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2010 (1) TMI 1276
Issues Involved:
1. Whether the Assessing Officer is entitled to probe into the objects of the charitable trust already registered under section 12A of the Income Tax Act.
2. Whether the activities carried on by the assessee can be termed as business activity in terms of Section 11(4A) of the Income Tax Act.
3. Whether the amount of Rs. 30,00,000 and Rs. 5,00,000 given to the two settlor associations can be treated as investment in terms of Section 11(5) of the Income Tax Act.
4. Whether the said advance of Rs. 30,00,000 and Rs. 5,00,000 are hit by the provisions of Section 13(1)(c) read with Section 13(2)(a) of the Income Tax Act.
5. Whether the objects for which accumulation was made under Section 11(2) were for charitable purposes or not.
Issue-wise Detailed Analysis:
1. Probing into the Objects of the Trust Registered under Section 12A:
It was established that the assessee trust was granted registration under Section 12A of the Income Tax Act from its inception. The Supreme Court in ACIT Vs. Surat City Gymkhana (2008) affirmed that once a trust is registered under Section 12A, the Assessing Officer cannot further probe into the objects of the trust. Thus, the Assessing Officer's detailed analysis of the trust's objects and subsequent denial of exemption under Section 11 was not in accordance with the law.
2. Activities Termed as Business Activity:
The term "Business" implies a continuous and systematic exercise of an occupation with the objective of making a profit. The trust's primary objective was to identify, enroll, allot work, and regulate private workers, without any profit motive. The trust's activities were deemed charitable, not commercial, as there was no profit distribution among trustees, and the surplus was retained for the trust's objectives. The activities were also in line with the Major Port Trust Act, 1963. Therefore, the trust's activities could not be treated as business activities.
3. Treatment of Advances as Investment under Section 11(5):
The assessee advanced Rs. 30,00,000 and Rs. 5,00,000 to M/s Visakhapatnam Stevedors Association and M/s Visakhapatnam Clearing and Forwarding Agents Association, respectively. As per the Andhra Pradesh High Court in CIT Vs. Polisetty Somasundaram Charities, advancing a loan is not an investment. Hence, these advances did not violate Section 11(5), and the question of violation of Section 11(3) did not arise.
4. Violation of Section 13(1)(c) read with Section 13(2)(a):
The advances were made to settlor associations, which were adequately secured and earned adequate interest at 12%. The interest was collected and offered to tax in the year of receipt. The trustees, being office bearers of the settlor associations, did not imply personal benefit, as trade associations are non-commercial legal persons without personal interest. Thus, there was no violation of Section 13(1)(c) read with Section 13(2)(a).
5. Accumulation of Income under Section 11(2):
The assessee specified the purposes of accumulation in Form No.10 as building construction and welfare amenities for workers. The Assessing Officer's conclusion that these were not for charitable activities was incorrect, as the objects of the trust had been approved as charitable by the Commissioner. The purposes specified were for advancing the trust's objectives and were not general. Hence, the accumulation was permissible under Section 11(2).
Conclusion:
The assessee trust was entitled to exemption under Section 11 of the Income Tax Act. The Assessing Officer was directed to re-compute the income in light of the principles stated above. All appeals filed by the assessee were allowed.
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2010 (1) TMI 1275
Issues Involved:
1. Maintainability of the petition under Section 115 of the CPC.
2. Validity of the compromise decree under Order 23 Rule 3 of the CPC.
3. Allegations of undue influence and fraud in obtaining the compromise decree.
4. Requirement of trial based on the pleas of undue influence.
Issue-wise Detailed Analysis:
1. Maintainability of the Petition under Section 115 of the CPC:
The petition was initially filed under Section 115 of the CPC but was found not maintainable as it did not satisfy the criteria laid down in *Shiv Shakti Co-op. Housing Society Vs. Swaraj Developers AIR 2003 SC 2434*. Consequently, the court treated and heard it as a petition under Article 227 of the Constitution of India.
2. Validity of the Compromise Decree under Order 23 Rule 3 of the CPC:
The compromise decree was recorded based on a lawful agreement between the parties, where the petitioner admitted the respondent's ownership of the property and agreed to vacate the premises within six months. The court found that the compromise was lawful and decreed the suit in terms thereof. The petitioner failed to vacate the premises, leading to the respondent filing for execution of the decree.
