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2005 (2) TMI 535
Issues Involved:
1. Whether plaintiffs' firm is registered under the Indian Partnership Act?
2. Do plaintiffs prove that there was a concluded contract of sale of the suit property for Rs. 8,85,000?
3. Do they prove to have paid Rs. 2 lakhs on 30-11-1977 to defendant No. 5?
4. Do they prove payment of Rs. 1 lakh on 29-12-1977 and further sum of Rs. 1 lakh on 3-1-1978 to defendant No. 5 towards the suit transaction?
5. Do they further prove payment of Rs. 75,000 and Rs. 2,25,000 to defendant No. 5 as stated in para 6 of the plaint?
6. Do they prove that defendants committed breach of the contract to sell as alleged in para 13 of the plaint?
7. Do they prove that they were ready and willing to perform their part of the contract?
8. Whether plaintiffs prove that defendant Nos. 3 to 5 were authorized by defendant No. 1 to enter into an agreement and commit various acts and, therefore, the agreement is binding upon defendant No. 1?
9. Are plaintiffs entitled to specific performance of the contract?
10. If not, are they entitled to refund of Rs. 10,20,400 and from which defendant?
11. Are they entitled to creation of the charge of this amount over the suit property?
12. What decree or order?
Issue-Wise Detailed Analysis:
Issue No. 1:
The plaintiffs produced the Registration Certificate showing that the Plaintiff-firm is duly registered with the Registrar of Firms. This issue was answered in the affirmative.
Issue Nos. 2, 3, 4, 5 & 8:
These issues were discussed together as they are inter-related. The plaintiffs alleged an oral contract of sale for the suit premises. They examined Harishlal Bhatia (PW-1) and R.T. Sharma (PW-2) to support their claim. Harishlal Bhatia stated that a meeting was held on 30-11-1977 where an agreement was reached for the sale of the suit premises for Rs. 8,85,000, with Rs. 3,00,000 to be paid as earnest money. However, the defendants denied such an agreement and contended that none of the defendant Nos. 3 to 5 had the authority to enter into such an agreement on behalf of defendant No. 1 Company. The court found that the plaintiffs failed to prove the payment of Rs. 3,00,000 as earnest money and that there was no evidence of the defendants having the authority to sell the property. The issues were answered in the negative.
Issue Nos. 6 & 7:
The court found that the plaintiffs were not ready and willing to perform their part of the contract. The plaintiffs issued a notice on 29-6-1979 demanding a refund of Rs. 3,00,000, which indicated that they had repudiated the contract. The court concluded that the plaintiffs were not entitled to specific performance of the contract, and these issues were answered in the negative.
Issue No. 9:
Given the findings on the previous issues, the court held that the plaintiffs were not entitled to specific performance of the contract, as there was no concluded contract and the plaintiffs had repudiated the contract. This issue was answered in the negative.
Issue No. 10:
The plaintiffs failed to prove the payment of Rs. 3,00,000 as earnest money. Therefore, they were not entitled to a refund of the said amount with damages and interest. The court noted that if the amount was paid towards earnest money of a concluded contract, the plaintiffs would be entitled to a refund of Rs. 3,00,000 with interest at the rate of 6% per annum from the date of the suit till payment. This issue was answered in the negative.
Issue No. 11:
In view of the findings on the previous issues, the plaintiffs were not entitled to the creation of a charge over the suit property. This issue was answered in the negative.
Issue No. 12:
The suit was dismissed with no order as to costs.
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2005 (2) TMI 534
Issues Involved:
1. Petition for winding up of the company.
2. Application for framing a scheme for repayment to small fixed deposit holders.
3. Modification of the management order.
4. Approval of the committee's scheme for repayment.
5. Disposal of the company's office premises.
6. Initiation of contempt proceedings against an advocate.
7. Application by secured creditors to vacate the stay on civil and criminal proceedings.
Detailed Analysis:
1. Petition for Winding Up of the Company:
The original petitioner filed for winding up to recover Rs. 3,75,00,000 advanced as a fixed deposit with 18% interest. The court directed the company to deposit the amount, failing which the petition would be admitted. The company did not deposit the amount, leading to the admission of the petition.
2. Application for Framing a Scheme for Repayment to Small Fixed Deposit Holders:
Various creditors and small fixed deposit holders sought a scheme for repayment instead of winding up the company. They argued that winding up would result in no recovery for small depositors who invested their hard-earned money. A committee was appointed to manage the company's affairs and formulate a repayment scheme.
3. Modification of the Management Order:
An order modified the management structure, vesting day-to-day affairs in the formal directors while the special committee supervised. The committee was authorized to recover outstanding dues and was supported by the Economic Offence Wing. Civil and criminal cases against the company and directors were stayed.
4. Approval of the Committee's Scheme for Repayment:
The committee proposed a scheme to repay depositors with amounts less than Rs. 5,000, suggesting Rs. 20 lakhs per month for repayment. The court approved the scheme with modifications, allocating 37.5% of the company's monthly income to operating expenses, 37.5% to depositors below Rs. 5,000, and 25% to secured creditors. The scheme would extend to depositors with amounts up to Rs. 10,000 after the initial category is paid.
5. Disposal of the Company's Office Premises:
The committee sought to dispose of office premises to recover blocked funds and prevent unnecessary expenses. The court permitted the sale, directing the proceeds to be deposited separately and used only for secured creditors' liabilities upon further court directions. The committee was authorized to seek the vacation of an interim injunction from the DRT.
6. Initiation of Contempt Proceedings Against an Advocate:
The committee reported that an advocate, despite court orders staying proceedings, filed a criminal case against the company and committee members. The court found prima facie grounds for contempt and directed the issuance of a show-cause notice to the advocate.
