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Showing 341 to 360 of 633 Records
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2004 (1) TMI 395
Issues:
Claim for payment by Official Liquidator from respondent M/s. Karnataka Electricity Board; Maintainability of application; Dispute over transfer of deposited amount to M/s. Pathi Silks; Liability of respondent to return deposited amount; Claim for interest on the deposited amount.
Claim for Payment by Official Liquidator:
The Official Liquidator of a company under liquidation filed an application seeking payment of Rs. 12,894 from the respondent, M/s. Karnataka Electricity Board. The amount included Rs. 10,530 deposited by the company with the respondent, along with interest and notice charges. The respondent objected, denying awareness of the winding-up order and claiming the amount was transferred to M/s. Pathi Silks. The respondent sought to implead M/s. Pathi Silks, which was allowed. The matter was to be posted for an enquiry regarding evidence.
Maintainability of Application:
The respondent argued that an enquiry was necessary, but the court disagreed, stating that an enquiry is needed only when there is a dispute between the parties. The undisputed fact was that the deposited amount was transferred to M/s. Pathi Silks. The legal position post a winding-up order was clear, with the Official Liquidator having control over the company's affairs.
Dispute over Transfer of Deposited Amount:
The respondent claimed that the amount was transferred to M/s. Pathi Silks at the request of the company under liquidation. However, the court held that such actions by the respondent at the request of former directors did not absolve their liability towards the company under liquidation. The liability of the respondent continued in law, and no further enquiry was required.
Liability of Respondent to Return Deposited Amount:
The court determined that the respondent must return the actual deposit of Rs. 10,800 to the Official Liquidator, along with interest. Interest was to be calculated from the date of the winding-up order until the date of realization. The court ordered interest at 6% per annum on the principal sum of Rs. 10,800 from September 1, 1996, until the date of realization, as per the Official Liquidator's claim.
Claim for Interest on Deposited Amount:
The court held that interest on the deposited amount was payable from the earliest occasion when the respondent was required to return the amount, upon receiving a notice from the Official Liquidator demanding payment. Interest was ordered at 6% per annum on the principal sum of Rs. 10,800 from September 1, 1996, until realization. The court ordered payment accordingly.
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2004 (1) TMI 394
Issues:
1. Entitlement to pendente lite interest on the suit amount.
2. Exercise of discretion by the Bank Court in waiving off pendente lite interest.
3. Applicability of RBI scheme for one-time settlement in the case.
Analysis:
Issue 1: Entitlement to pendente lite interest on the suit amount
The appeal was against a judgment where the plaintiff-Bank was held not entitled to pendente lite interest on the suit amount, as the defendants had fully satisfied the amount by payment through drafts and FDRs. The plaintiff-Bank had initiated a recovery suit for a specific amount with interest against the defendants. The Trial Court found that the entire suit amount had been paid, and relying on relevant judgments, exercised discretion under section 34 of the CPC to waive off pendente lite interest. The plaintiff-Bank contested this decision, arguing that the Court did not consider their plea for contractual interest and failed to acknowledge their liability to pay interest on deposits and charge interest on advances.
Issue 2: Exercise of discretion by the Bank Court in waiving off pendente lite interest
The Bank Court exercised its discretion to waive off pendente lite interest after finding that the suit amount had been fully paid by the defendants. The Court referred to relevant judgments and held that under section 34 of the CPC, the decision to award or refuse interest is at the Court's discretion. The plaintiff-Bank contended that the interest waiver was unjustified, especially considering their contestation of the case for seven years. However, the Court found no justification to award interest when the suit amount had been satisfied, leading to the dismissal of the plaintiff's suit.
Issue 3: Applicability of RBI scheme for one-time settlement in the case
During the appeal, it was revealed that the Reserve Bank of India had issued revised guidelines for compromise settlement of Non-Performing Assets (NPAs) of public sector banks. The defendants had paid the outstanding balance, which was declared as NPAs in 1990, through drafts and FDRs. The plaintiff-Bank had also communicated with the defendants for a compromise settlement under the RBI scheme for one-time settlement in 2003. The Court found that the defendants' case fell within the coverage of the RBI scheme, and the outstanding balance had been fully satisfied as per the scheme's requirements. Consequently, the Court dismissed the appeal, stating that the plaintiff-Bank had no merit in seeking further recovery from the defendants.
In conclusion, the High Court of Jammu and Kashmir dismissed the appeal, upholding the Bank Court's decision to waive off pendente lite interest, as the suit amount had been fully paid by the defendants in accordance with the RBI scheme for one-time settlement.
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2004 (1) TMI 393
Winding-up - Overriding preferential payment - Debts and claims against company - Whether interest can be claimed by the secured creditors after the date of winding up order or not - HELD THAT:- Considering the matter on record, I am of the opinion that the applicant Bank has general lien over the money realized on account of sale of sugar and molasses etc. which was secured under one agreement. The applicant-bank has a right to appropriate the surplus out of such sale proceeds towards the money due to the bank in the other account. In fact, such was the terms of agreement apart from the fact that such right is recognized under the law as well. Learned counsel for the official liquidator could not show any term of the agreement wherein the general lien of the applicant-bank has been curtailed in any manner. Consequently, the consortium of banks are entitled to first appropriate the sale proceeds in the agreed ratio in respect of the outstanding against Cash Credit Pledge Account. The balance, if any, can be appropriated by the consortium of banks in the same ratio in respect of the amount due to them in other accounts.
