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Showing 281 to 300 of 558 Records
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2007 (6) TMI 300
Issues Involved:
1. Grant of interest under section 244A on the amount of refund of tax deducted under section 195.
2. Equivalence of payment made under section 195(2) with payment made under section 156 of the Income-tax Act.
3. Application of case laws by CIT(A).
4. Alternative claim for interest under section 244A(1)(a) on the refund of TDS paid under section 195(2).
Detailed Analysis:
1. Grant of interest under section 244A on the amount of refund of tax deducted under section 195:
The assessee-company deducted tax at source under section 195 of the Income-tax Act on remittances to Denmark and Germany. The CIT(A) later ruled that no tax was required to be deducted on these remittances and directed the Assessing Officer to refund the tax. However, the Assessing Officer did not allow interest under section 244A on the refunded amount. The Tribunal held that under section 244A, the assessee is entitled to interest on any refund due, including amounts paid under section 195(2). The Tribunal referenced the decision in Grindwell Norton Ltd. and Sandvik Asia Ltd., which support the entitlement to interest on refunds of excess tax payments, including self-assessment taxes.
2. Equivalence of payment made under section 195(2) with payment made under section 156 of the Income-tax Act:
The CIT(A) had held that the payment of tax under section 195(2) is not equivalent to payment made under section 156. The Tribunal disagreed, stating that section 156 covers any tax, interest, penalty, or other sums payable due to any order passed under the Act, including orders under section 195(2). Therefore, payments made under section 195(2) should be treated similarly to those made under section 156 for the purpose of refund and interest under section 244A.
3. Application of case laws by CIT(A):
The CIT(A) relied on the decision in Sutlej Industries Ltd., where no interest under section 244A(1)(b) was allowed on excess self-assessment taxes. The Tribunal found this case law inapplicable, as the facts differed significantly. The Tribunal emphasized that the provisions of section 244A should be interpreted to include interest on refunds of any excess tax paid, not limited to specific cases like self-assessment taxes.
4. Alternative claim for interest under section 244A(1)(a) on the refund of TDS paid under section 195(2):
Given the Tribunal's decision on the primary grounds, the alternative claim for interest under section 244A(1)(a) was dismissed as redundant. The Tribunal directed the Assessing Officer to allow interest under section 244A(1)(b) on the refunded amounts due to the assessee following the CIT(A)'s orders.
Conclusion:
The Tribunal concluded that the assessee is entitled to interest under section 244A(1)(b) on the amounts refunded due to the CIT(A)'s orders. The provisions of section 244A apply to any refund due to the assessee, including those resulting from payments made under section 195(2). The Tribunal directed the Assessing Officer to grant the appropriate interest, thereby allowing the assessee's appeal on the primary grounds and dismissing the alternative ground as unnecessary. The appeal was partly allowed.
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2007 (6) TMI 299
Block assessment - Validity of issuance of notice u/s 158BD - Undisclosed income of any other person - search and seizure operation u/s 132(1) - Statements of the ''Dalal'' - recording of satisfaction by the Assessing Officer - Time limit for initiation of proceedings u/s 1158BD - Nature of satisfaction that is contemplated u/s 158BD - HELD THAT:- A search u/s 132(1) was carried out in the case of the ‘dalal’ on 14-9-1999. A notice u/s 158BC was issued to ‘dalal’ requiring him to file return of income declaring undisclosed income for the block period on 5-5-2000. The assessment u/s 158BC was finalized by the Assessing Officer on 21-5-2001. Subsequently in the case of the assessee before us a notice u/s 158BD was issued on 15-3-2002 calling upon the assessee to file return of income of undisclosed income for the block period.
Firstly the satisfaction is much after the date of assessment of undisclosed income in the case of the person searched i.e. ‘dalal’ and hence the same is belated. Such assessment has been completed on 21-5-2001 whereas this satisfaction has been recorded on 15-3-2002. Moreover on 15-3-2002. The ACIT, Yamuna Nagar could not be construed to be acting as an Assessing Officer of the person searched, i.e. ‘dalal’ qua the recording of satisfaction is the assessment in the case of ‘dalal’ had been computed on an anterior date. On this count also we are of the opinion that the said satisfaction note does not comply with the requirements of section 158BD of the Act.
The mechanics of section 158BD are governed by the provisions contained therein and section 158BG only comes into play only when the order of assessment is required to be made in the case of a person covered under Chapter XIV-B of the Act. Therefore, the inference of the revenue that the assessing authority in the case of the assessee is to be understood as ACIT, Yamuna Nagar automatically is not justified. If it were to be so, then there is no rationale for the order dated 13-12-2001 issued by the competent income-tax authority whereby the ACIT, Yamuna Nagar has been authorized to exercise jurisdiction and perform the functions of an Assessing Officer under Chapter XIV-B of the Act with respect to the assessee.
Ostensibly, the said order is governed by the statutory provisions provided in Chapter XIII-A and XIII-B of the Act. Thus, the revenue is not justified to argue that there was no Assessing Officer to whom the satisfaction along with the search material could be transmitted in terms of section 158BD and that the jurisdiction over the assessee under Chapter XIV-B automatically vested with the ACIT, Yamuna Nagar, i.e. Assessing Officer of ‘dalal’. Thus the said plea does not help in the case of the revenue that the requirements of section 158BD stood complied. On the basis of the foregoing, we hold that the satisfaction note dated 15-3-2002, does not comply with the requirement of section 158BD of the Act.
We are of the opinion that the assumption of jurisdiction by the Assessing Officer by issuance of notice u/s 158BD dated 15-3-2002 is vitiated in law. As we have noted earlier the invoking of section 158BD is a jurisdictional aspect and its validity is critical to justify the subsequent proceedings.
As we have already deduced in the present case that the invoking of section 158BD is vitiated, we therefore are of the opinion that the subsequent assessment framed by the Assessing Officer vide order dated 19-3-2004 u/s 158BD r/w section 158BC is liable to be quashed as lacking in jurisdiction. We hold so.
Addition on Unexplained investment - whether on the basis of the material before the Assessing Officer, could it be inferred that the assessee had indulged in money lending transactions outside the books of account - The sole basis for making the addition is the statement of Dalal. It is only on the basis of the statement of Dalal that the entries in the Annexure have been comprehended. The names and addresses of the parties have also been given by Dalal.
