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1998 (7) TMI 705
Issues:
1. Impleadment of IDBI as a necessary or proper party in a dispute regarding promoters agreement.
2. Suit filed to enforce promoters agreement and rights arising therein.
3. Contention of plaintiff regarding dominus litis and objection by defendant No.1.
4. Stand of IDBI and defendant SPGL on being impleaded as a party.
5. Support of defendant No.3 NTPC for the application.
6. Analysis of the necessity of IDBI's presence in the suit.
7. Legal interest required for being joined as a party.
8. Comparison with legal precedents regarding adding parties in suits.
9. Observations from English judgments on adding parties.
10. Application of tests for adding parties under Order 1 Rule 10 CPC.
11. Conclusion on the necessity of IDBI being impleaded as a party.
Analysis:
1. The core issue in this case revolves around whether IDBI should be impleaded as a necessary or proper party in a dispute concerning the promoters agreement. The plaintiff seeks to enforce the agreement, alleging violations by defendants No. 2 and 3, and the need for amendments in the Articles of Association. The suit aims to ensure the rights arising from the agreement are upheld.
2. The plaintiff, defendant No. 2, and 3 entered a joint venture based on the promoters agreement. The plaintiff alleges violations by the defendants and seeks remedies to address the financial implications of these breaches. The impleadment of IDBI is sought to safeguard public investments and ensure the project's smooth implementation, despite IDBI's stance of not normally involving itself in inter se disputes between promoters.
3. The plaintiff asserts dominus litis in the suit, emphasizing the necessity of IDBI's presence for evidentiary purposes. However, defendant No.1 objects to IDBI's impleadment, citing the overtaking of the promoters agreement by events and the lack of necessity for IDBI's involvement in resolving the disputes.
4. IDBI maintains a neutral stance, emphasizing its role as a financial institution focused on project financing and expressing willingness to abide by the court's decision. Defendant SPGL opposes IDBI's impleadment, arguing that it is neither necessary nor proper, given the lack of claims against IDBI and the evolving nature of the project's ownership structure.
5. Defendant No.3 NTPC supports the application for IDBI's impleadment, aligning with the plaintiff's position on the necessity of IDBI's presence in the suit.
6. The court deliberates on the necessity of IDBI's impleadment, considering the evidentiary value of IDBI's involvement in proving compliance with the promoters agreement. It concludes that IDBI's presence is not essential as a party but may be required for evidentiary purposes, thus dismissing the application for impleading IDBI.
7. Legal interest is a crucial factor for joining a party in proceedings, requiring a recognized stake in the subject matter to curtail legal rights. Mere commercial interest is insufficient for impleadment.
8. Legal precedents, including Razia Begum's case, emphasize the need for a direct interest in the subject matter for adding parties to a suit, highlighting the importance of substantive legal interests in litigation.
9. English judgments further reinforce the requirement of a party having a direct or legal interest in the subject matter, rather than a mere commercial or indirect interest, for impleadment in legal proceedings.
10. The court applies tests for adding parties under Order 1 Rule 10 CPC, emphasizing the need for substantive legal interests and the avoidance of adding parties for extraneous reasons unrelated to the subject matter of the suit.
11. Considering the lack of substantive legal interest for IDBI in the suit's questions, the court concludes that IDBI is neither a necessary nor proper party, leading to the dismissal of the application for its impleadment.
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1998 (7) TMI 704
Issues Involved:
1. Locus Standi of the Petitioner
2. Jurisdiction of the Company Law Board
3. Allegations of Forum Shopping/Jurisdictional Shopping
4. Limitation and Delay in Filing the Petition
5. Parallel Proceedings
Issue-wise Detailed Analysis:
1. Locus Standi of the Petitioner:
The petitioner, holding 15% shares in the company, claimed to have locus standi under Section 397/398 of the Companies Act, 1956. The respondents argued that since the petitioner had agreed to sell his shares, he should not be considered a member under Section 399. However, the Board held that since no consideration for the shares was exchanged and the share certificates were still with the petitioner, he remained a member of the company with more than 10% shareholding, thus qualifying to present the petition.
2. Jurisdiction of the Company Law Board:
The respondents contended that the Company Law Board lacked jurisdiction due to Section 68 of the Companies (Amendment) Act, 1988, which mandates that pending matters in the High Court should continue there. The Board clarified that the High Court's order allowing the withdrawal of the petition and granting liberty to file before the Company Law Board did not confer jurisdiction but allowed the Board to deal with the petition in accordance with the law. Since the petition was filed in 1996, after the jurisdiction had been transferred to the Company Law Board, the Board had the jurisdiction to hear the case.
3. Allegations of Forum Shopping/Jurisdictional Shopping:
The respondents accused the petitioner of forum shopping, arguing that withdrawing the petition from the High Court and refiling it before the Company Law Board constituted an abuse of the process of law. The Board noted that the allegations in both petitions were practically identical and that the petitioner had actively pursued the matter in the High Court for over six years. The Board concluded that the petitioner's actions amounted to forum shopping and an abuse of the process of law.
4. Limitation and Delay in Filing the Petition:
The respondents argued that the petition was barred by limitation as it dealt with events prior to 1990 and was filed only in 1996. The petitioner countered that the effects of the alleged acts of oppression and mismanagement were continuing. The Board acknowledged that while the Limitation Act does not apply to proceedings before it, abnormal delay is considered. Given the six-year gap and the similarity of allegations to the earlier petition, the Board found the petition to be significantly delayed and suffering from laches.
5. Parallel Proceedings:
The respondents highlighted that a similar suit was still pending in the Delhi High Court, suggesting the petitioner was pursuing two remedies simultaneously. The petitioner argued that the suit in the High Court was related to partition of family properties and did not cover the allegations of oppression and mismanagement in the company. The Board did not specifically address this issue in the final decision, focusing instead on the forum shopping and limitation aspects.