Rule 154 of the Companies (Court) Rules on which counsel for the official liquidator has put reliance is not applicable in respect of the secured creditors who stand outside the winding up. Since the secured creditors stand outside the winding up on the strength of their security, the consortium of banks are entitled to realize the interest in terms of the order passed by the Court of competent jurisdiction. The date of winding up is relevant only for those creditors whose claim is required to be settled by the official liquidator. Since the claim of the consortium of banks is not required to be adjudicated upon by the official liquidator, they are entitled to execute the order inclusive of interest against the sale proceeds of their securities. However, such realization would be subject to the dues of the workmen as and when finalized in respect of which the banks shall furnish undertaking aforesaid
To conclude, it is held that:- (i) by virtue of the provisions of section 11 of the Contract Act, the applicant bank had lien over the amount lying deposited under the orders of this Court in respect of its dues irrespective of the fact that the sale proceeds representes the sale of goods secured by the banks under the cash credit accounts;
(ii) the applicant-Bank are entitled to interest in terms of the orders passed by the Debts Recovery Tribunal up to the date of realization; and
(iii) the applicant-Bank shall furnish undertaking to reimburse the Official Liquidator to the extent of the workmen’s claims found due and payable without any demur or objection.
Thus, both the applications are allowed.
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2004 (1) TMI 392
Issues: Company petition for winding up under section 433(e) and (f) of the Companies Act.
Analysis:
1. The petitioner filed a company petition seeking winding up of the respondent company due to its inability to pay a debt of Rs. 1,71,43,173, despite repeated demands. The petition was supported by necessary facts and documents to establish the debt. The respondent filed a reply, but there was no indication of disputing or denying the debt. The court found that the petitioner had successfully established the debt payable by the respondent.
2. The court heard both parties and concluded that the petitioner had made a case for winding up the respondent company under section 433(e) of the Companies Act. Prior to this petition, 21 other creditors had also filed petitions for winding up the respondent company based on similar grounds of non-payment of debts. These petitions, including those from secured creditors like banks and financial institutions, were also founded on admitted debts amounting to crores of rupees.
3. It was undisputed that the respondent company had ceased its business activities. The closure of business, coupled with the absence of any proposal for repayment of debts, indicated the company's inability to pay its liabilities. The court noted that the company's liabilities exceeded its assets, and there was no indication of a profitable business revival plan.
4. Based on the lack of business activity, substantial outstanding dues, and absence of a viable repayment proposal, the court found a prima facie case for winding up the company under sections 433(e) and 433(f) of the Companies Act. Consequently, the court directed the winding up of the respondent company and scheduled a hearing for the appointment of an Official Liquidator to take custody of the company's assets.
5. Subsequently, on 27 January 2004, the court ordered the winding up of the respondent company, Kedia Distilleries Ltd. The Registrar was directed to inform the Official Liquidator about the winding up order and authorized the Official Liquidator to take possession of the company's assets to facilitate further proceedings. The Official Liquidator was also permitted to deploy security guards to safeguard the company's properties.
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2004 (1) TMI 391
Issues Involved:
1. Valuation of the appeal for jurisdiction purposes.
2. Jurisdiction of a Single Judge versus a Division Bench under the Allahabad High Court Rules, 1952.
3. Application of the Arbitration and Conciliation Act, 1996, Civil Procedure Code, 1908, and Court Fees Act as amended in U.P. to the valuation of the appeal.
Detailed Analysis:
1. Valuation of the Appeal for Jurisdiction Purposes:
The primal question involved is the valuation of the appeal for jurisdiction purposes. The appeal was initially reported by the stamp reporter as cognizable by a Single Judge based on a valuation below Rs. 1 lakh. However, the respondents contested this valuation, arguing that it exceeds Rs. 1 lakh and thus falls under the jurisdiction of a Division Bench.
2. Jurisdiction of a Single Judge versus a Division Bench:
Chapter V of the Allahabad High Court Rules, 1952, stipulates that a Single Judge has limited pecuniary jurisdiction for appeals up to Rs. 5 lakhs or Rs. 1 lakh, depending on the case. Appeals exceeding these amounts are to be heard by a Division Bench. The dispute arose from an application under section 9 of the Arbitration and Conciliation Act, 1996, which sought an injunction order. The District Judge, Kanpur, had rejected this application, leading to the present appeal.
3. Application of Relevant Legal Provisions:
The appeal's valuation needs to be determined considering the Arbitration and Conciliation Act, 1996, Civil Procedure Code, 1908, and the Court Fees Act as amended in U.P. The appellants argued that the right claimed in the appeal is incapable of valuation and that it is at their discretion to assign any valuation. They cited section 7(iv-B)(A) of the Court Fees Act and legal precedents such as Vasireddi v. Marupudi Butchiah and S. Rm. Ar. S. Sp. Sathappa Chettiar v. S. Rm. Ar. Rm. Ramnathan Chettiar.