In our considered view the impugned evidence is not sufficient to charge the assessee with any tax liability. The test of regularity of recording of transactions cannot by itself be a guarantee regarding its correctness and trustworthiness. The probative value of such evidence is to be tested on the basis of an independent and corroborative evidence. The entries in the Diary, cannot be taken as correct and authentic without any corroborative evidence. The plea of the Revenue is that the entries in the Annexure which pertained to the transaction carried out through banking channels have been put to verifications and stand admitted by the respective parties. This aspect is stated to be a corroborative evidence regarding the correctness of the contents of the said Annexure. In our view, the verifiability and subsequent confirmation of the bank transactions, can at best be viewed as proof of reliability of such entries alone and not to the other entries in the said Annexure. Moreover, this evidence does not corroborate the entries against the assessee. This is for the reason that factually it is admitted by the Revenue that none of the bank entries pertain to the assessee in question. Therefore, the evidence regarding the verifiability of bank entries do not corroborate Annexure A-1 against the assessee.
The stand of the Assessing Officer was corroborated by the material found during the search of a third party. Such material showed payments to assessee for illegal gratification. This corroborative evidence supported the case of the Revenue against the assessee and it was in this context the observation of the Tribunal that the material seized from a third person during the search is presumed to be correct and such observations have been thereafter approved by the Hon’ble High Court. Now insofar as the instant case is concerned, first of all nothing incriminating has been either found or seized from the assessee. The evidence and material in question belongs to and is found from a third person namely ‘dalal’. There is nothing to corroborate the contents of the same. As the facts show, in the instant case the situation stands on a totally different footing than it was in the case before the Hon’ble High Court. In the instant case there is no material to corroborate the stand of the Assessing Officer against the assessee.
Two specific evidences have been used by the revenue. First is the Diary (i.e. Annexure A-1) and second is the statement of Dalal, the scribe of the Diary. Insofar as the Annexure A-1 is concerned, the entries recorded therein do not, by itself, convey any meaning to any person other than the scribe himself. Therefore the only specific evidence i.e. meaningful and which requires scrutiny is in the shape of the statements of Dalal. This evidence is alone required to be scrutinized and evaluated as to whether it supports the inference drawn by the Assessing Officer that the assessee has indulged in transactions of money lending outside the books of account.
In our view, the verifiability and subsequent confirmation of the bank transactions, can at best be viewed as proof of reliability of such entries alone and not to the other entries in the said Annexure. Moreover, this evidence does not corroborate the entries against the assessee. This is for the reason that factually it is admitted by the Revenue that none of the bank entries pertain to the assessee in question. Therefore, the evidence regarding the verifiability of bank entries do not corroborate Annexure A-1 against the assessee.
The position taken by Dalal in the statement recorded by DDIT on 20-1-2000 and before the Assessing Officer in the course of impugned assessment proceedings is by and large consistent. On both the occasions Dalal has claimed that assessee has undertaken money lending dealings in cash. However on both the occasions it also emerges that he admitted or not having actually witnessed the money lending. In fact he has confirmed on the both the occasions that neither the money was exchanged through him and nor was he a witness to the exchange of money. He categorically confirmed that the money was transacted by the parties amongst themselves without his knowledge. He claimed that his role was merely to bring together the party in need of money with the party who was willing to lend.
From the aforesaid it emerges that the said evidence does not justify an inference that any transactions in cash have indeed taken place. Firstly, the parties (i.e., the lender and borrower) named by Dalal have denied having undertaken any such transactions. Secondly Dalal himself also does not admit of having either witnessed the cash transaction or of having transacted it himself. In the face of this, it cannot be established that the transactions as narrated by ‘Dalal’ ever took place. In the absence of any such evidence, the correctness of entries in Annexure A-1 cannot be established. After all the entries in the Annexure A-1 can be considered as corroborated only once the direct evidence of the person who is said to have made the payments or the direct evidence of a person who is said to have witnessed the exchange of payment is available on record. As the position stands before us there is no such evidence on record. Thus, there is no material on the basis of which it can be said that transaction in cash have been entered into by the assessee as recorded in the Annexure A-1. We, therefore are satisfied that the material and evidence brought on record by the Revenue is not sufficient to conclude that the assessee had indulged in money lending transactions in cash outside the books of account.
During cross examination done during the impugned assessment proceedings, ‘Dalal’ stated that the name of the parties in Annexure A-1 are written by him as told by the parties who indulged in money lending. This also supports the inference that the recording in Annexure A-1 are not on the basis of the first hand knowledge of Dalal. In other words, it can be safely deduced that the charge made out by ‘Dalal’ against the assessee is not on the basis of his personal knowledge. Thus, we feel that the evidence brought on record by the Revenue does not carry its case any further. The evidence in question is not amenable to be taken as true and correct to implicate the assessee with any tax liability under Chapter XIV-B of the Act.
Evidently in the case of ‘Dalal’, no adverse view has been taken in the face of the denials by the borrowers regarding the commission income in the hands of ‘Dalal’. Curiously, similar denials of the parties have not found credence with the revenue and adverse inference against such parties i.e. the assessee before us, has been drawn. Evidently, such a contradictory approach from the side of the Revenue is untenable.
Thus, the addition has been deleted by the CIT(Appeals) is hereby affirmed. The revenue has, thus to fail in its appeal.
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2007 (6) TMI 298
Issues Involved:
1. Assessment of income for the assessment year 2001-02.
2. Confirmation of penalty u/s 271(1)(c) of the Income-tax Act.
Summary:
Issue 1: Assessment of Income (ITA No. 8854/Mum./2004)
The assessee, a private limited company engaged in software development and services, appealed against the assessment order denying the benefit of section 10A of the Income-tax Act, 1961. The Assessing Officer (AO) denied the exemption on the grounds that the ownership or beneficial interest in the undertaking had been transferred, reducing the beneficial interest to less than 51%. The AO noted that the shareholding of the original promoters, Shri Aatish Dedhia and Shri Nanji Dedhia, had reduced to 42.63% and 51.42% respectively during the relevant previous year. The CIT(A) confirmed the AO's decision, stating that the beneficial interest in the undertaking had been transferred, thus disqualifying the assessee from claiming the exemption u/s 10A.
The Tribunal examined the case and upheld the CIT(A)'s order, emphasizing that the beneficial holding of shares carrying not less than 51% of the voting power must continue to be held by the original promoters. Since the shareholding had reduced to 42.60%, the Tribunal concluded that the promoters had ceased to beneficially hold shares carrying not less than 51% of the voting power. The Tribunal dismissed the appeal, stating that the assessee had been given sufficient opportunity to present its case.
Issue 2: Confirmation of Penalty u/s 271(1)(c) (ITA No. 5641/Mum./2006)
The assessee appealed against the order of the CIT(A) confirming the penalty of Rs. 35,95,187 levied by the AO u/s 271(1)(c) for allegedly concealing particulars of income by filing inaccurate particulars. The CIT(A) held that the assessee had wrongly claimed deduction u/s 10A by furnishing inaccurate particulars of income and that the explanation given by the assessee was not bona fide.
