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Showing 321 to 340 of 848 Records
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2010 (10) TMI 932
Whether the compromise in the case was obtained by perpetrating fraud on the court, the High Court was justified in exercising its powers under Section 103 C.P.C. to go into the question? Held that:-. The High Court was justified in re-appreciating the facts without formulating a substantial question of law in view of the provisions of Section 103 CPC. There was no occasion for the High Court to decide the second appeal without framing the substantial question of law and it was not a case which could warrant consideration under Section 103 C.P.C. Thus, the judgment and decree impugned are liable to be set aside.
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2010 (10) TMI 931
Petition under section 34 of the Arbitration & Conciliation Act, 1996 to challenge an award dated 1st December, 2006
Held that:- The award so far as it grants compensation of eighteen per cent per annum on the value of the first and the second floor is liable to be set aside also on the ground that the dispute in this regard did not fall within the arbitration agreement and on the ground that the award in this regard contains no reasons.In this view of the matter, it is not necessary for me to consider Mr.DeVitre’s submission that the claim of compensation at eighteen percent per annum on the value of the property was without any particulars or evidence and is therefore bad.
Having come to the conclusion that he had no jurisdiction to consider the issue of tenancy raised by the original Petitioner, the arbitrator could not have made any observations in regard thereto.
Mr.Kamdar also fairly stated that the question of the Petitioners being required to pay the monetary amount would arise only in the event of the issue of tenancy being decided against the Petitioners. He stated that the RAD suit filed by the original Petitioner has been dismissed for default only recently. Had I upheld the award, the amounts would have been payable only in the event of the order of dismissal attaining finality and subject to any further proceeding that the Petitioners may adopt in respect of their alleged tenancy.
The award of compensation regarding the first floor is therefore set aside.It cannot therefore be said that the learned arbitrator did not considered the affidavit. The arbitrator was not bound to accept the contents thereof merely because original Respondent No.3 was not cross-examined. The arbitrator weighed the evidence, analyzed the circumstances and drew inferences which were entirely within his jurisdiction. The submission in this regard is, therefore, rejected.
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2010 (10) TMI 930
Whether levy of entertainment tax is covered by Entry 62 of List II or is tax on broadcasting service covered by Entry 92C of List I?
Held that:- Levy of entertainment duty falls under entry 62 of List II and is not hit by entry 92C of List I. We are unable to hold that levy of entertainment duty on providing entertainment by broadcasting signals on TV sets is ultra vires the powers of the State Legislature. Petition dismissed.
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2010 (10) TMI 929
The High Court of Punjab & Haryana heard an appeal where the tax effect was below the limit for filing an appeal as per a 2008 circular. The court noted that the circular did not apply to appeals already filed and referred the matter to the Chief Justice for consideration by a larger Bench.
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2010 (10) TMI 928
The Bombay High Court remitted proceedings back to the Assessing Officer based on a previous judgment in the case of C.I.T. v. Kalpataru Colours & Chemicals. The appeal was disposed of with no order as to costs.
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2010 (10) TMI 927
Issues Involved:
1. Application of net profit rate.
2. Rejection of books of account u/s 145(3).
3. Consideration of past history in assessment.
4. Estoppel against agreed surrender.
Summary:
1. Application of Net Profit Rate:
The Department objected to the Commissioner of Income-tax (Appeals) directing the application of an 8% net profit rate subject to depreciation and interest, instead of the 10% rate applied by the Assessing Officer. The Department argued that the assessee had admitted to defects in the books and agreed to a 10% rate. The Assessing Officer noted discrepancies and concluded the assessee earned more profit than disclosed, applying a 10% rate based on precedents like Singh Construction and Co. v. Asst. CIT and CIT v. Govinda Choudhury and Sons.
2. Rejection of Books of Account u/s 145(3):
The Assessing Officer invoked section 145(3) due to discrepancies in the books of account, rejecting them and computing income by applying a 10% net profit rate. The Commissioner of Income-tax (Appeals) upheld the rejection but directed an 8% rate, considering the past history and undue pressure on the assessee to agree to a 10% rate.
