|
Advanced Search Options
Case Laws
Showing 381 to 400 of 664 Records
-
2006 (11) TMI 344
Issues Involved:
1. Whether failure to comply with the statutory requirement of section 220 of the Companies Act, 1956, constitutes a continuing offence.
2. Applicability of limitation period under section 468 of the Code of Criminal Procedure for offences under section 220 of the Companies Act.
3. Interpretation of sections 162, 220 of the Companies Act, and section 472 of the Code of Criminal Procedure.
Issue-wise Analysis:
1. Continuing Offence under Section 220 of the Companies Act:
The primary issue was whether the failure to file the balance-sheet and profit and loss account as required under section 220 of the Companies Act, 1956, constitutes a continuing offence. The petitioner, a director of a company, was prosecuted for not filing the required documents with the Registrar of Companies by the stipulated date. The court examined various precedents and the statutory provisions to determine if the offence was continuing.
The court referred to section 162 of the Companies Act, which imposes a penalty for every day the default continues, indicating that non-compliance is treated as a continuing offence. The court also examined section 472 of the Code of Criminal Procedure, which states that a fresh period of limitation begins at every moment the offence continues. The court concluded that the default in complying with section 220(1) is a continuing offence.
2. Applicability of Limitation Period under Section 468 of the Code of Criminal Procedure:
The petitioner argued that the complaint filed in 2002 for defaults occurring in 1999 was barred by limitation under section 468 of the Code of Criminal Procedure. However, the court noted that section 472 of the Code provides that for continuing offences, a fresh period of limitation begins at every moment of the time during which the offence continues.
The court discussed various judgments, including the Supreme Court's decision in Bhagirath Kanoria v. State of Madhya Pradesh, which held that non-payment of the employer's contribution to the provident fund is a continuing offence and thus not subject to the limitation period under section 468. The court applied this principle to the present case, concluding that the prosecution was not barred by limitation.
3. Interpretation of Relevant Sections:
The court analyzed sections 162 and 220 of the Companies Act in detail. Section 162 imposes a fine for every day the default continues, reinforcing the concept of a continuing offence. Section 220 mandates filing the balance-sheet and profit and loss account within 30 days of the annual general meeting or the latest date by which the meeting should have been held.
The court also reviewed conflicting judgments from various High Courts. It noted that the Division Bench of the Calcutta High Court in National Cotton Mills v. Asstt. Registrar of Companies had held that offences under section 162 are not continuing offences, but this view was overturned by the Supreme Court in Bhagirath Kanoria's case. The court agreed with the latter decisions of the Calcutta High Court in Luxmi Printing Works Ltd. and the Kerala High Court in Rani Joseph, which held that violations of section 220 are continuing offences.
Conclusion:
The court concluded that the contravention of section 220(1) of the Companies Act, made punishable under section 220(3), is a continuing offence. Consequently, the period of limitation prescribed under section 468 of the Code of Criminal Procedure does not apply, and the prosecution is governed by section 472 of the Code of Criminal Procedure. The reference was answered accordingly, affirming that the failure to comply with section 220 constitutes a continuing offence.
-
2006 (11) TMI 343
Issues Involved:
1. Right of Bank/Financial Institution to publish the photograph of a defaulting borrower.
2. Violation of Article 21 of the Constitution (Right to Privacy).
3. Fiduciary duty of Banks to maintain secrecy and confidentiality.
4. Applicability of the Right to Information Act, 2005.
5. Availability of statutory remedies under the SARFAESI Act.
Detailed Analysis:
1. Right of Bank/Financial Institution to publish the photograph of a defaulting borrower:
The primary issue is whether a bank or financial institution has the right to publish the photograph of a defaulting borrower in newspapers. The court noted that banks and financial institutions have been compelled to devise innovative methods to recover dues due to the increasing trend of borrowers defaulting on loans. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) was enacted to regulate the securitisation and reconstruction of financial assets and enforcement of security interest. Section 13(4) of the SARFAESI Act authorizes the bank to take possession of the secured asset and sell it, and Rule 8 of the Security Interest (Enforcement) Rules, 2002, prescribes the procedure for such sale, including issuing a possession notice to the borrower and the public. The court found that the statutory rules authorize the bank to publish the photograph of the borrower and the surety.
2. Violation of Article 21 of the Constitution (Right to Privacy):
The petitioner argued that publishing the photograph would violate Article 21 of the Constitution, which guarantees the right to life and personal liberty, including the right to privacy. The court discussed the evolution of the right to privacy through various judicial pronouncements, noting that while the right to privacy is part of the right to life, it is not absolute. The court cited several cases, including Govind v. State of M.P. and R. Rajagopal v. State of Tamil Nadu, which held that the right to privacy is subject to case-by-case development and can be lawfully restricted for the prevention of crime, disorder, or protection of health or the rights and freedoms of others. The court concluded that the right to privacy is not absolute and can be superseded by larger public interest or the bank's own interest under certain circumstances.
3. Fiduciary duty of Banks to maintain secrecy and confidentiality:
The court examined the fiduciary duty of banks to maintain secrecy and confidentiality towards their customers. It cited the case of Shankarlal Agarwalla v. State Bank of India, which held that banks are under an obligation to secrecy but can disclose information under certain circumstances, such as compulsion by law, public duty, or the bank's own interest. The court also referred to the case of Kattabomman Transport Corporation Ltd. v. State Bank of Travancore, which reiterated that banking practices in India follow the same principles as in England, allowing disclosure of information to protect against fraud or crime. The court concluded that the duty of secrecy is superseded by larger public interest or the bank's own interest under certain circumstances.