7. Application by Secured Creditors to Vacate the Stay on Civil and Criminal Proceedings:
Secured creditors sought to vacate the stay to prosecute their claims, arguing that the blanket stay obstructed their interests. The court rejected this, emphasizing the scheme's dependence on lease rent from properties held by the company's clients. Allowing proceedings would frustrate the scheme. The court directed guarantors to disclose their assets and authorized the committee to negotiate one-time settlements with secured creditors.
Conclusion:
The court approved the modified scheme for repayment to small depositors, permitted the sale of office premises with conditions, initiated contempt proceedings against an advocate, and maintained the stay on proceedings against the company. The court emphasized protecting small investors while balancing the interests of secured creditors.
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2005 (2) TMI 533
Issues: Shareholders agreement breach, issuance of further share capital without consent, failure to offer new shares to shareholder, communication method for offering shares, interim relief
Shareholders Agreement Breach:
The judgment revolves around a shareholders agreement breach where the plaintiff alleges that a resolution for further issuance of share capital was passed without their consent, violating Article 50 of the Articles of Association. The plaintiff argues that certain decisions, including increasing share capital, require the consent of both parties, which was not obtained in this case. The plaintiff further contends that even if the resolution was valid, the shares were not offered to them as per the resolution's conditions.
Communication Method for Offering Shares:
A crucial aspect of the case involves the communication method for offering new shares to the plaintiff. The plaintiff, residing outside India, claims they were not informed of the further share issuance by the defendant company and were not offered the new shares. The defendants assert that the plaintiff was informed of the offer; however, the communication was sent via ordinary post, unlike previous correspondence that was sent electronically or via courier. The court raises concerns about the communication method, stating that the defendants have not proven that the offer was sent to the plaintiff, indicating a prima facie breach of the Articles of Association.
Interim Relief:
Considering the breach of the Articles of Association and the doubts raised regarding the communication of the offer of new shares to the plaintiff, the court grants an ad-interim relief. The defendants are restrained by an injunction from utilizing or exercising any rights in respect of the new shares issued to certain parties until the motion is disposed of. The court deems this interim measure necessary to address the prima facie breach and protect the plaintiff's interests pending further proceedings.
This detailed analysis of the judgment highlights the core issues of shareholders agreement breach, failure to offer new shares, concerns over communication methods, and the granting of interim relief by the court to address the alleged violations and protect the plaintiff's rights.
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2005 (2) TMI 532
Issues Involved:
1. Validity of the sale of the company's assets.
2. Commencement of winding up under section 441(2) of the Companies Act, 1956.
3. Applicability of section 537(1) of the Companies Act, 1956.
4. Adequacy of valuation and publicity for the sale of assets.
5. Overriding effect of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) over the Companies Act, 1956.
Issue-wise Detailed Analysis:
1. Validity of the Sale of the Company's Assets:
The employees of M/s. Elconmet Ltd. filed an application to declare the sale of the company's assets as null and void. The sale was conducted by IPICOL as per the guidelines provided by the B.I.F.R. in its proceedings dated 19-2-2001. The B.I.F.R. had directed the sale of the company's assets and the proceeds to be deposited with the High Court for distribution as per the Companies Act, 1956. The sale was approved by the B.I.F.R. and the final bid of Rs. 131 lakhs by Mr. Shyam Sundar Agarwala was accepted.
2. Commencement of Winding Up Under Section 441(2) of the Companies Act, 1956:
The winding up of the company commenced on 4-4-2001 when Company Act No. 17 of 2001 was registered based on the opinion of the B.I.F.R. under section 20(1) of the SICA. The sale of the company's assets was made by IPICOL on 20-1-2003, which was after the commencement of winding up.
3. Applicability of Section 537(1) of the Companies Act, 1956:
Section 537(1) of the Companies Act, 1956 states that any sale of the company's properties after the commencement of winding up without the leave of the Court shall be void. The employees argued that the sale was void as it was conducted after the commencement of winding up without the Court's leave. However, the Court held that the sale was conducted pursuant to the B.I.F.R.'s order before the winding up commenced, and thus, section 537(1) did not apply.
4. Adequacy of Valuation and Publicity for the Sale of Assets:
The employees contended that no satisfactory valuation was made, and there was inadequate publicity for the sale. The Court noted that IPICOL had conducted the sale following the B.I.F.R.'s guidelines, including valuation by an approved valuer and advertisements in newspapers. The valuation report showed the assets were valued at Rs. 1,23,99,000, and the sale fetched Rs. 1,31,00,000, indicating a reasonable price.
5. Overriding Effect of the SICA Over the Companies Act, 1956:
Sections 20(4) and 32(1) of the SICA provide that the B.I.F.R. can cause the sale of assets of a sick industrial company and that the provisions of the SICA override those of the Companies Act, 1956. The Court held that the B.I.F.R.'s order for the sale of assets under section 20(4) of the SICA took precedence over the Companies Act, 1956, and the sale could not be declared void under section 537(1) of the Companies Act, 1956.
Conclusion:
The Court found no merit in the application to declare the sale of the company's assets as null and void. The sale was conducted in accordance with the B.I.F.R.'s guidelines and approved by the B.I.F.R. before the commencement of winding up. The provisions of the SICA, which override the Companies Act, 1956, were duly followed, and the sale was for a reasonable price after proper valuation. The application was dismissed.
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2005 (2) TMI 531
Issues Involved:
1. Sanction of an amalgamation scheme under sections 391 to 394 of the Companies Act, 1956.
2. Compliance with procedural requirements under section 101(2) of the Companies Act, 1956, for reduction of share capital.
