusion:
The petition was partly allowed. The proceedings against petitioner Nos. 3 and 4 were quashed. The Magistrate was directed to deal with the application as per the Act's provisions.
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2007 (6) TMI 554
The Bombay High Court issued an order on 6th July, 2007, stating that the respondents cannot levy or collect further tax from the petitioner. The petitioner is allowed to continue their lawful business without obstruction, but unlawful business is not permitted. The investigation by the respondents, including the seizure of computers, is allowed to proceed. The petitioner can challenge the action independently. The case is to be placed along with a group of matters on 6th July, 2007.
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2007 (6) TMI 553
Issues Involved:
1. Validity of the revisional order under Section 35 of the KGST Act.
2. Limitation period for initiating revisional proceedings under Section 35(2) of the KGST Act.
Summary:
Issue 1: Validity of the Revisional Order u/s 35 of the KGST Act
The petitioner, a partnership firm engaged in the jewellery business, challenged the revisional order passed by the Deputy Commissioner under Section 35 of the Kerala General Sales Tax Act, 1963 (KGST Act). The initial assessment for the year 1997-98 was completed on 14.01.1999. The petitioner filed appeals, and the Kerala Sales Tax Appellate Tribunal eventually allowed the appeal, directing the assessing authority to accept the accounts. Consequently, a fresh assessment order was passed on 26.12.2002.
The revisional authority issued a notice u/s 35 of the KGST Act on 2.8.2004, proposing to revise the assessment order dated 26.12.2002, citing irregularities and prejudice to the Revenue. The petitioner contended that the notice was beyond the prescribed time limit and requested the proceedings be dropped. However, the revisional authority proceeded to revise the order, leading to the petitioner filing an appeal before the Kerala Sales-tax Appellate Tribunal, which was rejected.
Issue 2: Limitation Period for Initiating Revisional Proceedings u/s 35(2) of the KGST Act
The petitioner argued that the notice issued by the revisional authority was beyond the time limit prescribed under Section 35(2) of the KGST Act. According to the petitioner, the revisional authority should have initiated proceedings on or before 13.01.2003 or at least by 19.04.2003. The Revenue contended that the revisional authority was revising the fresh assessment order dated 26.12.2002, and the notice issued on 2.8.2004 was within the limitation period.
The Court examined Section 35 of the KGST Act, which provides the Deputy Commissioner with the power of suo motu revision. Sub-section (2) prohibits revising an order if more than four years have elapsed after the passing of the order. Sub-section (2A) allows the Deputy Commissioner to revise an order on any point not decided in an appeal or revision within one year from the date of the order in such appeal or revision or within four years, whichever is later.
The Court concluded that the revisional authority was revising the order dated 26.12.2002, not the original order dated 14.1.1999, which had merged with the Tribunal's order dated 20.4.2002. Therefore, the notice issued on 2.8.2004 was within the time limit prescribed under Section 35(2) of the Act. The Tribunal rightly rejected the appeal filed by the assessee.
Conclusion:
The questions of law framed by the assessee were answered in the negative and in favor of the Revenue. The revision petition was rejected, and each party was directed to bear its own costs.
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2007 (6) TMI 552
Issues involved:
The issues involved in this case are:
- Whether depreciation on Plant & Machinery is allowable when the Appellant company had suspended its manufacturing activity?
- Whether depreciation on Plant & Machinery is allowable when assets merged in the block of assets in the earlier year?
- Whether depreciation on Plant & Machinery is allowable when the trucks continued to be part of the block of assets used by the company?
- Whether depreciation on Plant & Machinery is allowable based on passive use of the assets?
Issue A:
The Income tax Appellate Tribunal held that depreciation on Plant & Machinery is not allowable because the Appellant company had suspended its manufacturing activity. The Tribunal reasoned that once the business of manufacturing was stopped, the plant and machinery would go out of the block of assets and as they were not used for business purposes, no depreciation could be allowed. This decision was supported by Section 38(2) of the Act, which allows the disallowance of depreciation if the asset is not used for business purposes. The Tribunal also highlighted that there was no evidence that the machinery was intended to be used or kept ready for use, leading to the conclusion that depreciation on plant and machinery would not be allowed.
Issue B:
Regarding the merger of assets in the block of assets, the Tribunal found that depreciation on Plant & Machinery was not allowable when assets merged in the block of assets in the earlier year. However, depreciation related to trucks used for earning income was deemed allowable as they were part of a different block of assets and were used for business purposes.