The Tribunal, however, found that the assessee had made full and true disclosure of all facts material to the computation of its income and that the claim for exemption u/s 10A was based on the assessee's understanding of the law. The Tribunal noted that the rejection of the claim did not automatically attract penalty u/s 271(1)(c). Since there was no failure on the part of the assessee in making full and true disclosure of the facts, the Tribunal concluded that this was not a fit case for the levy of penalty. The Tribunal allowed the appeal and canceled the penalty.
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2007 (6) TMI 297
Issues Involved:
1. Confirming of penalty under section 271C of the Act for failure to deduct tax at source on discounting charges incurred.
Issue-wise Detailed Analysis:
1. Confirming of Penalty under Section 271C:
Facts and Background:
A survey under section 133A was conducted at the business premises of the assessee, revealing that the assessee had been debiting "financial charges" under the head "Discounting charges" for financial years 1999-2000 and 2000-01. The amounts debited were Rs. 45,96,349 and Rs. 49,40,715 respectively. The Assessing Officer (AO) observed that these payments were in the nature of interest and attracted the provisions of section 194A, which mandates tax deduction at source (TDS). The director of the assessee-company admitted this during the survey but later claimed ignorance and no intention to evade tax.
Penalty Proceedings:
During the penalty proceedings, the assessee argued that it believed the payments were "discounting charges" and not "interest," thus not covered under section 194A. The AO disagreed, stating that the financial charges paid were indeed in the nature of interest under section 2(28A) and that the assessee's failure to deduct TDS was intentional. The AO imposed penalties of Rs. 6,65,091 and Rs. 10,44,582 for the respective financial years.
Appeal to CIT(A):
The assessee contended that it should not be treated as an assessee in default since the deductees had already paid the taxes on their income, including the discounting charges. The CIT(A) rejected this argument, emphasizing that the deductor's responsibility to deduct tax at source cannot be absolved by the deductee's payment of tax. The CIT(A) upheld the AO's decision, including the classification of discounting charges as interest under section 2(28A), referencing the decision of the Madras High Court in Viswapriya Financial Services & Securities Ltd. v. CIT.
Reasonable Cause and Mens Rea:
The CIT(A) noted that the initial burden to prove reasonable cause for non-deduction of tax lies with the assessee, which the assessee failed to discharge. The CIT(A) also referenced the Supreme Court's decision in Gujarat Travancore Agency v. CIT, which states that the element of mens rea is not required for imposing penalties under such provisions.
Arguments before ITAT:
The assessee reiterated that it believed no tax was deductible on discounting charges and that there was no mens rea or deliberate intention to avoid tax. The assessee also argued that since the deductees had paid the taxes, the revenue had not suffered any loss. The assessee cited various judicial decisions to support its case, but the ITAT found these cases distinguishable on facts.
ITAT's Findings:
The ITAT noted that the transactions were essentially short-term loans, and the financial charges were in the nature of interest. The ITAT upheld the AO's and CIT(A)'s findings that the assessee's classification of these charges as discounting charges was an attempt to avoid TDS obligations. The ITAT also rejected the argument of reasonable cause, stating that ignorance of law is not an excuse, and the assessee had not provided any material to substantiate its claim of bona fide belief.
Conclusion:
The ITAT concluded that the assessee's failure to deduct tax at source was deliberate and without reasonable cause. The penalties under section 271C were confirmed for both financial years, and the appeals by the assessee were dismissed.
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2007 (6) TMI 296
Issues:
1. Rectification of tax calculation under section 154 of the Act.
2. Charging of tax on income computed under section 115JA at normal rate.
3. Charging of interest under sections 234B and 234C on income determined under section 115JA.
Analysis:
1. The appeal challenged the order of the CIT(A) regarding the rectification of tax calculation under section 154 of the Act. The Assessing Officer had noticed an error in the tax calculation under section 112(1) on the deemed income computed under section 115JA. The assessee argued that there was no mistake apparent from the record as the tax issue had been thoroughly discussed. The Assessing Officer proceeded with the rectification, leading to an appeal. The assessee contended that the tax should be charged at a lower rate based on long-term capital gains, not the normal rate. The tribunal found that the Assessing Officer correctly rectified the tax calculation under section 154, as the issue was not debatable, and the correct provision of law was not applied initially.
2. The appellant disputed the charging of tax on income computed under section 115JA at the normal rate instead of a lower rate based on long-term capital gains. The appellant argued that the tax should be calculated at 20% on capital gains and 35% on the balance of income. However, the tribunal held that when income is computed under section 115JA, the uniform tax rate of 35% applies, as confirmed by the Supreme Court precedent in Apollo Tyres Ltd. v. CIT. The tribunal emphasized that the Assessing Officer must charge income tax at the prescribed rate for the total income computed under section 115JA, and not based on specific heads of income.
3. The issue of charging interest under sections 234B and 234C on income determined under section 115JA was also raised. The tribunal upheld the charging of interest, as the Assessing Officer correctly rectified the tax calculation under section 154. The tribunal reasoned that the Assessing Officer had the jurisdiction to levy tax at the prescribed rate for the total income computed under section 115JA, and rectification was warranted as the correct provision of law was not initially applied. The tribunal dismissed the appeal, affirming the orders of the Assessing Officer and the CIT(A).
This detailed analysis of the judgment highlights the key issues raised in the appeal, the arguments presented by the parties, and the tribunal's reasoning in deciding the case.
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2007 (6) TMI 295
Carry-forward and set-off of business losses u/s 72 - Purchase and sale of shops - Whether the assessee was carrying on any business during the relevant previous year or not - HELD THAT:- The assessee had carried on business previously and subsequently. Only during the interregnum period of two years that the assessee was not in fact concluding any transactions as such. But that does not mean the cessation of business as held by the Bombay High Court in the case of Karsondas Ranchhoddass [1971 (1) TMI 33 - BOMBAY HIGH COURT]. This aspect of the case should be clear if we go through the detailed letter written by the assessee-company to the CIT(A). In fact the CIT(A) has asked a pertinent question to the assessee that whether the assessee had carried on any business or not during the relevant period. The assessee has furnished statement giving details of purchase and sale of shops made by it during the previous year relevant to the assessment year. The assessee has also stated that similar activity was carried on by the assessee in the previous year relevant to the assessment year 1996-97.
During the previous year period relevant to the assessment years 1997-98 and 1998-99, the assessee could not carry on any business because of hostile market conditions prevailed in the real estate business. The assessee further explained that the business was resumed by the assessee-company during the impugned previous year and, therefore, there was no question of not doing any business as apprehended by the Assessing Officer.