3. Allegations of Undue Influence and Fraud in Obtaining the Compromise Decree:
The petitioner alleged that the compromise decree was obtained through undue influence and fraud by the respondent, who was his mother. The petitioner claimed that he was under the respondent's influence, which led to the execution of a relinquishment deed and the compromise decree. However, the court noted that the petitioner had admitted the respondent's ownership in other legal proceedings, including a reply in a domestic violence case, and did not challenge the decree at that time. The court also found no substantial evidence or detailed pleadings to support the allegations of undue influence as required by Order 6 Rule 4 of the CPC.
4. Requirement of Trial Based on the Pleas of Undue Influence:
The court considered whether the application for setting aside the compromise decree required a trial. It concluded that the petitioner had not provided sufficient material to warrant a trial. The court emphasized that merely raising allegations of undue influence without detailed and specific pleadings does not necessitate a trial. The court also noted that the petitioner was well-educated, engaged in legal proceedings with his wife, and had legal representation, which undermined the claim of undue influence.
Conclusion:
The court dismissed the petition, finding no merit in the allegations of undue influence and fraud. It upheld the compromise decree, emphasizing the need to maintain the sanctity of court-approved compromises and avoid unnecessary delays in execution. The petitioner was ordered to pay costs of Rs. 20,000 to the respondent.
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2010 (1) TMI 1274
Issues Involved:
1. Delay in filing the appeal by the revenue.
2. Allowance of depreciation on Geographical Report under Section 35E of the Income Tax Act.
3. Disallowance of additional depreciation on Geographical Report.
4. Allowance of expenditure incurred for up-gradation/construction of a link road as revenue expenditure.
Detailed Analysis:
1. Delay in Filing the Appeal by the Revenue:
The appeal filed by the revenue was delayed by 8 days. The Tribunal found the cause for the delay reasonable and, as conceded by the counsel for the assessee, condoned the delay and admitted the appeal.
2. Allowance of Depreciation on Geographical Report:
The revenue contended that the depreciation claimed by the assessee on the Geographical Report (GR) should be disallowed under Section 35E of the Income Tax Act, which pertains to expenditure on prospecting, etc., for certain minerals. The Assessing Officer disallowed the depreciation by considering the GR as an expense covered under Section 35E, thereby reducing the depreciation claim by Rs. 66,00,000.
The CIT(A) allowed the depreciation but disallowed the additional depreciation. The CIT(A) held that the GR is not a tool fundamental to the assessee's business and cannot be considered a plant. Instead, it was treated as an intangible asset under Section 32(1)(ii) of the Act.
The Tribunal, upon reviewing the facts and circumstances, concluded that the GR is a fundamental document essential for assessing the feasibility of the mine, evaluating the economics of the mine, and planning mining activities. The Tribunal held that the GR constitutes an intangible asset eligible for depreciation as per Section 32(1)(ii) of the Act. However, it is not a plant under Section 43(3).
3. Disallowance of Additional Depreciation on Geographical Report:
The revenue argued that the additional depreciation should not be allowed as per the second proviso to Section 32(1)(iia), which states that no depreciation shall be allowed for any machinery or plant installed in office premises. The Assessing Officer disallowed the additional depreciation, considering the GR as an office document.
The Tribunal upheld the CIT(A)'s decision that the GR is an intangible asset and not a plant. Therefore, the assessee is not entitled to claim additional depreciation under Section 32(1)(iia) of the Act. The Tribunal emphasized that even if the GR were considered a plant, it would fall under the second proviso to Section 32(1)(iia), which bars additional depreciation for machinery or plant installed in office premises.
4. Allowance of Expenditure for Up-gradation/Construction of Link Road:
The revenue contended that the expenditure of Rs. 3,57,45,560 incurred by the assessee for the up-gradation/construction of a link road belonging to Birbhum Zilla Parishad should be considered capital expenditure. The Assessing Officer disallowed the expenditure, considering it as giving an advantage of enduring nature.
The CIT(A) allowed the expenditure as revenue expenditure, noting that the construction/up-gradation of the road facilitated the business operations of the assessee efficiently and profitably. The CIT(A) found that no asset was acquired by the assessee, and the expenditure did not expand the profit-making apparatus of the assessee.