Issue C:
The Tribunal also addressed the disallowance of depreciation on Plant & Machinery when the trucks continued to be part of the block of assets used by the company. It was determined that depreciation on the trucks would be allowable as they were used for earning income, unlike the plant and machinery which were not utilized for business purposes.
Issue D:
The Tribunal considered whether depreciation on Plant & Machinery is allowable based on passive use of the assets. It was concluded that passive use of the machinery does not warrant depreciation allowance, especially when there is no indication of the intention to resume manufacturing activity. The Tribunal dismissed the appeals, stating that no substantial question of law arose in these cases, and therefore, the appeals were dismissed at the admission stage.
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2007 (6) TMI 551
The Bombay High Court heard the case regarding the liability of the appellant to add profit margin to the cost of production of P.C. Poles. The question of law admitted was whether the appellant needed to add profit margin as per Valuation Rules.
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2007 (6) TMI 550
Issues involved: Interpretation of relief under the agreement for avoidance of double taxation of income u/s Income Tax Act, 1961.
Summary:
The High Court of Gujarat was presented with a question regarding the entitlement of the assessee to relief under the agreement for the avoidance of double taxation of income. The Court referred to a previous decision and emphasized that liability to tax is a legal situation, distinct from the actual payment of tax. The Court highlighted the importance of the Model Tax Convention of 1992 and the conditions for claiming relief under the agreement. It was noted that the assessee must demonstrate liability to tax in the foreign country with which the agreement was made, rather than proof of actual tax payment. The Court directed that the provisions of the foreign country's tax statute should be presented, and both parties should have the opportunity to provide evidence. The Court declined to answer the questions referred, instructing the Tribunal to decide the issue based on the additional evidence to be presented by the parties. The matter was remanded to the authorities to reevaluate the facts in light of the Court's discussion in a previous case and determine whether the benefit of the agreement for avoiding double taxation could be granted to the assessee.
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2007 (6) TMI 549
Issues Involved:
1. Compliance with Sections 94 and 97 of the Companies Act, 1956.
2. Payment of requisite fee/stamp duty on enhanced share capital.
3. Objection by a shareholder regarding information suppression and valuation.
Summary:
1. Compliance with Sections 94 and 97 of the Companies Act, 1956:
The main objection of the Registrar of Companies was that the petitioner must comply with Sections 94 and 97 before approaching the Court for amalgamation. The Court referenced the Andhra Pradesh High Court's decision in Saboo Leasing (P) Limited In Re., which held that the certified copy of the Court's order sanctioning the scheme, filed with the Registrar within 30 days, serves as sufficient notice under Sections 95 and 97. The Court concluded that the provisions of Sections 94 to 97 are complied with in the scheme of amalgamation, and there is no infraction of these provisions.
2. Payment of requisite fee/stamp duty on enhanced share capital:
The second objection raised was regarding the payment of requisite fee/stamp duty on the enhanced share capital. The Court cited various judgments, including Jaypee Cement Limited and Vasant Investment Corporation Limited, which held that upon merger, the combined authorized share capital does not necessitate additional fee/stamp duty payment. The Court concluded that since the requisite fee/stamp duty has already been paid on the authorized share capital of the respective companies, there is no obligation to pay again on the same authorized capital.
3. Objection by a shareholder regarding information suppression and valuation:
A shareholder objected to the scheme, alleging suppression of information and disputing the valuation and exchange ratio of shares. The Court noted that the shareholder did not attend the meeting and was informed to review the documents at the company's registered office, which he failed to do. The Court found no statutory obligation to provide three years of balance sheets and deemed the majority decision of the shareholders as just and fair. The valuation by Deloitte Haskin and Sells was accepted as fair and reasonable by the Board of Directors of both companies, and the Court held that it is not for the Court to substitute its judgment over the commercial wisdom of the shareholders.
Conclusion:
The Court found that all requisite statutory procedures were complied with, and the scheme was approved by the requisite majority. The scheme of amalgamation was sanctioned, binding on the petitioner company, its shareholders, and creditors. The petitioner was directed to file the certified copy of the order with the Registrar of Companies within thirty days. The office was instructed to draw up a decree in Form No. 42, with no costs awarded.
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2007 (6) TMI 548
Issues involved: Challenge to order upholding conviction under Sections 342, 365, and 330 u/s 34 IPC, confusion regarding concession on conviction, mis-conceived appeal.