Conclusion:
The petition was dismissed on grounds of forum shopping and significant delay. The Board emphasized that the petitioner's actions constituted an abuse of the process of law, and the petition suffered from grave limitation issues. The petition was dismissed without delving into the merits of the allegations, with no order as to costs.
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1998 (7) TMI 703
Issues Involved:
1. Allegations of oppression and mismanagement.
2. Parallel legal proceedings in other forums.
3. Validity of Board Meetings and resolutions.
4. Misappropriation of company funds.
5. Dismissal of a director and improper share transmission.
6. Appointment of additional directors and issuance of shares without quorum.
Detailed Analysis:
1. Allegations of Oppression and Mismanagement:
The petitioners, holding about one-third of the shares in Titan Engineering Co. (P) Ltd., filed a petition under sections 397, 398, 399, 402, and 403 of the Companies Act, 1956, alleging acts of oppression and mismanagement. They claimed that the company, initially managed on a partnership principle, saw a shift in management style that became oppressive and prejudicial to their interests. Specific instances include wrongful transfer of gas cylinders worth Rs. 3 lakhs, aiding fraudulent sales tax activities, and misappropriation of company funds.
2. Parallel Legal Proceedings in Other Forums:
The respondents argued that many allegations were already being addressed in other legal proceedings initiated by the petitioners, such as civil suits and criminal cases. They cited the doctrine of election, asserting that the petitioners, having chosen one forum, could not pursue the same matters in another forum. The Board agreed, noting that most allegations were covered in Title Suit No. 24 of 1993 and other proceedings, and thus, the petitioners should not be allowed to prosecute parallel proceedings.
3. Validity of Board Meetings and Resolutions:
The petitioners alleged irregularities in Board Meetings, such as the failure to hold the 104th meeting and falsification of minutes. They claimed that resolutions passed in several meetings were illegal, null, and void. However, the Board found that these issues were already part of Title Suit No. 24 of 1993 and thus refrained from re-examining them.
4. Misappropriation of Company Funds:
The petitioners highlighted instances of cash shortages and alleged misappropriation by the respondents. They claimed that despite raising these issues in Board Meetings and through letters, no corrective action was taken. However, the Board noted that these allegations were also part of the ongoing civil and criminal proceedings and declined to consider them separately.
5. Dismissal of a Director and Improper Share Transmission:
The petitioners contended that the dismissal of one of the petitioners as a director was in violation of the company's articles of association. They also pointed out inconsistencies in the company's stand regarding the cessation of office by the petitioner. Additionally, they alleged that the company failed to register the shares held by a deceased respondent in the name of his legal heirs. The Board, however, did not delve into these issues as they were part of Title Suit No. 70 of 1994.
6. Appointment of Additional Directors and Issuance of Shares Without Quorum:
The petitioners alleged that the respondent appointed an additional director and issued shares to new shareholders without a quorum, excluding existing shareholders. The Board found these allegations to be part of the ongoing legal proceedings and did not consider them separately.
Conclusion:
The Board dismissed the petition as not maintainable, emphasizing that many allegations were already being addressed in other legal proceedings. They cited the refusal of the civil court to grant liberty to re-agitate the same matters and upheld the principle that a party cannot pursue the same cause of action in multiple forums. Consequently, the petition was dismissed without delving into the merits of the case, and no order as to costs was made.
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1998 (7) TMI 702
Issues Involved:
1. Application u/s 482 of Cr.PC to quash proceedings.
2. Allegations of offence u/s 138 of the Negotiable Instruments Act.
3. Liability of Directors u/s 141 of the Negotiable Instruments Act.
4. Examination of complaint and cognizance by Magistrate.
Summary:
1. Application u/s 482 of Cr.PC to Quash Proceedings:
The petitioners, accused in C.C.No.897 of 1996, filed an application u/s 482 of Cr.PC to quash the proceedings initiated by the respondents for an offence u/s 138 of the Negotiable Instruments Act.
2. Allegations of Offence u/s 138 of the Negotiable Instruments Act:
The accused-company, a tenant of the complainant, issued three cheques towards rent, which were dishonoured due to "insufficient funds." Notices were issued to the accused, but they failed to pay the cheque amount within fifteen days. Consequently, a complaint was filed, and the Magistrate took cognizance u/s 138 read with 142 of the Act and issued summons.
3. Liability of Directors u/s 141 of the Negotiable Instruments Act:
The petitioners argued that petitioners 3 to 7 should not be held liable as they did not issue the cheques and there were no specific allegations against them. The court noted that u/s 141 of the Act, only those who were in charge of and responsible for the conduct of the business at the time of the offence could be held liable. The complaint lacked specific allegations against petitioners 3 to 7, making it inappropriate to hold them liable.
4. Examination of Complaint and Cognizance by Magistrate:
The court emphasized that the Magistrate must meticulously examine the complaint, sworn statements, and documents before taking cognizance. The Magistrate's order must reflect the application of mind. The court found that the complaint did not contain specific allegations against petitioners 3 to 7, and the sworn statement did not reveal anything against them. Therefore, the process should not have been set in motion against these petitioners.
Conclusion:
The proceedings in C.C.No.897 of 1996 were quashed insofar as they related to petitioners 3 to 7. The trial court was directed to proceed with the enquiry and trial only against petitioners 1 and 2, without being influenced by the observations made in this order. The criminal petition was partly allowed.