The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's judgment in L.H. Sugar Factory & Oils Mills (P) Ltd. Vs. CIT, which held that expenditure on road construction around a factory for facilitating business operations is revenue expenditure. The Tribunal concluded that the expenditure incurred by the assessee for the up-gradation/construction of the link road is allowable as revenue expenditure under Section 37(1) of the Act, as it was incurred wholly and exclusively for the purpose of the business.
Conclusion:
- The delay in filing the appeal by the revenue was condoned.
- Depreciation on the Geographical Report was allowed as an intangible asset under Section 32(1)(ii).
- Additional depreciation on the Geographical Report was disallowed as it is an office document and not a plant.
- Expenditure incurred for the up-gradation/construction of the link road was allowed as revenue expenditure under Section 37(1).
The appeal of the revenue and the cross-objection of the assessee were both dismissed.
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2010 (1) TMI 1273
Issues involved: Confirmation of levy of penalty u/s 271B of the I.T. Act based on acceptance of interest-free loans from family members exceeding specified limits.
Summary:
The appeal was filed against the CIT(A)'s order confirming the penalty u/s 271B of the I.T. Act due to the acceptance of interest-free loans exceeding limits from family members during scrutiny assessment proceedings. The assessee argued that the loans were not conventional "loans" or "deposits" but adjustments between family members. However, the A.O. imposed a penalty of Rs. 3,00,000, which was upheld by the CIT(A).
During the appeal, the assessee cited judgments supporting the view that penalties under sections 271D and 271E should not apply to family transactions due to "reasonable cause" and commercial expediencies. The Departmental Representative (D.R.) relied on the CIT(A)'s order.
After considering the submissions and relevant judgments, it was found that the loans were taken without interest to clear obligations to external parties. Citing the Punjab & Haryana High Court's ruling in CIT Vs. Sunil Kumar Goel, it was established that family transactions with no tax implications constitute "reasonable cause" under section 273B, exempting them from penalties under sections 271D and 271E.
Additionally, the Tribunal's decisions in other cases emphasized that penalties should not be imposed for technical defaults in family transactions aimed at business exigencies. The intention behind sections 269SS and 269T was to combat black money transactions, not minor breaches. As the Revenue failed to disprove the assessees' claims, the penalty under section 271D was deemed improper, leading to the reversal of the CIT(A)'s order and the deletion of the penalty.
In conclusion, the appeal of the assessee was allowed, and the penalty was revoked based on the principles outlined in the judgments referenced during the proceedings.
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2010 (1) TMI 1272
Issues involved:
The issues involved in the judgment are:
1. Whether delay in filing the appeal can be condoned due to valid reasons.
2. Whether a separate Section 5 application was necessary for condonation of delay.
3. Whether the Tribunal should take a liberal approach in considering delays in appeals.
Issue 1:
The assessee filed an appeal 40 days beyond the time limit, citing delay due to service of Assessment order on the ex-Accountant who failed to inform the Proprietor. The Tribunal dismissed the appeal on grounds of delay. However, a liberal view was suggested, allowing the appeal to be heard on merits if the assessee files an application under Section 5 of the Limitation Act within 10 days from the date of issuance of a certified copy of the order. The Tribunal's order was to be kept in abeyance until then.
Issue 2:
The Tribunal's decision not to condone the delay was based on the appeal not being accompanied by a Section 5 application. The assessee argued that the reasons for delay were mentioned in the appeal memo, and a separate Section 5 application was not necessary, citing a previous decision. The Tribunal's stance on this matter was questioned, highlighting the necessity of a separate application for condonation of delay.
Issue 3:
The Tribunal's dismissal of the appeal without considering a liberal approach towards delay was also challenged. It was contended that the Tribunal should have taken a more lenient view in such matters, allowing for a fair consideration of the reasons behind the delay. The judgment emphasized the need for a liberal approach by the Tribunal in dealing with delays in appeals.
In conclusion, the revision filed by the assessee under Section 11 of the U.P. Trade Tax Act for the assessment year 1996-97 against the Tribunal's order was disposed of with the directive for the assessee to file an application under Section 5 of the Limitation Act within a specified timeframe to enable the appeal to be heard on merits.
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2010 (1) TMI 1271
Issues involved: Two appeals by the department and the assessee against the order of the CIT(A) relating to assessment year 2002-03.