Summary:
Issue 1: Conviction and Sentence
The appeal challenged the order upholding the conviction of the appellants under Sections 342, 365, and 330 read with Section 34 of the IPC. The High Court noted that the conviction was not questioned, and only the quantum of sentence was debated. It was observed that the conviction was not in dispute, and the focus was on the severity of the sentence. The High Court found that the sentence was not disproportionate considering the nature of the offenses.
Issue 2: Alleged Confusion on Conviction
The appellants' counsel argued that there was confusion as the appellants never instructed not to challenge the conviction. They claimed that the conviction lacked material and basis, contrary to the concession made before the High Court.
Issue 3: Mis-conceived Appeal
The respondent-State's counsel contended that since the conviction was conceded to be in order before the High Court, the present appeal was mis-conceived. Reference was made to legal precedents emphasizing the finality of statements recorded in court judgments and the limited scope for challenging them later.
The Supreme Court declined to interfere in the matter, citing the need for parties to address discrepancies in court records promptly. However, the Court clarified that if a motion was filed before the High Court claiming no concession was made, it would be duly considered in accordance with the law. Ultimately, the appeal was dismissed.
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2007 (6) TMI 547
Issues Involved:
1. Legality of the judgment and decree dated 30-10-1999.
2. Ownership and partition of the suit land.
3. Validity of sale-deeds dated 11-10-1990 and 15-10-1990.
4. Jurisdiction of the Civil Court.
5. Service of statutory notices.
6. Allegations of fraud and collusion.
7. Delay and laches in filing the writ petition.
8. Availability of alternate remedy.
Detailed Analysis:
1. Legality of the Judgment and Decree:
The petitioner-MHADA questioned the legality and validity of the judgment and decree dated 30-10-1999, which directed the petitioner to release 40% of the total surplus land in light of the Circular dated 23-8-1988 of the State Government.
2. Ownership and Partition of the Suit Land:
The suit land was declared surplus under the Urban Land (Ceiling and Regulation) Act, 1976, and vested in the State Government. The original plaintiff, Ramji, claimed ownership through partition among his brothers, but no evidence of such partition was provided. The Civil Court failed to ascertain whether Gomaji or Ramji was the real owner of the suit land.
3. Validity of Sale-Deeds:
The sale-deeds dated 11-10-1990 and 15-10-1990 executed by Ramji were declared illegal as the land had already vested in the State Government by notification dated 26-10-1989. The transactions were null and void under Section 10(4) of the Ceiling Act.
4. Jurisdiction of the Civil Court:
The Civil Court's jurisdiction was challenged based on Section 33 of the Ceiling Act and Section 177 of the MHADA Act, which bar the Civil Court from entertaining such suits. The trial Court failed to address its jurisdiction before passing the judgment and decree.
5. Service of Statutory Notices:
The suit was liable to be dismissed due to the absence of statutory notices under Section 80 of the Code of Civil Procedure and Section 173 of the MHADA Act. The Civil Court overlooked this procedural requirement.
6. Allegations of Fraud and Collusion:
A joint pursis (Ex. 56) was filed without the consent of the Government Pleader, and the evidence recorded was fraudulent. The trial Court acted on this pursis and passed the judgment and decree on the same day, indicating collusion and fraud. The Supreme Court's precedents on fraud and collusion were cited to support this finding.
7. Delay and Laches in Filing the Writ Petition:
The delay of seven years in filing the writ petition was explained by the petitioners through various correspondences and affidavits. The Court found the explanation satisfactory and rejected the argument of delay and laches.
8. Availability of Alternate Remedy:
The argument that the petition should be dismissed due to the availability of an alternate remedy under Section 96 of the Code of Civil Procedure was rejected. The Court held that in cases of fraud and collusion, the High Court has the jurisdiction to set aside the impugned judgment and decree under Articles 226 and 227 of the Constitution.
Conclusion:
The writ petition was allowed, and the impugned judgment and decree dated 30-10-1999 were quashed and set aside. The trial Court was directed to decide the suit afresh, ignoring the pursis (Ex. 56) and addressing all issues comprehensively. The respondents were ordered to pay costs of Rs. 10,000/- to the petitioners within four weeks.