3. Consideration of Past History in Assessment:
The Commissioner of Income-tax (Appeals) found that the Assessing Officer did not consider the past history, where an 8% net profit rate was approved for previous years. The Tribunal agreed, noting that past history is the best guide for assessments under section 145(3), citing cases like CIT v. Gotan Lime Khanij Udhyog and Ajay Goyal v. ITO.
4. Estoppel Against Agreed Surrender:
The Tribunal held that there is no estoppel against the assessee's right to appeal, even if they initially agreed to a higher net profit rate. This principle is supported by various judgments, including Pullangode Rubber Produce Co. Ltd. v. State of Kerala and Board's Circular No. 286/2/2003, which advises against additions based solely on confessions not supported by credible evidence.
Conclusion:
The Tribunal confirmed the Commissioner of Income-tax (Appeals)'s direction to apply an 8% net profit rate, dismissing the Department's appeal. The decision emphasized the importance of considering past history and the right to appeal against agreed assessments. The order was pronounced on October 12, 2010.
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2010 (10) TMI 926
Issues involved: Interpretation of Notification No. 1/2006-S.T. u/s Finance Act, 1994 for service tax on free supply of materials in construction services.
Summary:
The Appellate Tribunal CESTAT AHMEDABAD considered the case of an appellant engaged in providing construction services, specifically laying pipelines, to customers like ONGC, GAIL, BPCL, and IOCL. Two show cause notices were issued to the appellant for the period from October 2006 to March 2008, demanding service tax on the value of free supply of materials. The notices were based on the classification in Notification No. 1/2006-S.T., which states that the gross amount charged for the service should include the value of goods and materials supplied by the provider of the construction service. The impugned order confirmed the demand for service tax and imposed penalties under sections of the Finance Act, 1994.
Upon hearing both sides, the Tribunal noted that a previous order had held that the cost of materials supplied by the service receiver should be included in the taxable value. However, the appellant cited a different decision in the case of Cemex Engineers v. CST, where it was held that the cost of materials need not be included in the taxable value. The appellant argued that this decision was not brought to the notice of the Tribunal during their own case proceedings. Additionally, the appellant contended that the service was not liable to service tax before 1-6-07 as it was a works contract.
After considering the submissions, the Tribunal acknowledged the conflicting views and the time-barred nature of one show cause notice. Recognizing the possibility of two interpretations, the Tribunal found merit in the argument that the appellant had a prima facie case for waiver of pre-deposit and stay against the recovery of service tax, interest, and penalties during the appeal. Consequently, the Tribunal waived the requirement of pre-deposit and allowed the stay petition unconditionally during the pendency of the appeal.
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2010 (10) TMI 925
Issues involved: Challenge to vires of Section 66A of the Finance Act, 1994 and show-cause notice issued pursuant to the provision.
Summary:
The High Court of Madras heard two Writ Petitions challenging the validity of Section 66A of the Finance Act, 1994 and the related show-cause notice. The Court did not grant a Stay during the pendency of the writ petition. A counter affidavit was filed justifying the show-cause notice and the provision in question. The issue raised in the writ petition had already been addressed by the Division Bench of the Bombay High Court in a previous case. The Supreme Court had also dismissed a Leave Appeal related to the matter. Subsequently, the Government of India issued a Circular directing authorities on the assessment of service tax liabilities. The Circular clarified the tax liabilities in cases of taxable services provided by non-residents and received in India. It also highlighted the application of service tax in cases of services received outside India by residents or businesses in India. The Circular addressed discrepancies in the application of service tax in certain cases and directed field formations to follow specific guidelines. The Court, considering the judgments and Circular, held that the petitioners' liability should be calculated from a specific date. Ultimately, both writ petitions were dismissed without costs.
In conclusion, the Court rejected the Writ Petitions based on the previous judgment of the Bombay High Court and directed the authorities to determine the petitioners' liability from a specified date based on the Circular issued by the Government of India.