Product Development Expenses:
The department appealed against the holding that product development expenses of Rs. 36,97,528 were revenue in nature and allowable u/s 37(1). The AO disallowed the expenses as capital in nature, citing a previous Tribunal decision. The CIT(A) differentiated the case, stating the expenses were for upgrading existing products, not for a new line of business. The Tribunal upheld the CIT(A)'s decision, noting the expenses were revenue in nature as they were incurred in the existing line of business.
Depreciation Recomputation:
The assessee appealed for recomputation of depreciation based on the WDV as on 1.4.1997 by reducing the depreciation allowed for AY 1999-00. The assessee had not claimed depreciation from FY 1996-97 onwards due to a Supreme Court decision. The CIT(A) directed the AO to recompute depreciation for the year under consideration based on the actual disallowed depreciation for AY 1999-00. The Tribunal confirmed this decision, finding it reasonable.
Reopening of Assessment u/s 147:
The issue was against the reopening of assessment u/s 147. The AO reopened the assessment based on depreciation allowed for AY 1999-00. The Tribunal's decision on AY 1999-00 impacted the depreciation for subsequent years, making the issue of reopening assessment academic. Consequently, the appeal of both the department and the assessee was dismissed.
The judgment addressed the disputes regarding the nature of product development expenses, recomputation of depreciation, and the reopening of assessment u/s 147, providing detailed reasoning for each issue and ultimately dismissing the appeals of both parties.
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2010 (1) TMI 1270
The High Court Bombay dismissed the petition after the Commissioner of Customs furnished an undertaking on 25th January, 2010. No further orders were deemed necessary, and the petition was dismissed with no costs.
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2010 (1) TMI 1269
Issues involved:
The petitioners seek a Writ of Prohibition or a Writ in the nature of Prohibition and/or direction under Article 226 of the Constitution of India to prohibit the respondents from proceeding with adjudication u/s Foreign Exchange Regulation Act, 1947, Foreign Exchange Regulation Act, 1973, and Foreign Exchange Management Act, 1999 for alleged acts and omissions in the years 1958, 1966, and 1970.
Factual Background:
The petitioners faced adjudication proceedings under various foreign exchange regulations for alleged acts in the years 1958, 1966, and 1970. Show-cause notices were issued in 1973-74, but no action was taken for over 27 years until the proceedings were revived after the repeal of FERA in 2001.
Contentions:
The petitioners argued that the long delay of 28 years deprived them of the ability to defend themselves effectively. They claimed that the reopening of proceedings after such a long period violated their right to equality before the law and cited concerns about the right to a speedy trial as per legal precedents.
Consideration:
The court noted that the proceedings sought to adjudicate upon matters from 1958, 1966, and 1970 based on show-cause notices issued in 1973-74. Despite the long delay and lack of action by the respondents, the court considered whether the proceedings had become stale and arbitrary. Legal precedents were cited where delays in adjudication led to quashing of proceedings due to lack of justification for the delay.
Judgment:
The court found that the delay of over 27 years without any fault of the petitioners rendered the reopening of proceedings unjust and arbitrary. It was observed that the Department cannot be allowed to reopen old matters after such a long period, as it would cause serious prejudice to the petitioners. The court allowed the petition, emphasizing that the Department cannot commence adjudication proceedings decades after the original show-cause notice. The rule was made absolute in favor of the petitioners with no order as to costs.
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2010 (1) TMI 1268
Issues involved: Appeals by the department against CIT(A) order for assessment years 2004-05 & 2005-06. Grounds related to deduction u/s 80IB for adhesive unit at Bhimpore, Daman and Epoxy M-Seal unit at Kadaiya, Daman, and treatment of expenses on ad-film as revenue expenditure.
Deduction u/s 80IB: The Tribunal confirmed CIT(A) order allowing deduction u/s 80IB for both units based on earlier Tribunal decisions in favor of the assessee for AY 1998-99 to 2002-03. The Tribunal found facts identical and dismissed the department's appeal for AY 2003-04. No other grounds in appeal for AY 2004-05.
Treatment of Ad-film Expenses: AO treated ad-film production expenses as capital expenditure u/s 35D(2)(d), disallowing Rs. 73,90,067. Assessee argued the short lifespan of ad-films and no enduring benefit, supported by detailed explanations and case laws. CIT(A) found the expenses to be revenue in nature after considering evidence like telecast dates and TV channels, and personally viewing the ad-film. The Tribunal upheld CIT(A) decision, noting the absence of enduring benefit in telecasting the ad-film after June 2005.