The respondents, however, contended that the valuation should be based on the amount affected by the relief sought, referencing section 7(iv-B)(b) of the Court Fees Act. They argued that the bank account with a cash credit limit of Rs. 15 lakhs is the property involved and affected by the injunction sought.
Relevant Provisions and Case Law:
- Section 2(e) of the Arbitration and Conciliation Act, 1996, defines "Court" and includes the High Court in its ordinary and original civil jurisdiction.
- Section 9 of the Act allows a party to apply to a "Court" for interim measures.
- Section 7(iv-B)(b) of the Court Fees Act mandates that suits for injunction should be valued according to the amount at which the relief is sought, with a minimum valuation of 1/5th of the market value of the property involved or Rs. 200, whichever is greater.
- Case law such as Commercial Aviation & Travel Co. v. Mrs. Vimla Panna Lal and Kamaleshwar Kishore Singh v. Paras Nath Singh were cited to support the argument that the valuation should be based on objective standards and not arbitrarily set by the plaintiff.
Conclusion:
The court concluded that the valuation of the appeal should be Rs. 15 lakhs for jurisdiction purposes, as the bank account with a cash credit limit of Rs. 15 lakhs is the property involved and likely to be affected by the injunction sought. The appellants were directed to correct the valuation of the appeal, and the case was to be listed before the appropriate Division Bench. The appeal had not yet been heard on merits, and urgency was noted in the matter.
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2004 (1) TMI 390
Issues:
Company petition filed under section 433(c) of the Companies Act seeking winding up of the respondent-company when another petition for winding up the same company is already admitted.
Analysis:
The judgment pertains to a company petition filed under section 433(c) of the Companies Act by the petitioner seeking the winding up of the respondent-company. The court notes that another petition, Company Petition No. 9 of 1996, for winding up the same company has already been entertained and admitted. In the previous petition, directions were given for advertising the petition and other consequential steps for creditors to submit their claims. The court emphasizes that when a company petition for winding up has been admitted and advertised, it represents all creditors with claims against the company, not just the petitioner. Therefore, there is no need to entertain a separate petition for the same relief. The petitioner is granted liberty to submit their grievances in the form of a claim in the existing Company Petition No. 9 of 1996. The court highlights that both petitions seek the same relief, and all creditors' claims will be examined in the ongoing petition. As a result, the current petition is dismissed with liberty given to the petitioner to present their claim in the existing winding-up petition.
This judgment underscores the principle that once a company petition for winding up has been admitted and advertised, it represents all creditors with claims against the company. The court's decision to dismiss the current petition and allow the petitioner to submit their claim in the existing winding-up petition ensures a consolidated and efficient process for addressing all creditor claims. By granting liberty to the petitioner to present their grievances in the ongoing petition, the court streamlines the resolution of claims and avoids duplicative proceedings. The judgment reflects the court's commitment to upholding procedural fairness and maximizing the effectiveness of the winding-up process by consolidating creditor claims in a single petition for adjudication.
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2004 (1) TMI 389
Whether representation made by the detenu or on his behalf is required to be considered by all the authorities?
Held that:- The copy of the representation made by the detenu to one authority must be placed before all the authorities and all such authorities also should consider and pass orders on those representations, though really not made to any one of them.
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2004 (1) TMI 388
Issues Involved:
1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Personal liability of petitioner Nos. 2 to 7 for deductions made by petitioner No. 1 from the wages of employees and not remitted to respondent No. 5.
3. Validity of service of notice and the consequent orders of respondent Nos. 2 and 3.
Detailed Analysis:
1. Applicability of Section 22 of the SIC (SP) Act, 1985:
The court examined whether Section 22 of the SIC (SP) Act, 1985, which provides a moratorium on certain legal proceedings against a sick industrial company, was applicable. The court held that Section 22 was not applicable to the proceedings under Section 49 of the Maharashtra Co-operative Societies Act, 1960, as these were not suits but rather orders sought to be executed. The court clarified that Section 22 would not apply to the recovery of wages deducted from employees and not remitted to respondent No. 5, as these amounts were not loans or advances but wages. The court cited previous judgments, including Baburao P. Tawade v. Hes Ltd. and Carona Ltd., to support the view that wages and terminal benefits are not covered by Section 22. Consequently, the relief sought by the petitioners based on Section 22 was rejected.
2. Personal Liability of Petitioner Nos. 2 to 7:
The court analyzed Section 49 of the Maharashtra Co-operative Societies Act, 1960, which allows for deductions from the salary of employees to meet society's claims. The court noted that the employer, having deducted the wages, acts in a fiduciary capacity and is personally liable for remitting the amounts to the society. The court referred to the judgment in Madanlal Tantia v. Collector of Bombay, which held that directors could be held jointly and severally responsible for non-payment of dues deducted from employees' wages. The court concluded that petitioner Nos. 2 to 7, being directors, were personally liable along with petitioner No. 1 for the amounts deducted but not remitted.
3. Validity of Service of Notice and Consequent Orders:
The petitioners contended that they were not properly served notices, and thus the orders of respondent Nos. 2 and 3 should be set aside. The court found that petitioner Nos. 1, 2, and 7 were duly served and had chosen not to appear, thus they could not claim non-service. However, the court observed that petitioner Nos. 3 to 6 were either served on the date of the hearing or after, which did not provide them a fair opportunity to respond. Therefore, the court set aside the orders against petitioner Nos. 3 to 6 and remanded the matter to respondent No. 2 for a fresh hearing.
