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Showing 281 to 300 of 495 Records

• 2006 (10) TMI 245
  
  Issues: Classification of aerobridges under Central Excise Tariff, waiver of pre-deposit of duty.
  
  Classification Issue Analysis:
  The applicant filed for waiver of pre-deposit of duty concerning the classification of aerobridges. The dispute arose as the Revenue sought to classify the aerobridges under Heading No. 7308.10 of the Central Excise Tariff, pertaining to bridges and bridge-sections. In contrast, the applicant argued for classification under Heading No. 8428 for Customs Tariff, encompassing conveyors, escalators, and teleferics. Notably, the applicant had already paid a substantial amount out of the total demand. The applicant contended that previous Custom authorities had classified similar aerobridges under Heading No. 8428.90 of the Customs Tariff, emphasizing that aerobridges differ from bridge-sections. Reference was made to the HSN Explanatory notes, highlighting that escalators and moving walkways fall under Heading No. 8428. Considering these aspects, it was observed that the amount already deposited sufficed for the appeal hearing, leading to the waiver of the remaining duty amount. The stay petition was granted, and the appeal was scheduled for listing in early 2006.
  
  This detailed analysis of the judgment showcases the key arguments presented by both parties regarding the classification of aerobridges under the Central Excise Tariff and the subsequent decision by the Appellate Tribunal CESTAT, New Delhi to waive the pre-deposit of duty based on the circumstances and past practices of the Custom authorities.

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• 2006 (10) TMI 244
  

  Compromise and arrangement - sanction of the scheme - challenging the order of the Bombay Stock Exchange - direct the stock exchange to list the shares - whether the no objection from the stock exchange is to be treated as a mandatory requirement - HELD THAT:- The listing agreement requiring placing of the scheme before the exchange and a requirement that the arrangement is not contrary to the securities law show that given the authority to the exchanges under the Securities Contracts (Regulation) Act and the Securities and Exchange Board of India Act, 1992 the undertaking given as per the listing agreement needs to be given its due weightage, that, should there be any claim from a company for listing contrary to the provisions of the SEBI Act, the question of insisting on recognition under the protective umbrella of the approval order does not arise.

  Now, coming to the reference from the SEBI as regards the direction to the Bombay Stock Exchange to grant its approval, it must be noted that it is not a blanket direction, but an approval to be granted subject to its bye-laws and if the Bombay Stock Exchange finds that the terms of arrangement are contrary to its regulations or the requirement under the listing agreement the same has to be tested in a manner known to law and as provided under the Securities and Exchange Board of India Act. It may also be noted that the Bombay Stock Exchange, apart from referring to the non-satisfaction of the listing requirement, had also pointed out to the conduct of the transferor company, namely, Pentamedia Graphics Ltd., as regards issuance of fake certificates in the market. In the background of this and the view on writing off of assets to a huge sum, it is better the question as to the satisfaction of the listing agreement and the correctness of the order of this court is left to the expert body, viz., Bombay Stock Exchange, and the appellate forum, if the applicant so chooses to test the correctness of the same. In the light of the view that I have taken, I do not accept the plea of the applicants. I accept the objections raised by the Bombay Stock Exchange.

  The question is what would be the effect of the order of this court granting approval. It must be noted that the Act provides for an appeal against the order of the Bombay Stock Exchange before the Appellate Tribunal. In the face of such an expert body to deal with the matters relating to the views expressed, it is but proper that the applicants seek their remedy by way of appeal before the Appellate Tribunal. Until such time, the listing cannot take place as regards Mayajaal Entertainment Ltd., or on the question of allotment of shares to the shareholders of Pentamedia Graphics Ltd. The approval granted to the scheme cannot stand in the way of the stock exchange considering the compliance of the listing agreement.

  In the view that I have taken, subject to the result in the appeal before the Appellate Tribunal the clause in the scheme as regards listing has to await the outcome of proceedings. In the face of section 392(1)(b), the applicants herein are directed to exhaust their appeal remedy to satisfy the listing agreement, particularly sub-clause (g) so that clause 34 of the scheme breathes life.

  In the circumstances, the applications are dismissed reserving the liberty to the applicants to move the Tribunal if they so choose. Until then, clause 34 in the approved scheme cannot be enforced by reason of the order of this court dated November 8, 2004. There will, however, be no order as to costs.

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• 2006 (10) TMI 243
  
  Issues:
  1. Whether the application is barred by time?
  2. Whether the applicant has proved that the respondent is liable to pay Rs. 5,29,947 with interest at 21 per cent per annum from 1-9-1996 to the date of payment?
  3. What is the final order?
  
  Analysis:
  
  Issue 1:
  The respondent argued that the application is time-barred as per the Limitation Act, citing the promissory note date of 20-7-1989. The Full Bench decision highlighted that the period of limitation for claims under section 446(2)(b) of the Companies Act is determined by the relevant Article in the Limitation Act. Excluding the period from the commencement of winding up to the winding up order and one year thereafter, the application should have been filed by 4-12-1997. However, the application was filed on 30-10-2000, clearly beyond the prescribed time limit. The alleged payment acknowledgment on 31-8-1996 was deemed ineffective as it was made after the period of limitation. The court held the application as time-barred, leading to the dismissal of the claim.
  
  Issue 2:
  The applicant failed to establish the respondent's liability to pay the claimed amount with interest. Despite the promissory note and the applicant's contentions, the court found the application deficient in proving the respondent's obligation to repay Rs. 5,29,947 with interest. Consequently, the court answered this issue in the negative, indicating that the applicant was not entitled to recover the amount sought in the application.
  
  Final Order:
  Based on the findings regarding the time-barred nature of the application and the lack of proof of the respondent's liability, the court dismissed the Company application as barred by time. Therefore, the applicant was not granted the requested recovery of Rs. 5,29,947 with interest at 21 per cent per annum, leading to the rejection of the application.

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• 2006 (10) TMI 242
  
  Issues:
  Application under section 454(5) and (5A) of the Companies Act, 1956 for non-compliance with section 454 requirements.
  