Conclusion: The Tribunal found no infirmity in CIT(A) findings regarding the ad-film expenses, as telecasting did not provide enduring benefit. Previous Tribunal decisions favored the assessee, and CIT(A) findings remained uncontroverted. Therefore, the department's appeals were dismissed.
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2010 (1) TMI 1267
Issues involved: Appeal against CIT(A)'s order for A.Y 2005-06 regarding expenses for acquiring audio rights and disallowance of advertisement expenses.
Expenses for acquiring audio rights:
The revenue appealed against CIT(A)'s decision to treat expenses of Rs. 3,76,92,710 for acquiring audio rights as revenue expenditure, not capital expenditure. The Tribunal referred to a previous decision in the assessee's own case for A.Y 2004-05 where it was held that such expenditure is revenue in nature. The Tribunal dismissed the revenue's appeal on this ground, citing consistency with previous decisions.
Disallowance of advertisement expenses:
The revenue also challenged the deletion of an addition made on account of disallowance of 1/3rd of the expenses claimed by the assessee under 'advertisement expenses'. The Tribunal again referred to a previous decision in the assessee's favor for similar issues. It upheld the CIT(A)'s decision and dismissed the revenue's appeal on this ground as well.
In conclusion, the Tribunal dismissed the revenue's appeal, stating that the issues raised were already covered by previous decisions in the assessee's favor. The order was pronounced on January 29, 2010.
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2010 (1) TMI 1266
Issues involved: Challenge to order regarding duty liability on manufacturer vs hired labor, jurisdiction of High Court under Section 35G of Central Excise Act.
Regarding duty liability: The case involved M/s Food & Health Care Specialties supplying raw material to M/s Heinz India Pvt. Ltd. for blending and packing of products, with job charges paid to respondent No.1. The Revenue contended duty is leviable on products sold by M/s Heinz India Pvt. Ltd. to respondent No.1. The Appellate Tribunal held that as respondent No.1 was doing job work, duty liability rests on M/s Heinz India Pvt. Ltd. The Revenue challenged this order.
Jurisdiction under Section 35G: Counsel for respondent No.1 argued that appeals against valuation orders should go to the Supreme Court under Section 35L, citing Commissioner of C.Ex., Chandigarh Vs. C ESTAC , New Delhi. The High Court concurred, stating that the appeal challenging the Tribunal's order on goods valuation does not lie before the High Court under Section 35G, advising the appellant to seek remedy under the Central Excise Act, 1944.
Conclusion: The High Court dismissed the Revenue's appeal as not maintainable under Section 35G, emphasizing the specific exclusion of High Court jurisdiction in valuation matters as per the Central Excise Act.
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2010 (1) TMI 1265
The Bombay High Court dismissed both appeals and cross objections, as the Tribunal's findings were reasonable and no substantial question of law was found.
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2010 (1) TMI 1264
The Supreme Court dismissed the appeal in the case with citation 2010 (1) TMI 1264 - SC. Judges were Mr. S.H. Kapadia and Mr. Aftab Alam.
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2010 (1) TMI 1263
Deduction u/s 80IA - Whether twisting and texturising of partially oriented yarn ('POY') amounts to 'manufacture' in terms of Section 80IA? - HELD THAT:- As examined the process in the light of the opinion given by the expert, which has not been controverted, we find that POY is a semi-finished yarn not capable of being put in warp or weft, it can only be used for making a texturized yarn, which, in turn, can be used in the manufacture of fabric. In other words, POY cannot be used directly to manufacture fabric. According to the expert, crimps, bulkiness etc. are introduced by a process, called as thermo mechanical process, into POY which converts POY into a texturized yarn. If one examines this thermo mechanical process in detail, it becomes clear that texturising and twisting of yarn constitutes 'manufacture' in the context of conversion of POY into texturized yarn. See M/s. Oracle Software India Ltd. [2010 (1) TMI 9 - SUPREME COURT] as held term “manufacture” implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. If an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process fall6 s within the meaning of the word “manufacture
Applying the above test to the facts of this case, it is clear that POY simplicitor is not fit for being used in the manufacture of a fabric. It becomes usable only after it undergoes the operation/process which is called as thermo mechanical process which converts POY into texturised yarn, which, in turn, is used for the manufacture of fabric.