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1998 (7) TMI 701
Issues Involved:
1. Whether the appellants violated regulation 10 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994.
2. Whether the appellants contravened section 15H of the Securities and Exchange Board of India Act, 1992.
3. Whether the appellants' acquisition of shares was through mortgage/pledge or purchase.
4. Applicability of regulation 3(a) and 3(d) exemptions.
5. Whether the penalty of rupees five lakh was justified.
6. Jurisdiction of the Tribunal to substitute the offence under regulation 9.
Issue-wise Detailed Analysis:
1. Violation of Regulation 10:
The appellants were accused of acquiring about 67% of the equity share capital of Hindustan Finstock Ltd. (HFL) without making a public announcement as required under regulation 10. However, it was established that the appellants were not holding any shares in HFL at the time of acquisition. Regulation 10(1) applies to an acquirer who holds shares carrying ten percent or less of voting rights in the company and intends to acquire further shares from the open market. The Tribunal concluded that since the appellants were not existing shareholders at the time of acquisition, regulation 10(1) did not apply.
2. Contravention of Section 15H:
Section 15H mandates penalties for failing to disclose shareholding or make a public announcement. Given that the acquisition did not fall under the purview of regulation 10, section 15H was deemed inapplicable. The Tribunal held that the appellants did not violate section 15H since the acquisition itself was beyond the scope of the Takeover Regulations.
3. Nature of Acquisition (Mortgage/Pledge vs. Purchase):
The appellants contended that the shares were acquired through mortgage/pledge agreements with the Khandwala family. However, the Memoranda of Understanding (MOUs) clearly indicated that the appellants intended to purchase the shares at a premium after allotment. The Tribunal found no evidence supporting the claim of mortgage or pledge and concluded that the shares were purchased from the Khandwalas.
4. Applicability of Regulation 3(a) and 3(d) Exemptions:
Regulation 3(a) exempts acquisitions by allotment in a public issue, and regulation 3(d) exempts acquisitions in companies whose shares are not listed on any stock exchange. The shares were allotted to the Khandwalas on May 26, 1995, and listed on the stock exchanges on June 14 and 15, 1995. Since the shares were not listed at the time of acquisition, the Tribunal held that the transaction was exempt under regulation 3(d) and did not fall under regulation 10.
5. Justification of Penalty:
The Adjudicating Officer had imposed a penalty of rupees five lakh, the maximum penalty under section 15H. However, since the Tribunal found no contravention of regulation 10 or section 15H, the penalty was deemed unjustified and was set aside.
6. Jurisdiction to Substitute Offence under Regulation 9:
The respondents suggested that if the transaction did not fall under regulation 10, it should be considered under regulation 9, which deals with negotiated acquisitions. The Tribunal rejected this suggestion, stating that it had no jurisdiction to investigate and decide afresh the applicability of regulation 9, as it was an appellate forum limited to reviewing the Adjudicating Officer's order.
Conclusion:
The Tribunal concluded that the appellants did not violate regulation 10 or section 15H. The acquisition was exempt under regulation 3(d) as the shares were not listed at the time of acquisition and were not purchased from the open market. Consequently, the appeal was allowed, and the adjudication order dated September 26, 1997, was set aside.
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1998 (7) TMI 700
The petition challenged an endorsement dated 13.11.1997 on the ground of time limitation under KTEG Act for the year 1989-90. The court dismissed the petition as the period of eight years had not expired due to stay orders. The contention that no reassessment can be made without original assessment was rejected citing a Supreme Court judgment. The argument that time could not be excluded as assessment proceedings were not stayed was also dismissed.
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1998 (7) TMI 699
Issues:
Classification of supertax non-woven carpet under the Tariff.
Entitlement to the benefit of Notification No. 29/95-C.E., dated 16-3-1995.
Classification Issue:
The dispute revolves around the classification of supertax non-woven carpet by the appellants, with the Revenue contending it falls under Heading 5703.90 as other floor coverings, while the appellants argue for classification under Heading 5703.20 as floor coverings of jute. The appellants based their classification on the predominance of jute content by weight over other textile materials, citing Section Note 2A of Section XI. They relied on the decision of the Hon'ble A.P. High Court in a similar case to support their argument. The manufacturing process was detailed to highlight the jute content's significance in the product. The Hon'ble A.P. High Court's decision emphasized the correct classification criteria for goods containing multiple textile materials, supporting the appellants' claim. The Appellate Tribunal, following the High Court's decision, classified the supertax non-woven carpet under Heading 5703.20 as floor coverings of jute, thereby allowing the appeal and setting aside the impugned order.
Entitlement to Notification Benefit Issue:
The Notification No. 29/95-C.E., dated 16-3-1995, provides a concessional rate of duty for floor coverings of jute. As the Appellate Tribunal classified the supertax non-woven carpet under Heading 5703.20 as floor coverings of jute, the appellants are deemed entitled to the benefit of this Notification. Consequently, the impugned order was overturned, and the appeal was allowed in favor of the appellants. The detailed analysis of the classification issue, supported by legal precedents and statutory provisions, led to the decision in favor of the appellants, ensuring their entitlement to the Notification benefit based on the correct classification of the product.
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1998 (7) TMI 698
Issues Involved:
1. Legislative Competence of Parliament to Enact the Central Act.
2. Validity of Provisions of the Central Act.
3. Validity of Provisions of the State Act.
4. Directions Issued by the Gauhati High Court.
Summary:
1. Legislative Competence of Parliament to Enact the Central Act:
The Supreme Court held that Parliament was competent to enact the Armed Forces (Special Powers) Act, 1958 (Central Act) under Entry 2 of List I and Article 248 read with Entry 97 of List I. Post the Forty-Second Amendment, the legislative power flows from Entry 2A of List I. The Act is not a law for maintaining public order falling under Entry 1 of List II. The expression "in aid of the civil power" implies that the armed forces operate in cooperation with the civil administration, not supplanting it.