  Analysis:
  The judgment pertains to an application filed under section 454(5) and (5A) of the Companies Act, 1956, seeking to take cognizance of an offence committed by the respondents for not complying with the provisions of section 454 and to punish them for not filing the statement of affairs. Respondents 1 to 3 argued that they had ceased to be directors as of the winding-up order date and were not required to file the statement of affairs, as their resignation had been accepted and communicated to the Registrar of Companies. Respondent 4 was deleted from the application, and the application was dismissed against respondent 5 in separate orders.
  
  The Official Liquidator's counsel sought time to verify if the documents showed that respondents 1 to 3 had indeed ceased to be directors. It was found that the forms submitted by respondents 1 to 3 were not available in the Registrar of Companies' documents, and the specific details regarding their cessation as directors were also not found. The Registrar of Companies confirmed that the documents had been destroyed as per the records disposal rule.
  
  The court considered the evidence presented, including the intimation sent to the Registrar of Companies in 1997 by respondents 1 to 3, stating their cessation as directors and enclosing Form No. 32. Given that the winding-up order was passed in 1999, the court accepted that respondents 1 to 3 had ceased to be directors in 1997, as claimed. As the documents supporting this claim had been destroyed, and based on the Official Liquidator's report, the court held that respondents 1 to 3 were not required to file the statement of affairs. Consequently, the company application was dismissed, and respondents 1 to 3 were discharged from the proceedings.

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• 2006 (10) TMI 241
  
  Issues Involved:
  1. Validity and implications of agreements dated 19-5-1997.
  2. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956.
  3. Registration and transfer of shares.
  4. Delay and acquiescence in seeking relief.
  5. Pendency and relevance of a civil suit (Suit No. 961/2004).
  
  Detailed Analysis:
  
  1. Validity and Implications of Agreements Dated 19-5-1997:
  The foundation of the dispute involves two agreements dated 19-5-1997, where shares of Durga Builders (P.) Ltd. and Rajdhani Housing Syndicate Ltd. were purportedly sold to the Mehras. The agreements included terms such as the resignation of the Nandas as directors and the transfer of shares to the Mehras. Despite these agreements, the Mehras did not take control of the companies, nor did they file the necessary Form 32 with the Registrar of Companies. The CLB noted that the agreements were not given effect to, and the Mehras' conduct suggested the agreements were intended to secure their investments in the companies rather than effectuate an actual transfer of control.
  
  2. Allegations of Oppression and Mismanagement:
  The Mehras invoked Sections 397 and 398 of the Companies Act, alleging that the Nandas were conducting the affairs of the companies in a manner oppressive to them. The CLB found that the Mehras' claims were inconsistent with their pleadings in Suit No. 961/2004, where they stated the agreements were intended to secure their investments. The CLB held that the Mehras could not claim oppression when they had not taken steps to enforce their rights under the agreements.
  
  3. Registration and Transfer of Shares:
  The Mehras sought rectification of the register of members to reflect their ownership of shares. However, the CLB noted that the Mehras did not take control of the companies or file Form 32, which would have formalized their positions as directors. The CLB found that the lack of action by the Mehras indicated acquiescence and a failure to enforce their rights, leading to the conclusion that the agreements were not intended to be fully executed.
  
  4. Delay and Acquiescence in Seeking Relief:
  The CLB observed that the Mehras' delay in seeking relief (agreements were dated 1997, and petitions were filed in 2004) indicated acquiescence and condonation of any wrongful acts by the Nandas. The court cited legal precedents to support the view that delay, coupled with inaction, could bar relief under Sections 397 and 398, as it evidenced acceptance of the status quo.
  
  5. Pendency and Relevance of Civil Suit (Suit No. 961/2004):
  The CLB considered the pendency of Suit No. 961/2004, where the validity of the agreements and the intentions behind them were being contested. The CLB found that the issues in the civil suit were central to the petitions and that granting relief in the company petitions would be premature. The court emphasized that the civil suit would ultimately determine the validity and implications of the agreements after a full trial.
  
  Conclusion:
  The High Court upheld the CLB's decision, dismissing the appeals and holding that the CLB had correctly considered the pleadings in Suit No. 961/2004. The court noted that the observations made were prima facie and would not prejudice the final determination of the issues in the civil suit. The appeals were dismissed with no order as to costs.

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• 2006 (10) TMI 240
  
  Issues involved: Company Law Board's order to transfer share, interpretation of Companies Act u/s 111, trust deed provisions, beneficiary rights, legal heirs' claim, recognition of trust by company.
  
  The respondent filed a petition u/s 111 of the Companies Act, 1956, seeking registration of a share transfer from legal heirs. The company refused, citing long-standing dividend enjoyment by a beneficiary and legal precedents. The respondent claimed rightful transfer based on a trust deed provision naming a son as trustee. The Company Law Board directed transfer, but the company argued against it, emphasizing the company's non-involvement in trust relations regarding shares.
  
  The court analyzed the trust deed, noting the share's long-standing benefit to a leprosy treatment institute. The trust, established in 1957, designated the eldest son as trustee, indicating a clear intention for continued benefits to the beneficiary. The court found no valid right for legal heirs to transfer the share, as the trust's provisions indicated ongoing benefits for the beneficiary even after the author's death.
  
  While acknowledging the trust's existence, the court held that the Company Law Board erred in directing the share transfer to the respondent. The company was not obligated to register the transfer, but it should recognize the trust outside the register. Therefore, the court allowed the appeal, setting aside the Company Law Board's order for share transfer.

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• 2006 (10) TMI 239
  
  Issues Involved:
  1. Quashing of proceedings in STC No. 146 of 2001.
  2. Limitation period for taking cognizance of the offence.
  3. Whether the offence u/s 113 of the Companies Act is a continuing offence.
  
  Summary:
  
  Issue 1: Quashing of proceedings in STC No. 146 of 2001

  Seeking to have the proceedings in STC No. 146 of 2001, on the file of the Special Judge for Economic Offences, Nampally, Hyderabad, quashed, this criminal petition is filed by the 3rd accused. The complaint, in STC No. 146 of 2001, was filed by the Registrar of Companies, A.P., Hyderabad on 21-8-2001, u/s 113(2) of the Companies Act, for contravention of the provisions of section 113(1) of the Companies Act.