Our judgment in the present case is to be confined to the facts of the present case. We are not saying that texturising or twisting per se in every matter amounts to manufacture. It is the thermo mechanical process embedded in twisting and texturising when applied to a partially oriented yarn which makes the process a manufacture. In the circumstances, the judgment in the Swastik Rayon Processors's case[2006 (11) TMI 31 - SUPREME COURT] will not apply. Decided in favour of assessee.
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2010 (1) TMI 1262
Issues involved: Assessment of gross profit ratio, valuation of closing stock using LIFO method, estimation of making charges for gold ornaments, addition on alleged purchases from partners.
Assessment of gross profit ratio:
The appeals challenged the CIT(A)'s order regarding the estimation of gross profit ratio at 20% for the assessment years 2002-03 to 2004-05. The appellant contended that the rejection of the LIFO method for valuing closing stock was the sole reason for the revenue authorities' actions. The appellant argued that the LIFO method is a recognized and valid accounting method, supported by past consistency and legal precedents. The Departmental Representative claimed that necessary details regarding stock valuation were not provided by the appellant. However, the Tribunal found the LIFO method consistently followed by the appellant to be valid and recognized. It noted that the method was based on accepted accounting principles and no other accounting defects were identified. Consequently, the trading additions made by estimating gross profit at a flat rate were deemed unjustified and deleted.
Valuation of closing stock using LIFO method:
The Tribunal acknowledged the appellant's consistent use of the LIFO method for valuing closing stock, emphasizing its acceptance in past years and adherence to accounting principles. Despite the Departmental Representative's arguments, the Tribunal found no justification for rejecting the appellant's accounting methods and upheld the validity of the LIFO method. The Tribunal concluded that the trading additions based on estimating gross profit at a flat rate were unwarranted and therefore deleted.
Estimation of making charges for gold ornaments:
Regarding the addition on account of making charges for gold ornaments, the appellant argued against the uniform application of a fixed rate, emphasizing variations among goldsmiths. The Departmental Representative supported the Assessing Officer and CIT(A)'s decisions, highlighting the reasonable relief granted to the appellant. The Tribunal observed discrepancies in the goldsmiths' statements but noted the lack of a request for cross-examination by the appellant. Ultimately, the Tribunal upheld the CIT(A)'s decision to restrict the addition to a specific amount, considering the circumstances and evidence presented.
Alleged purchases from partners:
The appellant's ground of appeal concerning alleged purchases from partners for the assessment year 2004-05 was not pressed by the appellant's counsel. As a result, the Tribunal rejected this ground of appeal.
In conclusion, the Tribunal allowed the appeals for the assessment years 2002-03 and 2003-04, while partially allowing the appeal for the assessment year 2004-05. The Tribunal's decision highlighted the importance of consistent accounting methods, recognized principles, and the need for justifications in estimating additions or charges in tax assessments.
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2010 (1) TMI 1261
Interpretation of Statute - section 31(7) of Arbitration and Conciliation Act 1996 - power of the arbitral tribunal to award interest - award of interest on interest from the date of award - future interest from the date of award.
Whether section 31(7) of the Act authorizes and enables arbitral tribunals to award interest on interest from the date of award? - HELD THAT:- Interest may be payable in pursuance of a contract, or a provision in a statute, or the fiat of a court of tribunal. It is usually quantified in terms of a percentage of the ‘principal’ or the ‘investment’ or the ‘amount of liability’. Interest unless otherwise specified, refers to simple interest, that is interest paid on only the principal and not on any accrued interest - Compound interest can be awarded only if there is a specific contract, or authority under a Statute, for compounding of interest. There is no general discretion in courts or tribunals to award compound interest or interest upon interest - This Court in Renusagar Power Co. Ltd v. General Electric Co.[1993 (10) TMI 232 - SUPREME COURT] held that award of interest on interest was not opposed to the public policy of India, but could be awarded only if authorized by contract or statute.
The principles relating to award of interest, in general, are not different for courts and arbitral tribunals, except to the extent indicated in section 31(7) of the Act and CPC. A comparatively high rate of post-award interest is provided in section 31(7)(b) of the Act, not because 18% is the normal rate of interest to be awarded in arbitrations, but purely as a deterrent to award-debtors from avoiding payment or using delaying tactics. In fact a provision similar to section 31(7)(b) of the Act, if provided in section 34 of Code of Civil Procedure, will considerably reduce the travails of plaintiffs in executing their decrees in civil cases.