4. Applicability of the Right to Information Act, 2005:
The court noted that with the advent of the Right to Information Act, 2005, banks are obliged to disclose information to the public. Section 3 of the Act entitles all citizens to a right to information, and Section 4(2) requires public authorities to provide as much information suo motu to the public. The respondent bank is considered a public authority under the Act and owes a duty to disseminate information. The court highlighted that certain exemptions under Section 8 of the Act, such as information available in a fiduciary relationship or personal information, can be overridden by larger public interest. The court concluded that the right to privacy fades out in front of the right to information and larger public interest.
5. Availability of statutory remedies under the SARFAESI Act:
The court emphasized that the petitioner has a statutory remedy of appeal under Section 17 of the SARFAESI Act, which he has not exhausted. The court noted that a writ of mandamus can only be issued to compel the performance of a statutory or public duty, but the petitioner is seeking to prevent the bank from performing its public duty. The court found no violation of any right or legal provision in the bank's threat to publish the photographs and dismissed the writ petition.
Conclusion:
The court concluded that the bank's threat to publish the photograph of the borrower and the surety is authorized by statutory rules and does not violate any right or legal provision. The writ petition was dismissed, and the petitioner was advised to exhaust the statutory remedy of appeal under the SARFAESI Act.
-
2006 (11) TMI 342
Issues Involved:
1. Maintainability of the application under sections 542 and 543 of the Companies Act, 1956, by the 'administrator'.
2. Jurisdiction of the company judge under section 542 of the Companies Act, 1956, to punish the guilty person for the criminal offense mentioned thereunder.
Issue-Wise Detailed Analysis:
1. Maintainability of the application under sections 542 and 543 of the Companies Act, 1956, by the 'administrator':
The primary issue was whether the 'administrator' appointed by the court could move an application under sections 542 and 543 of the Companies Act, 1956. The company in liquidation, RPS Benefit Fund Ltd., had collected Rs. 43 crores from 16,000 depositors and subsequently collapsed. The learned company judge had appointed administrators to investigate the affairs of the company. The administrator filed an application under sections 539 to 543 of the Companies Act, 1956, seeking a declaration that the respondents were liable and sought their prosecution.
The appellants contended that the application was not maintainable as the administrator did not have the jurisdiction to file it. The learned company judge observed that the administrator was appointed to investigate the affairs of the company and held that the application was maintainable. However, the court noted that section 542 specifies that only the Official Liquidator, liquidator, any creditor, or contributory of the company could file such an application. The court emphasized that merely because the administrator had taken certain actions in the past without opposition, it did not grant them the jurisdiction to file the application. The court concluded that the application under sections 542 and 543 by the administrator was not maintainable.
2. Jurisdiction of the company judge under section 542 of the Companies Act, 1956, to punish the guilty person for the criminal offense mentioned thereunder:
The second issue was whether the company judge had the jurisdiction to punish the guilty person for the criminal offense under section 542. Section 542 deals with the liability for fraudulent conduct of business, allowing the Tribunal to make declarations and determine liability if fraudulent conduct is found during the winding up of a company. However, such declarations and orders can only be made on the application of the Official Liquidator, liquidator, any creditor, or contributory of the company.
Section 543 allows the Tribunal to assess damages against delinquent directors, managers, liquidators, or officers of the company for misapplication, retention, misfeasance, or breach of trust. The court clarified that while section 542 makes a person criminally liable, section 543 is civil in nature. For criminal enforcement under section 542, the Official Liquidator or liquidator must seek permission to prosecute the guilty person, and the company judge/Tribunal can only give a declaration and permit the Official Liquidator or liquidator to move the court of criminal jurisdiction. The court concluded that the company judge/Tribunal could not impose punishment under sub-section (3) of section 542, as it could only give permission to prosecute.
Conclusion:
The court held that the application under sections 542 and 543 by the administrator was not maintainable, and the learned company judge did not have the jurisdiction to impose a fine in lieu of imprisonment under sub-section (3) of section 542. Consequently, the impugned order dated 22-3-2006, passed by the learned company judge, was set aside. The court noted that this order would not prevent the Official Liquidator, liquidator, any creditor, or contributory of the company from filing an application under sections 542 and 543 based on the observations made by the learned company judge.
The original side appeals were allowed, and the connected miscellaneous petitions were closed with no order as to costs.
-
2006 (11) TMI 341
Issues involved: Possession and damages/mesne profits after termination of tenancy, authority of managing director to file suit on behalf of company, request for reasonable time for vacating premises.
Issue 1: Possession and damages/mesne profits after termination of tenancy
The respondent/plaintiff filed a suit against the appellant-tenants for possession and damages/mesne profits after terminating the tenancy u/s 106 of the Transfer of Property Act. The Trial Court granted a decree for the tenants to vacate, deliver possession, and pay damages at a rate varying between Rs. 5 to Rs. 8 per square foot from the date of termination. Interest at 12% was also awarded on damages, with enhanced interest at 18% for default.
Issue 2: Authority of managing director to file suit on behalf of company
The appellant argued that the managing director lacked proper authorization from the board to file the suit. Citing Order 29 of the Civil Procedure Code, it was contended that the managing director, as per the provisions of the Companies Act, had the authority to file the suit on behalf of the company. The appellant relied on a Calcutta High Court ruling, but the court found that in this case, there was no evidence of disagreement among directors regarding the suit filing, and the managing director's actions were within the scope of "substantial powers of management" as defined in the Companies Act.