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2007 (6) TMI 546
Issues Involved:
1. Allegations of oppression and mismanagement.
2. Validity of the Board and AGM meetings.
3. Illegal transfer and allotment of shares.
4. Compliance with interim orders and contempt proceedings.
5. Maintainability of the petition and preliminary objections.
Issue-wise Detailed Analysis:
1. Allegations of Oppression and Mismanagement:
The petitioners alleged acts of oppression and mismanagement under Sections 397, 398, and 402 of the Companies Act, 1956. Specific grievances included illegal control of the company by respondents, fraudulent resolutions, and unauthorized share allotments. The petitioners contended that the respondents manipulated records, fabricated transfer share registers, and tampered with statutory records. Instances included unauthorized transfer of shares belonging to various individuals to the respondents' family members, fraudulent share allotments, and misappropriation of company assets.
2. Validity of the Board and AGM Meetings:
The petitioners challenged the validity of several meetings, including the Board Meeting on 23.08.1996 and the AGM on 9.09.1996. They argued that these meetings were held without proper notice, lacked quorum, and were conducted in contravention of the Companies Act. The removal of P-8 as Chairman and the unauthorized increase in share capital from Rs. 50 lakhs to Rs. 65 lakhs were specifically highlighted. The respondents failed to provide documentary evidence or arguments to substantiate the legality of these meetings.
3. Illegal Transfer and Allotment of Shares:
The petitioners alleged that the respondents illegally transferred shares of deceased or inactive shareholders to their own names without proper authority. Specific instances included the transfer of shares belonging to Jhaimal Singh, Mandip Singh, and others. The petitioners also contended that the increase in share capital and subsequent allotment of 60,000 shares to the respondents' group were fraudulent and not in compliance with Section 81 of the Companies Act. The Local Commissioner's report supported these allegations, pointing out discrepancies and lack of satisfactory explanations from the respondents.
4. Compliance with Interim Orders and Contempt Proceedings:
The petitioners argued that the respondents failed to comply with interim orders issued by the Company Law Board (CLB), including directions to deposit daily collections and produce transfer deeds. The petitioners filed applications seeking contempt proceedings against the respondents for non-compliance. The respondents' deliberate disregard for CLB's orders further demonstrated their oppressive and mismanaged conduct.
5. Maintainability of the Petition and Preliminary Objections:
The respondents raised preliminary objections, arguing that the petition was not maintainable due to lack of continuous cause of action, delay in filing, and defective consent letters. They contended that the petitioners' grievances related to events from 1996 and 1998, making the 2001 petition time-barred. However, the CLB held that the Limitation Act does not apply to its quasi-judicial functioning and that the petitioners had been diligently pursuing their grievances. The CLB also dismissed objections regarding defective consent letters, emphasizing the need for substantial justice over technical defects.
Conclusion and Orders:
The CLB found the allegations of oppression and mismanagement substantiated and ruled in favor of the petitioners. The following orders were issued:
1. The removal of P-8 as Chairman and P-3 as General Manager was set aside, and status quo ante was restored.
2. The Board Meeting on 23.08.1996 and the AGM on 9.09.1996 were declared null and void.
3. The increase in share capital from Rs. 50 lakhs to Rs. 65 lakhs and the allotment of 60,000 shares to the respondents' group were set aside.
4. The R-1 company was directed to implement these directions forthwith.
The company petition No. 68 of 2001 was allowed, all interim orders were vacated, and all connected applications were disposed of with no order as to costs.
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2007 (6) TMI 545
Acquittal Order passed by HC by setting aside the conviction - non-compliance of mandatory requirement of Section 50 - meaning of the words "search any person" - Offence punishable u/s 17 of the Narcotic Drugs & Psychotropic Substance Act, 1985 ('Act') - HELD THAT:- This Court has also followed this principle right from the beginning. In Jugalkishore Saraf v. Raw Cotton Co. Ltd.[1955 (3) TMI 38 - SUPREME COURT] held that: -"The cardinal rule of construction of statutes is to read the statute literally, that is, by giving to the words used by the legislature their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation."
A bag, briefcase or any such article or container, etc. can, under no circumstances, be treated as body of a human being. They are given a separate name and are identifiable as such. They cannot even remotely be treated to be part of the body of a human being. Depending upon the physical capacity of a person, he may carry any number of items like a bag, a briefcase, a suitcase, a tin box, a thaila, a jhola, a gathri, a holdall, a carton, etc. of varying size, dimension or weight. However, while carrying or moving along with them, some extra effort or energy would be required. They would have to be carried either by the hand or hung on the shoulder or back or placed on the head. In common parlance it would be said that a person is carrying a particular article, specifying the manner in which it was carried like hand, shoulder, back or head, etc. Therefore, it is not possible to include these articles within the ambit of the word "person" occurring in Section 50 of the Act.