The Act does away with the distinction and differentiation among the four interest bearing periods, that is, pre-reference period, pendente lite period, post-award period and post-decree period. Though a dividing line has been maintained between pre-award and post-award periods, the interest bearing period can now be a single continuous period the outer limits being the date on which the cause of action arose and the date of payment, subject however to the discretion of the arbitral tribunal to restrict the interest to such period as it deems fit.
Clause (b) of Section 31(7) is intended to ensure prompt payment by the award-debtor once the award is made. The said clause provides that the “sum directed to be paid by an arbitral award” shall carry interest at the rate of 18% per annum from the date of award to the date of payment if the award does not provide otherwise in regard to the interest from the date of the award. This makes it clear that if the award grants interest at a specified rate up to the date of payment, or specifies the rate of interest payable from the date of award till date of payment, or if the award specifically refused interest, clause (b) of Section 31 will not come into play. But if the award is silent in regard to the interest from the date of award, or does not specify the rate of interest from the date of award, then the party in whose favour an award for money has been made, will be entitled to interest at 18% per annum from the date of award. He may claim the said amount in execution even though there is no reference to any post award interest in the award. Even if the pre-award interest is at much lower rate, if the award is silent in regard to post- award interest, the claimant will be entitled to post- award interest at the higher rate of 18% per annum. The higher rate of interest is provided in clause (b) with the deliberate intent of discouraging award-debtors from adopting dilatory tactics and to persuade them to comply with the award.
Whether the Arbitral Award granted future interest from the date of award, only on the principal amount found due to the respondent (that is ₹ 14,94,000/-) or on the aggregate of the principal and interest upto the date of award (Rs.31,98,879/-) - HELD THAT:- The Arbitrator allowed interest at the rate 12% per annum on the total amount of the award, that is ₹ 14,94,000/-, with effect from 19.12.1990 up to the date of the Award. He further directed that in case the “total amount of the award together with this interest” is not paid within 30 days from the date of making the award, future interest shall be paid at the rate 18% per annum on the entire Award from the date of Award upto the actual date of payment - Therefore, what was awarded by the Arbitrator was future interest at the rate of 18% per annum on the amounts awarded on various claims (that is Claim No.1 to 7) in all aggregating to ₹ 14,94,000/- and not upon the interest awarded thereon upto to date of the award. It should be noted that the difference in the interest awarded for the pre-award period and post-award period, is only with reference to the rate of interest and not the quantum of principal (that bears interest).
We allow this appeal, set aside the judgment of the Executing Court dated 5.9.2007 and the order of the High Court 9.9.2008 and hold that the respondent was entitled only to simple interest on the principal amount as per original calculation shown in the Execution Petition.
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2010 (1) TMI 1260
Whether the share subscription and shareholders agreement executed by and between Subhkam Holding Private Ltd. (now taken over by the appellant), MSK Projects (India) Ltd. (target company) and its promoters in Schedule I to the agreement gives to the appellant ‘control’ over the target company - The case of the appellant is that by virtue of the agreement it did not acquire control over the target company and, therefore, Regulation 12 of the takeover code did not get triggered and that it rightly made the open offer only under Regulation 10. The Board, on the other hand, refers to the various clauses of the agreement and insists that the appellant acquired control over the target company and that it should mention Regulation 12 also in the letter of offer so that proper disclosures are made to the shareholders to enable them to take an informed decision. ‘Control’ carries with it certain responsibilities and obligations which the appellant does not want to be burdened with
Provisions of clause 9 do impose fetters on the target company for purposes of good governance and it is conventional for financial investors to protect their investment and, indeed, the target company itself from the whims and fancies of the promoters who manage the target company. Such fetters fall far short of the existence of “control” over the target company. It must be remembered that every fetter of any nature in the hands of any person over a listed company cannot result in “control” of that person over that company. We also cannot lose sight of the fact that in the instant case even if the entire open offer is accepted and 20 per cent shares are tendered, the appellant would be far short of a simple majority that is necessary for getting an ordinary resolution passed. In these circumstances, we cannot hold that the appellant has gained control over the target company.
HELD THAT:- Having gone through the agreement carefully with the help of the learned counsel for the parties, we are clearly of the view that none of the clauses therein taken individually or collectively demonstrates control in the hands of the appellant. In this view of the matter, Regulation 12 does not get triggered and the Board was not justified in making the appellant incorporate this regulation in the letter of offer. The question posed in the opening part of our order is , thus, answered in the negative.