Issue 3: Request for reasonable time for vacating premises
The appellant requested for a reasonable time to vacate the premises due to difficulty in finding immediate alternate accommodation. The court confirmed the eviction order but granted the tenants time until the end of March, 2008, to vacate. Damages for use and occupation were fixed at Rs. 5 per square foot, payable from the date of the suit till delivery of possession. Non-payment of damages within five months would result in forfeiture of the granted time for vacation and immediate executability of the eviction order.
-
2006 (11) TMI 340
Issues:
Review of order restraining a director from participating in company management due to disqualification.
Analysis:
The petitioners sought a review of an order restraining a director from participating in the company's management due to disqualification incurred by him. The petitioners filed a suit regarding the board of directors and management of the company, leading to multiple revisions. The court's order directed the participation of both petitioners and respondents in the company's affairs until the suit's disposal. The review petition contended that the first respondent's disqualification as a director arose from a conviction and sentence under the Companies Act. The first respondent argued that his sentence was suspended pending appeal, providing him protection to continue as a director.
The main issue was whether the first respondent's disqualification warranted his removal from the board of directors. The first respondent was convicted for offenses involving moral turpitude and sentenced to imprisonment. Section 274 of the Companies Act outlines disqualifications for directors, including convictions for moral turpitude. However, a different provision in section 283 addresses the vacation of office by directors if they incur disqualifications during their term. Subsection (2) of section 283 provides protection to directors facing disqualification until the appeal process is exhausted.
The judgment highlighted the distinction between disqualifying a person from appointment as a director and causing the cessation of office for an existing director due to disqualification. The Act's provisions ensure that a director facing disqualification can continue in office until the appeal process is concluded. The judgment compared this distinction to similar provisions in other enactments, emphasizing the protection granted to directors under section 283 until the appeal process is finalized.
Ultimately, the court dismissed the review petition, stating that the first respondent, despite incurring disqualification, could not be compelled to vacate the office due to the protection provided under section 283(2) of the Companies Act. The judgment concluded that the first respondent's appeal against the conviction and sentence justified his continuation as a director.
-
2006 (11) TMI 339
Issues involved:
The issue in this case is whether the Revisional Court is required to issue a notice to the respondents/borrowers and any other person claiming right over a security interest in a revision petition filed by a secured creditor challenging the order of the Chief Metropolitan Magistrate declining to proceed under section 14(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
Comprehensive Details:
Issue 1:
The petitioner, a Bank, filed an application under section 14 of the Act to take possession of a secured asset belonging to the respondents. The respondents 6 and 7, subsequent purchasers of the property, contested the Bank's right to take possession, leading to the Chief Metropolitan Magistrate declining to act under section 14(1) for various reasons.
Issue 2:
The Revisional Court, the XXXVI Additional Sessions Judge, directed the petitioner to issue notices to the respondents 6 and 7 before passing any order in the revision petition. The petitioner argued that under the Act, no such notice was required, citing previous decisions. However, the Sessions Judge held that the affected parties must be heard before any order is made.
Issue 3:
The petitioner contended that the Act does not mandate notice to the borrower or other persons when seeking possession of a secured asset. The learned Counsel for the petitioner emphasized that the Act's provisions aim to enable the Bank to take possession without court intervention, and thus, notices to borrowers are unnecessary in revision petitions.
Issue 4:
The Sessions Judge based the requirement for notice on section 401(2) of the Cr. P.C. and principles of natural justice. The decision on issuing notice in a revision petition hinges on whether the borrower's or any person's rights over the secured asset are affected by the Revisional Court's order.
Issue 5:
The scope of section 14 and the Act's objective were highlighted, emphasizing that the Chief Metropolitan Magistrate or District Magistrate's role is to assist the secured creditor in taking possession, not to decide on rights. The Act allows for enforcement of security interest without court intervention, with challenges directed to the Debts Recovery Tribunal.
Issue 6:
The judgment clarified that the Chief Metropolitan Magistrate or District Magistrate need not hear the borrower or any person claiming through him before passing an order under section 14(1) and (2) of the Act. The decision to decline to act under section 14(1) must be supported by valid reasons recorded in writing.
Issue 7:
The Court held that the right of a borrower or transferee to challenge the secured creditor's actions lies in appealing to the Debts Recovery Tribunal, not in proceedings before the Chief Metropolitan Magistrate or District Magistrate. Therefore, there was no requirement to issue notices to the respondents in the revision petition.
In conclusion, the petition was allowed, and the order directing the issuance of notices to the respondents was quashed. The Sessions Judge was instructed to consider the revision petition on its merits in line with the observations made in the judgment.
-
2006 (11) TMI 338
Issues Involved:
1. Requirement of notice under section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 before invoking section 14.
Issue-wise Detailed Analysis:
1. Requirement of Notice Under Section 13(4):
The primary issue in this writ appeal is whether a notice needs to be issued under section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 before invoking section 14. The judgment under appeal held that there is a statutory requirement to issue a notice under section 13(4) before invoking section 14.
The appellant's counsel argued that the Act does not contemplate the issuance of another notice under section 13(4) before taking possession of the security interest. The only notice required is under section 13(2), which gives the borrower 60 days to regularize his account, failing which the financial institution can take action under section 13(4).
The court referred to the Supreme Court's decision in Mardia Chemicals v. Union of India, which clarified that the purpose of serving a notice under section 13(2) is to allow the borrower to explain why measures should not be taken under section 13(4). The creditor must consider the objections raised in response to the notice meaningfully rather than ritualistically rejecting them and proceeding with drastic measures under section 13(4). The Supreme Court emphasized the importance of fairness and transparency in the dealings between banks and borrowers.