The scope and ambit of Section 50 of the Act was examined in considerable detail by a Constitution Bench in State of Punjab v. Baldev Singh[1999 (7) TMI 630 - SUPREME COURT] : "12. On its plain reading, Section 50 would come into play only in the case of a search of a person as distinguished from search of any premises etc. However, if the empowered officer, without any prior information as contemplated by Section 42 of the Act makes a search or causes arrest of a person during the normal course of investigation into an offence or suspected offence and on completion of that search, a contraband under the NDPS Act is also recovered, the requirements of Section 50 of the Act are not attracted."
In view of the aforesaid judgment by a three Judge Bench of this Court, the acquittal, as directed by the High Court, is clearly unsustainable. However, we find that other points were urged in support of the appeal before the High Court, but the High Court allowed the appeal filed by the accused only on the ground of non-compliance of Section 50 of the Act. It did not examine the other grounds of challenge. We, therefore, remit the matter to the High Court to hear the appeal afresh on grounds other than that of alleged non-compliance with Section 50 of the Act, which, as noted above, has no application to the facts of the case.
The appeal is allowed to the aforesaid extent.
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2007 (6) TMI 544
Opium Recovered - Acquittal Order passed by HC by setting aside the conviction - non-compliance with the mandatory requirements of Section 50 - Offence punishable u/s 18 of the Narcotic Drugs and Psychotropic Substances Act, 1985 ('Act') - HELD THAT:- This Court has also followed this principle right from the beginning. In Jugalkishore Saraf v. Raw Cotton Co. Ltd.[1955 (3) TMI 38 - SUPREME COURT] held that: -"The cardinal rule of construction of statutes is to read the statute literally, that is, by giving to the words used by the legislature their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation."
A bag, briefcase or any such article or container, etc. can, under no circumstances, be treated as body of a human being. They are given a separate name and are identifiable as such. They cannot even remotely be treated to be part of the body of a human being. Depending upon the physical capacity of a person, he may carry any number of items like a bag, a briefcase, a suitcase, a tin box, a thaila, a jhola, a gathri, a holdall, a carton, etc. of varying size, dimension or weight. However, while carrying or moving along with them, some extra effort or energy would be required. They would have to be carried either by the hand or hung on the shoulder or back or placed on the head. In common parlance it would be said that a person is carrying a particular article, specifying the manner in which it was carried like hand, shoulder, back or head, etc. Therefore, it is not possible to include these articles within the ambit of the word "person" occurring in Section 50 of the Act.
The scope and ambit of Section 50 of the Act was examined in considerable detail by a Constitution Bench in State of Punjab v. Baldev Singh[1999 (7) TMI 630 - SUPREME COURT] : "12. On its plain reading, Section 50 would come into play only in the case of a search of a person as distinguished from search of any premises etc. However, if the empowered officer, without any prior information as contemplated by Section 42 of the Act makes a search or causes arrest of a person during the normal course of investigation into an offence or suspected offence and on completion of that search, a contraband under the NDPS Act is also recovered, the requirements of Section 50 of the Act are not attracted."
In view of the aforesaid judgment by a three Judge Bench of this Court, the acquittal, as directed by the High Court, is clearly unsustainable. However, we find that other points were urged in support of the appeal before the High Court, but the High Court allowed the appeal filed by the accused only on the ground of non-compliance of Section 50 of the Act. It did not examine the other grounds of challenge. We, therefore, remit the matter to the High Court to hear the appeal afresh on grounds other than that of alleged non-compliance with Section 50 of the Act, which, as noted above, has no application to the facts of the case.
The appeal is allowed to the aforesaid extent.
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2007 (6) TMI 543
Acts of oppression and mismanagement - removal of director - Increase in the shareholding - company maintaining two sets of Minutes, one signed and other not signed - Petitioner No.1 himself was a wrong doer - HELD THAT:- In the present petition the respondents have succeeded in proving the unclean hands of the petitioner. The petitioner himself being a wrong doer is not entitled to any relief and it is settled law that the CLB may refuse to grant relief where the petitioner does not come to the court with clean hands. Thus, I find that the petition is not maintainable even on the basis of the preliminary objections raised in this case.