Issue-wise Detailed Analysis:
1. Sanction of an Amalgamation Scheme under Sections 391 to 394 of the Companies Act, 1956:
The petitions were filed by the transferor and transferee companies seeking sanction for an amalgamation scheme. The board of directors of the transferor company approved the scheme on 16-3-2004, and a court order for convening meetings of equity shareholders and creditors was passed on 6-5-2004. A special resolution approving the scheme was passed in these meetings. The procedural requirements for amalgamation under the Companies Act and Company Court Rules were complied with. The Regional Director confirmed no objections except for the procedure for reduction of capital under section 101(2).
2. Compliance with Procedural Requirements under Section 101(2) of the Companies Act, 1956, for Reduction of Share Capital:
The Regional Director raised an objection regarding Clause (20.2)(a) of the amalgamation scheme, which involved the automatic cancellation of shares held by the transferor company in the transferee company. This cancellation was argued to amount to a reduction in share capital, necessitating compliance with sections 100 and 101 of the Companies Act. The shares held by the transferor company would be extinguished upon amalgamation, reducing the share capital by 6,38,109 equity shares.
The petitioner argued that this reduction in share capital was an automatic effect of amalgamation, as the transferor company would cease to exist, and the transferee company could not allot shares to itself. The petitioner relied on judgments from the Madras High Court (Asian Investments Ltd., In re [1992] 73 Comp. Cas. 517) and Calcutta High Court (Mcleod & Co. v. S.K. Ganguly [1975] 45 Comp. Cas. 563), asserting that the prescribed procedure of section 101(2) need not be followed in cases of automatic reduction by operation of law.
The court analyzed section 101, noting that sub-section (2) applies to cases involving diminution of liability in respect of unpaid share capital, payment to shareholders of paid-up share capital, and any other cases. The court emphasized that the third category should be read in context with the preceding categories, focusing on protecting creditors' interests. The court concluded that automatic cancellation of shares due to amalgamation does not necessitate compliance with section 101(2), as it does not adversely affect creditors.
The court also considered the judgment in PMP Auto Industries Ltd., In re [1994] 80 Comp. Cas. 289 (Bom.), which supported the view that section 391 is a complete code for amalgamation and does not require compliance with other provisions for reduction of capital.
Conclusion:
The court found no merit in the Regional Director's objection and sanctioned the amalgamation scheme, making the petitions absolute in terms of the prayer clauses. The Official Liquidator had no objections to the scheme.
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2005 (2) TMI 530
Issues:
1. Scheme of Arrangement under section 391(1) of the Companies Act, 1956
2. Disputes regarding amounts claimed by creditors and admitted by the company
3. Payment schedule for creditors
4. Security for unpaid balance
5. Interest payment on claims
6. Order of winding up and stay conditions
7. Advertisement costs
8. Treatment of non-appearing creditors
9. Injunction against filing suits
10. Disposal of all connected applications
Scheme of Arrangement under section 391(1) of the Companies Act, 1956:
The company proposed a Scheme under section 391(1) of the Companies Act, 1956, and filed an application for final sanction of the Scheme of Arrangement. The court resolved disputes regarding amounts claimed by creditors and admitted by the company, with the company accepting most claims except for one creditor. Lump sum payments were made to creditors in a phased manner, and the company proposed to pay the remaining balance over four years.
Payment schedule for creditors and Security for unpaid balance:
The court permitted the company to pay the balance dues of creditors, except for one, in three yearly installments. The company was directed to furnish security to the satisfaction of the Registrar for the unpaid balance of one creditor by a specified date. Failure to provide security would result in the amount being included in the creditor's claim.
Interest payment on claims:
The company was directed to pay interest on the respective claims of creditors at a rate of 5% per annum until payment, with the interest amount due by a specified date.
Order of winding up and stay conditions:
An order of winding up was issued, but it would remain stayed as long as the company made the scheduled payments. In case of default, the Official Liquidator would take possession of the company's assets.
Advertisement costs and Treatment of non-appearing creditors:
The company was directed to pay the actual advertisement cost to the petitioning creditor. Non-appearing creditors were not allowed to take punitive steps without court permission once the order of winding up was passed and stayed due to payments to appearing creditors.
Injunction against filing suits:
One creditor was restrained from filing a suit for a disputed sum until a specified period after furnishing security. Failure to file the suit would allow the company to request the return of the security.
Disposal of all connected applications:
All connected applications were disposed of by the court's order, resolving the issues related to winding up, creditor payments, security, and interest payments.
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2005 (2) TMI 529
Issues Involved:
1. Non-payment of debt by the respondent-company.
2. Validity of the statutory notice under Sections 433 and 434 of the Companies Act, 1956.
3. Necessity of re-endorsement of the bill of exchange for maintaining the petition.
Issue-wise Detailed Analysis:
1. Non-payment of debt by the respondent-company:
The petitioner, a foreign company engaged in manufacturing wines and champagne, supplied goods to the respondent, an Indian company, under an exclusive distributorship agreement dated 6-10-2001. The petitioner claimed an outstanding amount of 220,273 Euros from the respondent for the goods supplied. Despite the goods being delivered and invoices raised, the respondent failed to make the payment. The petitioner issued a statutory notice under Sections 433 and 434 of the Companies Act, 1956, but received no response from the respondent. The court noted that there was no dispute regarding the delivery of goods and the amount due, thus establishing the respondent's liability to pay.