The court concluded that the intention of the creditor to proceed against the assets is expressed only once through the notice under section 13(2). There is no requirement for another notice under section 13(4). The rejection of objections does not give the borrower an occasion to resort to proceedings not permissible under the Act. The borrower can challenge the action only after measures under section 13(4) have been taken.
The court also referred to the case of Digivision Electronics Ltd. v. Indian Bank, which indicated that after the notice under section 13(2) and consideration of objections, there is no intermediate notice under section 13(4). Challenges to notices under sections 13(2) and 13(4) were rejected based on the availability of alternative remedies.
The court reiterated the principle that the judiciary should not amend or supplement the language of a statute unless the legislative intent is clear. The words of the section and the law laid down in Mardia Chemicals do not envisage a notice under section 13(4). The fairness required of the lender is to communicate reasons for not accepting objections before taking measures like taking possession of secured assets.
The court emphasized that possessing drastic powers calls for a higher degree of good faith and fair play from financial institutions. The directions given by the Supreme Court in Mardia Chemicals have been incorporated as section 3A, which requires the secured creditor to communicate reasons for non-acceptance of objections within one week of receipt.
In conclusion, the court allowed the writ appeal and set aside the direction to issue a prior notice under section 13(4) of the Act. There was no order as to costs, and the related application was closed.
-
2006 (11) TMI 337
Meetings and proceedings - Contents and manner of service of notice and person on whom it is to be served, Directors - Appointment of directors and proportion of those who are to retire by rotation, Share capital - Further issue of, Oppression and mismanagement, Directors - Validity of acts of
-
2006 (11) TMI 336
Issues Involved:
1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act (SICA) to the encashment of a bank guarantee.
2. Entitlement of the plaintiff to the claimed amount and the applicable rate of interest.
Issue-Wise Detailed Analysis:
Issue 1: Applicability of Section 22 of SICA to the Encashment of a Bank Guarantee
7.2 The court first set out the provisions of Section 22(1) of SICA, which states that no proceedings for the enforcement of any security against an industrial company or any guarantee in respect of any loans or advances granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or the Appellate Authority.
7.3 The court noted that Montari Industries Limited was referred to the Board for Industrial and Financial Reconstruction (BIFR), and thus, no suit for the recovery of money or enforcement of any security against an industrial company would lie without the consent of the Board.
7.4 The plaintiff contended that the claim was against the defendant bank and not the industrial company, making Section 22(1) inapplicable.
8 The central question was whether Section 22(1) of SICA applied to the proceedings for encashment of the bank guarantee against the defendant bank.
9 The plaintiff emphasized undisputed facts, including the execution and irrevocability of the bank guarantee by the defendant bank and the failure of Montari Industries Limited to pay the invoices within 30 days.
10 The plaintiff argued that the bank guarantee was not in respect of any loan or advance granted to Montari Industries Limited, and thus, Section 22(1) did not bar the suit.
11 The plaintiff further contended that bank guarantees are autonomous contracts, imposing an absolute obligation on the bank to fulfill the guarantee, as established in Syndicate Bank v. Vijay Kumar.
12 The court referred to the Supreme Court's decision in Patheja Brothers Forgings & Stamping v. ICICI Ltd., which held that no suit for the enforcement of a guarantee in respect of a loan or advance granted to an industrial company would lie without the consent of the Board.
13 The court also cited Kailash Nath Aggarwal v. Pardeshiya Industrial & Investment Corpn. of Uttar Pradesh Ltd., which distinguished between suits and proceedings and held that Section 22(1) only prohibits recovery against the industrial company.
15 The plaintiff argued that the bank guarantee in question was not in respect of a loan or advance granted to Montari Industries Limited, making the suit maintainable without the Board's consent.
16 The court distinguished the current case from Chandan Capital Services v. Mid East India Ltd., where the guarantee was in respect of a loan or advance.
17 The court referred to LML Ltd. v. Saraswati Trading Co. Ltd., which held that a suit for enforcement of a guarantee not in respect of a loan or advance was not barred by Section 22 of SICA.
19 The court also cited Ved Prakash Agarwal v. Rama Petrochemicals Ltd., where the Bombay High Court held that the protection under Section 22(1) applies only if the guarantee is in respect of a loan or advance granted to the industrial company.
21 The defendant's counsel argued for a broad interpretation of Section 22 to align with the remedial objective of SICA.
25 The court concluded that the transaction in question was not a loan or advance but a commercial transaction, and the guarantee was not in respect of any loan or advance extended to Montari Industries Limited. Therefore, the suit was maintainable without the Board's consent.
26 Issue No. 1 was decided in favor of the plaintiff.
Issue 2: Entitlement of the Plaintiff to the Claimed Amount and the Applicable Rate of Interest
27 With Issue No. 1 decided in favor of the plaintiff, the court addressed the amount to which the plaintiff was entitled and the applicable rate of interest.
28 The plaintiff claimed Rs. 40,83,759.82 with further interest on the principal sum of Rs. 33,36,792.10 at 18% per annum. The defendant did not specifically deny the calculation of the claimed amount.
29 The plaintiff provided affidavits stating that there were no RBI directives on the rate of interest, and banks could fix their own prime lending rates. The State Bank of India's prime lending rates varied from 11% to 10.25% during the relevant period.
30 The plaintiff calculated the amount due as Rs. 65,46,735.77, but conceded that the bank guarantee limited the liability to Rs. 50,00,000 inclusive of interest.