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2010 (10) TMI 924
Issues:
1. Dispute over VAT amount paid by a State Government undertaking.
2. Applicability of Service Tax on transactions.
3. Maintainability of writ petitions.
4. Interpretation of Supreme Court judgment on VAT liability and conditional interim orders.
Analysis:
1. The appellant, a State Government undertaking, disputed the VAT amount paid and argued that no direction to deposit 50% of the demanded VAT amount is necessary pending Writ Petitions. The appellant contended that the disputed amount related to transactions subject to Service Tax.
2. The Government Advocate cited previous Division Bench judgments where directions were issued to collect both Service Tax and VAT. It was argued that based on these precedents, the writ petitions filed by the appellant were not maintainable.
3. The appellant's Counsel relied on a Supreme Court judgment involving Bharat Petroleum Corp. Ltd. The Counsel argued that as a State Government undertaking regularly paying VAT, there was no need for a conditional interim order to deposit 50% of the VAT amount demanded by the respondents.
4. Referring to the Supreme Court case, the Court noted that the Apex Court did not interfere with the interim order related to tax levy due to peculiar circumstances. The Court observed that in cases involving public sector companies with substantial financial standing, imposing a condition to deposit 50% of the tax demanded for enjoying an interim order may not be justified. Consequently, the Court modified the interim order, directing the appellant and revenue to seek permission to hear the matter on merits promptly.
5. Ultimately, the Court disposed of the appeals, emphasizing that there was no justification to impose a 50% deposit condition on the appellant, a substantial company in good financial standing. The Court upheld the grant of the interim order of stay and instructed the parties to proceed to the Single Judge for a timely hearing on the merits of the case.
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2010 (10) TMI 923
Issues Involved
1. Alleged oppression and mismanagement under sections 397, 398, and 237(b) read with sections 399, 402, and 403 of the Companies Act, 1956.
2. Legality of the petitioner's removal as a director.
3. Allegations of financial misappropriation and mismanagement.
4. Denial of access to company records.
5. Validity of board resolutions and meetings.
6. Equitable relief and valuation of shares.
Detailed Analysis
1. Alleged Oppression and Mismanagement:
The petitioner alleged oppression and mismanagement in the affairs of the company, including financial misappropriation, non-declaration of dividends, and denial of access to company records. The petitioner sought relief under sections 397, 398, and 237(b) read with sections 399, 402, and 403 of the Companies Act, 1956. The court noted that the respondents failed to controvert the petitioner's allegations of contradictions and illegality in his removal/cessation as a director, as well as the allegations regarding mismanagement and misuse of company assets.
2. Legality of the Petitioner's Removal as a Director:
The petitioner contended that his removal as a director was abrupt and illegal, violating the company's articles of association. The court observed that the petitioner was removed by a resolution passed on April 26, 2004, but the reasons for his removal were inconsistent and contradictory. The court found that the removal did not comply with the company's articles, which required the approval of the Directorate General of Resettlement. Thus, the removal was deemed illegal and null and void.
3. Allegations of Financial Misappropriation and Mismanagement:
The petitioner alleged several instances of financial misappropriation and mismanagement by the respondents, including the sale of a company vehicle at a throwaway price, shifting the registered office to a property owned by respondent No. 2, and purchasing property at exorbitant prices. The court noted that these allegations were not effectively countered by the respondents and found evidence of financial mismanagement and misappropriation.
4. Denial of Access to Company Records:
The petitioner claimed that he was denied access to company records despite being a director and shareholder. The court noted that the Company Law Board had directed the respondents multiple times to allow inspection of records, but the respondents failed to comply, leading to the imposition of costs. The court found that the respondents' conduct in denying access to records was wrongful and burdensome.
5. Validity of Board Resolutions and Meetings:
The petitioner argued that the board meetings and resolutions were invalid due to the lack of proper notice and compliance with the company's articles. The court observed that the respondents failed to prove the validity of the notices and the resolutions passed in the board meetings. The court held that the resolutions removing the petitioner as a director and appointing new directors were invalid.
6. Equitable Relief and Valuation of Shares:
The petitioner sought a fair valuation of his shares and proposed to exit the company. The court considered the valuation reports submitted by both parties and directed the petitioner to go out of the company on receipt of fair value at Rs. 2,000 per share for his group's 1,500 shares within three months. The court also ordered that the petitioner would continue as a director until full payment was made, and any resolutions passed in board meetings including the newly appointed directors would not be effective unless approved by the court.