2. Validity of the statutory notice under Sections 433 and 434 of the Companies Act, 1956:
The respondent contended that the statutory notice dated 10-3-2003 was invalid as it was issued before the assignment deed dated 1-4-2003, transferring the assets and liabilities from Clicquot Hong Kong Limited to Clicquot Asia Limited. The court referred to the Rajasthan High Court's judgment in Dawn Communications (P) Ltd. v. Rajasthan Petro Synthetics Ltd., which held that a notice given by an assignor before assignment remains valid. The court agreed with this view, stating that as long as the petitioner was a creditor at the time of filing the petition, the notice was valid. The notice was issued on behalf of both Clicquot Hong Kong Ltd. and Clicquot Asia Limited, making the petition maintainable.
3. Necessity of re-endorsement of the bill of exchange for maintaining the petition:
The respondent argued that the petitioner could not maintain the petition without re-endorsement of the bill of exchange dated 2-1-2002, which was endorsed to a bank. The court examined various judgments, including the Division Bench judgment of the Bombay High Court in Bank of India v. Laffans India Exports (P.) Ltd., which held that re-endorsement is not necessary if the bill of exchange is dishonored and the holder is in possession of the bill. The court concluded that the petitioner, being the original creditor and holder of the dishonored bill, could maintain the petition based on the original cause of action and the bill of exchange.
Conclusion:
The court found the respondent's defenses unsubstantial and ordered the respondent to deposit 220,273 Euros within eight weeks. If the respondent failed to deposit the amount, the petition would be admitted and advertised. If the amount was deposited, the petitioner was to file a suit within four weeks. The petition was disposed of with no order as to costs.
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2005 (2) TMI 528
Issues Involved:
1. Whether the proceedings for seeking directions to convene the meeting are ex parte and whether other parties have any right of audience in the said proceedings.
2. Whether the Court can examine the scheme at the stage of seeking direction to convene the meeting or reject the scheme without issuing direction to convene the meeting.
3. Whether the facts of the present case warrant dismissal of the Summons for directions at the threshold.
Issue-Wise Analysis:
1. Ex Parte Proceedings and Right of Audience:
The applicant-company sought directions for convening meetings of its creditors and shareholders to consider a scheme of arrangement and compromise. The Court examined whether these proceedings are ex parte and if other parties have the right to be heard. According to Rule 67 of the Company (Court) Rules, 1959, such applications are generally moved ex parte unless the company is not the applicant or is being wound up (Rule 68). However, Rule 69, which deals with directions at the hearing of the summons, implies that the Court can hear interested parties. The Court referred to the Allahabad High Court's decision in Hind Auto Industries Ltd. and the Bombay High Court's decision in Vasant Investment Corpn. Ltd., which support the view that interested parties can be heard even in ex parte proceedings. Consequently, the Court allowed the objector, UTI Bank, to make submissions.
2. Examination of Scheme at the Stage of Direction to Convene Meeting:
The Court considered whether it could reject the scheme at the stage of issuing directions to convene the meeting. The Court referred to its previous decision in Gujarat Kamdar Sahakari Mandal and the Supreme Court's decision in Rainbow Denim Ltd., which suggest that the Court should not reject the scheme at the threshold but allow the meeting to take place for further discussion and potential modification. The Court noted that the appropriate time to consider the scheme's merits is after it has been approved by the requisite majority at the meeting. Therefore, the Court held that it should issue directions for convening the meetings and not delve into the scheme's merits at this stage.
3. Dismissal of Summons for Directions at the Threshold:
The Court examined whether the objections raised by UTI Bank warranted dismissal of the Summons for directions at the initial stage. The objections included issues with the scheme's merits and claims that prior consultation had already taken place. However, the Court found that the alleged meeting by ARCIL did not result in unanimous agreement among creditors, and different modifications were suggested. The Court emphasized that prior consultation does not prevent the company from seeking directions to convene a meeting. The Court concluded that objections regarding the scheme's merits should be discussed at the meeting, and if the scheme is rejected, there would be no need for Court sanction. Therefore, the Court decided to issue directions for convening the meetings.
Directions Issued by the Court:
1. Four separate meetings of the secured creditors with first charge, secured creditors with second charge, other creditors, and shareholders of the applicant-company were scheduled to be held on specified dates and venues.
2. Notices convening the meetings, along with copies of the scheme, explanatory statement, and proxy form, were to be sent to creditors and shareholders at least 21 days before the meetings.
3. Notices were to be published in specified newspapers, indicating that copies of the scheme and related documents could be obtained from the company's registered office or its advocates' office.
4. Mr. S. Khasnobis or Mr. R.S. Patel was appointed as the Chairman of the meetings, with specific instructions regarding the conduct of the meetings and reporting the results to the Court.
5. The quorum for the meetings was set, and voting by proxy was permitted under specified conditions.
6. The value of votes was to be determined based on the amount of debt or capital subscribed, with the Chairman having the authority to resolve disputes regarding voting value.
7. The Chairman was required to report the meeting results to the Court within 14 days of the meetings' conclusion.
Rejection of Stay Request:
The objector's request for a stay against the implementation, operation, and execution of the order was rejected, as the Court found no need for a stay given the scheduled meeting date.
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2005 (2) TMI 527
Issues Involved:
1. Requirement of separate permissions under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) for proceeding with the recovery suit and for executing the decree.
2. Validity of BIFR's composite permission covering both suit proceedings and execution proceedings.
3. Interpretation of Section 22(1) of SICA post-1994 amendment.
Detailed Analysis:
1. Requirement of Separate Permissions under Section 22(1) of SICA:
The primary issue in the writ petition was whether separate permissions were required under Section 22(1) of SICA for proceeding with the recovery suit and for executing the decree, or if a composite permission would suffice. The petitioner contended that after the 1994 amendment to Section 22, which included the expression "pertaining to suit for recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to industrial company," separate permissions were necessary for filing the suit and for executing the decree.