Conclusion:
The court issued the following orders:
- The relief based on Section 22 of the SIC (SP) Act was rejected.
- The orders of respondent Nos. 2 and 3 were confirmed for petitioner Nos. 1, 2, and 7.
- The orders dated 1st October 2003 and 13th November 2003 were set aside for petitioner Nos. 3, 4, 5, and 6, and the matter was remanded for a fresh hearing.
- The attachment warrant against petitioner Nos. 3, 4, 5, and 6 would continue pending the fresh hearing and for four weeks thereafter if the order was adverse to respondent No. 5.
The petition was partly allowed, and no order as to costs was made.
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2004 (1) TMI 387
Issues Involved:
1. Declaration of rights governed by the sanctioned scheme.
2. Discharge of the Court Receiver.
3. Maintainability of the Chamber Summons.
4. Binding nature of the sanctioned scheme on the claimants.
5. Entitlement to recover amounts under consent terms.
6. Jurisdiction of the High Court in relation to B.I.F.R. proceedings.
7. Satisfaction of the decree under Order XXI, rule 2, C.P.C.
Detailed Analysis:
1. Declaration of Rights Governed by the Sanctioned Scheme:
The Respondents sought a declaration that the rights of the Claimants are governed by the sanctioned scheme dated 30th October, 2002, read with the order dated 16th January, 2003, and not by the consent terms dated 20th January, 2000, and 31st July, 2000. The Court held that the final scheme formulated by the B.I.F.R. binds the Claimants, as it crystallizes their claim against the Respondent Company. The scheme is statutorily binding on the Claimants, as per sections 18(8), 19(2), and 32 of the SICA.
2. Discharge of the Court Receiver:
The Respondents also prayed for the discharge of the Court Receiver appointed in the Award/Arbitration Proceedings and Execution Proceedings, with directions to hand over formal possession of the hypothecated equipment back to the Respondents. The Court granted this relief, noting that the Respondents had already paid more than the amount provided for in the final scheme.
3. Maintainability of the Chamber Summons:
The Claimants argued that the Chamber Summons was not maintainable since the execution application had already been disposed of. However, the Court found that the Chamber Summons was maintainable under section 47 of the Code of Civil Procedure, as it raised questions related to the execution or satisfaction of the decree.
4. Binding Nature of the Sanctioned Scheme on the Claimants:
The Court emphasized that the sanctioned scheme is binding on the Claimants due to the statutory provisions of the SICA. The Claimants had initially consented to the original proposal with reservations only regarding the cut-off date. The final scheme, which was formulated after following the necessary procedures, binds the Claimants, and their claim is crystallized as per the scheme.
5. Entitlement to Recover Amounts Under Consent Terms:
The Claimants contended that they were entitled to recover amounts as per the consent terms. However, the Court held that the Claimants could not recover any further amounts beyond what was provided for in the final scheme. The argument that the decree had not been satisfied was rejected, as the final scheme binds the Claimants, and they can only recover amounts in conformity with the scheme.
6. Jurisdiction of the High Court in Relation to B.I.F.R. Proceedings:
The Court noted that entertaining the Claimants' grievance would amount to questioning the correctness of the scheme framed by the B.I.F.R., which is barred under section 26 of the SICA. The High Court does not have jurisdiction over matters that the B.I.F.R. or the Appellate Authority is empowered to determine under the SICA.
7. Satisfaction of the Decree Under Order XXI, Rule 2, C.P.C.:
The Claimants argued that the decree had not been satisfied as per Order XXI, rule 2, C.P.C. The Court, however, held that the final scheme binds the Claimants, and they are not entitled to any further claims beyond what is provided for in the scheme. The fact that the decree had not been satisfied or that it was a consent decree was of no avail to the Claimants.
Conclusion:
The Chamber Summons was made absolute in terms of prayer clauses (a) and (b), declaring that the rights of the Claimants are governed by the sanctioned scheme and discharging the Court Receiver. The operation of the order was stayed for six weeks to allow the Claimants to appeal.
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2004 (1) TMI 386
Issues:
Appointment of Advocate-Commissioner for property sale in a winding-up case.
Analysis:
The applicant, a creditor of the respondent company, sought the appointment of an Advocate-Commissioner to sell a property and deposit the sale proceeds. However, the respondent company was already wound up by the court, and the Official Liquidator was appointed as the Provisional Liquidator to manage all assets. As per the Companies Act, all assets of the debtor company are deemed to be in the custody of the court from the date of winding up. The winding-up order operates in favor of all creditors, and the applicant, as a creditor, cannot repossess the property without adjudicating the claims of all creditors.
Furthermore, under the Companies Act, no legal proceedings can be commenced or proceeded with against the company without the court's permission after a winding-up order. The applicant needs to obtain leave from the Company Court where the winding-up proceedings are ongoing to proceed further in the matter. Additionally, the appointment of an Advocate Commissioner with powers of a Receiver is not permissible since the Official Liquidator already has the authority to deal with the company's assets and effects.