2. Validity of Provisions of the Central Act:
The Court found that Section 3 of the Central Act does not confer arbitrary power to declare an area as "disturbed" and must be periodically reviewed before the expiry of six months. The power to declare an area as disturbed can be exercised by the Governor, Administrator, or Central Government. Sections 4 and 5, which confer powers on officers of the armed forces, were upheld, noting that these powers must be exercised with minimal force and in compliance with legal safeguards. Section 6, which provides protection against prosecution without Central Government sanction, was also upheld, provided the order granting or refusing sanction is reasoned.
3. Validity of Provisions of the State Act:
The provisions of Sections 3 to 6 of the Assam Disturbed Areas Act, 1955 (State Act) were upheld, except for the words "or any officer of the Assam Rifles not below the rank of Havildar/Jamadar" in Sections 4 and 5, which were struck down as Assam Rifles are part of the armed forces of the Union. The State Act was found to be in pith and substance a law for maintaining public order under Entry 1 of List II, and not repugnant to the Central legislation like Cr.P.C. or the Arms Act.
4. Directions Issued by the Gauhati High Court:
The Supreme Court set aside the Gauhati High Court's directions that limited the application of notifications declaring disturbed areas to specific districts and required monthly reviews. The Court emphasized that periodic reviews should occur every six months. The direction to issue instructions for handling arrested persons was upheld.
Conclusion:
The Supreme Court upheld the validity of the Central Act and the State Act with certain modifications and clarifications, ensuring that the powers conferred are exercised with due safeguards and periodic reviews. The appeals against the Gauhati High Court's judgment were allowed to the extent indicated, while the appeals against the Delhi High Court's judgment were dismissed.
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1998 (7) TMI 697
Issues Involved:
1. Creation and administrative control of the post of Director General of Police, Lok Ayukta.
2. Jurisdiction of entrusting functions under the Prevention of Corruption Act, 1988 to police officers on deputation with the Lok Ayukta.
3. Harmonizing provisions of Section 17 of the Prevention of Corruption Act, 1988 and Section 15 of the Karnataka Lok Ayukta Act, 1984.
4. Continuation of further investigation by police officers on deputation to the Lok Ayukta.
Summary:
Point 1: Creation and Administrative Control of the Post of Director General of Police, Lok Ayukta
The court examined whether the State Government could create the post of Director General of Police, Lok Ayukta by an administrative order dated 21.12.1992, despite the post not being included in the relevant recruitment rules of the Lok Ayukta. The court agreed with the Division Bench that the post, although created by an administrative order, must be treated as part of the Lok Ayukta's staff. The administrative and disciplinary control of the Lok Ayukta over the Director General of Police and the police wing staff was affirmed, thus rejecting the learned Single Judge's view that the independence of the Lok Ayukta was under threat.
Point 2: Jurisdiction of Entrusting Functions under the Prevention of Corruption Act, 1988
The court considered whether the State Government could entrust additional duties under the Prevention of Corruption Act, 1988 to police officers on deputation with the Lok Ayukta. It was held that such entrustment is within the jurisdiction of the State Government under its statutory powers traceable to Section 17 of the Prevention of Corruption Act, 1988. The court noted that the relationship of master and servant between the State of Karnataka and the deputed officers remains intact, and the entrustment has the tacit approval of the Lok Ayukta.
Points 3 and 4: Harmonizing Provisions and Continuation of Investigation
The court addressed how to balance the powers of the State Government under the Prevention of Corruption Act, 1988, and the Lok Ayukta under the Karnataka Lok Ayukta Act, 1984. It was suggested that the State Government should inform the Lok Ayukta before entrusting additional work to deputed officers. If the Lok Ayukta objects, it can direct that these officers will not take up the extra work. However, if no objection is raised at the initial stage, the investigation should continue without interruption. The court upheld the Division Bench's decision that the memorandum dated 2.9.1997 issued by the Lok Ayukta was redundant and invalid.
Conclusion
The Supreme Court dismissed the special leave petitions, affirming the Division Bench's judgment that the further investigation by police officers on deputation with the Lok Ayukta could continue. The court emphasized the importance of maintaining the independence and effective functioning of the Lok Ayukta while allowing the State to exercise its statutory powers.
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1998 (7) TMI 696
Issues Involved:
1. Whether the income of the hospital is exempt under Section 10(22A) of the Income Tax Act.
2. Whether the hospital exists solely for philanthropic purposes and not for profit.
3. Whether the income from the medical research center is exempt under Section 10(21) of the Income Tax Act.
4. Whether certain other incomes (interest from banks, UTI, profit on sale of units, etc.) are exempt.
5. Whether the depreciation on assets should be allowed.
Issue-wise Detailed Analysis:
1. Exemption under Section 10(22A):
The primary question was whether the hospital's income is exempt under Section 10(22A). Two conditions must be satisfied: the hospital should exist solely for philanthropic purposes, and it should not exist for profit. The Kerala High Court in CIT vs. Pulikkal Medical Foundation (P) Ltd. clarified that running a hospital is a philanthropic purpose. The court also noted that free treatment for the poor is not an essential ingredient of philanthropy and that profit earning should only be incidental to the dominant philanthropic purpose. The hospital's consistent deficits over 30 years and the treatment of poor patients free of charge or at subsidized rates indicated that it did not exist solely for profit. The hospital's compliance with the Bombay Public Trust Act and the issuance of certificates by the Director of Health Services further supported its philanthropic nature. Thus, the hospital's income was held exempt under Section 10(22A).
2. Philanthropic Purposes and Profit Motive:
The Assessing Officer (AO) argued that the hospital was run on commercial lines, indicating a profit motive. However, the hospital's deficits and its scheme for treating poor patients free of charge or at concessional rates contradicted this view. The CIT(A) noted that the charges levied by the hospital and the service charges did not prove a profit motive. The hospital's consistent deficits and reliance on donations indicated that profit earning was not the driving force. The facilities provided, such as central air-conditioning and TVs, were deemed part of patient care rather than luxury, and the modern concept of a super-speciality hospital was considered. Thus, the hospital was not run solely for profit.