2. Validity of BIFR's Composite Permission:
The BIFR had granted permission to respondent No. 3 to proceed with the suit, which was interpreted to include both the suit proceedings and the execution of the decree. The petitioner argued that the BIFR's order did not explicitly cover execution proceedings and that a separate permission should have been sought. However, the BIFR, in its orders dated 31-8-1998, 31-10-2002, and 28-1-2004, clarified that the permission granted included both the suit and execution proceedings. The Appellate Authority for Industrial and Financial Reconstruction (AAIFR) upheld this interpretation, stating that once permission to file a suit was granted, further action to recover the money would necessarily follow unless explicitly limited by the BIFR.
3. Interpretation of Section 22(1) of SICA Post-1994 Amendment:
The court analyzed Section 22(1) of SICA, which suspends legal proceedings against a sick industrial company except with the consent of the BIFR or the appellate authority. The petitioner argued that the 1994 amendment necessitated separate permissions for suit proceedings and execution proceedings. However, the court found that Section 22(1) did not prescribe any specific mode of granting permission and did not bar the issuance of a composite order covering both stages. The court noted that the BIFR had granted permission in 1998, post-amendment, and was aware of the amendment's implications. Therefore, the BIFR's composite permission was valid and covered both the suit and execution proceedings.
Conclusion:
The court dismissed the petition, agreeing with the AAIFR's view that the BIFR had granted permission for both the suit and execution proceedings. The court held that Section 22(1) of SICA did not require separate orders for filing a suit and executing a decree and that a composite order could be issued. The court emphasized that the BIFR and AAIFR are the competent authorities to grant such permissions, and their clarification that the permission covered both stages was binding. The petitioner's resistance to the execution of the decree, which had been affirmed up to the Supreme Court, was not justified.
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2005 (2) TMI 526
Issues Involved:
1. Eviction of the respondent from the premises of Vijaya Mills Ltd.
2. Disposal of the land after eviction.
3. Legitimacy of the electric meter installation.
4. Overall reliefs in the interest of justice.
Issue-wise Detailed Analysis:
1. Eviction of the respondent from the premises of Vijaya Mills Ltd.:
The applicant, Textile Labour Association, sought the eviction of the respondent from Vijaya Mills Ltd. premises, alleging unauthorized and illegal occupation. The respondent claimed lawful possession as a tenant, supported by rent receipts and a history of rent payments. The court scrutinized the rent receipt dated 12-1-1988, finding it to be false and fabricated, issued on the letterhead of Shri Krishna Chawl, meant for workers' residences, and containing visible interpolations. The court concluded that the respondent was never a tenant but merely a Reeling Contractor whose contract ended with the company's closure. The court directed the Official Liquidator (O.L.) to take immediate possession of the premises from the respondent and disconnect the electricity supply.
2. Disposal of the land after eviction:
The disputed land was part of the property already sold by the O.L., with the sale confirmed by the court. The court noted that the purchaser now has the duty to protect the property and defend the court's order if challenged. The court emphasized the need for the O.L. to act promptly in taking possession and ensuring the property's protection.
3. Legitimacy of the electric meter installation:
The applicant questioned the legitimacy of an electric meter installed by the respondent. The respondent claimed it was a reconnection after damage during riots, supported by a letter from the O.L. to the Ahmedabad Electricity Company (A.E.C.). The court found that the O.L. had no authority to recommend the electric connection without prior court permission, deeming the installation unauthorized.
4. Overall reliefs in the interest of justice:
The court addressed various allegations and counterclaims, including the respondent's assertion of tenancy rights and the applicant's challenge to the respondent's locus standi. The court dismissed the respondent's objections, affirming the applicant's right to file the application. The court criticized the O.L.'s role, highlighting malpractices and the need for thorough scrutiny and investigation into the O.L.'s dealings. The court allowed the application, directing the respondent to vacate the premises and the O.L. to take possession immediately.
Separate Judgments Delivered by Judges:
Not applicable as the judgment was delivered by a single judge.
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2005 (2) TMI 525
Issues Involved:
1. Legitimacy of adjournments of the debenture holders' meetings.
2. Requirement for the Scheme of Arrangement/Compromise to be put to vote.
3. Compliance with statutory guidelines and the role of the Chairman in the meetings.
4. Court's intervention and directions regarding the Scheme's approval process.
Detailed Analysis:
1. Legitimacy of Adjournments of the Debenture Holders' Meetings:
The applicant argued that the meetings were adjourned multiple times without putting the Scheme to vote, which suggested a bias and an attempt to delay the process. The respondent-Company contended that the adjournments were necessary due to ongoing negotiations and the need to finalize terms with lenders. The Court noted that out of 11 adjournments, 8 were unanimous and without protest, and found no statutory provision requiring a 3/4th majority for adjournments. It was concluded that the Chairman acted within his rights, but the Court expressed concern over the frequent adjournments and the potential misuse of the process.
2. Requirement for the Scheme of Arrangement/Compromise to be Put to Vote:
The applicant and supporting institutions argued that the Scheme should be put to vote as it was apparent that the requisite majority was not in favor. The Court acknowledged that while meetings can be adjourned by majority vote, it should not be used to avoid putting the Scheme to vote. The Court directed that the Scheme must be put to vote in a meeting to be held no later than 30-6-2005, with the outcome to be reported to the Court by 7-7-2005.