Considering the legal provisions and the circumstances of the case, the court found that the application for the appointment of an Advocate-Commissioner was not justified and, therefore, dismissed the application. The applicant was directed to obtain the necessary leave from the Company Court to proceed with any actions against the respondent debtor company in accordance with the Companies Act.
In conclusion, the court dismissed the application for the appointment of an Advocate-Commissioner, emphasizing the need for the applicant to obtain the required leave from the Company Court to pursue any further actions against the respondent debtor company in a winding-up scenario.
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2004 (1) TMI 385
Issues Involved:
1. Injunction against invoking bank guarantees.
2. Jurisdiction and arbitration clause.
3. Effect of winding up order and appointment of provisional liquidator on bank guarantees.
Detailed Analysis:
Injunction Against Invoking Bank Guarantees:
The appellant, a company, had awarded a contract to respondent No. 1 for setting up a UPPC Complex. Respondent No. 1 obtained three bank guarantees from Bank of Maharashtra to secure advance payments from the appellant. Due to non-completion of the work, the appellant sought to invoke the bank guarantees. Respondent No. 1 filed suits to restrain the invocation, and the Trial Court granted an injunction. The appellant argued that the Trial Court erred in granting the injunction as no fraud was alleged or proved, citing various Apex Court judgments which state that an injunction against a bank guarantee can only be issued if fraud is proven. The High Court agreed with the appellant, stating that the Trial Court erred in issuing the injunction as no prima facie case of fraud was made out by the plaintiff.
Jurisdiction and Arbitration Clause:
The appellant also filed an application under Section 9A of the Civil Procedure Code, challenging the jurisdiction of the Pune Court, and under Section 8 of the Arbitration and Conciliation Act, 1996, seeking a stay of the suit and reference to arbitration. The Trial Court's decision to grant the injunction was challenged on the grounds that the arbitration clause in the contract should have led to a stay of the proceedings. The High Court did not specifically address the jurisdiction and arbitration issues in detail but focused on the erroneous issuance of the injunction.
Effect of Winding Up Order and Appointment of Provisional Liquidator on Bank Guarantees:
During the pendency of the appeals, the respondent No. 1 company was ordered to be wound up, and a provisional liquidator was appointed. The appellant argued that the winding up order should not affect the invocation of the bank guarantees. The High Court referred to Apex Court judgments which held that payment under a bank guarantee should not be stayed due to winding up proceedings, as the bank guarantee is an independent contract between the bank and the beneficiary. The High Court concluded that the winding up order and the appointment of the provisional liquidator do not affect the appellant's right to invoke the bank guarantees.
Conclusion:
The High Court quashed the Trial Court's order of injunction and directed Bank of Maharashtra to honor the bank guarantees within four weeks. The appeals were allowed, and any pending civil applications were disposed of accordingly. The High Court emphasized that the bank guarantees are independent contracts and must be honored irrespective of the liquidation proceedings of respondent No. 1.
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2004 (1) TMI 384
The High Court of Rajasthan dismissed a winding-up petition as the amount due was decreed in favor of the petitioner by the Civil Court and could be recovered through execution. The petition was dismissed with costs of Rs. 1000.
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2004 (1) TMI 383
Issues:
1. Applicability of the appropriate Government to grant remission under section 432 of the Code of Criminal Procedure.
2. Interpretation of the term "appropriate Government" as per section 432 of the Code.
3. Determination of the appropriate Government for remission in the case of offences under section 138 of the Negotiable Instruments Act, 1881.
Analysis:
Issue 1: The primary issue in this case is to determine whether the Government of Kerala has the authority to grant remission under section 432 of the Code of Criminal Procedure. The respondent, the wife of an individual convicted under section 138 of the Negotiable Instruments Act, filed a petition seeking remission of her husband's sentence. The central question is whether the State Government or the Central Government is the competent authority to consider such remission requests.
Issue 2: The interpretation of the term "appropriate Government" under section 432 of the Code is crucial. As per the provisions, the appropriate Government may suspend or remit a sentence. Sub-section (7) defines the "appropriate Government" as the Central Government for offences under laws within the executive power of the Union, and the State Government for other cases. This interpretation is pivotal in determining the jurisdiction of remission in this case.
Issue 3: The specific issue at hand is the determination of the appropriate Government for remission in cases related to section 138 of the Negotiable Instruments Act, 1881. The judgment delves into the constitutional provisions, specifically Article 73 and Article 246, to establish that matters related to cheques fall under the exclusive legislative power of the Parliament. Since the Act is a law made by Parliament and the offence pertains to dishonour of cheques, the appropriate Government for remission in such cases is deemed to be the Central Government.
In conclusion, the High Court of Kerala, in the judgment delivered by Cyriac Joseph, J., clarified that in cases involving offences under section 138 of the Negotiable Instruments Act, 1881, the appropriate Government for remission under section 432 of the Code of Criminal Procedure is the Central Government. The judgment emphasized the exclusive legislative power of the Parliament over matters related to cheques, leading to the Central Government being the competent authority for remission in such cases. Consequently, the writ appeal filed by the State of Kerala and others was allowed, setting aside the earlier judgment that directed the State Government to consider the remission application.