31 The court decreed Rs. 50,00,000 inclusive of interest in favor of the plaintiff, with further interest at 10% per annum from the date of the suit till the decree and 6% per annum from the decree till payment.
32 The suit was disposed of accordingly.
33 Parties were left to bear their own costs.
-
2006 (11) TMI 335
Issues:
Petitioner seeking writ of certiorarified mandamus to quash recovery proceedings under TNGST Act and SICA. Interpretation of SICA Section 22 for recovery proceedings against sick industrial company.
Analysis:
The petitioner filed a writ petition seeking relief from recovery proceedings under the Tamil Nadu General Sales Tax Act (TNGST Act) and the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The court noted that the provisions for recovery are present in the TNGST Act and that the embargo under SICA Section 22 does not apply to the petitioner. The court referred to the Supreme Court's interpretation in D. CTO v. Corromandal Pharmaceuticals, emphasizing that the consent of the Board is required for proceedings against a sick company, but it is not an absolute bar. The court highlighted that the purpose of SICA is to provide preventive or remedial measures to sick companies through a sanctioned scheme, and recovery steps should not impede the scheme's implementation without consent. The court reasoned that the embargo under SICA Section 22 applies only to dues included in the sanctioned scheme, not to amounts like sales tax collected after the scheme's date.
The court also cited Tata Davy Ltd. v. State of Orissa, where it was emphasized that creditors must obtain consent from the Board for recovery from sick industrial companies under inquiry or scheme consideration. Since there were no pending claims in the present case, the protection under SICA Section 22 did not apply. The court quoted Justice B.P. Jeevan Reddy's opinion, highlighting the Act's objective to provide measures against those responsible for a company's sickness and not to encourage unfair practices. The court concluded that the writ petition failed based on the absence of pending claims and the completion of all proceedings. The court rejected the petitioner's plea for leniency on arrears, stating it is for the Government to decide. As the Government was not a party to the petition, the court could not grant such a direction. Consequently, the writ petition was dismissed without costs, along with connected motions.
-
2006 (11) TMI 334
Issues Involved:
1. Grounds for winding up under Section 433(f) of the Companies Act, 1956.
2. Deadlock in management.
3. Application of principles of quasi-partnership.
4. Allegations of misconduct and lack of probity.
5. Impact of joint venture agreement and distribution agreement.
6. Judicial admissions and their implications.
7. Arbitration clause and its applicability in winding-up petitions.
8. Loss of substratum.
9. Final directions and interim measures.
Detailed Analysis:
1. Grounds for Winding Up Under Section 433(f) of the Companies Act, 1956:
The petitioner sought winding up of the company on "just and equitable" grounds due to a complete deadlock between the petitioner and the respondent group, both holding 50% shares. The business had come to a standstill, and there was a failure to comply with statutory requirements, leading to mutual loss of confidence and lack of probity.
2. Deadlock in Management:
The court recognized the deadlock, citing the case of Brown Forman Mauritius Ltd. v. Jagatjit Brown Forman India Ltd., where it was established that equal shareholding and lack of consensus on vital business issues indicated a deadlock. The deadlock in this case was evident from the inability to pass resolutions, appoint statutory auditors, and comply with statutory provisions.
3. Application of Principles of Quasi-Partnership:
The court applied principles of quasi-partnership, referencing the Supreme Court's judgment in Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwala, which allows for winding up on just and equitable grounds when there is a complete deadlock and lack of probity in management. The relationship between the petitioner and respondent was akin to a partnership, requiring mutual confidence and participation in business conduct.
4. Allegations of Misconduct and Lack of Probity:
The respondent alleged that the petitioner sought to escape obligations under the joint venture agreement and establish a competing business. However, the court found that the respondent group's actions, such as suspending the CEO and appointing new directors without the petitioner's consent, demonstrated a lack of probity and contributed to the deadlock.
5. Impact of Joint Venture Agreement and Distribution Agreement:
The court examined the joint venture agreement and distribution agreement, noting that the latter allowed for termination with notice. The respondent's claim that the petitioner violated the joint venture agreement by terminating the distribution agreement was rejected. The court emphasized that the winding-up petition was based on statutory rights, not contractual obligations.
6. Judicial Admissions and Their Implications:
The respondent group's admissions in their petition before the Company Law Board, acknowledging the deadlock and paralysis of business operations, were considered judicial admissions. These admissions supported the petitioner's case for winding up.
7. Arbitration Clause and Its Applicability in Winding-Up Petitions:
The court held that a winding-up petition could not be referred to arbitration, as the power to order winding up is conferred on the court by the Companies Act. The respondent's failure to invoke the arbitration clause and their participation in the proceedings further weakened their argument.
8. Loss of Substratum:
The court noted that the substratum of the company had disappeared, as the joint venture's purpose had failed. The respondent group's contradictory statements about the company's financial health and operations before different forums further supported this conclusion.
9. Final Directions and Interim Measures:
The court admitted the winding-up petition and deferred the appointment of a provisional liquidator for one month, allowing the respondent group to purchase the petitioner's shares for Re. 1 per share. If the offer was not accepted, the court would consider appointing an official liquidator to take custody of the company's assets.
Conclusion:
The court found that the conditions for winding up the company on just and equitable grounds were satisfied due to the complete deadlock, lack of probity, and failure of the joint venture's purpose. The winding-up petition was admitted, with interim measures to allow the respondent group to purchase the petitioner's shares.
-
2006 (11) TMI 333
Issues Involved:
1. Applicability of Section 5 of the Limitation Act to condone delay in filing an appeal under Section 111(2) of the Companies Act.