3. Compliance with Statutory Guidelines and the Role of the Chairman in the Meetings:
The applicant argued that the Scheme was contrary to the statutory guidelines issued by the Reserve Bank of India and that the Chairman's actions suggested bias. The respondent-Company maintained that the adjournments were necessary for negotiations and that the Chairman acted according to the Articles of Association and the Companies (Court) Rules, 1959. The Court found that the Chairman's actions were generally within legal bounds but emphasized the need for transparency and fairness in the process.
4. Court's Intervention and Directions Regarding the Scheme's Approval Process:
The Court noted its inherent powers to intervene when its directions are misused or misinterpreted. It expressed concern over the prolonged adjournments and directed the Chairman to ensure the Scheme is put to vote by the specified deadline. The Court emphasized the importance of balancing the interests of all parties involved, including the significant investments and sacrifices made by lenders and small debenture holders.
Conclusion:
The Court directed that the Scheme of Arrangement/Compromise must be put to vote in a meeting held no later than 30-6-2005, with the results reported to the Court by 7-7-2005. The application was disposed of without any order as to costs, emphasizing the need for fairness and transparency in the proceedings.
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2005 (2) TMI 524
Whether the sales in question were inter-State or intra-State sales?
Held that:- The issue whether the transactions in question were inter-State sales or intra-State sales and if so whether the same had taken place in Andhra Pradesh are issues which should be decided as a question of fact initially by a fact-finding Tribunal. It is true that by virtue of the provisions of sections 21-E and 21-F of the Andhra Pradesh General Sales Tax Act, 1957 the appellant could not have approached the Tribunal or the High Court.
We transfer these matters to the Andhra Pradesh Sales Tax Tribunal for determining the aforesaid issues and any other issues which are appropriately raised at the instance of the parties. Pending the determination by the Tribunal the interim order granted by this court on March 22, 2002 will continue to operate. We make it clear that before the Tribunal takes any decision the Union of India and State of Orissa must be given notice.
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2005 (2) TMI 519
Whether contracts entered into and executed by the assessee were contracts for sale and not works contract?
Held that:- Department's appeal is allowed. In the present case, on facts, it is find that the major component of the end-product is the material consumed in producing the lift to be delivered and the skill and labour employed for converting the main components into the end-product was only incidentally used and, therefore, the delivery of the end-product by the assessee to the customer constituted a "sale" and not a "works contract". Hence, transactions in question constitute "sale" in terms of entry 82 of the First Schedule to the said Act and, therefore, section 5G of the said Act was not applicable.
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2005 (2) TMI 518
Whether cash registers are classifiable under entry 90 or under entry 97(b) of Part II, Schedule C of the Bombay Sales Tax Act, 1959?
Held that:- Appeal allowed. The High Court was wrong. It is significant that by contrast, data processing machines have expressly excluded computers. Were it not so excluded, computers would have also fallen within entry 90. In fact computers are separately dealt with in entry 97(a). But the exclusion of computers from data processing machines would indicate that the items mentioned in entry 90 are generic covering all species of such items. Given the language of the two entries we fail to understand how the High Court could have come to the conclusion that entry 97(b) was the specific entry and that entry 90 was the general entry. Such an interpretation goes against the express language of the two entries.
Tribunal was right in holding that 'electronic cash register' sold by the applicant was covered by entry No. 90 of Schedule C, Part II and not by entry No. 97(b) of Schedule C, Part II appended to the Bombay Sales Tax Act, 1959.
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2005 (2) TMI 510
Whether the appellant is liable to pay interest on the balance of sales tax dues for the period October 1, 1993 to September 30, 1994 under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 or was it exempt from doing so under section 17-A(2) of that Act?
Held that:- Appeal dismissed. In compliance with the order dated December 31, 1996, the payment was in fact made by the appellant. As such the amended notification was indeed an amendment of the first notification dated July 28, 1993 consequent upon the revised sanction of the BIFR on August 18, 1994 enhancing the need and assistance limits and it was not seeking to retrospectively deny any benefit already conferred on the appellant. We therefore do not need to go into the further question whether the High Court was right in importing section 15 of the Tamil Nadu General Clauses Act into section 17-A.
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2005 (2) TMI 503
Issues Involved:
1. Existence of seller-buyer relationship between MAL and its dealers.
2. Determination of place of removal for valuation purposes.
3. Inclusion of various expenses in the assessable value.
4. Sale of goods at prices below the cost of manufacture.
5. Validity of duty demands and penalties.
Issue-Wise Detailed Analysis:
1. Existence of Seller-Buyer Relationship:
The core issue was whether there was a seller-buyer relationship between MAL and its dealers. The Tribunal examined the facts and concluded that the relationship was indeed that of seller and buyer. The goods were sold by MAL to its dealers at the factory gate, which was evident from the invoices, lorry receipts, and the credit policies allowing cash discounts and charging interest on delayed payments. The Tribunal referenced previous decisions, including the Associated Strips Ltd. case, which supported the view that delivery to the transporter constituted delivery to the buyer, establishing the transfer of title at the factory gate.
2. Determination of Place of Removal:
The Tribunal held that the place of removal was the factory gate of MAL, where the goods were sold in wholesale to the dealers. This finding was based on the consistent practice of issuing invoices at the factory gate and the legal precedent that delivery to the transporter equates to delivery to the buyer. The Tribunal rejected the Commissioner's finding that the dealers' premises were the place of removal, noting that the goods were sold at the factory gate and not merely transferred to agents.
3. Inclusion of Various Expenses in the Assessable Value:
The Tribunal addressed several specific expenses that the Commissioner had included in the assessable value:
- Running Showroom and Workshop Expenses: The Tribunal found these expenses non-includible, citing the Supreme Court's decision in Moped India Ltd. that such maintenance is a normal trade practice.