Conclusion
The court concluded that the respondents' conduct was oppressive and burdensome, lacking in probity. The petitioner's removal as a director was illegal and null and void. The court directed the petitioner to be bought out at a fair value of Rs. 2,000 per share and ordered that he continue as a director until full payment was made. All interim orders were vacated, and costs imposed on the respondents were to be paid forthwith.
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2010 (10) TMI 922
Issues:
Petition under section 397/398 of the Companies Act, 1956 seeking various reliefs against respondents. Procedural defects in filing the petition.
Analysis:
1. The petitioners, who are directors and shareholders of the company, sought reliefs including direction for vacation of office and management of the hotel by respondents, imprisonment, restoration of auditors, investigation of company, and restoration of shareholding/directorship. Allegations included fraudulent transfer of shares, misuse of funds, and wrongful management by the second respondent.
2. The respondents contended that there was no cause of action for the petition, as they held a majority of shares and the petitioners had admitted to share transfers. They argued that the petition was vexatious and an abuse of process.
3. The second respondent raised preliminary objections, citing procedural flaws in the petition, such as antedated verifying affidavits and lack of authorization for the representative. He also claimed that the petitioners had received consideration for share transfers and had misappropriated funds.
4. In response, the petitioners alleged fraudulent actions by the second respondent, including unauthorized share transfers and appointment of family members in key positions. They argued that the documents presented were forged and tampered with to benefit the second respondent.
5. The Bench observed procedural defects in the petition, such as predated verifying affidavits and lack of authorization for the representative, rendering it non-maintainable. Due to these defects, the Bench refrained from discussing the case on merits and dismissed the petition.
6. The dismissal granted the petitioners the liberty to file a fresh petition addressing the same cause of action. No costs were awarded, and all pending applications were closed as the main petition was disposed of.
This judgment highlights the importance of procedural compliance in company law petitions and emphasizes the need for accurate documentation and authorization to maintain the validity of legal actions.
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2010 (10) TMI 921
Issues:
- Restoration of the name of the original shareholder in a company under section 111 of the Companies Act, 1956.
Analysis:
The petitioner, being the legal heir of the deceased father who held 150 shares in the company, filed a petition seeking directions to restore the name of the original shareholder, Mr. Giridharlal Issandas, whose shares were transferred to the managing director of the company after his death. The petitioner discovered the transfer in 2008, nearly 20 years after the father's demise, and alleged that the transfer was collusive and fraudulent. Despite multiple notices sent to the respondents, they failed to appear before the bench, leading to an ex-parte hearing. The petitioner provided evidence, including share certificates and the annual return of the company, to support the claim that the shares were transferred without sufficient cause. The bench concluded that the transfer was illegal and ordered the company to restore the name of the original holder within thirty days under section 111(5) of the Act.
This judgment highlights the importance of upholding the rights of original shareholders and preventing unauthorized transfers of shares, especially in cases where the transfer is deemed fraudulent or collusive. The legal heir's right to seek restoration of the original shareholder's name, supported by evidence and compliance with procedural requirements, was recognized by the Company Law Board. The bench's decision to direct the company to rectify the transfer and restore the original holder's name demonstrates the judicial authority's power to intervene and enforce compliance with company law provisions to protect shareholders' interests. The judgment serves as a reminder to companies to adhere to legal requirements and prevent unauthorized or fraudulent actions that may harm the rights of shareholders, emphasizing the need for transparency and accountability in corporate governance.