  Issue 2: Limitation period for taking cognizance of the offence

  Learned Counsel for the petitioner contended that the learned Magistrate ought not to have taken cognizance of the offence since it was beyond the period of limitation prescribed u/s 468 of the Criminal Procedure Code. The penalty prescribed u/s 113(2) is only fine, the period of limitation is six months, and as the complaint was filed only on 21-8-2001, more than one year from the date of knowledge, it is barred by limitation. The Court referred to the relevant sections of the Companies Act and the Criminal Procedure Code, emphasizing that the period of limitation, u/s 468(2)(a), Cr.P.C, is six months, and as the complaint itself was filed more than one year after the date of knowledge, no cognizance could have been taken of the offence since it is barred by limitation.

  Issue 3: Whether the offence u/s 113 of the Companies Act is a continuing offence

  The Court examined whether the offence u/s 113 of the Companies Act is a continuing offence, in which event u/s 472, Cr. P.C. a fresh period of limitation will begin to run at every moment of the time during which the offence continues and the bar u/s 468, Cr. P.C. would not apply. The Court concluded that the offence u/s 113(1) is not a continuing offence. The liability under section 113(1) does not continue until the rule, or its requirement, is obeyed or complied with. The offence, on the breach of section 113(1), is complete once and for all on the failure to deliver the shares, debentures, and stocks within the time stipulated. There is no continuing obligation even after the expiry of the time limit. The offence under section 113(1) is not repeated or committed day to day after the initial default and cannot, therefore, be said to be a continuing offence attracting the provisions of section 472 of the Code of Criminal Procedure.

  Conclusion:

  Since the penalty prescribed, for violation of section 113(1) of the Companies Act, is fine of Rs. 500 for each day during which the default continues, even if the period of limitation is calculated from the date of knowledge u/s 469(1)(b) of the Code of Criminal Procedure, cognizance could not have been taken beyond six months in view of the bar in taking cognizance u/s 468(2)(a), Cr.P.C. In the case on hand, since the complaint itself was filed more than one year after the date of knowledge, no cognizance can be taken of the offence u/s 113(1) of the Companies Act. Proceedings in S.T.C. No. 146 of 2001, on the file of the Special Judge for Economic Offences, Nampally, Hyderabad, for the offence u/s 113(1), read with section 113(2) of the Companies Act is quashed. The criminal petition is allowed.

  This Court acknowledges the valuable assistance rendered by Sri O. Kailashnath Reddy, learned amicus curiae.

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• 2006 (10) TMI 238
  
  Issues:
  - Failure to serve notice under section 434 of the Companies Act at the registered office.
  
  Analysis:
  The judgment involves an appeal against an order directing the winding up of a company under the Companies Act. The key issue revolves around the failure to serve a statutory notice under section 434 of the Act at the company's registered office. The company petition was initially filed without serving the required notice, which was later attempted through substituted service. The respondent/appellant argued that the lack of notice served at the registered office invalidated the winding-up application. The respondent's counsel contended that the respondent's subsequent actions in court, despite the defective notice, rendered the lack of proper service inconsequential. The court examined precedents from various High Courts emphasizing the mandatory nature of serving notice at the registered office under section 434(1) of the Act.
  
  The respondent/appellant relied on judgments from different High Courts, highlighting the mandatory requirement of serving notice at the registered office as per section 434 of the Companies Act. The Bombay High Court, Madras High Court, and Allahabad High Court decisions underscored the strict compliance necessary for serving notice under this provision. The absence of such notice was deemed fatal to the maintainability of a company petition, as seen in previous cases. The court noted that in the present case, the evidence presented by the petitioner remained unrebutted due to the respondent's failure to provide a defense despite opportunities granted during the proceedings.
  
  Ultimately, the court allowed the appeal, setting aside the order for winding up the company due to the failure to serve the statutory notice at the registered office. The judgment emphasized that the presumption of inability to pay debts under section 434 of the Act could only apply if the notice had been properly served, which was not the case in this instance. Consequently, the order passed by the learned company judge in the original petition was overturned, with no costs imposed on either party.

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• 2006 (10) TMI 237
  
  Issues:
  1. Application under sections 542 and 543(1) of the Companies Act, 1956 filed by the creditor of the company in liquidation against ex-directors and officers for misapplication of company funds.
  2. Interpretation of clauses (a) and (b) of section 543 of the Companies Act, 1956 regarding the retention of security deposit by directors.
  3. Burden of proof on the applicant to establish misapplication or retention of funds by the directors under sections 542 and 543.
  4. Examination of the conduct of past or present directors, managers, or officers under section 543 to determine misapplication or breach of trust.
  
  Analysis:
  1. The judgment involved an application under sections 542 and 543(1) of the Companies Act, 1956, where the creditor of a company in liquidation sought action against ex-directors and officers for misapplication of company funds. The applicant alleged that the directors had misapplied or misappropriated funds, leading to misfeasance or breach of trust. However, the Company Judge dismissed the application, finding insufficient evidence to prove the directors' guilt in misapplication or misappropriation.
  
  2. The interpretation of clauses (a) and (b) of section 543 was a crucial aspect of the judgment. The applicant argued that the retention of a security deposit by the directors fell under clause (a) of section 543, eliminating the need to establish misfeasance or breach of trust. The argument was supported by citing relevant case law, emphasizing that the directors holding the security deposit in trust was sufficient grounds for action under section 543.
  
  3. The burden of proof was a significant issue addressed in the judgment. The court emphasized that the applicant must plead and prove the delinquency of the directors under sections 542 and 543. Mere vague allegations were deemed insufficient, requiring specific evidence to establish misapplication or retention of funds by the directors. The judgment highlighted the necessity of concrete evidence to support allegations of wrongdoing by the directors.
  