2. Whether the Company Law Board (CLB) acts as a Court under the Limitation Act.
3. The distinction between applications under Sections 111(2) and 111(4) of the Companies Act.
Detailed Analysis:
1. Applicability of Section 5 of the Limitation Act:
The primary question was whether Section 5 of the Limitation Act, which allows for condoning delays if sufficient cause is shown, applies to appeals filed under Section 111(2) of the Companies Act. The appellant argued that the CLB is not a Court, and therefore, Section 5 should not apply. They cited the Supreme Court's decision in *Prakash H. Jain v. Ms. Marie Fernandes*, which held that a competent authority under the Maharashtra Rent Control Act is not a Court and cannot condone delays under Section 5 of the Limitation Act.
However, the respondent contended that under Section 29(2) of the Limitation Act, the provisions of Sections 4 to 24, including Section 5, apply to any special or local law unless expressly excluded. The Full Bench of the Kerala High Court in *State of Kerala v. Ayilammal Syamala Thamburatti* supported this view, holding that Sections 4 to 24 of the Limitation Act apply to applications filed before various tribunals unless expressly excluded.
The Supreme Court in *Mukri Gopalan v. Cheppilat Puthanpurayil Aboobacker* also held that Section 5 of the Limitation Act applies to appeals filed before the appellate authority under the Kerala Buildings (Lease and Rent Control) Act, as it is a special law prescribing a different period of limitation.
2. Whether the CLB Acts as a Court:
The judgment examined whether the CLB has the trappings of a Court and thus can apply Section 5 of the Limitation Act. The CLB, while dealing with applications under Section 111 of the Companies Act, exercises judicial powers and has the authority to make definitive judgments. The CLB's powers include discovery and inspection of documents, enforcing attendance of witnesses, compelling production of documents, examining witnesses on oath, granting adjournments, and receiving evidence on affidavits. It was noted that the CLB's decisions are appealable, further indicating its judicial nature.
The Supreme Court in *Canara Bank v. Nuclear Power Corporation of India Ltd.* recognized that the CLB performs functions previously exercised by civil courts under Section 155 of the Companies Act, reinforcing the view that the CLB acts as a Court for the purposes of Section 5 of the Limitation Act.
3. Distinction Between Sections 111(2) and 111(4):
The CLB held that even if an appeal under Section 111(2) is barred by limitation, it can be entertained under Section 111(4), which has no prescribed limitation period. The CLB followed the decision in *Citi Bank NA v. Power Grid Corporation of India Ltd.*, which treated remedies under Sections 111(2) and 111(4) as alternate remedies.
The Supreme Court in *Canara Bank* observed that applications under Sections 111 and 155 (now assimilated into Section 111) can be made as alternate remedies. The CLB found sufficient grounds to condone the delay, treating the application as one under Section 111(4) if not maintainable under Section 111(2).
Conclusion:
The High Court of Kerala upheld the CLB's order, agreeing that the CLB acts as a Court for the purposes of the Limitation Act, and therefore, Section 5 applies. The delay in filing the appeal was condoned, and the application was deemed maintainable under Section 111(4) if not under Section 111(2). The appeals were dismissed, and the case was remanded to the CLB for further proceedings on the merits of the application.
-
2006 (11) TMI 332
Issues Involved:
1. Alleged collusion and bias of the arbitrator.
2. Denial of opportunity due to refusal to change the venue.
3. Arbitrator's application of mind.
4. Validity of arbitration agreement and jurisdiction.
5. Limitation period for filing the arbitration claim.
Issue-wise Detailed Analysis:
1. Alleged Collusion and Bias of the Arbitrator:
The petitioner contended that the first respondent allowed an office bearer of the third respondent to act as an arbitrator, implying collusion to pass an adverse award. However, the court found no merit in this argument. The arbitrator was appointed in accordance with the contract and bye-laws of the third respondent, and he was not an officer of the third respondent but an independent arbitrator. The court upheld the arbitrator's independence and dismissed the claim of bias.
2. Denial of Opportunity Due to Refusal to Change the Venue:
The petitioner argued that the refusal to change the arbitration venue from Mumbai to Chennai denied him the opportunity to present his defense effectively. The court observed that the petitioner had agreed to the contract stipulating that arbitration would be governed by the by-laws of the third respondent, which included the venue clause. Therefore, the petitioner could not later insist on a different venue. The court found no denial of opportunity as the petitioner had the option to participate but chose not to.
3. Arbitrator's Application of Mind:
The petitioner claimed that the arbitrator did not apply his mind and simply accepted the first respondent's claim. The court reviewed the arbitrator's award and found that the arbitrator had meticulously considered all the facts, documents, and submissions. The arbitrator had framed specific issues and provided detailed reasons for his findings, demonstrating a thorough application of mind. The court rejected the petitioner's claim of lack of application of mind.
4. Validity of Arbitration Agreement and Jurisdiction:
The petitioner questioned the arbitrator's jurisdiction, asserting that there was no valid arbitration agreement. The arbitrator examined the contract notes and found that they included a clause for arbitration as per the rules and regulations of the National Stock Exchange of India Ltd. (NSEIL). The court agreed with the arbitrator's finding that an arbitration agreement existed and that the arbitrator had jurisdiction. The court referenced the Bombay High Court's decision in Viraj Holdings v. Motilal Oswal Securities (P.) Ltd., which supported the validity of arbitration agreements in contract notes.
5. Limitation Period for Filing the Arbitration Claim:
The petitioner argued that the arbitration claim was barred by limitation. The arbitrator considered the relevant dates and concluded that the claim was filed within the 90-day limitation period. The court reviewed the arbitrator's reasoning and found it to be sound. The court noted that the first respondent's notice dated 8-11-1996 and subsequent actions were within the limitation period, thus rejecting the petitioner's claim of time-barred arbitration.