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2010 (10) TMI 920
Present application under section 151 CPC read with Order 39 Rule 2 and 2A CPC made by the applicant/petitioner in a contempt petition seeking directions against the respondents from continuing the contempt on a repetitive basis
Held that:- There was no direction issue by CLB against the parties from corresponding with the Government authorities seeking permission /licenses/sanctions in respect of the said land. The directions given by CLB were to maintain status quo and as already observed by this Court this implied that no construction activities and no parting with the possession of said land and no transfer of title should be there. There is no bar on parties in corresponding with authorities and seeking licenses /permissions /approvals of projects from Government in anticipation of succeeding in the litigation. However, it is directed that respondents during pendency of this petition shall not undertake any development activities over the land and shall not part with possession of the land to any third party and shall not transfer title of the land in question to any third party. Obtaining permission by respondents is at their own risk and costs as for that, there was no injunction granted by CLB. However it is made clear that if construction activities are done and status quo is altered, the respondents shall be liable to restore the status of the land as it existed on the date of grant of injunction, at their costs and if it is not done by the respondents and a violation is undertaken by the respondents, the court shall be constrained to restore the position of the land in question as it existed on the date of status quo through Court Commissioner. Thus the present application stands disposed of
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2010 (10) TMI 919
Issues Involved:
1. Whether the treatment meted out to the second petitioner by the respondents has been unfair and oppressive.
2. Whether respondents 2 to 10 are conducting the affairs of the company in a manner oppressive to the petitioners and prejudicial to the interest of the company and public interest.
3. Whether there was an editorial framework for retirement and succession for the editorial board members.
4. Whether the petitioners are entitled to any equitable reliefs.
5. To what reliefs and costs.
Detailed Analysis:
Issue 1: Unfair and Oppressive Treatment of the Second Petitioner
The petitioners argued that the second petitioner, who had been a director for 30 years and managing director since 2006, was unfairly stripped of his powers without notice or explanation. The court noted that the second petitioner's responsibilities were significantly reduced in a board meeting on 20-3-2010, which was seen as a vindictive and punitive action. The court found this decision lacked probity and good faith, and was unfair, thus setting aside the decision to reallocate the functions of the Senior Managing Director and restoring the position prior to 20-3-2010.
Issue 2: Conduct of Respondents 2 to 10
The petitioners alleged that the respondents were conducting the affairs of the company in a manner prejudicial to the interests of the company and public interest. The court observed that the company is a public limited entity and not a quasi-partnership, thus the claims should be based on decisions taken by the board of directors. The court did not find sufficient grounds to support the claim that the respondents' actions were prejudicial to the company or public interest.
Issue 3: Editorial Framework for Retirement and Succession
The petitioners claimed there was an informal understanding that the second respondent would retire at 65, which was not honored. The court found no enforceable decision or understanding for the retirement and succession of the editorial board members. It was noted that the proposal for a permanent editorial succession plan and corporate governance policy was under consideration by the board and should be decided by the board and shareholders without judicial intervention.
Issue 4: Entitlement to Equitable Reliefs
The court acknowledged the special circumstances of the case and the long association of the second petitioner with the company. It directed the board to reconsider the decision taken on 20-3-2010 regarding the reallocation of the second petitioner's functions, restoring his previous status and responsibilities until his planned retirement in August 2011.
Issue 5: Reliefs and Costs
The court issued the following orders:
1. Declined the reliefs to implement a permanent editorial succession plan of retirement and corporate governance policy based on informal discussions, directing the board and shareholders to consider these issues without delay.
2. Set aside the decision taken on 20-3-2010 to reallocate the functions of the Senior Managing Director and restored the position prior to that date.
3. Declined the relief regarding the appointments of the 12th and 13th respondents as correspondents.
4. Declined the relief to appoint a permanent independent chairman.
5. No order as to costs, and all interlocutory applications were dismissed, and interim orders vacated.
Conclusion:
The court's judgment focused on addressing the specific grievances of the second petitioner regarding the reallocation of his responsibilities while emphasizing the need for the board and shareholders to decide on the broader issues of editorial succession and corporate governance. The court balanced the need for fair treatment of the second petitioner with the autonomy of the company's board and shareholders to manage its affairs.