  4. The judgment also delved into the examination of the conduct of past or present directors, managers, or officers under section 543 to determine misapplication or breach of trust. The court stressed the importance of positive and specific evidence to hold individual directors personally liable for misapplication of company funds. Without specific allegations or evidence, the court could not compel directors to reimburse or compensate the company, emphasizing the need for detailed pleadings and evidence in such cases.
  
  In conclusion, the judgment upheld the decision of the Company Judge to dismiss the application, citing lack of evidence to prove misapplication or misappropriation of funds by the directors. The court emphasized the importance of concrete evidence and specific allegations to establish wrongdoing by directors under sections 542 and 543 of the Companies Act, 1956.

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• 2006 (10) TMI 236
  
  Issues Involved:
  1. Status of the tenant after the expiry of the lease period.
  2. Definition and implications of 'lease' under the Rajasthan Premises (Control of Rent and Eviction) Act.
  3. Jurisdiction of the Company Law Board (CLB) in passing a decree of rent enhancement.
  4. Provisions of the Rajasthan Premises (Control of Rent and Eviction) Act regarding rent fixation and acceptance.
  5. Rights and liabilities of a lessee under the Transfer of Property Act, 1882.
  6. Whether non-payment of increased rent constitutes oppression against the landlord.
  7. Validity and modification of the CLB's order regarding the payment of increased rent.
  
  Detailed Analysis:
  
  1. Status of the Tenant After Expiry of the Lease Period:
  The tenant-company argued that even after the expiry of the lease period, it still holds the property under the principle of holding over and should not be considered a trespasser. The court examined this issue in light of the Transfer of Property Act, 1882, which outlines the rights and liabilities of a lessee. The court found that the tenant-company could not be deemed a trespasser merely because the lease period had expired.
  
  2. Definition and Implications of 'Lease' Under the Rajasthan Premises (Control of Rent and Eviction) Act:
  The tenant-company contended that the term 'lease' under Section 3(iv) of the Rent Act includes sub-leases, and therefore, the CLB's finding that the tenant-company was a trespasser was incorrect. The court agreed that the definition of 'lease' includes sub-leases but emphasized that this did not exempt the tenant from its obligations to the landlord.
  
  3. Jurisdiction of the CLB in Passing a Decree of Rent Enhancement:
  The tenant-company argued that the CLB had no jurisdiction to pass a decree of rent enhancement as the provisions of Section 397 of the Companies Act, 1956, do not apply to personal contracts like lease agreements. The court noted that the CLB's jurisdiction under Sections 397 and 398 of the Companies Act extends to addressing acts of oppression and mismanagement, which includes the issue of non-payment of increased rent.
  
  4. Provisions of the Rent Act Regarding Rent Fixation and Acceptance:
  The tenant-company cited Sections 5, 6, and 8 of the Rent Act, which outline the procedures for rent fixation and prohibit landlords from accepting excessive rent without a decree. The court acknowledged these provisions but emphasized that the tenant's obligation to pay increased rent derived from the Transfer of Property Act, which supplements the Rent Act where it is silent.
  
  5. Rights and Liabilities of a Lessee Under the Transfer of Property Act, 1882:
  The court extensively reviewed Section 108 of the Transfer of Property Act, which enumerates the rights and liabilities of lessees. It highlighted that the lessee is bound to pay the agreed rent and any increased rent charged from sub-tenants to the landlord. The tenant-company's failure to disclose the increased rent to the landlord and pay the proportionate increase was deemed a violation of these obligations.
  
  6. Non-Payment of Increased Rent as Oppression Against the Landlord:
  The court concurred with the CLB's finding that non-payment of the proportionate increase in rent constituted an act of oppression against the landlord. It emphasized that the tenant-company's obligation to pay the increased rent was clear under the Transfer of Property Act and that failure to do so amounted to oppressive conduct.
  
  7. Validity and Modification of the CLB's Order:
  The court found merit in the landlord's appeal for full payment of the increased rent. It modified the CLB's order to direct the tenant-company to pay 100% of the increased rent received from the sub-tenants to the landlord. The court also ruled that expenses incurred on the shops by the tenant or sub-tenant should not be adjusted against the arrears of rent.
  
  Conclusion:
  The court dismissed the tenant-company's appeal and allowed the landlord's appeal, directing the tenant-company to pay 100% of the increased rent received from the sub-tenants to the landlord by 20-11-2006. The court also ruled that expenses incurred on the shops should not be adjusted against the arrears of rent and that proceedings under Section 629 of the Companies Act may be initiated if the outstanding rent is not paid by 30-11-2006. The CLB's order was modified accordingly, and no order as to costs was made.

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• 2006 (10) TMI 235
  
  Issues Involved:
  1. Interpretation of Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
  2. Duty of the bank to consider borrower's objections raised in reply to the notice under Section 13(2).
  3. Availability of remedies to the borrower under the Act.
  4. Jurisdiction of the High Court under Article 227 of the Constitution of India.
  
  Issue 1: Interpretation of Section 13(2) of the Act
  The case involved a dispute where the respondent had advanced a loan to the petitioners, who failed to repay despite a notice issued under Section 13(2) of the Act. The Chief Metropolitan Magistrate appointed an Advocate Commissioner to take possession of the property. The petitioners contended that the bank concealed the fact that they had replied to the statutory notice. The court noted that under the Act, the borrower has the right to reply to the notice, and the creditor must consider these objections before taking drastic measures under Section 13(4). The court emphasized the importance of communication of reasons for not accepting the objections raised by the borrower, as it ensures fairness and allows the borrower to understand the decision-making process.
  
  Issue 2: Duty of the bank to consider borrower's objections
  The court referred to the Supreme Court decision in Mardia Chemicals Ltd. v. Union of India, emphasizing that the bank has a duty to consider the objections raised by the borrower in response to the notice under Section 13(2) of the Act. It highlighted the need for the creditor to communicate reasons for not accepting the objections, providing transparency and allowing the borrower to comprehend the decision-making process. Failure to communicate reasons may lead to challenges before the Debt Recovery Tribunal under Section 17 of the Act.
  