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2004 (1) TMI 382
Issues:
- Interpretation of section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 regarding the period for making a reference to the Board of Industrial and Financial Reconstruction (BIFR).
- Jurisdiction of the High Court to entertain a petition challenging BIFR's decision.
Analysis:
Issue 1: Interpretation of section 15(1) of the SICA
The petitioner, a Public Limited Company, filed a reference to the BIFR beyond the 60-day period specified in section 15(1) of the SICA. The BIFR dismissed the reference as time-barred, leading to subsequent review and appeal. The petitioner argued that the 60-day period is not a strict limitation period but a requirement to initiate proceedings promptly. The petitioner contended that the aim of the Act is timely detection and rehabilitation of sick companies, and non-compliance should result in penal consequences, not automatic dismissal. Reference was made to a judgment emphasizing the obligation on the board of directors to refer a sick company to the BIFR within the specified timeframe. The court agreed with the petitioner, stating that the 60-day period is a directive to prompt action, not a strict limitation. Dismissing a reference solely based on exceeding this period would defeat the Act's purpose of timely rehabilitation. The court set aside the BIFR's dismissal and directed the BIFR to proceed with the restored reference.
Issue 2: Jurisdiction of the High Court
Respondent's counsel argued that the High Court lacked jurisdiction to entertain the petition challenging BIFR's decision, suggesting it should have been filed where the decisions were made. Citing a Supreme Court judgment regarding the impact of governmental actions, the respondent contended that the ultimate effect of the decisions would be felt in a different location. However, the court rejected this argument, stating that the cause of action leading to the original proceedings and the petition was the same - the sickness of the company. The court distinguished another judgment related to company law, emphasizing that the SICA does not create a prohibition but a duty on companies to act promptly. The court held that the High Court had jurisdiction to hear the petition challenging BIFR's decision and proceeded to set aside the dismissal and restore the reference for further proceedings.
In conclusion, the High Court interpreted section 15(1) of the SICA as a directive for prompt action rather than a strict limitation period. It asserted its jurisdiction to entertain the petition challenging BIFR's decision and directed the BIFR to proceed with the restored reference.
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2004 (1) TMI 381
Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956.
2. Validity of the transfer of shares in respondent companies.
3. Election and constitution of the new Board of Directors.
4. Valuation and sale of shares.
Detailed Analysis:
1. Allegations of Oppression and Mismanagement:
The petitioners alleged that the transfer of shares in respondents 5 to 7 companies was fraudulent and without proper consideration, constituting oppression and mismanagement. They claimed that these shares were major assets of the Kanthimathy Company and were sold at a value prejudicial to the company's interests. The Company Law Board (CLB) initially ordered a status quo and later directed the convening of a general body meeting to elect five directors.
2. Validity of the Transfer of Shares:
The CLB found that the consideration paid by the second respondent for the shares did not represent their true value. It noted a lack of transparency in the transfer process, as there was no record of offers made to other members or invitations for offers from others. Consequently, the CLB set aside the transfer of shares, ordering the company to refund the consideration received and rectify the register of members accordingly.
3. Election and Constitution of the New Board of Directors:
The CLB directed the election of a new Board of Directors, which resulted in petitioners 1 to 5 being elected. The old Board, including the second appellant, ceased to function. The CLB advised the inclusion of the second appellant as a director, which was agreed upon. However, the new Board's constitution was challenged, leading to the appeal.
4. Valuation and Sale of Shares:
The CLB's decision to set aside the share transfer was based on the finding that the shares were sold at an undervalued price. The appellants argued that the decision to sell the shares was taken with legitimate business considerations and that the valuation certificates produced by the appellants were not properly considered by the CLB. The High Court noted that the CLB failed to consider relevant materials, such as balance sheets and profit and loss accounts, and did not appoint an independent chartered accountant for proper valuation.
Judgment:
The High Court found that the CLB misdirected itself on the question of law regarding the circumstances under which it could set aside the Board's decision. The High Court emphasized that the decision to sell the shares was taken when the second appellant was not a Board member and that there was no evidence of mismanagement or prejudice to the company during Sivaramkrishna Iyer's tenure as Chairman. The High Court concluded that the CLB should have appointed an independent chartered accountant for valuation before determining that the shares were undervalued. Consequently, the High Court set aside the CLB's decision to cancel the share transfer and remanded the matter to the CLB for reconsideration.
Conclusion:
The appeal was partly allowed, and the matter was remanded to the CLB to decide the question of share valuation and transfer afresh, considering all relevant materials and appointing an independent chartered accountant if necessary.
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2004 (1) TMI 380
Issues: Challenge to General Circular No. 35/2003 under Companies Act, 1956 regarding compliance certificate for employing a whole-time company secretary.