The contention of the ld senior DR is that the purchase and sale of shops stated to be made during the impugned previous year was only a make-belief arrangement. But we find to state that there is no material on record to support such an observation. On the other hand, the details were furnished before the CIT(A) and on that ground, the CIT(A) has come to a conclusion that the assessee has carried on business during the relevant previous year.
Therefore, it is to be stated that the CIT(A) has considered both the objections raised by the Assessing Officer against the claim of the assessee on the question of carry forward of the loss. The CIT(A) has held on proper grounds that both the reasons pointed out by the assessing authority did not survive. It is for that reason, he has directed the Assessing Officer to carry forward the loss determined by him. Thus, we agree with the order passed by the CIT(A).
In result, this appeal filed by the Revenue is dismissed.
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2007 (6) TMI 294
Issues Involved
1. Validity of the second part of the order dated 24-1-2006 requiring petitioners to file balance sheets and profit and loss accounts.
2. Non-appointment of statutory auditor by the Comptroller and Auditor General (CAG) and its implications.
3. Mandatory nature of Section 220(1) of the Companies Act, 1956.
4. Jurisdictional error in the impugned order of the learned Judicial Magistrate.
Detailed Analysis
1. Validity of the Second Part of the Order Dated 24-1-2006
The petitioners challenged the order dated 24-1-2006 passed by the learned Judicial Magistrate, Shillong, which required them to file three copies of the balance sheets and profit and loss accounts for financial years from 31-3-1997 to 31-3-2004 with the Registrar of Companies within one month, failing which Section 614A(2) would be attracted. The petitioners argued that the direction to file these documents was impossible to comply with as no statutory auditor was appointed by the CAG, a requirement for government companies under Section 619(2) of the Companies Act, 1956. The learned magistrate found the petitioners guilty under Section 162(1) and imposed a fine, which the petitioners paid.
2. Non-appointment of Statutory Auditor by the CAG
The petitioners contended that the CAG did not appoint a statutory auditor, making it impossible to file the required documents. The learned counsel for the petitioners argued that this non-appointment should exempt them from the statutory requirement. However, the learned counsel for the respondents maintained that the statutory duty to file these documents under Section 220(1) of the Act admits no exception, and the petitioners could not rely on their own default as a defense.
3. Mandatory Nature of Section 220(1) of the Companies Act, 1956
Section 220(1) mandates that a company must file three copies of the balance sheet and profit and loss account with the Registrar within thirty days from the date they were laid before the company at an annual general meeting. The court noted that the word "shall" in Section 220(1) indicates that the provision is mandatory. The court referenced various sections of the Act, including Sections 210(1), 215(3), and 216, to emphasize that the auditor's report is an integral part of the balance sheet and profit and loss account. The court concluded that the requirement to file these documents is mandatory and not directory, and the failure to comply attracts penalties under Section 220(3).
4. Jurisdictional Error in the Impugned Order of the Learned Judicial Magistrate
The court examined whether the learned Judicial Magistrate committed a jurisdictional error in directing the petitioners to file the documents. The court found no such error, noting that the petitioners had not approached the Central Government for condonation under Section 637B(b) of the Act, which allows for condonation of delay in filing documents with the Registrar. The court upheld the learned magistrate's order, emphasizing that the magistrate was exercising discretionary jurisdiction in issuing the impugned order.
Conclusion
The court dismissed the revision petition, finding no merit in the arguments presented by the petitioners. The court held that the requirement to file balance sheets and profit and loss accounts under Section 220(1) is mandatory, and the petitioners' failure to comply due to the non-appointment of a statutory auditor by the CAG does not exempt them from this statutory duty. The court found no jurisdictional error in the learned Judicial Magistrate's order and directed the parties to bear their own costs.
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2007 (6) TMI 293
Issues:
Sanctioning scheme of amalgamation, dispensation with meetings of equity shareholders, unsecured creditors, and secured creditors, objection raised by Central Government regarding increase in authorized capital, consideration of bona fides of the scheme, payment of stamp duty, compliance with Companies Act provisions, observations and clarifications for transferee company.
Analysis:
The judgment pertains to a group of petitions seeking sanction for the scheme of amalgamation of two transferor companies with a transferee company and the demerger of an industrial undertaking. The Bombay High Court has already sanctioned the scheme of amalgamation for one of the transferor companies. Dispensation with meetings of equity shareholders, unsecured creditors, and secured creditors for all companies involved has been granted by the court. Compliance with directions regarding newspaper advertisements and notice to the Central Government has been confirmed through filed affidavits.
The Central Government raised objections related to the transferee company's desire to utilize the authorized capital of the transferor company. The court, citing a previous decision, rejected the objections, emphasizing that no additional stamp duty or registration charges are required post-sanction of the scheme. The court also noted that objections raised by the Registrar of Companies cannot be sustained as no orders have stayed the previous judgment's implementation.
However, the court highlighted the importance of considering the bona fides of the scheme, especially in cases where an increase in authorized capital might lead to additional stamp duty. The judgment emphasized that the transferee company should not benefit unduly from the amalgamation, and any stamp duty already paid should be considered in the process.
Regarding objections on stamp duty payment, the court emphasized that statutory provisions must be adhered to, even if the companies have agreed to amalgamate. The judgment stressed the need for a reasonable approach to avoid double recovery of stamp duty and ensure equity and good conscience in such matters.
The court sanctioned the scheme of amalgamation/demerger with specific observations and clarifications. It directed the transferee company to follow Companies Act procedures, including filing declarations and paying necessary stamp duty, with consideration given to the stamp duty already paid by the transferor and transferee companies. The petitioners were instructed to pay costs to the Assistant Solicitor General of the Central Government, with the option to pay directly to the concerned authority.
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2007 (6) TMI 292
Reduction of Share capital - manufacture of lightening arresters - Company seeks to reduce its share capital, constituting 25 per cent of its issued and paid up share capital - HELD THAT:- In the present case, there are two aspects to the resolution proposed by the Company which are as follows: (i) An affirmative or negative vote in respect of the resolution proposing reduction and (ii) An objection to giving up one’s shares in the proposed reduction thereby dealing with the mechanism of the reduction. In the present case, both these facets are covered by the same resolution. 3723 shareholders who did not object to the scheme by casting their votes are not counted towards the votes required to approve the decision to reduce per se. In other words, the assumption made on account of abstention in respect of the persons who did not vote is only in respect of the mechanism of reduction. This is, therefore, not a case where the Company has assumed that such persons who abstained from voting were in favour of the resolution that was resolved per se. Consequently, the question as to whether such abstention can be assumed to be in favour of the resolution will not arise in the facts of this case.