  Issue 3: Availability of remedies to the borrower
  The court noted that the petitioners failed to exhaust the remedy available to them, which was to file an appeal before the Debt Recovery Tribunal. Instead of following the proper procedure, the petitioners invoked Article 227 of the Constitution of India, which the court deemed as not sustainable in law. The judgment emphasized the importance of availing the appropriate remedies provided under the Act before approaching the High Court under Article 227.
  
  Issue 4: Jurisdiction of the High Court under Article 227
  After considering the facts, arguments, and relevant legal provisions, the court found no merit in the petitioners' case. It concluded that invoking Article 227 without availing the proper remedy before the Debt Recovery Tribunal was not sustainable. The Civil Revision was dismissed with costs imposed on the petitioners. The judgment highlighted the limitations of invoking Article 227 and the importance of following the prescribed legal procedures for seeking redressal under the Act.

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• 2006 (10) TMI 234
  
  Issues Involved:
  1. Misuse of company funds by directors for personal gains.
  2. Non-disclosure of company's conversion to public limited status.
  3. Unauthorized appointment and remuneration of directors.
  4. Failure to maintain proper books of account and statutory records.
  5. Jurisdiction and limitation for initiating misfeasance proceedings.
  
  Detailed Analysis:
  
  1. Misuse of Company Funds by Directors for Personal Gains:
  The inspection report revealed that the directors of M/s. Parasrampuria Trading and Finance Ltd. used company funds for personal gains. Specifically, Shri S.K. Parasrampuria withdrew significant amounts for personal use without paying interest. Investments were made in other group concerns without charging interest, and various activities were conducted without statutory information. The misuse of funds by directors and their relatives was substantial, contributing to the company's financial instability.
  
  2. Non-disclosure of Company's Conversion to Public Limited Status:
  The company became a public limited company under section 43A of the Companies Act, 1956, effective from 1-10-1985. However, the company failed to disclose this change until prompted by the Central Government on 24-3-1995. This non-disclosure violated several statutory requirements, including sections 295, 211, 269, 227, and 43A of the Companies Act, 1956.
  
  3. Unauthorized Appointment and Remuneration of Directors:
  The inspector found that the appointment of directors and their remuneration after the company became a public limited company were not approved by the Central Government. This contravention of sections 211 and 227 of the Companies Act, 1956, indicated that the directors treated the company as their own establishment, disregarding corporate governance norms.
  
  4. Failure to Maintain Proper Books of Account and Statutory Records:
  The inspection report highlighted serious departures from compliance with the Companies Act while preparing balance sheets. Auditors failed to account for the company's converted status and audited balance sheets as if it were still a private limited company. The directors' actions, including maintaining personal accounts within the company and not disclosing investments, led to inaccurate financial statements.
  
  5. Jurisdiction and Limitation for Initiating Misfeasance Proceedings:
  The court addressed the jurisdiction and limitation issues raised by the ex-directors. Inspections were conducted for the period 31-3-1990 to 31-3-1994, and the report was submitted on 31-7-1995. The winding-up petition was filed on 20-5-1997, and the company was wound up on 25-3-1998. The Central Government's letter to initiate misfeasance proceedings was sent on 19-12-2001. The court concluded that the inspections and report were not within the two-year period preceding the winding-up or within three years as required for initiating criminal prosecution under section 468 of the Criminal Procedure Code. The official liquidator acted on the Central Government's instructions without independently detecting misfeasance during liquidation proceedings.
  
  Conclusion:
  The court found that the misfeasance proceedings lacked jurisdiction and were barred by limitation. The charges against the ex-directors were dropped, and the application filed by the official liquidator was dismissed. The court emphasized that the Central Government should have initiated prosecution before the company was wound up and that the official liquidator did not substantiate the claims of misfeasance contributing to the company's losses.

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• 2006 (10) TMI 233
  
  Issues:
  1. Advertisement of winding up proceedings without proper direction.
  2. Alleged abuse of court process through advertisement.
  3. Impact of advertisement on company's reputation and business.
  4. Legal implications of publishing a notice about an interim order.
  5. Court's decision on abuse of process and imposition of costs.
  
  Issue 1: Advertisement of winding up proceedings without proper direction
  The judgment addresses the issue of the respondent company causing an advertisement to be published in newspapers regarding the winding up proceedings without the necessary direction of the Court. The applicants argue that the advertisement was an abuse of the court process and a breach of the Companies (Court) Rules. The respondent justifies the public notices as a warning to the general public not to purchase any assets of the company due to an interim injunction. The Court examines the nature of the notice and whether it was in compliance with the legal requirements.
  
  Issue 2: Alleged abuse of court process through advertisement
  The judgment delves into the allegations of the applicants that the respondent's advertisement of the winding up proceedings was an abuse of the court process. The applicants claim that the advertisement was misleading, causing significant losses and damage to the company's reputation. Reference is made to previous judgments highlighting the negative impact of premature advertisements of winding up petitions and the potential for harassment and blackmail. The Court considers whether the advertisement was indeed an abuse of the legal process.
  
  Issue 3: Impact of advertisement on company's reputation and business
  The judgment discusses the adverse effects of the advertisement on the company's reputation and business. The applicants argue that the advertisement created panic among stakeholders, leading to cancellations of orders and financial losses. The respondent contends that the notice was issued in good faith to inform the public about the court's order and the interim injunction. The Court evaluates the extent of the damage caused by the advertisement and its implications on the company's operations.
  
  Issue 4: Legal implications of publishing a notice about an interim order
  The judgment analyzes the legal implications of publishing a notice regarding an interim order of the Court. It references previous cases to determine whether the publication of such notices, even before the admission of a winding up petition, constitutes an abuse of the legal process. The Court examines the requirements for issuing public notices related to court orders and assesses whether the respondent's actions were in line with legal standards.
  