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2010 (10) TMI 918
Petitions filed by the petitioner-companies for sanction of a composite scheme of arrangement in nature of demerger and transfer of treasury segment of Paras Pharmaceuticals Ltd., the demerged company to Sterling Addlife India Ltd., the resulting company and reduction of capital of Paras Pharmaceuticals Ltd., under sections 391 and 394 read with sections 78 and 100 to 104 of the Companies Act, 1956
Held that:- Considering the petitions and other relevant documents on record and considering the submissions made at the time of hearing the court is satisfied that the observations made by the Regional Director do not survive and the scheme of arrangement would be in the interest of the companies and their members and creditors. Prayers in terms of paragraph 20(a) in the case of Company Petition No. 87 of 2010 and paragraphs 16(a) and (b) in the case of Company Petition No. 88 of 2010 are hereby granted.
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2010 (10) TMI 917
Issues Involved:
1. Legality of the transfer of shares.
2. Authority of the constituted attorney.
3. Allegations of forgery and fraud.
4. Compliance with statutory provisions for share transfer.
5. Validity of the petition under section 111(4) of the Companies Act, 1956.
Detailed Analysis:
1. Legality of the transfer of shares:
The petitioners claimed that the transfer of 40% shares of petitioner No. 1 to respondent Nos. 2 and 5 and 5% shares of petitioner No. 2 to respondent No. 4 were "ab initio void and illegal." They alleged that these transfers occurred without their consent and knowledge. The petitioners also maintained that they had never handed over their original share certificates to anyone. The respondents countered by presenting a declaration-cum-confirmation dated March 13, 2006, signed by petitioner No. 1, which stated that he transferred his shares as a benami holder without consideration. The Board found this declaration credible and ruled that the transfer was legal and valid.
2. Authority of the constituted attorney:
The respondents challenged the authority of the constituted attorney representing the petitioners, arguing that petitioner No. 1 had no authority to appoint an attorney on behalf of petitioner No. 2. The petition was filed without proper authority, and the petitioners avoided subscribing their signatures to avoid scrutiny. The Board did not find sufficient grounds to dismiss the petition on this basis alone but noted the irregularity.
3. Allegations of forgery and fraud:
The petitioners alleged that their signatures were forged on the transfer documents. The respondents refuted this, stating that petitioner No. 1 had signed various documents in his capacity as a director, and his signatures on the disputed documents matched those on record. The Board concluded that the petitioners failed to prove the forgery allegations in any competent court of law and found the respondents' evidence more credible.
4. Compliance with statutory provisions for share transfer:
The petitioners argued that the statutory provisions for the transfer of shares were not complied with, citing several legal precedents. However, the Board held that the declaration-cum-confirmation by petitioner No. 1, stating he was a benami holder, allowed the transfer without further formalities. The Board also noted that the second petitioner had legally transferred her shares by signing the share transfer deed on May 2, 2001.
5. Validity of the petition under section 111(4) of the Companies Act, 1956:
The main issue for consideration was whether the petitioners were entitled to the reliefs sought under section 111(4) of the Companies Act, 1956. The Board examined whether the names of the respondents were entered in the register of members without sufficient cause. The Board found that the names of respondent Nos. 2, 4, and 5 were entered with sufficient cause based on the declaration-cum-confirmation and other evidence presented. Consequently, the petitioners failed to establish their claims, and the petition was dismissed.
Conclusion:
The Board dismissed the petition, ruling that the transfer of shares was legal and valid, the petitioners failed to prove forgery or fraud, and the statutory provisions were complied with. The petitioners' claims were not substantiated, leading to the dismissal of the petition with no order as to costs.
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2010 (10) TMI 916
Issues Involved:
1. Validity of the notice dated 2-4-2010 issued by the respondents under sections 188 and 284 of the Companies Act, 1956.
2. Compliance with the numerical requirements under section 188 of the Companies Act, 1956.
3. Allegations of abuse of the process of law by the respondents.
4. Previous legal actions and judgments related to similar notices issued by the respondents.
Detailed Analysis:
1. Validity of the Notice Dated 2-4-2010:
The petitioner-company sought exemption from publication, circulation, or reading out the notice dated 2-4-2010 issued by the respondents at the forthcoming annual general meeting. The petitioner also sought a declaration that the notice does not comply with the numerical requirements under section 188 of the Companies Act, 1956, and is therefore invalid and void. The respondents held only 360 equity shares, representing 0.0001% of the total issued and paid-up share capital, which is below the statutory requirement under section 188.