Having considered the petition of the Stock Exchange, it is not possible for the Court to come to the conclusion that the exit opportunity that was offered was inequitable or unjust. The material placed on the record provides data of the share price movements. The price of Rs. 183 per share was well above the price at which the shares of the Company were traded on the date on which a resolution was passed by the Board of Directors. In fact, as the Company has pointed out to the Court, the price per share as offered was higher than the price prevalent on the date on which the result of the postal ballot was declared as well as on the date on which a draft petition was filed before the Stock Exchange for its approval. The speculative variation in the price of the shares of the Company will not operate, as suggested, to invalidate a resolution which has been validly passed. None of the shareholders have objected to the proposed reduction.
Thus, there is no reason why the prayer for reduction should not be allowed. However, before proceeding to do so, it would be appropriate for the Court to clarify that the orders passed in this petition, shall not preclude the Bombay Stock Exchange and the Pune Stock Exchange from taking recourse to their rights on the question as to whether there has been any violation of the listing agreement either with reference to the provision of clause 24(f) or otherwise. The Stock Exchanges would be at liberty to take recourse to such powers as are conferred upon them in accordance with law. Subject to the aforesaid, the Company Petition is made absolute in terms of prayer clauses (a) to (d).
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2007 (6) TMI 291
Issues Involved:
1. Entitlement of Hungerford to proceed with the appeal after ceasing to be a shareholder.
2. Validity and legality of the auction sale of shares held by Hungerford.
3. Maintainability and relief under section 397 of the Companies Act, 1956.
Summary:
1. Entitlement of Hungerford to Proceed with the Appeal:
The court examined whether Hungerford, having ceased to be a shareholder of Turner Morrison due to the auction sale of its shares by the Income-tax Department, could continue with the appeal. The Division Bench had previously dismissed Hungerford's appeal on the grounds that it was no longer a shareholder. The apex court remitted the matter to the company judge to decide Hungerford's entitlement in the context of subsequent events, but not as a preliminary issue.
2. Validity and Legality of the Auction Sale:
The auction sale of Hungerford's shares was conducted by the Tax Recovery Officer on May 27, 1994. Hungerford's appeal against this sale was initially allowed by the Commissioner, but the order was later set aside by the High Court. Hungerford's subsequent writ petitions were dismissed, and the Division Bench held that the auction sale had attained finality. Hungerford's special leave petition against this decision was dismissed by the apex court. The court found no merit in Hungerford's argument that the auction sale was obtained by fraud, as there was no evidence to support this claim.
3. Maintainability and Relief under Section 397 of the Companies Act, 1956:
The court held that since Hungerford ceased to be a shareholder of Turner Morrison, it could not be granted any relief under section 397. The company petition, which alleged oppression and mismanagement, lost its utility as Hungerford was no longer a member of the company. The court emphasized that an order granting relief under section 397 requires the petitioner to be a current member of the company. Consequently, the company petition was dismissed as it would only result in an academic decision without any practical benefit to Hungerford.
Conclusion:
The application by Turner Morrison to dismiss the company petition was allowed, and the company petition was dismissed. The court found no reason to make any order for costs.
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2007 (6) TMI 290
Issues Involved:
1. Winding up of the respondent-company under sections 433(a), 434, and 439 of the Companies Act, 1956.
2. Liability and acknowledgment of debt by the respondent-company.
3. Dispute regarding the full and final settlement of the debt.
4. Entitlement to customary interest at 18% per annum on delayed payments.
5. Validity of the petition under sections 433 and 439 for realizing interest.
Issue-wise Detailed Analysis:
1. Winding up of the respondent-company under sections 433(a), 434, and 439 of the Companies Act, 1956:
The petitioner-firm filed a petition for winding up of the respondent-company under sections 433(a), 434, and 439 of the Companies Act, 1956. The court noted that another creditor had filed a similar petition (C.P. No. 287 of 1999), which was admitted, and the instant petition was ordered to be heard along with it. The court concluded that the respondent-company had failed to discharge its debt to the petitioner-firm and thus, the petitioner-firm was entitled to recover the principal amount along with interest.
2. Liability and acknowledgment of debt by the respondent-company:
The petitioner-firm claimed that the respondent-company owed Rs. 5,51,716 as of September 30, 1997, and had made part payments leaving a balance of Rs. 2,51,716 as on March 28, 1998. The respondent-company acknowledged the debt in its balance sheet for the year 1997-98. The court found that the respondent-company had acknowledged its liability to pay the petitioner-firm.
3. Dispute regarding the full and final settlement of the debt:
The respondent-company argued that the payment of Rs. 2,99,550 was made as a full and final settlement of the debt. However, the court found no evidence to support this claim. The documents produced by the respondent-company did not show acceptance by the petitioner-firm, and there were no signatures from the petitioner-firm on the settlement documents. The court concluded that the payment was part of the debt and not a full settlement.
4. Entitlement to customary interest at 18% per annum on delayed payments:
The petitioner-firm claimed customary interest at 18% per annum on delayed payments. The court noted that the petitioner-firm had provided a certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961, showing interest payments. However, the court found no mutually agreed rate of interest and considered the financial crisis faced by the respondent-company due to the sudden death of its directors. The court awarded interest at 12% per annum from March 28, 1998, till the date of realization.
5. Validity of the petition under sections 433 and 439 for realizing interest:
The respondent-company argued that a petition under sections 433 and 439 for realizing interest was not maintainable. The court rejected this argument, stating that once the company judge is seized of the matter regarding payment of dues and winding up, it is the proper forum for determining entitlement to interest to avoid multiplicity of litigation. The court relied on precedents from the Division Bench of the Punjab and Haryana High Court and other High Courts.
Conclusion:
The court concluded that the respondent-company had failed to discharge its debt to the petitioner-firm. The petitioner-firm was entitled to recover the principal amount of Rs. 2,51,716 with interest at 12% per annum from March 28, 1998, till the date of realization. The respondent-company was directed to pay the amount within two months, failing which it would be deemed unable to pay its debts and would be wound up. The petition was disposed of accordingly.
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2007 (6) TMI 289
Issues Involved:
1. Entitlement to recover the principal amount.
2. Determination of the rate of interest on the principal amount.
3. Maintainability of the petition u/s 433 and 439 for realizing interest.
Summary:
1. Entitlement to Recover the Principal Amount:
The petitioner-firm filed a petition u/s 439 read with u/s 433 of the Companies Act, 1956, for winding up the respondent-company, claiming an outstanding amount of Rs. 17,33,082.34, including interest calculated as on September 30, 1999. The respondent-company acknowledged the principal amount of Rs. 10,14,486.92, which was paid in April 2006. The court found that the principal amount was indeed outstanding as of March 31, 1998, and had been paid, leaving the question of interest to be determined.