3. Exemption under Section 10(21) for Medical Research Center:
The CIT(A) initially held that certain incomes of the medical research center were not exempt under Section 10(21) as they were not related to research activities. However, the income and expenditure account showed that the entire income was applied for research purposes, and there was a significant deficit. The CIT(A)'s view that the medical research center and the hospital were closely connected and should be viewed as part of the same object was upheld. Thus, the income of the medical research center was also exempt under Section 10(21).
4. Exemption of Other Incomes:
The CIT(A) examined the nature and source of other incomes such as interest from banks, UTI, profit on sale of units, and donations. He concluded that these incomes had no connection with the hospital's activities and were not exempt. The Tribunal generally agreed with this conclusion, except for the service charges from Indian Overseas Bank, which were connected to the hospital's activities. Thus, the other incomes were not exempt.
5. Depreciation on Assets:
The issue of depreciation on assets was considered academic as the hospital's income was exempt under Section 10(22A). The CIT(A) had directed the AO to consider the claim according to the provisions of law and allow depreciation on the actual cost or written down value. This direction was upheld.
Year-wise Decisions:
Assessment Year 1987-88:
- The assessee's appeal was allowed, granting exemption under Section 10(22A) and deleting the addition of Rs. 5,000 from house property income.
- The Department's appeal was dismissed, upholding the CIT(A)'s decision to treat donations as receipts of the medical research center and exempting them under Section 10(21).
Assessment Year 1988-89:
- The assessee's appeal was allowed, granting exemption under Section 10(22A).
- The Department's appeal was dismissed as the grounds were academic due to the exemption granted.
Assessment Year 1989-90:
- The Department's appeal was dismissed, upholding the exemption under Section 10(22A).
Assessment Year 1990-91:
- The assessee's appeal was dismissed as academic due to the exemption under Section 10(22A).
- The Department's appeal was dismissed, upholding the exemption under Section 10(22A).
Assessment Year 1991-92:
- The assessee's appeal was partly allowed, directing the AO to carry out the Tribunal's decision regarding certain incomes and holding that the amount paid to the medical research center was not applied for non-philanthropic purposes.
- The Department's appeal was dismissed, upholding the exemption under Section 10(22A).
Cross-Objection No. 1141:
- The cross-objection was dismissed as infructuous due to the exemption under Section 10(22A).
Conclusion:
The Tribunal upheld the exemption of the hospital's income under Section 10(22A) and the medical research center's income under Section 10(21), except for certain other incomes not related to the hospital's activities. The issue of depreciation was considered academic due to the exemptions granted. The appeals and cross-objection were disposed of accordingly.
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1998 (7) TMI 695
Issues Involved:
1. Impracticability of calling an extraordinary general meeting.
2. Validity of the requisition dated February 9, 1998.
3. Allegations of misappropriation of funds by the first respondent.
4. Deadlock in the management of the company.
5. Non-attendance of the first respondent at the board meeting.
6. Status and involvement of Mr. Faiz Mohammed.
Issue-wise Detailed Analysis:
1. Impracticability of Calling an Extraordinary General Meeting:
The core issue is whether it is "impracticable" to call an extraordinary general meeting under Section 186 of the Companies Act, 1956. The petitioner argued that the first respondent's refusal to attend meetings created a deadlock, making it impracticable to call a meeting. The petitioner cited various legal precedents to support the claim that "impracticable" is more limited than "impossible" and should be viewed from a reasonable point of view. The first respondent countered that impracticability should not be based on inter-rivalry between shareholders or directors. The judgment concluded that due to the serious disputes and deadlock in management, it was indeed impracticable to call, hold, and conduct an extraordinary general meeting.
2. Validity of the Requisition Dated February 9, 1998:
Pucci SRL, holding 90% of the company's equity shares, sent a requisition on February 9, 1998, to convene an extraordinary general meeting. The first respondent challenged its validity, arguing it lacked a specific resolution from Pucci SRL. The judgment found that while Pucci SRL had the requisite shareholding to convene a meeting, the validity of the requisition was disputed, making it impracticable to convene a meeting under Section 169 of the Act.
3. Allegations of Misappropriation of Funds by the First Respondent:
The petitioner accused the first respondent of misappropriating company funds, which the first respondent denied, stating the funds were used with the petitioner's consent to buy land for future profit sharing. The judgment did not delve deeply into this issue, focusing instead on the broader impracticability of convening a meeting.
4. Deadlock in the Management of the Company:
The petitioner highlighted a serious deadlock in the company's management, causing significant operational paralysis. The judgment acknowledged this deadlock, noting the larger interests of the company and the need to remove the deadlock to ensure proper functioning.
5. Non-attendance of the First Respondent at the Board Meeting:
The first respondent did not attend the board meeting on February 20, 1998, which the petitioner argued was deliberate to avoid quorum. The first respondent cited personal reasons for non-attendance. The judgment found the first respondent's explanation unconvincing and noted the ongoing disputes and strained relationships as factors contributing to the impracticability of convening a meeting.
6. Status and Involvement of Mr. Faiz Mohammed:
Mr. Faiz Mohammed, a subscriber to the memorandum and articles of association, had resigned as a director but continued to be a member. The judgment noted the strained relationship between Mr. Faiz Mohammed and the petitioner, questioning the practicality of convening a meeting with his involvement.
Conclusion:
The judgment directed that a board meeting be convened to fix a date for an extraordinary general meeting. If a board meeting could not be held due to lack of quorum, an extraordinary general meeting should be convened with one member constituting a quorum. The petition was disposed of with these directions, emphasizing the need to address the deadlock and ensure the company's proper functioning. No order as to costs was made.