2. Compliance with Numerical Requirements Under Section 188:
As per section 188 of the Companies Act, 1956, a valid requisition requires members representing not less than one-twentieth of the total voting power or not less than one hundred members holding shares with an aggregate paid-up sum of not less than one lakh rupees. The respondents, holding only 360 equity shares, did not meet these criteria. Therefore, the notice for the removal of Mr. Keki M. Mistry was deemed invalid and void ab initio.
3. Allegations of Abuse of the Process of Law:
The petitioner argued that the respondents had a history of issuing frivolous and vexatious notices, primarily for the removal of directors, including Mr. Deepak S. Parekh, on similar grounds. The respondents' actions were seen as an abuse of the process of law, aimed at securing needless publicity and defaming the petitioner-company. The petitioner-company had previously sought relief from the Company Law Board against such notices, which were found to be baseless and defamatory.
4. Previous Legal Actions and Judgments:
The petitioner-company had filed a criminal complaint against the respondents for cheating, impersonation, forgery, and dishonest intentions. The Bombay High Court and the Metropolitan Magistrate had found prima facie cases against the respondents. Additionally, the respondents had issued several notices under sections 284 and 190 of the Act for the removal of directors, which were dismissed by various courts, including the Gujarat High Court. The Gujarat High Court had specifically directed that the respondents could not issue notices on the same grounds as previous notices.
Conclusion:
The Company Law Board found that the respondents did not meet the numerical requirements under section 188 of the Companies Act, 1956, and their notice dated 2-4-2010 was deemed invalid and void. The respondents were directed not to issue similar notices in the future unless they met the statutory requirements. The petition by the petitioner-company was allowed, and the notice for the removal of Mr. Keki M. Mistry was declared null and void.
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2010 (10) TMI 915
Issues:
Challenge to a composite scheme of amalgamation and arrangement under sections 391 to 394 of the Companies Act; Rights of objector to be heard at the first motion stage.
Analysis:
1. The application challenges a scheme of amalgamation and arrangement proposed by certain companies under sections 391 to 394 of the Companies Act. The objector alleges potential harm to creditors of the demerged company due to substantial asset transfers under the scheme, impacting debt recovery. A winding-up petition against the demerged company is also pending.
2. The objector sought to be heard at the first motion stage, citing the Bombay High Court judgment and the right to present objections before the Court. The respondent companies contended that Rule 67 of the Companies (Court) Rules, 1959 does not mandate notice issuance for directions at the first motion stage.
3. The objector's counsel argued for the right to be heard at the first motion stage, referencing the Supreme Court's stance in Chembra Orchard Produce Ltd. v. Regional Director of Company Affairs. The Court clarified that no obligation exists for the Company Court to hear parties at the first motion stage, as the scheme provides safeguards and opportunities for objections later in the process.
4. The Court emphasized that the Companies Act's unique scheme ensures adequate opportunities for affected parties to be heard before final sanctioning of any scheme. The objector's reliance on a different case was deemed irrelevant, and the Court rejected the plea for a hearing at the first motion stage.
5. Ultimately, the Court dismissed the application by M/s. Asia Satellite Telecommunications Co. Ltd., ruling that the objector's plea for a hearing at the first motion stage was not maintainable. The judgment highlighted the comprehensive framework of the Companies Act, which safeguards the rights of parties involved in amalgamation and arrangement schemes.
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2010 (10) TMI 914
Issues Involved:
1. Authority of SFIO to file the petition.
2. Maintainability of the petition for recovery of amounts under sections 397-398 read with sections 406, 542 & 543 of the Companies Act.
3. Continuity of the acts complained of till the date of the petition.
4. Relief sought.
Issue-wise Detailed Analysis:
Issue (i): Authority of SFIO to file the petition
The application challenged the maintainability of the petition on the ground that the SFIO (Serious Fraud Investigation Office) lacked authority to file it. The court referenced the Union of India's right to apply under sections 397-398 as provided under section 401, stating that the SFIO, being a part of the Ministry of Corporate Affairs, had not sub-delegated power/authority. The court accepted the contention that the Central Government could file a petition either on its own or through any authorized person, validating the filing of the petition by SFIO on behalf of the Union of India.