2. Determination of the Rate of Interest on the Principal Amount:
The petitioner-firm argued for an agreed rate of interest based on a communication dated February 28, 1995, stipulating interest rates of Rs. 1.50 per hundred per month after 30 days and Rs. 1.60 per hundred per month after 60 days. The court examined various documents, including bank statements, balance-sheets, and TDS forms, to substantiate the claim. However, it concluded that there was no conclusive evidence of a mutually agreed rate of interest as per the letter dated February 28, 1995. The court, considering the sudden deaths of key directors and the financial losses of the respondent-company, deemed it appropriate to award interest at 12% per annum from April 1, 1998, to March 31, 2006.
3. Maintainability of the Petition u/s 433 and 439 for Realizing Interest:
The respondent-company argued that a petition under sections 433 and 439 for realizing interest was not maintainable. The court rejected this argument, citing that once the company judge is seized of the matter regarding payment of dues and winding up, it is a proper forum for determining the creditor's entitlement to interest. The court relied on precedents, including the Division Bench judgment in Stephen Chemical Ltd. v. Innosearch Ltd. and the Delhi High Court's decision in Devendra Kumar Jain v. Polar Forgings and Tools Ltd., to support its view.
Conclusion:
The petition succeeded, and the court directed that interest at 12% per annum be calculated from April 1, 1998, to March 31, 2006, on the principal amount of Rs. 10,14,486.92. The respondent-company was ordered to pay the calculated interest within two months from the date of receipt of the order, failing which it would be presumed unable to pay, leading to its winding up. The petition was disposed of accordingly.
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2007 (6) TMI 288
Issues:
- Jurisdiction of the company court under the Companies Act regarding the enforcement of security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
- Maintainability of the application before the company court as objected to by the respondent-bank.
Jurisdiction of the Company Court:
The judgment revolves around the jurisdiction of the company court under the Companies Act concerning the enforcement of security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. The respondent-bank, a secured creditor, initiated proceedings under the SARFAESI Act and took possession of the immovable properties of the applicant-company. The applicant sought to stay the public auction, arguing that the reserve price set by the bank was undervalued compared to the independent valuation of the property. The respondent-bank contended that actions under the SARFAESI Act cannot be questioned before the company court as it is a special enactment. The court analyzed the provisions of the SARFAESI Act, emphasizing that it is a self-contained code for enforcement of security interest, providing for appeals to the Debts Recovery Tribunal and Appellate Tribunal. Citing relevant Supreme Court judgments, the court concluded that the SARFAESI Act prevails over the Companies Act in matters of security interest enforcement, dismissing the application on the grounds of jurisdiction.
Maintainability of the Application:
The court delved into the maintainability of the application before the company court, as contested by the respondent-bank. It acknowledged that the SARFAESI Act is a special enactment regulating the enforcement of security interest, with specific provisions for appeals to specialized tribunals. The court highlighted that the SARFAESI Act's provisions, along with relevant Supreme Court decisions, establish the Act's supremacy over general laws like the Companies Act in matters of security interest enforcement. Consequently, the court upheld the respondent-bank's objections on the maintainability of the application before the company court, ultimately dismissing the application.
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2007 (6) TMI 287
Issues Involved:
1. Whether the respondent company is liable to be wound up u/s 433(e) of the Companies Act, 1956.
2. Whether the deductions made by the respondent are bona fide.
3. Whether the winding-up petition is a legitimate means to recover a debt.
Summary:
1. Liability for Winding Up u/s 433(e):
The petitioner, a sub-contractor, sought the winding up of the respondent company u/s 433(e) of the Companies Act, 1956, alleging an outstanding debt of Rs. 41,48,696.25, later restricted to Rs. 20,68,015.70. The petitioner completed only 12,158 sq. meters of work against the allotted 26,145 sq. meters, with the balance work completed by another contractor, indicating issues with the petitioner's performance.
2. Bona Fide Deductions:
The respondent deducted Rs. 10,32,023 for consumables and Rs. 10,58,696.95 for damages due to breach of agreement, workmanship issues, and delays. The court found these deductions prima facie bona fide, supported by correspondence indicating serious disputes about the quality and timeliness of the petitioner's work. The petitioner failed to provide necessary certificates or evidence to counter these claims, necessitating detailed investigation inappropriate for summary proceedings.
3. Legitimacy of Winding-Up Petition:
The court emphasized that a winding-up petition is not a legitimate means to recover a disputed debt. The statutory notice must conform to mandatory requirements, and the inability to pay debts must be substantiated. The petitioner's claim was disputed by the respondent well before the statutory notice, indicating a bona fide dispute. The court referenced precedents affirming that winding-up petitions should not be used to exert pressure for debt recovery and are inappropriate where disputes require detailed investigation.
Conclusion:
The petition was dismissed with costs of Rs. 5,000, allowing the petitioner to withdraw the deposited sum of Rs. 25,671 with accrued interest. The court reiterated that the appropriate forum for resolving such disputes is the Civil Court, not summary proceedings like a winding-up petition.
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2007 (6) TMI 286
Issues Involved:
1. Adjustment of TDS towards the amount payable.
2. Waiver of right to dispute legality of payment.
3. Opportunity to make payment of the balance amount.
Issue-wise Detailed Analysis:
1. Adjustment of TDS towards the amount payable:
The appellant contended that the deduction of interest by way of TDS should be adjusted towards the amount payable under the conditional order disposing of the winding-up petition. The appellant argued that the Income-tax Act mandates the deduction of TDS, which should be treated as payment on behalf of the creditor to the revenue. The respondent opposed this, asserting that the original order by P.C. Ghose, J., which specified the amount payable, had attained finality and could not be varied by a judges' summons. The court found substance in the appellant's argument that TDS should be deemed paid on behalf of the creditor. However, it concurred with the respondent that the plea of adjustment was barred by constructive res judicata, as it was available at the time of the original order but not raised.
2. Waiver of right to dispute legality of payment:
The appellant argued that by accepting the first instalment without protest, despite being aware of the TDS adjustment, the respondent had waived its right to dispute the legality of the payment. The court noted that the appellant had provided detailed accounts and indicated proposed instalments, including the TDS adjustment, before making the first payment. The respondent accepted all five instalments without objection, leading the appellant to believe that the TDS adjustment was acceptable. The court held that the respondent's silence and acceptance of the payments could not be seen as a waiver but recognized the appellant's bona fide mistake.
3. Opportunity to make payment of the balance amount:
The appellant sought an opportunity to pay the balance amount if the first two contentions were found untenable. The court agreed that the appellant should be given a chance to make the balance payment due to the respondent's acceptance of the payments without protest. The court emphasized that extending the time for payment does not amount to amending the original order or reviewing it. The court allowed the appeal, extending the time for the appellant to make the balance payment within one month with an enhanced interest rate of 12% per annum on the deficit amount from the date it became payable until actual payment. Failure to comply would result in the dismissal of the appeal.