  Issue 5: Court's decision on abuse of process and imposition of costs
  The judgment concludes with the Court's decision on the alleged abuse of the court process through the advertisement of winding up proceedings. Despite the apology tendered by the respondent, the Court deems it appropriate to dismiss the applications with the liberty for the applicants to claim damages separately. However, the Court imposes a cost of Rs. 10,000 on the petitioners for publishing a truncated version of the court order without disclosing the pre-admission show-cause notice. The judgment clarifies the consequences of such actions and emphasizes the importance of adhering to legal procedures in publicizing court orders.
  
  This detailed analysis of the judgment provides a comprehensive overview of the issues raised, the arguments presented by the parties, and the Court's decision on each aspect of the case.

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• 2006 (10) TMI 232
  
  Issues Involved:
  1. Jurisdiction under Article 226 of the Constitution of India.
  2. Arbitration clause and its implications.
  3. Enforcement of rights under the Memorandum of Understanding (MoU).
  4. Role and actions of the Securities and Exchange Board of India (SEBI).
  5. Maintainability of writ petition for specific performance of contractual obligations.
  6. Compliance with SEBI regulations.
  
  Detailed Analysis:
  
  1. Jurisdiction under Article 226 of the Constitution of India
  The appellant contended that the learned Single Judge should have exercised jurisdiction under Article 226 of the Constitution of India to issue directions to SEBI to ensure no transfer or variation of shareholdings of respondent No. 3 until the arbitration matter was resolved. The court, however, agreed with the Single Judge's finding that invoking Article 226 was inappropriate since the appellant had already sought relief under section 9 of the Arbitration and Conciliation Act, 1996, to enforce rights arising from the same MoU.
  
  2. Arbitration Clause and Its Implications
  The appellant argued that the disputes with respondent No. 4, which had been referred to arbitration, could not encompass the sale and transfer of shares by others. The court noted that the enforcement of rights arising from the MoU was already under consideration in another petition under section 9 of the Arbitration and Conciliation Act. Thus, it was inappropriate to seek parallel relief under Article 226.
  
  3. Enforcement of Rights under the Memorandum of Understanding (MoU)
  The MoU dated 14-8-2005 between the petitioner and respondent No. 4 contemplated the execution of a formal agreement for acquiring shares and control of respondent No. 3. The court noted that no substantial steps had been taken by the petitioner to enforce the MoU, such as the encashment of a cheque for Rs. 25 lakhs. The court emphasized that the MoU was not specifically enforceable and was determinable, thus not justifying the relief sought under Article 226.
  
  4. Role and Actions of the Securities and Exchange Board of India (SEBI)
  The appellant claimed SEBI failed to implement the court's order dated 6-9-2006, which directed respondent Nos. 3 and 4 to maintain status quo regarding shareholdings. The court held that any non-compliance by SEBI should be addressed in the appropriate court where the original order was issued, rather than through a separate writ petition under Article 226.
  
  5. Maintainability of Writ Petition for Specific Performance of Contractual Obligations
  The court cited that specific performance of a private commercial transaction, such as the MoU, could not be enforced through a writ petition under Article 226. The appropriate remedy for the petitioner was to seek compensation for any alleged breach, rather than specific performance.
  
  6. Compliance with SEBI Regulations
  The petitioner argued that SEBI regulations were not followed, particularly the distinction between regulation 10 (acquisition of shares) and regulation 12 (control over a company). The court found that the petitioner's claims did not justify invoking Article 226 jurisdiction, as there was no illegality, arbitrariness, or procedural unreasonableness in the actions of SEBI.
  
  Conclusion
  The appeal was dismissed, with the court agreeing with the Single Judge that the petition under Article 226 was not maintainable. The court emphasized that the appropriate forum for addressing the appellant's grievances was the arbitration proceedings or the court where the original order was issued. The court clarified that its observations were not final expressions of opinion on the merits of the case in any ongoing arbitration proceedings.

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• 2006 (10) TMI 231
  
  Issues Involved:
  1. Whether the Company Law Board had objectively analyzed the evidence before arriving at its conclusion.
  2. Whether the ingredients of section 397 of the Companies Act are attracted in the facts and circumstances of the case.
  3. Whether the shares standing in the name of the first respondent belong to him or to the Hindu undivided family.
  4. Relief to be granted.
  
  Detailed Analysis:
  
  Point No. 1: Objective Analysis by the Company Law Board
  The appellant argued that the Company Law Board did not objectively analyze the evidence before it and made erroneous conclusions. The Board's decision on the non-co-option of a third director was criticized as it failed to recognize the second respondent's obstruction in appointing a new director. The second respondent's refusal to clear accumulated stocks and his unjustified objection to surrendering 100 KVA electricity were also highlighted. The Board's finding on the non-issuance of duplicate share certificates was challenged, asserting that the second respondent's non-cooperation was evident. The Board's conclusion on the non-redemption of preference shares was accepted, but it was argued that the second respondent's obstruction in sanctioning increments to staff was unjustified. The Board's overall finding of a deadlock due to animosity between the petitioner and the second respondent was upheld, recognizing the impossibility of their cooperation.
  
  Point No. 2: Applicability of Sections 397 and 402 of the Companies Act
  The Court discussed the applicability of sections 397 and 402, referencing precedents that support intervention in cases of deadlock and oppression, even if the company is profitable. The Court cited decisions like Eastern Linkers (P.) Ltd. v. Dina Nath Sodhi and Kilpest (P.) Ltd. v. Shekhar Mehra, which emphasize that family-run companies should be treated as partnerships for the purpose of these sections. The Court concluded that the deadlock and animosity between the father and son justified the application of section 402 to resolve the situation.
  
  Point No. 3: Ownership of Shares
  The ownership of shares standing in the name of the first respondent was contested. The appellant argued that the shares were held in his individual capacity, while the second respondent claimed they belonged to the Hindu undivided family. The Court acknowledged that the question of ownership is a serious factual issue, best resolved by a competent civil court. For the purpose of the current proceedings, the Court accepted the Company Law Board's prima facie finding that the shares belonged to the first respondent individually, allowing for immediate relief under the Companies Act.
  