Conclusion:
The court dismissed the petitioner's claims on all grounds, affirming the arbitrator's award. The court found that the arbitrator had acted independently, applied his mind, and adhered to the contractual and legal framework. The petitioner's failure to participate in the arbitration proceedings and subsequent attempt to challenge the award was not substantiated. The original petition was dismissed with no costs.
-
2006 (11) TMI 331
Issues Involved:
1. Maintainability of the petition under Sections 391 and 394 of the Companies Act, 1956, in light of the pending reference before the Board for Industrial and Financial Reconstruction (BIFR).
2. Validity and fairness of the proposed scheme of arrangement.
3. Objections raised by creditors, including Dena Bank and Nu Tech Corporate Services Ltd.
Issue-wise Detailed Analysis:
1. Maintainability of the Petition:
The primary issue was whether the petition filed under Sections 391 and 394 of the Companies Act, 1956, is maintainable given the pending reference before the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The petitioners argued that the scheme of arrangement should be sanctioned by the court despite the ongoing BIFR proceedings. However, Dena Bank and Nu Tech Corporate Services Ltd. contended that the petition was not maintainable due to the overriding effect of SICA, which mandates that once a reference is made to BIFR, the jurisdiction of the company court is ousted.
2. Validity and Fairness of the Proposed Scheme:
The petitioners proposed a scheme of arrangement to settle the dues of secured and unsecured creditors by infusing necessary funds and working out a modality for settlement. The scheme received approval from the requisite majority of equity shareholders, secured creditors, and unsecured creditors. The regional director filed an affidavit stating that the scheme was not prejudicial to the interests of shareholders and creditors. However, Dena Bank opposed the scheme, arguing that it was unfair and one-sided, as it proposed scaling down a significant debt to a meager sum, which they claimed was detrimental to public interest.
3. Objections Raised by Creditors:
Dena Bank raised objections on the grounds of maintainability and fairness of the scheme. They argued that the scheme was detrimental to the interests of secured creditors and was not in public interest. Nu Tech Corporate Services Ltd. also objected, pointing out that the petitioner had not approached the court with clean hands and had suppressed material facts. They argued that the petitioner should have proposed the scheme before the BIFR, which has the authority to consider such schemes for rehabilitation and revival.
Judgment Analysis:
The court acknowledged the preliminary objection regarding the maintainability of the petition due to the pending BIFR reference. It referred to the Supreme Court's judgment in NGEF Ltd. v. Chandra Developers P. Ltd., which held that SICA is a special statute and a complete code in itself, prevailing over the Companies Act. The court noted that the jurisdiction of the company court would arise only when BIFR or AAIFR exercises its jurisdiction under Section 20 of SICA recommending winding up of the company.
Given the conflicting judgments of the co-ordinate Benches of the High Court and the Supreme Court's ruling, the court found it necessary to refer the matter to a Division Bench for an authoritative pronouncement on whether an industrial company with a pending BIFR reference can apply to the court for sanctioning a scheme of arrangement under Sections 391 and 394 of the Companies Act.
The court concluded that it would not be appropriate to deal with the merits of the scheme until the jurisdictional question is resolved. The issue was referred to the Chief Justice for placing it before a Division Bench to resolve the question of maintainability. The court appreciated the valuable assistance rendered by the counsels.
Summary:
The judgment primarily dealt with the maintainability of a petition under Sections 391 and 394 of the Companies Act, 1956, in light of a pending reference before the BIFR under SICA. The court found that the jurisdiction of the company court is ousted once a reference is made to BIFR, as per the Supreme Court's ruling in NGEF Ltd. v. Chandra Developers P. Ltd. The matter was referred to a Division Bench for an authoritative pronouncement on the issue. The court did not delve into the merits of the proposed scheme of arrangement, keeping the issue open for consideration at a later stage.
-
2006 (11) TMI 330
Issues Involved:
1. Delayed filing of the statement of affairs by ex-directors.
2. Efforts of PICUP to recover dues.
3. Financial irregularities and fraudulent activities by ex-directors.
4. Discrepancies in the company's accounts.
5. Misfeasance by ex-directors in dealing with company properties post-liquidation.
Issue-wise Detailed Analysis:
1. Delayed Filing of Statement of Affairs by Ex-Directors:
The ex-directors of Danin Leathers Ltd. (in liquidation) were required to file the 'statement of affairs' and hand over possession of the company's assets to the Official Liquidator. Despite repeated summons and non-bailable warrants, they delayed compliance until 22-2-2006, filing an incomplete statement. This non-compliance is a violation under section 454 of the Companies Act, 1956, punishable with imprisonment and fine.
2. Efforts of PICUP to Recover Dues:
PICUP advanced a loan of Rs. 40,21,118.02 to the company, which escalated to Rs. 2,75,38,400.09. Despite several recovery attempts, including issuing recovery certificates and taking possession of the damaged unit post-fire, PICUP managed to recover only a fraction of the dues. The managing director of PICUP filed an affidavit detailing these efforts, but the court found them insufficient, indicating a lack of effective steps to recover the amount.
3. Financial Irregularities and Fraudulent Activities by Ex-Directors:
The Official Liquidator reported that the ex-directors engaged in unreasonable and unexplained accounting practices, as highlighted by the chartered accountant's report. These included discrepancies in cartage, freight, and octroi expenses, overvaluation of raw material stocks, and inflated gross profit rates. The ex-directors also diverted funds to associate companies and engaged in misleading financial reporting to secure higher bank withdrawals.