- Sales Promotion, Advertisement, and Publicity Expenses: These were also held non-includible, referencing the Supreme Court's decision in Philips India Ltd.
- Pre-Delivery Inspection and Other Miscellaneous Expenses: The Tribunal ruled these expenses non-includible, maintaining the seller-buyer relationship and applying the principles from previous cases.
- Equalized Freight: The Tribunal set aside the demand for including equalized freight in the assessable value, as the place of removal was the factory gate.
- Cash Discount: The Tribunal allowed the deduction of cash discounts, following the Supreme Court's decision in Bombay Tyre International.
- Advances Against Sale of BMW Motorcycles: The Tribunal found no nexus between the advances and the price of goods, thus setting aside the demand.
- Collection Charges for Cheque Payments: These were found non-includible as they were incurred post-sale.
4. Sale of Goods at Prices Below Cost of Manufacture:
The Tribunal examined the sale of certain models at prices below the cost of manufacture. It concluded that these were distress sales due to high project costs, heavy interest burdens, and poor market uptake. The Tribunal held that the prices at which these goods were sold were normal prices under Section 4 of the Central Excise Act, referencing the Supreme Court's decision in Guru Nanak Refrigeration Corpn. The Tribunal set aside the Commissioner's finding that these goods were not sold by MAL to its dealers.
5. Validity of Duty Demands and Penalties:
The Tribunal found that the duty demands and penalties were not sustainable. It set aside the Commissioner's order, which had included various expenses in the assessable value based on the incorrect assumption of a principal-agent relationship. The Tribunal did not address the argument of the demand being barred by limitation, as the appeals succeeded on merits.
Conclusion:
The impugned order was set aside, and the appeals were allowed. The Tribunal's decision reaffirmed the existence of a seller-buyer relationship between MAL and its dealers, established the factory gate as the place of removal, and excluded various expenses from the assessable value, leading to the dismissal of the duty demands and penalties imposed by the Commissioner.
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2005 (2) TMI 495
Issues involved:
1. Deduction under section 80P(2)(a)(ii) and (iv) for income derived from specific activities.
2. Disallowance of rebate paid to members.
Analysis:
Issue 1: Deduction under section 80P(2)(a)(ii) and (iv) for income derived from specific activities
The appeals by the Revenue were against the order of the CIT(A) concerning the deduction claimed under section 80P(2)(a)(ii) and (iv) for the assessment years 1993-94 and 1994-95. The assessee, a federal co-operative society engaged in marketing milk and milk products, claimed deductions amounting to Rs. 97,391 and Rs. 1,12,787 for the respective years. The AO rejected the claim, leading to an appeal. The CIT(A) found that the activities of the assessee were in line with the objectives defined under the Gujarat Co-operative Societies Act, 1961, and fell under the purview of section 80P(2)(a)(ii) and (iv). Referring to a decision of the Madras High Court, the Tribunal dismissed the Revenue's appeal, emphasizing a liberal construction of section 80P and the sufficiency of engagement in qualifying activities for claiming the deduction.
Issue 2: Disallowance of rebate paid to members
The second common ground in the appeals related to the disallowance of rebates paid to members. The AO contended that the amount represented a diversion of profit to the capital account, leading to disallowance. However, the CIT(A) reversed this observation, highlighting the co-operative nature of the society and the purpose of the rebates to incentivize members and maintain active cash flow. The Tribunal, guided by a decision of the Andhra Pradesh High Court, held that the rebates were not part of the profit but a business expenditure incurred for the purpose of the business. Consequently, the appeals of the Revenue were dismissed on this issue as well.
In conclusion, the Tribunal upheld the CIT(A)'s decision regarding both issues, emphasizing the alignment of the assessee's activities with the provisions of section 80P and the legitimate nature of the rebates paid to members as a business expenditure.
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2005 (2) TMI 494
Method Of Accounting - addition made on account of low gross profit - correctness of the sales/purchases in the books of account - best judgment assessment - HELD THAT:- The duty of the Assessing Officer is to administer the provisions of the Act in the interest of public revenue and to prevent evasion or escapement of tax legitimately due to the State. At the very same time, the duty of the Appellate Authority is to ensure not only that the provisions of the Act are administered in the interest of public revenue so as to prevent evasion/ escapement of tax, but at the very same time to ensure that only the tax legitimately due to the State is collected.
The First Appellate Authority has all the powers which the original authority may have. In the absence of any statutory provisions to the contrary, the appellate authority is vested with the plenary powers, which the subordinate authority has in the matter. In this case, the CIT (Appeals) himself has looked into audited accounts as well as quantitative statement of daily sales and purchases and compared it with the rate prevailing in Ahmedabad Bullion Merchant Association and found that the profit arrived at in each and every transaction was correct. All these exercise was done by the CIT(A) in the presence of the Assessing Officer. No ground has been taken by the Revenue with regard to any additional materials relied on by the CIT (Appeals) in contravention of rule 46A, while reaching to such conclusion.
The Hon'ble Supreme Court in Brij Bhushan Lal Praduman Kumar v. CIT [1978 (10) TMI 2 - SUPREME COURT], categorically observed that while making "best judgment assessment", the Assessing Officer should keep in mind what honestly he believes to be fair estimated or the proper figure of assessment. Furthermore, Hon'ble Calcutta High Court in the case of CIT v. Popular Electric Co. (P.) Ltd.[1992 (3) TMI 15 - CALCUTTA HIGH COURT] wherein it was observed that while making "best judgment", the Assessing Officer should make independent and well grounded estimate and such estimate may be based on adequate and relevant materials.