  Point No. 4: Relief
  The Court upheld the Company Law Board's order for the second respondent to purchase the shares of the first respondent, with the valuation to be determined by a valuer. The Court provided a timeline for the purchase and allowed for alternative measures if the initial purchase failed. The Court also recorded the petitioner's willingness to deposit 50% of the sale proceeds in a fixed deposit in the High Court, ensuring protection of the second respondent's potential rights in the pending civil suit. The appeal was partly allowed, modifying the Company Law Board's order to ensure the smooth running of the company.
  
  Conclusion:
  The appeal was partly allowed, with modifications to the Company Law Board's order to ensure the smooth functioning of the company amidst the deadlock between the directors. The Court emphasized the need for immediate relief under the Companies Act while leaving the final determination of share ownership to the civil court.

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• 2006 (10) TMI 230
  
  Issues Involved:
  1. Jurisdiction of the Company Law Board under section 111A(3) of the Companies Act.
  2. Retrospective application of the amendment to section 111A(3).
  3. Limitation period for filing rectification petitions under section 111A(3).
  4. Availability of civil remedies alongside statutory remedies.
  
  Issue-wise Detailed Analysis:
  
  1. Jurisdiction of the Company Law Board under section 111A(3) of the Companies Act:
  The appeals questioned the jurisdiction of the Company Law Board (CLB) under the amended section 111A(3) of the Companies Act, particularly for transactions occurring before the amendment's effective date (15-1-1997). The amendment allowed the CLB to rectify the register of members for violations of the Companies Act or any other law. The court held that the statutory remedy for rectification was recognized only from 15-1-1997, and prior to this, the remedy was purely a common law right to be pursued in civil courts.
  
  2. Retrospective application of the amendment to section 111A(3):
  The court addressed whether the amendment to section 111A(3) should be applied retrospectively. It was argued that the amendment, which included the words "any other law for the time being in force," was clarificatory and thus retrospective. However, the court held that the amendment could not be read retrospectively as it did not explicitly state so. The court emphasized that retrospective construction is not applicable unless expressly or by necessary implication intended by the legislature.
  
  3. Limitation period for filing rectification petitions under section 111A(3):
  The court examined the limitation period for filing rectification petitions under the amended section 111A(3). It was argued that the two-month limitation period prescribed should apply prospectively and not affect vested rights. The court held that the limitation period could not be relaxed on the notion of retrospectivity or fairness. The statutory remedy introduced by the amendment was subject to the prescribed limitation, and the common law remedy remained available for violations occurring prior to the amendment.
  
  4. Availability of civil remedies alongside statutory remedies:
  The court discussed the availability of civil remedies alongside the statutory remedy provided under section 111A(3). It was noted that the amendment did not abrogate the common law right to seek rectification through civil courts. The court emphasized that both common law and statutory remedies were concurrent, allowing the aggrieved party to choose the forum. The amendment merely provided an additional statutory remedy without taking away the existing common law right.
  
  Conclusion:
  The court concluded that the amendment to section 111A(3) of the Companies Act, effective from 15-1-1997, could not be applied retrospectively. The statutory remedy for rectification introduced by the amendment was subject to the prescribed limitation period, and the common law remedy remained available for violations occurring before the amendment. The appeals were allowed, and the order of the Company Law Board was reversed.

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• 2006 (10) TMI 229
  

  Whether the portion of Golf Links property which at the time of settlement was occupied by Shri Narendra Nath Nanda be not allotted to him?

  Whether appropriate directions be given so that the appellants be made liable for payment of capital gains tax, if any, levied in future which levy shall be challenged by Respondent No. 1-Company, provided the funds are made available to it by the appellants for the purpose?

  Whether the judgment of the High Court could be suitably modified to provide for challenge by respondent-company to any order that may be passed in future by the tax authority imposing capital gains tax on the hypothetical transfers made under the settlement?

  Held that:- Appeal allowed by way of remand. That the judgment and order of the High Court is modified to the extent that appellant No. 2, namely - Shri Narendra Nath Nanda shall be allotted the portion of the Golf Links house which was in his occupation on the date of settlement, and the value thereof shall be adjusted against his share. If something remains to be paid even after adjustment, the appellants shall pay such amount within a period of two months from the date of the order of the High Court.

  That no deduction shall be made from the value of the assets of the anticipated capital gains tax liability on the hypothetical sale under the settlement. In case a demand of capital gains tax is made by the tax authority in future against respondent-company, the aforesaid Company shall be entitled to challenge the imposition of such tax subject to appellant No. 2 providing sufficient funds to the respondent-company for this purpose. In any event, the capital gains tax, if found payable, shall be the liability of the appellants to be discharged by them. They shall furnish an undertaking before the High Court accepting such liability, and shall execute a document creating a charge on the assets allocated to them under the settlement to discharge capital gains tax liability, if found payable.

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• 2006 (10) TMI 228
  
  Issues:
  Debt settlement agreement enforceability, protection under U. P. Industrial Undertakings Act, renewal of notification, compliance failure leading to loss of protection, reference under Sick Industrial Companies Act, registration denial by BIFR, appeal allowed, protection against recoveries, stay of winding up proceedings, enforcement of consent decree, interpretation of Companies Act provisions, stay of execution proceedings, misuse of legal provisions, rehabilitation process, industrial unrest, settlement enforcement, statutory protection piercing, rehabilitation objectives.
  
  Debt Settlement Agreement Enforceability:
  The respondent-company admitted liability for payment to the petitioner-company towards supplies and entered into a settlement agreement. The settlement agreement required the respondent to pay Rs. 52.43 lakhs in 24 monthly installments, which was accepted by the petitioner. However, the respondent stopped payments midway, citing protection under a notification issued under the U. P. Industrial Undertakings Act.
  
  Protection under U. P. Industrial Undertakings Act and Compliance Failure:
  The respondent-company claimed protection under the U. P. Industrial Undertakings Act, which was renewed with conditions. However, the company failed to comply with the conditions and subsequently lost the protection. The respondent then made a reference under the Sick Industrial Companies Act to the Board for Industrial and Financial Reconstruction (BIFR), which initially denied registration due to missing documentation.
  