4. Discrepancies in the Company's Accounts:
The chartered accountant's report and the Official Liquidator's findings revealed significant discrepancies in the company's accounts, including:
- Overvaluation of raw material stocks.
- Unreasonable increase in advances to associate companies.
- Misleading financial reporting to show better performance before a public issue.
- Non-compliance with Schedule VI of the Companies Act, 1956, in reporting land and building costs separately.
5. Misfeasance by Ex-Directors in Dealing with Company Properties Post-Liquidation:
The ex-directors continued to deal with the company's properties even after the winding-up order, selling assets without informing the Official Liquidator. They sold the company's building and appropriated the proceeds to pay the State Bank of India, violating sections 536 and 540 of the Companies Act, 1956. This misfeasance is punishable with imprisonment and fine.
Conclusion:
The court framed charges against the ex-directors for their deliberate neglect in filing the statement of affairs, engaging in fraudulent accounting practices, and unauthorized dealings with company properties post-liquidation. The ex-directors are required to appear in court on every date fixed for the defense of the charges, except for the lady directors. The court allowed eight weeks for the ex-directors to submit their defense and listed the case for prosecution evidence on 9-1-2007. PICUP is permitted to pursue remedies by arresting the ex-directors and attaching their properties, as the mortgaged properties are reportedly exhausted.
-
2006 (11) TMI 329
Jurisdiction of the Monopolies and Restrictive Trade Practices Commission - whether it was a sheer breach of contract or deficiency in service?
Whether appellant herein can be given possession of the flat on his clearing of the dues?
Held that:- The total amount payable in respect of the flat is a sum of Rs. 17,27,612. DLF has agreed to deduct a sum of Rs. 93,745 which was agreed to be paid by way of compensation. The total amount payable, therefore, would be Rs. 16,33,867. The amount has been calculated on the premise that the registration would be done in the name of appellant’s wife and/or daughter on the rate of stamp duty and charges payable in case of family allottee.
Furthermore clarify that appellant, upon getting possession of the said flat shall be treated by DLF at par with all others similarly situated. Appellant may pay the aforementioned amount of Rs. 16,33,867 within eight weeks from date, whereupon, respondent shall execute and/or register the requisite documents in favour of the wife of appellant.
We are passing this order on broad consensus arrived at by the parties as also in exercise of our jurisdiction under article 142 of the Constitution of India.
-
2006 (11) TMI 328
Market fee on the consignment of cut tobacco dispatched - Held that:- The revisional power went out of the domain of the State Government and the same remained with the Board. After 1991 the situation is that section 33 deals with aspects other than those covered under section 32. That is because the revisional power was already with the Board. Post 1991, the delegation could be done only under the regulation. That being so, the High Court's vis-a-vis conclusions, section 32 of the Act are not correct. On the merits there is no scope for interference with the High Court's order because there was no power to reopen. The respondent shall, however, produce the accounts relating to the period subsequent to August 1, 1998, and the factual aspects have to be considered by the appellants.
-
2006 (11) TMI 324
Whether the amount which has been deducted at source by the Corporation is required to be deposited with the Commercial Tax Department?
Held that:- Appeal allowed. In the circular of the Deputy Commissioner it has been clearly stated that the tax is to be deducted at source wherever tax is leviable. In the Commissioner's circular dated July 7, 1999, it has been clearly stated that in the meeting held on March 27, 1999, it was decided to deduct tax at source in respect of all purchases made by the Corporation and to deposit the said amount with the Commissioner.
In view of the aforesaid factual position, we direct that the Corporation should deposit the amounts which have not yet been deposited in respect of amounts deducted at source as tax. The deposit shall be made within one month from today.
-
2006 (11) TMI 323
Whether the "sale price" was the consideration receivable by the dealer which was fixed by the Government of India or the amount the dealer was required to collect by way of consideration plus amount payable to the "Oil Pool Account"
Held that:- The Senior Superintendent of Taxes arrives at a definite conclusion that the appellant-company had, in fact, collected sales tax on the entire sales, then the appellant-company would deposit the entire sales tax amount collected from the consumers with the respondent-State within four weeks' of the order passed by the Senior Superintendent of Taxes along with nine per cent interest from the date of collecting the amount towards sales tax till payment. If the amount, as directed, is not paid by the appellant-company within the stipulated period, the same would be recovered as the arrears of land revenue by the respondent-State.
-
2006 (11) TMI 321
Whether the brand owner who is an exclusive purchaser of goods manufactured, using its brand name, by a manufacturer who is exempted under section 8A or 19C is entitled to claim set off on the deemed tax paid on the purchases made from such manufacturer and is required to pay tax under section 5(3)(a), only on the value addition thereof?
Held that:- Appeal dismissed. In the present case, the appellant is the owner of the brand name "Whirlpool" registered under the Trade and Merchandise Act, 1958. Under the agreement between the parties, the refrigerators and other consumer goods are got manufactured by M/s. Applicomp India Ltd. and as per the agreement M/s. Applicomp have to manufacture the products under the brand name "Whirlpool" and sell them exclusively to the appellant. M/s. Applicomp is not the registered user of the brand name "Whirlpool".
Moreover, the sales made by M/s. Applicomp to the appellant, are not sales to the exclusive marketing agent or distributor or wholesaler or any other dealer but are only sales of manufactured branded goods to the brand owner. Hence, the sixth proviso and Explanation III to section 5(3)(a) are clearly not applicable.
............
|
9911796707