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1998 (7) TMI 694
Issues Involved:
1. Time-barred assessment
2. Legality of assessment procedure under Chapter XIV-B
3. Additions based on evidence found during search
4. Specific additions challenged by the assessee
Summary:
1. Time-barred assessment:
The first objection raised by the assessee was that the assessment was time-barred. According to section 158BE, the order should have been passed before the end of one year from the end of the month in which the last of the authorizations issued u/s 132(1) was "executed." The assessee argued that the assessment should have been completed by 31-10-1996, but it was completed on 31-12-1996, making it barred by limitation. The Tribunal, however, concluded that the search continued until 20-12-1995, and thus, the assessment completed on 31-12-1996 was within the permissible time limit.
2. Legality of assessment procedure under Chapter XIV-B:
The assessee argued that assessments for searches conducted between 30-6-1995 and 1-1-1997 had to be completed as per the procedure prescribed under Chapter XIV-B of the IT Act. The Tribunal agreed that income under Chapter XIV-B has to be computed u/s 158BB(1) based on "evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the Assessing Officer."
3. Additions based on evidence found during search:
The Tribunal scrutinized various additions made by the Assessing Officer based on evidence found during the search. The Tribunal emphasized that the assessment under Chapter XIV-B should be based on evidence, documents, material, and information found during the search, and not on conjectures, surmises, or estimates.
4. Specific additions challenged by the assessee:
- Cash of Rs. 55,950 and silver articles valued at Rs. 66,625: The Tribunal deleted these additions considering the status and income of the assessee's family.
- Blank hundi papers: The addition of Rs. 1 lakh was deleted as the hundis did not prove any actual transaction.
- Piece of paper showing Rs. 3,18,305: The addition was deleted as the paper could not be linked to the assessee.
- Addition of Rs. 2,96,655 based on a loose paper: Deleted for similar reasons as above.
- Investment in diamond jewelry: The addition of Rs. 6,76,471 was deleted since no such jewelry was found during the search.
- Horse-racing transactions: The addition of Rs. 22,52,219 was reduced to Rs. 22,522.19P.
- Addition of Rs. 5 lakhs: Reduced to Rs. 1 lakh.
- Investment in "Santhana Towers": The addition was reduced to Rs. 60,000.
- Crockery purchases: The addition of Rs. 3,72,600 was deleted.
- Pocket diaries showing loans: The addition of Rs. 88,75,782 was reduced to Rs. 42,000.
- Deposits in bank accounts: The addition of Rs. 37,45,852 was reduced to Rs. 1,45,000, with the issue of the remaining amount set aside for fresh consideration.
- Tenancy rights: The additions of Rs. 12,00,000 and Rs. 20,00,000 were deleted as the tenancy rights were in the names of the assessee's major sons.
- Household expenses: The addition was reduced by Rs. 3,20,000.
- Investment in flat No. 201: The addition of Rs. 7 lakhs was deleted as there was no basis for it.
Conclusion:
The Tribunal partly allowed the appeal, emphasizing that the assessment under Chapter XIV-B should be based on concrete evidence found during the search and not on mere estimates or presumptions.
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1998 (7) TMI 693
Whether the provisions of section 115JA of the Act would be applicable in computing the total income of a foreign company like the applicant ?
Whether in computing the profit attributable to the permanent establishment (‘‘PE’’) of the applicant which is a tax resident of Netherlands, recourse can be had to provisions of section 115JA, having regard to the provisions of the convention for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and on capital entered into by India with the Netherlands (‘‘the treaty’’) ?
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1998 (7) TMI 691
Issues:
1. Refund of excise duty paid under mistake of law.
2. Refund of excise duty based on a judgment of the Customs, Excise Gold Control Appellate Tribunal.
3. Applicability of Section 11B of the Central Excises and Salt Act for refund claims.
4. Time limit for filing refund applications under Section 11B.
Issue 1: Refund of excise duty paid under mistake of law
In the present case, the Kerala State Electricity Board sought a direction for the refund of excise duty paid under a mistake of law. The Collector of Central Excise (Appeals) rejected their applications for refund, leading to the filing of Original Petitions challenging the orders and seeking the return of the excise duty amount. The petitioners claimed that the excise duty was paid under a mistake of law, emphasizing the need for a refund based on this ground.
Issue 2: Refund of excise duty based on a judgment of the Customs, Excise Gold Control Appellate Tribunal
The petitioners also sought a refund of excise duty based on a judgment of the Customs, Excise Gold Control Appellate Tribunal, which held that the petitioners were not manufacturers. Subsequently, the petitioners applied for a refund of the excise duty paid, amounting to a significant sum. The appeal against the Tribunal's order filed by the Collector of Central Excise was dismissed by the Supreme Court, reinforcing the petitioners' claim for a refund based on the Tribunal's judgment.
Issue 3: Applicability of Section 11B of the Central Excises and Salt Act for refund claims
The judgment referred to a decision by a Constitution Bench of the Supreme Court in Mafatlal Industries Ltd. v. Union of India, which clarified the procedure for seeking a refund under the Central Excises and Salt Act. The Bench highlighted that claims for refund, except those arising from the declaration of unconstitutionality, must be preferred and adjudicated under the provisions of the respective enactments. This necessitated the petitioners to make an application under Section 11B of the Act for seeking a refund, as the law declared by the Supreme Court governed all pending matters, including refund claims.
Issue 4: Time limit for filing refund applications under Section 11B
The judgment emphasized the importance of adhering to the time limit prescribed by the Supreme Court for filing refund applications under Section 11B of the Central Excises and Salt Act. As the petitioners failed to make such an application within the specified period, the court noted that the Original Petitions had to be disposed of. The petitioners were advised to seek an extension of time to file their refund application before the Supreme Court, without prejudice to their right to seek appropriate relief.