Conclusion:
The court dismissed the appellant's plea for TDS adjustment due to constructive res judicata but granted an opportunity to pay the balance amount with enhanced interest, acknowledging the respondent's role in the appellant's bona fide mistake. The appeal was allowed with specific conditions for payment, ensuring equity and justice.
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2007 (6) TMI 285
Issues:
Admission of petition for winding up of the company based on non-payment and quality dispute.
Analysis:
The judgment revolves around the admission of a petition for winding up a company due to non-payment and quality dispute. The respondent filed a petition for winding up the appellant company, which was admitted by the Company Judge after the appellant failed to reply to the statutory notice or provide sufficient cause for not proceeding against the winding up. The appellant raised three grounds of objection: substandard quality of goods supplied, a bona fide dispute over the amount due, and the claim being barred by limitation. The court found that the appellant failed to produce any evidence or material supporting their claims, emphasizing that the liability existing at the petition's filing date continues despite subsequent bar by limitation. The appellant's challenge mainly focused on disputing the quality of goods supplied and the rates charged by the respondent. However, the court noted that the appellant did not provide any substantial evidence or material to support their claims. The appellant's arguments lacked specifics, and the court highlighted the absence of a genuine dispute raised by the appellant regarding the rates or quality of the goods supplied.
The judgment further delves into the timeline of events, pointing out that the appellant only raised disputes regarding the quality and rates of the goods after the cheques issued for payment were dishonored. A letter dated 5-3-1994 was cited as the first instance of the appellant raising a dispute, but the court found the contents vague and lacking in specific details regarding the alleged discrepancies in rates and quality. The court emphasized the necessity for the appellant to provide concrete particulars to substantiate their claims of substandard quality and higher rates. Additionally, the judgment addressed the dismissal of a criminal complaint filed by the respondent, noting that the dispute between the parties was of a civil nature, leading to the rejection of criminal liability.
Ultimately, the court found no grounds for interference in the impugned order admitting the winding-up petition. The appellant's failure to discharge the liability to the respondent, as evidenced by dishonored cheques, led to the dismissal of the appeal. The judgment concluded by dismissing the appeal with costs and allowing the continuation of interim stay for a specified period.
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2007 (6) TMI 284
Issues Involved:
1. Whether a woman can be arrested and detained in civil prison in proceedings for recovery of debt certified by the Debts Recovery Tribunal.
Issue-wise Detailed Analysis:
1. Legislative Framework and Definitions:
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act, 1993) establishes a Tribunal for expeditious adjudication and recovery of debts due to banks and financial institutions. The term 'debt' is defined under section 2(g) to include any liability claimed as due from any person by a bank or financial institution. Section 22 specifies that the Tribunal and Appellate Tribunal are not bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by principles of natural justice.
2. Exclusive Jurisdiction of Recovery Officer:
The Recovery Officer has exclusive jurisdiction to execute orders as per sections 25 to 30 of the Act. Section 25 outlines the modes of recovery, including attachment and sale of the defendant's property, arrest and detention, and appointing a receiver. These modes are alternative, not exclusive, and the Recovery Officer can resort to one or more modes.
3. Supplementary Provisions and Application of Income-tax Act:
Section 28 provides additional modes of recovery without prejudice to those in section 25. Section 29 applies certain provisions of the Income-tax Act, 1961, including the Second and Third Schedules, to the recovery process under the Act. This includes provisions relating to arrest and detention of defaulters.
4. Prohibition Against Arrest of Women:
Clause 81 of the Second Schedule to the Income-tax Act prohibits the arrest of women. The rationale behind this provision is rooted in societal norms and the special status accorded to women in the society.
5. Judicial Precedents and Interpretations:
The High Court referred to the case of Union of India v. Delhi High Court Bar Association, where the Supreme Court upheld the provisions of sections 25 and 28, stating they are not arbitrary or unreasonable. The Court emphasized the detailed procedure for recovery, including the prohibition against the arrest of women.
6. Analysis of Previous High Court Decisions:
In Cyril Britto v. Union of India, the Kerala High Court considered whether section 56 of the Code of Civil Procedure, which protects women from arrest in execution of a money decree, is ultra vires Articles 14 and 15 of the Constitution. The Court concluded that while section 25 of the 1993 Act does not explicitly provide such protection, the legislative intent was to treat public dues differently from private dues.
7. Object-oriented Interpretation:
The Court emphasized that the provisions of the Act should receive an object-oriented interpretation. The reasoning that women who take substantial loans should be treated like any other judgment-debtor was found to be contrary to the Act and societal norms.
8. Distinguishing Consumer Protection Act Cases:
In Mary Chacko v. Jancy Joseph, the Kerala High Court held that the Consumer Protection Act, 1986, does not provide for the arrest of women in execution of orders. However, this decision was distinguished from the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, due to the specific reference to section 29 of the latter Act.
Conclusion:
The High Court concluded that the Recovery Officer under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, is not authorized to arrest and detain a woman due to the specific prohibition contained in Rule 81 of the Second Schedule to the Income-tax Act, 1961, which is made applicable by section 29 of the Act.
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2007 (6) TMI 283
Issues Involved:
1. Maintainability of the appeals.
2. Interpretation of the term "appeal" under rule 164 of the Companies (Court) Rules, 1959.
3. Applicability of sections 460(6) and 483 of the Companies Act.
4. Jurisdiction and powers of the company judge and official liquidator.
5. Precedents and judicial definitions of "appeal."
Detailed Analysis:
1. Maintainability of the Appeals:
The respondents raised a preliminary objection regarding the maintainability of the appeals, arguing that the orders passed by the company judge were in an appeal against the order of the official liquidator, and a further appeal to the High Court is barred by the amendment to section 100A of the Code of Civil Procedure, 1908, effective from July 1, 2002. The appellants contended that the order by the company judge was not in a judicial proceeding, thus the term "appeal" in rule 164 of the Companies (Court) Rules, 1959, was a misnomer.
2. Interpretation of the Term "Appeal" under Rule 164:
Rule 164 allows a creditor dissatisfied with the decision of the liquidator to appeal to the court. This rule was scrutinized to determine whether the proceedings before the company judge constituted an appeal. The court examined various definitions and judicial interpretations of the term "appeal," including those from Wharton's Law Lexicon, Nagendra Nath Dey v. Suresh Chandra Dey, and other precedents. The court concluded that an appeal involves a judicial examination of a decision by a higher court, and the term "appeal" in rule 164 is not a misnomer but a statutory right provided to creditors.