Analysis:
The petitioner challenged General Circular No. 35/2003, which clarified that a company employing a full-time company secretary is not required to obtain a compliance certificate from a company secretary in practice. The petitioner argued that this clarification contradicts the proviso to section 383A of the Companies Act, 1956, which mandates the issuance of such certificate by a company secretary in practice. The respondent contended that the intent of the statute is to have either an employed or practicing company secretary issue the compliance certificate based on the company's paid-up capital. For companies with a paid-up capital over Rs. 2 crores, employing a whole-time company secretary is compulsory, while it is optional for those with paid-up capital between Rs. 10 lakhs and Rs. 2 crores. The respondent argued that requiring a compliance certificate only from a practicing company secretary in cases where a full-time company secretary is employed is unnecessary. The court acknowledged the respondent's intent to correct an anomaly in the Circular but raised concerns about modifying the proviso through a general Circular. The court suggested the option of granting a general exemption under section 637A of the Act instead of issuing a Circular. The respondent was given time to seek instructions before the next hearing.
This analysis highlights the key arguments presented by both parties regarding the interpretation of the Companies Act, 1956, in relation to the issuance of compliance certificates for companies employing full-time company secretaries. The court's consideration of the statutory provisions and the implications of the General Circular on the existing legal framework is crucial in determining the validity and impact of the Circular on companies' compliance requirements. The court's suggestion of an alternative approach through a general exemption under the Act indicates a potential resolution to the issue raised by the petitioner while ensuring compliance with the statutory provisions. The detailed examination of the legal principles and statutory provisions involved in this judgment provides a comprehensive understanding of the complexities surrounding the interpretation and application of company law regulations.
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2004 (1) TMI 379
Issues Involved:
1. Maintainability of the writ petition under Article 226 of the Constitution of India.
2. Interpretation and application of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
3. Rights and remedies available to the borrower under the SARFAESI Act.
4. Jurisdiction of courts and tribunals under the SARFAESI Act.
Detailed Analysis:
1. Maintainability of the Writ Petition under Article 226 of the Constitution of India:
The respondents raised a preliminary objection regarding the maintainability of the writ petition, arguing that the petitioner is not entitled to challenge any action initiated under section 13 of the SARFAESI Act unless measures have been taken under section 13(4). The petitioner countered that since no appeal under the Act can be filed against the present impugned notice/order, the constitutional remedy under Article 226 of the Constitution of India is not barred.
The court acknowledged that while constitutional remedies cannot be barred, the High Court would generally refrain from interfering with actions proposed under the Act unless there is a gross miscarriage of justice, lack of jurisdiction, or malafides. The court emphasized that the High Court should exercise discretion with due care and caution.
2. Interpretation and Application of the SARFAESI Act:
The court delved into the object, purpose, and scheme of the SARFAESI Act, which aims to regulate the securitisation and reconstruction of financial assets and enforcement of security interests. The Act allows secured creditors to enforce security interests without court intervention, particularly when dealing with non-performing assets.
Section 13(1) of the Act empowers secured creditors to enforce security interests without court intervention. Section 13(2) mandates that a notice be issued to the borrower to discharge liabilities within sixty days. If the borrower fails to comply, section 13(4) allows the secured creditor to take measures such as taking possession of secured assets or taking over their management.
3. Rights and Remedies Available to the Borrower under the SARFAESI Act:
The court noted that the Act provides a specific remedy under section 17, allowing an aggrieved person to appeal to the Debts Recovery Tribunal against measures taken under section 13(4). The court clarified that no remedy is provided for challenging actions taken before measures under section 13(4) are implemented.
Section 19 of the Act safeguards the borrower's interests, allowing for compensation and costs if the Tribunal or Appellate Tribunal finds the secured creditor's actions wrongful. The court emphasized that the borrower can file objections against the notice under section 13(2) if there are discrepancies in the demanded amount or if the borrower is not a defaulter.
4. Jurisdiction of Courts and Tribunals under the SARFAESI Act:
The court highlighted that the SARFAESI Act ousts the jurisdiction of civil courts in matters of enforcement of security interests. The Act provides a statutory remedy for borrowers through appeals to the Debts Recovery Tribunal and further to the Appellate Tribunal. The court underscored that it cannot introduce new rights or forums for appeal beyond what the statute provides.
Conclusion:
The court declined to entertain the writ petitions at this stage, emphasizing that the statutory remedies under the SARFAESI Act must be exhausted before seeking constitutional remedies. The court directed the petitioners to deposit specified amounts within a month and continue with monthly instalments, failing which the bank could proceed with legal actions for recovery.
Final Order:
The writ petitions were dismissed, subject to the petitioners' compliance with the conditions for depositing the due amounts in instalments.
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2004 (1) TMI 378
Interim order passed by a Division Bench of the Bombay High Court ?
Held that:- Appeal allowed. The High Court has not indicated any reason while giving interim protection. Though, while passing interim orders, it is not necessary to elaborately deal with the merits, it is certainly desirable and proper for the High Court to indicate the reasons which has weighed with it in granting such an extraordinary relief in the form of an interim protection. This, admittedly has not been done in the case at hand.
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2004 (1) TMI 377
Appointment of receiver - Held that:- The order under appeal is modified. Though the order of the High Court appointing a receiver on the partnership business is maintained, the rest of the order is set aside and substituted as the business shall run as before under the actual management and control of Group "B" but as receivers.
The Commissioner of Excise, Madhya Pradesh shall appoint an official who has been associated with the excise department of Madhya Pradesh, preferably a retired person, who shall act as an observer.