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1998 (7) TMI 690
Issues:
1. Percentage of breakages claimed by the assessee for bottles used in manufacturing.
2. Genuineness of the price paid by the assessee for the bottles.
3. Deletion of addition towards purchase of complimentary articles claimed by the assessee.
Analysis:
1. Percentage of Breakages:
The case involves a dispute over the percentage of breakages claimed by the assessee for bottles used in manufacturing liquor. The Assessing Officer initially deemed the claimed rate of breakages as excessive, especially for 180 ml. bottles. However, on appeal, the Commissioner (Appeals) estimated an allowance of 11% for breakages, considering the suppliers as genuine. The Tribunal further investigated the matter, confirming the existence of suppliers and explaining the higher breakage rate due to various factors like transportation, cleaning, and the use of high-speed machinery. The Tribunal ultimately determined the breakage rate to be 15.25%, emphasizing that the facts were thoroughly examined, and their decision should be considered final.
2. Genuineness of Price Paid for Bottles:
Regarding the genuineness of the price paid by the assessee for the bottles, the Tribunal found the suppliers to be authentic and justified the higher price due to differences in bottle shapes and sizes. The Tribunal rejected the revenue's plea to refer this question to the Court, emphasizing that it was a factual matter already resolved by the Tribunal's findings. The Court upheld the Tribunal's decision on this issue.
3. Deletion of Addition for Complimentary Articles:
The Court directed a reference on whether the Tribunal's decision to delete the addition towards the purchase of complimentary articles claimed by the assessee was legally sound. This direction was based on a similar issue previously referred by the Court concerning the same assessee for an earlier assessment year. The Tribunal was instructed to provide a statement of the case along with relevant materials to address this question, highlighting the need for a detailed examination of the matter.
In conclusion, the judgment delves into the assessment of breakages, the genuineness of suppliers and prices, and the treatment of claimed expenses for complimentary articles. It emphasizes the importance of factual findings by the Tribunal and the necessity for detailed references on specific legal and factual issues for thorough examination and resolution.
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1998 (7) TMI 689
Issues:
Dismissal of a Lekhpal from service after a departmental inquiry, challenge of dismissal order before U.P. Public Services Tribunal, findings of illegality in departmental proceedings, dismissal of writ petition by High Court.
Departmental Inquiry Findings:
The respondent, a Lekhpal, was dismissed from service after a departmental inquiry. The U.P. Public Services Tribunal found that the inquiry was illegal and void due to failure to supply copies of documents mentioned in the charge-sheet to the respondent, violating principles of natural justice.
Principles of Natural Justice:
The Tribunal's findings were based on the lack of opportunity for the respondent to defend himself effectively, as he was not provided copies of documents or statements relied upon in the inquiry. Previous cases emphasized the importance of supplying documents to the accused for a fair defense.
Legal Precedents:
Cases like Chandrama Tewari vs. Union of India and High Court of Punjab & Haryana vs. Amrik Singh highlighted the necessity of providing copies of documents to the accused in departmental proceedings to ensure fairness and adherence to natural justice principles.
Violation of Natural Justice:
The failure to supply copies of documents and witness statements to the respondent during the preliminary inquiry compromised his ability to defend himself effectively. The appellant's admission that documents were not provided, despite the respondent's right to inspect them, further supported the violation of natural justice principles.
Conclusion:
The appeal was dismissed as the failure to provide essential documents to the respondent infringed upon his right to a fair hearing. The court found no merit in the appeal and ruled in favor of the respondent, emphasizing the importance of upholding natural justice principles in departmental proceedings.
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1998 (7) TMI 688
Case: Sujata V. Manohar and G.B. Pattanaik, JJ. dismissed the Civil Appeal. (Citation: 1998 (7) TMI 688 - SC)
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1998 (7) TMI 687
Issues:
1. Confiscation of imported camera parts due to misdeclaration and misvaluation.
2. Determination of whether the imported goods constituted complete cameras or camera parts.
3. Applicability of the Import Trade Control Policy and relevant entries to the imported goods.
4. Valuation of the imported goods and justification for the fine and penalty imposed.
Confiscation and Misdeclaration:
The appeal challenged the Order-in-Original confiscating a consignment of camera parts imported from Hong Kong. The appellant was given the option to redeem the goods on payment of a fine and penalty due to misdeclaration and misvaluation. The appellant argued that they imported camera parts, not complete cameras, and submitted cost analysis data to support their valuation claim.
Complete Cameras vs. Camera Parts:
The Department contended that the imported goods were ready-to-assemble kits of complete cameras, including screws and accessories, which were not permissible for import. The appellant's description of the goods as camera parts was disputed, and it was found that the imported items could be assembled into complete cameras. The adjudicating authority determined that the goods constituted complete cameras based on their specifications and components.
Applicability of Import Trade Control Policy:
The dispute revolved around the interpretation of relevant entries in the Import Trade Control Policy. The Department argued that the import of complete cameras fell under entry No. 172 of Appendix 2B, prohibiting the import of consumer goods not specified for import under Open General Licence. The adjudicating authority found that the imported goods matched the specifications of complete cameras and were subject to the restrictions under the policy.
Valuation and Penalty Imposition:
The valuation of the imported goods was contentious, with the Department relying on prices from a Hong Kong supplier to determine the value. The appellant's claim based on a supplier's letter was rejected due to discrepancies in specifications. The Tribunal upheld the confiscation but reduced the fine and penalty, concluding that the imported goods were indeed complete cameras and subject to the relevant policy entries. The valuation based on the supplier's price list was deemed justified, leading to the partial allowance of the appeal with modified penalties.