  Registration Denial by BIFR and Appeal Outcome:
  The BIFR denied registration of the reference due to missing documents, but the respondent filed an appeal under BIFR Regulations, which was allowed. The registration of the reference activated provisions providing protection against recoveries and stayed winding up proceedings as per sections 22 and 23 of the Act.
  
  Enforcement of Consent Decree and Stay of Proceedings:
  The petitioner sought to enforce the settlement agreement as a decree under the Code of Civil Procedure, arguing that the company court could proceed with winding up if the debt was admitted. However, the respondent argued that winding up and execution proceedings should be stayed upon registration of a reference under the Sick Industrial Companies Act.
  
  Interpretation of Legal Provisions and Misuse Concerns:
  Legal arguments were presented citing relevant case laws to support differing views on the interpretation of legal provisions regarding the stay of proceedings upon registration of a reference. Concerns were raised about potential misuse of legal provisions and the role of the Legislature in amending laws if necessary.
  
  Rehabilitation Process and Industrial Unrest:
  The respondent-company faced significant liabilities and industrial unrest, leading to production closure. To address its financial situation, the company entered into a settlement with the petitioner and subsequently sought rehabilitation under the Act. The protection under section 22(1) became available upon registration of the reference with the BIFR.
  
  Statutory Protection Piercing and Rehabilitation Objectives:
  The court deliberated on the implications of enforcing the settlement agreement in the context of the statutory protection granted for rehabilitation purposes. It was highlighted that the objectives of rehabilitation under the Act should be considered beyond mere recovery of admitted amounts, emphasizing the broader benefits of the rehabilitation process.
  
  Conclusion:
  The court rejected the plea to enforce the settlement agreement, emphasizing the importance of upholding the statutory protection for rehabilitation purposes. The respondent was allowed to seek permission from the BIFR to pursue execution of the settlement. The matter was scheduled for a follow-up after two months to review the status of proceedings before the BIFR.

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• 2006 (10) TMI 227
  

  Whether in the nature of the respective claims arising out of the loan transaction, it was just and proper to order a joint trial of the two causes?

  Whether there was anything in the Recovery of Debts Act which prevented the Debt Recovery Tribunal from entertaining the claim made by the plaintiff in the suit?

  Held that:- Appeal allowed. The trial court and the High Court have failed to exercise the jurisdiction vested in them by law in refusing to transfer the suit to the Debt Recovery Tribunal, Patna. They have not considered the question whether it will be fit and proper to order a joint trial of the two actions. It is not only fit and proper but also just and necessary to have the two causes tried together. Hence, we allow this appeal and setting aside the order of the High Court and that of the trial Court, transfer Money Suit from the file of Subordinate Judge-I, Patna to the Debt Recovery Tribunal, Patna for being treated as a counter-claim by way of a cross suit and for being jointly tried and disposed of pending on its file.

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• 2006 (10) TMI 226
  
  Issues Involved:
  
  1. Whether the action to recover dues under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act) is maintainable against an industrial company with pending proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
  
  Issue-wise Detailed Analysis:
  
  1. Maintainability of Recovery Actions under EPF Act against Sick Industrial Companies:
  
  The primary issue in these appeals is whether recovery actions under the EPF Act are maintainable against companies undergoing proceedings under SICA. The appellants, sick companies under section 3(1)(o) of SICA, argued that recovery actions for provident fund dues should not proceed without BIFR's consent, citing section 22(1) of SICA. The appellants relied on a previous Division Bench decision in ESSORPE Mills United v. Central Provident Fund Commissioner, which held that recovery actions under the EPF Act require BIFR's consent.
  
  2. Provident Fund Dues as Statutory Settlements:
  
  The court examined the nature of provident fund dues under the EPF Act, emphasizing that these dues are part of the employees' rightful statutory settlements. The EPF Act, a welfare legislation, mandates employers to contribute to the provident fund, which is meant to provide social security to employees. The court noted that the contributions deducted from employees' wages and the employer's contributions belong to the employees.
  
  3. Non-applicability of Section 22(1) of SICA to EPF Act:
  
  The court concluded that section 22(1) of SICA does not apply to provident fund dues under the EPF Act. The EPF Act's provisions for provident fund contributions, interest on delayed payments, administrative charges, and damages are integral to the welfare of employees and cannot be suspended by SICA. The court highlighted that the EPF Act, as a social welfare legislation, serves a different purpose from SICA, which aims to rehabilitate sick industrial companies.
  
  4. Judicial Precedents and Interpretation of Section 22 of SICA:
  
  The court reviewed various Supreme Court decisions interpreting section 22 of SICA in the context of other statutes. It noted that while section 22 provides a moratorium on certain proceedings against sick companies, it does not extend to statutory dues like provident fund contributions. The court cited cases where the Supreme Court held that statutory dues, including sales tax and property tax, could not be recovered without BIFR's consent, but distinguished these from provident fund dues, which directly benefit employees.
  
  5. Legislative Intent and Social Security Measures:
  
  The court underscored that the EPF Act's objective is to ensure social security for employees, aligning with the Directive Principles of State Policy in the Constitution. It emphasized that provident fund contributions are not taxes or contractual dues but statutory entitlements of employees. The court observed that allowing sick companies to withhold provident fund dues would undermine the social security framework and deprive employees of their rightful benefits.
  
  6. Limited Immunity under Section 14B of EPF Act:
  
  The court acknowledged that section 14B of the EPF Act provides limited immunity for sick industrial companies regarding damages for delayed payments. However, this immunity does not extend to the principal contributions or other statutory dues under the EPF Act. The court emphasized that the legislative intent behind section 14B was to grant conditional relief to sick companies, not to exempt them from their statutory obligations.
  
  Conclusion:
  
  The court held that provident fund dues under the EPF Act are not covered by section 22(1) of SICA and that recovery actions for these dues can proceed without BIFR's consent. It dismissed the writ appeals and directed the appellants to pay the provident fund dues within three months. The court's decision reinforces the priority of employees' statutory entitlements over the rehabilitation processes of sick industrial companies.

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