Issue (ii): Maintainability of the petition for recovery of amounts
The petition was filed for recovery of amounts from former directors based on an investigation report alleging fraudulent acts. Sections 397 and 398 are meant to address ongoing oppression and mismanagement, not for recovery of amounts. The court highlighted that the proceedings under these sections are summary in nature and not suitable for detailed trials involving witness examination and document verification. The court referenced the Supreme Court decision in Barium Chemicals Ltd. v. Company Law Board, emphasizing the need for compliance with conditions before taking action. The court concluded that the petitioner should seek alternate legal remedies as sections 397-398 are not applicable for the recovery of money. Additionally, section 543, which allows for assessing damages against delinquent directors, can only be invoked by a creditor or member, which the petitioner was not.
Issue (iii): Continuity of the acts complained of
The court noted that the allegations pertained to years 1992-2000, while the petition was filed in 2006. There was no evidence that the acts complained of were continuous or existed at the time of filing the petition. The court referenced judgments from the Karnataka and Kerala High Courts, which emphasized that the state of affairs must be in existence at the time of the application. Since the alleged acts were not ongoing, the provisions of sections 397-398 could not be invoked.
Issue (iv): Relief sought
The court found that the petitioner had not made out a prima facie case for interference. The application by Respondent No. 2 (CA No. 465 of 2008) was allowed, and CP No. 71 of 2006 was dismissed as not maintainable. No order as to costs was made.
Conclusion:
The petition filed by the SFIO on behalf of the Union of India was dismissed on grounds of maintainability, as it sought recovery of amounts rather than addressing ongoing oppression or mismanagement. The court emphasized the need for continuous acts of oppression or mismanagement to invoke sections 397-398 and suggested that the petitioner pursue alternate legal remedies.
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2010 (10) TMI 913
Issues Involved:
1. Whether the dispute raised in the company petition is liable to be referred to arbitration.
2. Whether the proposed rights issue by the respondent company is in violation of the articles of association and the Companies Act, 1956.
Detailed Analysis:
Issue 1: Arbitration Clause Invocation
The first issue for consideration is whether the dispute raised in the company petition should be referred to arbitration by invoking clause 16 in the agreement dated April 29, 2009. The petitioners argue that their statutory rights under the Companies Act are being violated, alleging acts of oppression and mismanagement by the respondents. They contend that not all parties to the company petition are bound by the arbitration agreement. The company, however, asserts that the petitioners are relying on the agreement, which includes an arbitration clause, thus barring the company petition under section 8(1) of the Arbitration and Conciliation Act, 1996. The Board concluded that since not all parties to the company petition are parties to the arbitration agreement, and the petition includes issues beyond the scope of the agreement, the matter cannot be referred to arbitration. The application for arbitration was dismissed, referencing the precedent set in Sukanya Holdings (P.) Ltd. v. Jayesh H. Pandya.
Issue 2: Rights Issue and Articles of Association
The second issue concerns the legality of the proposed rights issue by the respondent company. The petitioners argue that the rights issue violates clause 157A(e) of the articles of association, which requires the affirmative vote of petitioner No. 2 for any further issue of shares. The respondent company contends that clause 157A(e) is inconsistent with sections 81(1)(a) and 81(1A) of the Companies Act, 1956, and thus void under section 9(b) of the Companies Act. The Board examined whether clause 157A(e) conflicts with the Companies Act and concluded that it does. The clause was found to be repugnant to sections 81(1)(a) and 81(1A) and therefore void. Consequently, the petitioners' request to restrain the company from proceeding with the rights issue was denied.
Conclusion:
The interim injunction against the rights issue was vacated, allowing the respondent company to proceed with the rights issue as resolved in the board meeting on May 25, 2010. The order is subject to the final outcome of the company petition. The respondents were directed to file a counter within four weeks, and the company petition was adjourned to December 15, 2010.
This comprehensive analysis covers the key issues, legal arguments, and conclusions while preserving the original legal terminology and significant phrases from the judgment.
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