All the sale proceeds shall be deposited day to day in a bank account to be opened in a nationalised bank in the name of the ‘Firm M/s. Ashok Traders. Any amounts to be withdrawn shall be only under the joint signatures of at least one members of Group "B" or "C" and the observer, for the purpose of making payments to the State Government, and on account of rent/licence fee of the shops, salary of the staff, transport charges and other necessary expenses required for running day to day business.
Though the conduct of the business is being allowed to be continued by Group "B" but that is in their capacity of receivers as appointed by the Court. They must truly and strictly perform their duties as receivers. Any deviation would be viewed seriously.The members of Group "A" and/or their representative/s, authorized in writing, shall have a reasonable right to visit the shops during business hours and watch the activities going on but without interfering with the business activities run by the receivers.
The observer shall be paid such monthly remuneration and reimbursed such expenses, as may be considered reasonable and appointed by the Commissioner of Excise subject to overall directions of the Trial Court.
This arrangement shall continue till 31-3-2004 and also for such further period as may be necessary for winding up of the business as per terms of the license of the State Government (Excise Department).
On finalization of the accounts duly audited by Chartered Accountants the net profit or loss, if any, shall be distributed in accordance with the award given by the arbitrator or decision by any competent forum.The receivers and observers shall be under the control of the trial Court.
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2004 (1) TMI 376
Issues Involved:
1. Intervention by the applicant-company.
2. Bona fides of the petition for winding up.
3. Petitioner's right to invoke Section 433(e) of the Companies Act.
4. Principle of lifting the corporate veil.
5. Obligations under the Joint Venture Agreement.
Issue-wise Detailed Analysis:
1. Intervention by the applicant-company:
The applicant-company sought permission to intervene in the winding-up petition of C & M Hy-line Farms (P.) Ltd., asserting its vital interest as a shareholder, joint venture partner, creditor, and guarantor. The court noted that no reply was filed opposing the application, thus the facts justifying the intervention went uncontroverted. The petitioner opposed, arguing that the applicant had no locus to intervene at this stage, citing the Supreme Court decision in National Textile Workers Union v. P.R. Ramkrishnan. However, the court found the petitioner's reliance on this case misplaced, favoring the expansive provisions of the Companies Act and Rules, as supported by the Punjab & Haryana High Court's decision in Smt. Keerat Kaur v. Patiala Exhibition (P.) Ltd. and an unreported decision of the Bombay High Court in Bharat Petroleum Corpn. Ltd. v. National Organic Chemical Industries Ltd. Consequently, the court allowed the applicant-company to intervene and participate in the proceedings.
2. Bona fides of the petition for winding up:
The petitioner, a partnership firm, filed the petition under Sections 433 and 434 of the Companies Act, alleging non-payment for the supply of Grandparent birds. The company and the intervenor opposed the petition, asserting it was mala fide and aimed at evading the petitioner's obligations under the Joint Venture Agreement. They contended that the petition was a tactic to terminate the Joint Venture Agreement and that the petitioner's claim was covered by the arbitration clause in the agreement. The court noted that the issue of bona fides would be considered at the admission stage of the petition.
3. Petitioner's right to invoke Section 433(e) of the Companies Act:
The petitioner claimed the company's inability to pay its debts under Section 433(e). The company and the intervenor argued that the petitioner, being a joint venture partner, could not invoke this remedy to recover amounts from the company. They contended that the petitioner's obligation to share the company's losses, which exceeded the claimed amount, remained undischarged. The court agreed, noting that the petitioner had a dual relationship with the company and had not fulfilled its obligation to share the losses, thus precluding the invocation of Section 433(e).
4. Principle of lifting the corporate veil:
The court examined the principle of lifting the corporate veil, referencing the Supreme Court decision in New Horizons Ltd. v. Union of India, which discussed this principle in the context of joint ventures. The court observed that lifting the corporate veil would reveal the petitioner and the intervenor as partners in the joint venture, thereby disallowing the petitioner from suing the company for recovery of amounts. The court also cited Delhi Development Authority v. Skipper Construction Co. (P.) Ltd., emphasizing that the corporate veil could be lifted to prevent misuse of corporate entity. The court concluded that the petitioner's dual role as a creditor and shareholder, along with its failure to discharge its obligations, justified lifting the corporate veil.
5. Obligations under the Joint Venture Agreement:
The petitioner's claim for unpaid amounts was countered by the company's assertion that the petitioner had not fulfilled its obligation to share the company's losses as per the Joint Venture Agreement. The court noted that the petitioner's obligation to make good the losses was far in excess of the claimed amount. The court found substance in the company's argument that the petition aimed to evade this obligation and create grounds for terminating the Joint Venture Agreement. The court concluded that entertaining the petition would result in partial settlement of claims, contrary to the principles of partnership law, and dismissed the petition, emphasizing the petitioner's unfulfilled obligations and the inappropriateness of exercising discretion in favor of the petitioner.
Conclusion:
The court dismissed the petition for winding up, highlighting the petitioner's failure to discharge its obligations under the Joint Venture Agreement, the principle of lifting the corporate veil, and the inappropriateness of invoking Section 433(e) given the petitioner's dual relationship with the company. The court allowed the applicant-company to intervene in the proceedings, emphasizing the expansive provisions of the Companies Act and the Rules.
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