I find that the respondents are right in contending that the provisions of Section 80(1A) are not applicable to this case and that the removal of the petitioner as director has been as per the compliance with the law. The petitioner was very much aware of his removal, he was served with the notice of EGM on 13.1.2003. Though the petitioner has denied the receipt of this notice served under Certificate of Posting, the circumstances of assessee make it amply evident that the petitioner was in full knowledge of his removal from 4.1.2003 when the first notice of his removal was received by him. However, even if the petitioner's contention is believed to be true that the last notice sent under Certificate of Posting was not received by him an action in contravention of law may not per se be oppressive. The CLB, however, will have to consider the entire materials on record and the totality of the circumstances of the case. Otherwise too, the directorial complaints cannot be entertained in a petition under Sections 397 and 398 of the case and particularly so when the petition already stands dismissed on account of preliminary objections.
Increase in the shareholding, the petitioner had failed to make out a case that the petitioner groups' shareholding has been reduced from 51.40% to 33.33%, that it has been made with merely for an extraneous purpose and not in the interest of the company but to gain control over the affairs of the company. Rather it is a case where the petitioners' had themselves consented, though a tacit consent, to revert back their shareholding to 33.33.% for each of the promoters/directors from 51% immediately after the transfer of land (belonging to AVI trading partnership firm of petitioners) in the name of AVI Sales Pvt. Ltd. i.e. the respondent No.1 company to get over the hassles and to override the provisions of liability of transfer charges. Thus, even this allegation of petitioner fails on account of their consent and acquiescence as this transfer and reduction in share was done on 18.2.2002 and this petition has been filed in Feb. 2005.
As regarding the only other allegation of maintaining two sets of Minute Books of Meetings, the CLB's Bench Officer's report explains it all. The unsigned minutes were basically a computer printout taken in the absence of directors. The petitioners have failed to make out a case even on merits.
Thus, I find no reason to allow the petition. The petition is hereby dismissed. All interim orders stand vacated. All CAs stand disposed off.
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2007 (6) TMI 542
Issues involved:
1. Confirmation of addition of royalty and interest due to exchange fluctuation
2. Characterization of exchange rate difference compared to royalty
3. Application of Double Taxation Agreement to income from Malaysia
4. Disallowance of depreciation for assets of amalgamated company
5. Disallowance of depreciation on assets not allowed under relevant sections
6. Benefit of unabsorbed depreciation not allowed despite compliance with relevant provisions
Issue I: Confirmation of addition of royalty and interest due to exchange fluctuation
The Tribunal confirmed the addition of royalty and interest received from a Malaysian party as a result of exchange fluctuation. The question of law raised was whether this confirmation was correct under the applicable legal provisions.
Issue II: Characterization of exchange rate difference compared to royalty
The Tribunal also confirmed that the difference in exchange rate, amounting to a specific sum, did not have the same character as royalty derived from Malaysia as per the Agreement for Avoidance of Double Taxation with Malaysia. The legal query was whether this characterization was appropriate under the relevant laws.
Issue III: Application of Double Taxation Agreement to income from Malaysia
Considering the findings that royalty and interest income from Malaysia fell under the exemption method, the issue arose as to whether the provisions of the Agreement for Avoidance of Double Taxation should be interpreted to apply to such income only at the accrual stage and not at the receipt stage in respect of exchange fluctuation.
Issue IV: Disallowance of depreciation for assets of amalgamated company
The Income Tax Appellate Tribunal upheld the disallowance of depreciation amounting to a specific sum concerning the assets of a company that was amalgamated with the appellant company as per the order of BIFR. The question was whether this disallowance was justified under the Income-tax Act, 1961.
Issue V: Disallowance of depreciation on assets not allowed under relevant sections
Another point of contention was the confirmation by the Tribunal of the disallowance of depreciation on the value of assets of the amalgamating company that were not actually allowed under specific sections of the Income-tax Act, 1961.
Issue VI: Benefit of unabsorbed depreciation not allowed despite compliance
Lastly, it was argued whether the Tribunal erred in not allowing the benefit of unabsorbed depreciation, even though compliance with the relevant provisions of the Income-tax Act, 1961, along with the Sick Industrial Companies (Special Provision) Act, 1985, had been met.
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