3. Applicability of Sections 460(6) and 483 of the Companies Act:
Section 460(6) allows any person aggrieved by an act or decision of the liquidator to apply to the court for confirmation, reversal, or modification of the decision. Section 483 provides for appeals from any order made or decision given in the matter of winding up of a company. The appellants argued that the proceedings under rule 164 were not appeals but applications for confirmation or reversal of the liquidator's decisions. However, the court held that these sections, along with rule 164, clearly provide for an appeal mechanism against the decisions of the liquidator.
4. Jurisdiction and Powers of the Company Judge and Official Liquidator:
The court examined the jurisdiction and powers conferred on the official liquidator and the company judge. It was noted that the official liquidator acts under the supervision and control of the court, and any decision made by the liquidator can be appealed to the court under rule 164. The court emphasized that the liquidator's decisions are subject to judicial review, and the company judge exercises appellate jurisdiction over the liquidator's decisions.
5. Precedents and Judicial Definitions of "Appeal":
The court referred to multiple precedents to define "appeal," including cases like Chautala Workers Co-operative Transport Society Ltd. v. State of Punjab, State of Gujarat v. Salimbhai Abdulgaffar Shaikh, and Shiv Shakti Co-operative Housing Society v. Swaraj Developers. The consistent judicial interpretation is that an appeal involves a re-hearing on law and facts by a superior court. The court also considered judgments like Union of India v. Official Liquidator and Smt. Ganga Bai v. Vijay Kumar, which reinforced that the right of appeal is statutory and not inherent.
Conclusion:
The court concluded that the proceedings under rule 164 are indeed appeals and not mere applications for confirmation or reversal of the liquidator's decisions. The appeals filed against the company judge's orders are barred by the amendment to section 100A of the Code of Civil Procedure, 1908. Consequently, the appeals were dismissed for lack of maintainability.
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2007 (6) TMI 282
Issues:
- Relief sought under sections 397 and 398 of the Companies Act, 1956
- Amendment of the petition to seek winding up
- Allegations of irregularities and misappropriation of funds
- Appointment of additional directors and financial transactions
- Court orders related to recovery of dues and possession of assets
- Financial distress and inability to pay debts
- Appointment of Official Liquidator as Liquidator
- Direction regarding ownership of specific flats
Relief sought under sections 397 and 398 of the Companies Act, 1956:
The Company Petition was initially filed seeking reliefs under sections 397 and 398 of the Companies Act, 1956. During the proceedings, an amendment was allowed to change the nature of the relief sought to include an order of winding up based on the grounds that the company was unable to pay its debts and that it was just and equitable for the company to be wound up.
Allegations of irregularities and misappropriation of funds:
The petitioners alleged irregularities and misappropriation of funds by the second and third respondents since August 1989. They claimed to have been excluded from the management of the company, leading to a revelation of the poor financial status of the company in December 1989. The petitioners further stated that they were informed of their removal as additional directors in May 1990.
Appointment of additional directors and financial transactions:
The first respondent company, incorporated in 1988, underwent financial transactions including the purchase of a Lithotripter Machine in March 1989 with financial assistance from the Bank of India. The petitioners provided guarantees for the repayment of the loan. Subsequently, the company faced financial distress and was unable to repay its dues to the bank, leading to legal proceedings and a decree against the company.
Court orders related to recovery of dues and possession of assets:
Various court orders were passed, including the appointment of a Court Receiver and the direction to take possession of assets like residential flats and machinery. The company's financial difficulties were evident through its inability to comply with court orders and accumulating losses, leading to the appointment of a Provisional Liquidator.
Financial distress and inability to pay debts:
The financial distress of the company was highlighted by its continuous losses since inception, as well as its inability to challenge the decree issued by the Debts Recovery Tribunal. The accumulated losses and outstanding debts further emphasized the company's dire financial situation, ultimately leading to the conclusion that the company was unable to pay its debts.
Appointment of Official Liquidator as Liquidator:
The Company Petition was allowed, and the Official Liquidator was appointed as the Liquidator of the company. The Liquidator was tasked with taking control of all assets, business properties, and accounts of the company. Specific directions were provided regarding the ownership of certain flats, pending the production of necessary documents by the concerned parties.
Direction regarding ownership of specific flats:
Respondents were directed to produce documents of title for specific flats within a specified timeframe, allowing the Liquidator to take appropriate action based on the ownership status of the flats. The Company Petition was disposed of with the Official Liquidator's appointment and specific directions concerning the identified flats.
Additional Note:
The judgment also mentioned the continuation of a previous order restraining respondents from alienating certain properties until the Official Liquidator made a determination. The stay was refused in this regard.
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2007 (6) TMI 281
Issues:
1. Dismissal of company petition due to lack of ascertained debt and entries in petitioner's books of account.
2. Dispute regarding liability acknowledgment and reconciliation with company's books.
3. Question of limitation for filing the company petition.
Issue 1: Dismissal of company petition
The appeal was filed against the Company Judge's order in CP No. 143 of 2002, which dismissed the company petition primarily because there was no ascertained or determined debt and the application related to entries made in the petitioner's books of account prior to three years. The appellant challenged both findings, arguing that the last transaction on the running account was on 2-3-2002 to 23-3-2002, and there was an agreement (Ex. A59) confirming outstanding amounts. The appellant contended that the liability of Rs. 24,80,592 was accepted subject to reconciliation, not that the liability was acknowledged. The Supreme Court's judgment in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries was cited to support the argument that a winding-up order could be made even if the exact amount of the debt was disputed.
Issue 2: Dispute regarding liability acknowledgment
The dispute centered around the acknowledgment of liability and reconciliation with the respondent company's books. The appellant argued that although the liability was accepted to the tune of Rs. 24,80,592, it was subject to reconciliation, indicating that the liability was not acknowledged. The Company Judge's decision not to consider Ex. A59 as admitted liability was based on the outstanding amount being subject to reconciliation. The appellant relied on legal precedents to support the contention that where a debt is undisputed but the exact amount is disputed, a winding-up order can still be made without requiring precise quantification of the debt.
Issue 3: Question of limitation
The Company Judge concluded that the company petition was barred by limitation based on the dates of the last agreement (Ex. A59) on 21-3-2002 and the end of the running account on 23-3-2002. However, the appellant argued that if the dates were taken as 21-3-2001 or 23-3-2002, the petition was within the limitation period of three years. The Court found that the company petition, filed on 31-3-2002, was within the limitation period, contrary to the Company Judge's decision. Consequently, the appeal was allowed, and the company petition was admitted for further consideration on merits, without delving into the substantive issues of winding up at this stage. The Company Judge was directed to proceed with the case and make appropriate orders.
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