In the instant case no mistake has been pointed out by the Assessing Officer either in the books of account or in the statement of purchases, sales and stock which was maintained quantitatively on day-to-day basis. The findings recorded by the CIT(A) at page Nos. 3 and 4 have not been controverted by the department by bringing any positive material on record. We are, therefore, inclined to agree with the learned AR, Mr. Rindani, that the assessee has maintained proper books of account and full details regarding the purchases, sales and stock registers were furnished to the Assessing Officer in which no defect whatsoever was pointed out, thus there was no reason before the Assessing Officer for rejecting the book results and thereby estimating the profit merely by comparing the assessee's G.P. rate. M/s. Gayatri Bullion, which was standing entirely on different footings than the assessee.
In the result, the appeal of the Revenue is dismissed.
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2005 (2) TMI 491
Issues:
Appeal against CIT(A)'s order confirming AO's action under s. 154 applying s. 167B(2)(i) to rectify assessment order for asst. yrs. 1994-95 to 1997-98 taxing income at maximum marginal rates.
Analysis:
The assessee appealed against CIT(A)'s decision confirming AO's action under s. 154 applying s. 167B(2)(i) to rectify the assessment order for the relevant assessment years. The original returns were processed under s. 143(1)(a) assessing the assessee as 'AOP' at ordinary rates. The AO rectified the assessment order taxing the total income at maximum marginal rates after issuing a notice and providing an opportunity to the assessee to file objections. The CIT(A) dismissed the appeal of the assessee, leading to the present appeal before the ITAT.
The ITAT considered the provisions of s. 154, which allow rectification of any mistake apparent from the record by the IT authority. The word 'record' was analyzed, concluding that it refers to the record of the assessee for whom the order is sought to be rectified. The information and documents available at the time of passing the order should form part of the record. The ITAT noted that the record of a different assessee cannot be linked to rectifying the order of a particular assessee. The ITAT referred to case laws supporting this interpretation and highlighted that information from a different record may provide jurisdiction under s. 147 but cannot be used under s. 154.
The ITAT found that the AO's action under s. 154, based on information from the 'HUF' record, was not appropriate as 'AOP' and 'HUF' are distinct assesses. While acknowledging that such information could be relevant for initiating action under s. 147, it cannot be considered a mistake apparent from the record for rectification under s. 154. Consequently, the ITAT set aside the orders of the lower authorities and quashed the AO's order under s. 154, allowing all the appeals of the assessee.
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2005 (2) TMI 490
Issues Involved:
1. Legality of the block assessment proceedings under sections 158BC/158BD.
2. Validity of the notice issued under section 158BC.
3. Additions made on the basis of evidence found during the search.
4. Additions based on material gathered after the search.
5. Presumptive interest on funds diverted by the directors.
6. Validity of additions made on the basis of bank statements.
Issue-wise Detailed Analysis:
1. Legality of the Block Assessment Proceedings under Sections 158BC/158BD:
The Tribunal examined whether the block assessment proceedings initiated under sections 158BC/158BD were valid. It was found that there was no material to initiate proceedings under section 158BC/158BD, and the search was conducted in the case of Smt. B. Surya Prabha, not the assessee. The Tribunal noted that for initiating action under section 158BC, there must be a search in the case of the assessee, and for section 158BD, the AO must be satisfied that the assessee had undisclosed income based on material seized. The Tribunal concluded that the block assessment proceedings were void ab initio due to the absence of any material found during the search indicating undisclosed income.
2. Validity of the Notice Issued under Section 158BC:
The Tribunal found that the notice issued under section 158BC was invalid because it was issued without any material indicating undisclosed income. The AO issued the notice based on roving inquiries rather than material found during the search. The Tribunal emphasized that valid initiation of assessment proceedings is the foundation for a valid assessment, and since there was no material to justify the notice, the assessment was annulled.
3. Additions Made on the Basis of Evidence Found During the Search:
The Tribunal examined the additions made based on evidence found during the search. It was found that the AO made additions without any evidence or material seized during the search. The Tribunal noted that the income disclosed in the regular returns and books of account cannot be treated as undisclosed income unless there is material indicating that the entries are bogus. The Tribunal concluded that the additions made in the block assessment were not justified as they were not based on evidence found during the search.
4. Additions Based on Material Gathered After the Search:
The Tribunal found that the AO made additions based on material gathered after the search, such as bank statements and receipt and payment accounts filed by the assessee during the block assessment proceedings. The Tribunal emphasized that undisclosed income must be computed based on evidence found as a result of the search and material relatable to such evidence. Since the additions were based on material gathered after the search, they were not justified and were deleted.
5. Presumptive Interest on Funds Diverted by the Directors:
The Tribunal examined the addition of presumptive interest on funds diverted by the directors. It was found that the AO added interest income based on the presumption that the assessee diverted funds for non-business purposes. The Tribunal noted that no income can be charged to tax until it accrues or is received by the assessee. Since there was no material or evidence proving that the assessee earned the income, the addition was deleted.
6. Validity of Additions Made on the Basis of Bank Statements:
The Tribunal found that the AO made additions based on bank statements filed by the assessee during the block assessment proceedings. The Tribunal emphasized that bank statements cannot be regarded as books of account, and additions cannot be made under section 68 based on bank statements. The Tribunal concluded that the additions made on the basis of bank statements were not justified and were deleted.
Conclusion:
The Tribunal annulled the block assessment proceedings and deleted the additions made by the AO. The Tribunal emphasized that block assessments under Chapter XIV-B should be based on evidence found during the search and material relatable to such evidence. Additions based on material gathered after the search and presumptive income were not justified and were deleted. The Tribunal also highlighted the importance of valid initiation of assessment proceedings and proper service of notice under section 158BC/158BD.
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