In conclusion, the judgment addressed the issues of misdeclaration, determination of goods as complete cameras, policy applicability, and valuation, resulting in the partial allowance of the appeal with adjusted penalties.
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1998 (7) TMI 686
Issues Involved:
1. Interpretation of "seniority-cum-merit" criterion for promotion.
2. Validity of promotion processes followed by various Regional Rural Banks.
3. Compliance with the prescribed rules and principles of "seniority-cum-merit".
Detailed Analysis:
1. Interpretation of "Seniority-Cum-Merit" Criterion for Promotion:
The main issue in these appeals is the interpretation of the "seniority-cum-merit" criterion prescribed for promotion to the post of Area Manager/Senior Manager in Regional Rural Banks under the Regional Rural Banks (Appointment & Promotions of Officers and Other Employees) Rules, 1988. The criterion of "seniority-cum-merit" emphasizes seniority, provided the candidate has the minimum necessary merit requisite for efficiency of administration. The senior, even though less meritorious, shall have priority, and a comparative assessment of merit is not required.
2. Validity of Promotion Processes Followed by Various Regional Rural Banks:
The appeals are categorized into two groups: Andhra Pradesh and Madhya Pradesh. The Andhra Pradesh group involves Rayalaseema Grameena Bank and Pinakini Grameena Bank, while the Madhya Pradesh group involves Baster Kshetriya Gramin Bank, Rewa Sidhi Gramin Bank, and Chhindwara-Seoni Kshetriya Gramin Bank.
Rayalaseema Grameena Bank:
- 1988 Promotions: Promotions made on May 3, 1988, were challenged belatedly in 1993. The High Court dismissed the challenge due to laches, and the Supreme Court upheld this decision, noting that the promoted officers had acquired rights to seniority.
- 1989 Promotions: The promotion process laid down in September 1989 was found to be contrary to the principle of "seniority-cum-merit" as it involved awarding marks for seniority, qualifications, interview, and performance, with more than 50% marks for interview and performance. The High Court's decision to quash these promotions was upheld by the Supreme Court.
Pinakini Grameena Bank:
- 1992 Promotions: The promotion process involved awarding marks for seniority, qualifications, performance, and interview. The High Court found this method to be contrary to the principle of "seniority-cum-merit" as it virtually amounted to "merit-cum-seniority." The Supreme Court upheld the High Court's decision.
Baster Kshetriya Gramin Bank:
- 1993 Promotions: The selection was based on marks assigned during interviews, which was not in consonance with the principle of "seniority-cum-merit." The High Court's decision to quash these promotions was upheld by the Supreme Court.
Rewa Sidhi Gramin Bank:
- 1989 Promotions: The promotion policy involved awarding marks for seniority, qualifications, performance, and interview, with candidates needing to secure a minimum of 40% marks in the interview. The High Court found this method to be contrary to the principle of "seniority-cum-merit." The Supreme Court upheld the High Court's decision.
Chhindwara-Seoni Kshetriya Gramin Bank:
- 1993 Promotions: The selection process involved prescribing minimum qualifying marks for the interview, and those who met this standard were selected based on seniority. The Supreme Court found this method to be in accordance with the principle of "seniority-cum-merit" and set aside the High Court's decision, affirming the promotions.
3. Compliance with the Prescribed Rules and Principles of "Seniority-Cum-Merit":
The Supreme Court emphasized that the criterion of "seniority-cum-merit" does not involve a comparative assessment of merit but requires assessing the minimum necessary merit for efficiency. The competent authority can lay down the minimum standard and prescribe the mode of assessment, such as performance appraisal and interview, but promotions should be based on seniority once the minimum standard is met.
Conclusion:
The Supreme Court upheld the High Court's decisions in most cases, except for the Chhindwara-Seoni Kshetriya Gramin Bank, where the promotion process was found to be in accordance with the principle of "seniority-cum-merit." The appeals challenging the promotions in Rayalaseema Grameena Bank (1988), Pinakini Grameena Bank, Baster Kshetriya Gramin Bank, and Rewa Sidhi Gramin Bank were dismissed, while the appeal related to Chhindwara-Seoni Kshetriya Gramin Bank was allowed.
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1998 (7) TMI 685
Issues involved: Interpretation of the term 'action' as defined in Section 2(1) of the Karnataka Lokayukta Act, 1984.
Summary:
The Supreme Court considered an appeal by the State of Karnataka against a judgment of the Karnataka High Court regarding the interpretation of the term 'action' under the Karnataka Lokayukta Act, 1984. The case involved allegations against a government officer and the subsequent investigation by the Lokayukta. The key contention was whether the act of amassing wealth by the officer fell within the definition of 'action' under the Act.
The Court analyzed the provisions of the Karnataka Lokayukta Act, emphasizing its objective to ensure fairness in administrative actions and providing for investigations by the Lokayukta or Upalokayukta. Section 7 outlined the matters that could be investigated, while Sections 8 to 11 and relevant Rules prescribed procedures for complaints and investigations. Section 12 required forwarding investigation reports to the competent authority for action, and Section 14 allowed for prosecution if a public servant committed a criminal offense.
The definition of 'action' in Section 2(1) of the Act encompassed administrative actions taken in various forms, including decisions, recommendations, findings, or any other manner. The Court noted that the term 'action' did not extend to actions unrelated to administrative functions. The principle of eiusdem generis was applied to interpret the phrase 'in any other manner' in the definition, limiting its scope to actions akin to those specifically mentioned.
The Court rejected the argument that 'action' should be broadly construed to include actions like amassing wealth by public servants. It held that investigations by the Lokayukta or Upalokayukta should be limited to administrative actions falling within the defined scope. As the investigation in this case was based on an unsigned letter, the Court affirmed the High Court's interpretation and dismissed the appeals for lacking merit.
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