In the result, the appeal is allowed and the impugned direction contained in the letter dated December 15, 2008 set aside with no order as to costs.
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2010 (1) TMI 1259
Issues Involved:
1. Challenge to summons issued by Tamil Nadu Information Commission.
2. Entitlement to information under the RTI Act.
3. Privileged communication under Section 126 of the Indian Evidence Act.
4. Public Prosecutor's duty to disclose information.
5. Overriding effect of RTI Act over other laws.
Summary:
1. Challenge to Summons Issued by Tamil Nadu Information Commission:
The writ petition was filed by the Superintendent of the office of the Public Prosecutor, High Court, Madras, challenging the summons issued by the Tamil Nadu Information Commission. The summons was based on a complaint by the second respondent seeking information under the RTI Act.
2. Entitlement to Information under the RTI Act:
The second respondent initially applied to the Additional Public Prosecutor for records related to an FIR and a judgment. The petitioner's office informed the second respondent that he was not entitled to such information, particularly the opinion tendered by the Public Prosecutor, as it was privileged. The second respondent then approached the Tamil Nadu Information Commission, which directed the petitioner's office to furnish the information.
3. Privileged Communication under Section 126 of the Indian Evidence Act:
The petitioner contended that the information sought was privileged communication protected by Section 126 of the Indian Evidence Act, which prohibits disclosure of any communication made to a lawyer by their client without the client's express consent. The court emphasized that the relationship between the Public Prosecutor and the Government is akin to a lawyer-client relationship, making the information privileged.
4. Public Prosecutor's Duty to Disclose Information:
The court referred to the Supreme Court's judgment in Shrilekha Vidyarthi v. State of U.P., which held that the Public Prosecutor holds a public office and is subject to statutory duties. However, the court also noted that the Public Prosecutor is bound by professional conduct rules, which prohibit breaching the obligation imposed by Section 126 of the Indian Evidence Act.
5. Overriding Effect of RTI Act over Other Laws:
The court examined whether the RTI Act overrides the privilege conferred by Section 126 of the Indian Evidence Act. It concluded that Section 22 of the RTI Act does not override Section 126 of the Indian Evidence Act. The court also referred to the Freedom of Information Act, 2000 (UK), which exempts information covered by legal professional privilege from disclosure.
Conclusion:
The court held that the information sought by the second respondent was privileged and could not be disclosed without the express consent of the State of Tamil Nadu. The impugned summons issued by the Tamil Nadu Information Commission was set aside, and the writ petition was allowed. The court emphasized that the Commission must consider whether disclosure of information is barred under any law before issuing such notices.
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2010 (1) TMI 1258
The Supreme Court dismissed the appeal in the case. The judges were Mr. D.K Jain and Mr. H.L. Dattu.
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2010 (1) TMI 1257
Issues Involved:
1. Application u/s 10 of CPC for stay of ejectment proceedings.
2. Consolidation of suits for ejectment and specific performance.
3. Legal rights arising from an agreement to sell.
4. Jurisdiction to stay eviction pending a suit for specific performance.
5. Relationship of landlord and tenant.
Summary:
1. Application u/s 10 of CPC for stay of ejectment proceedings:
The petitioner/defendant filed an application u/s 10 of CPC to stay the ejectment proceedings initiated by the respondents/plaintiffs, arguing that a prior suit for specific performance of an agreement to sell the same property was pending. The Additional District Judge dismissed the application, stating that the matters in the two suits were different and that the court handling the specific performance suit had not stayed the ejectment proceedings.
2. Consolidation of suits for ejectment and specific performance:
The petitioner/defendant sought consolidation of the suits by transferring the ejectment suit to the court handling the specific performance suit. The court found this request to be inequitable, as it would delay the ejectment suit, which could be resolved more quickly in its current court.
3. Legal rights arising from an agreement to sell:
The court held that a mere agreement to sell does not create any right to occupy the property. Even if the petitioner/defendant succeeds in the specific performance suit, he would not have the right to remain in possession until a conveyance deed is executed. The court cited Jiwan Das Vs. Narain Das, stating that no rights enure to the agreement purchaser until the conveyance is executed.
4. Jurisdiction to stay eviction pending a suit for specific performance:
The court emphasized that the jurisdiction to stay eviction proceedings lies with the court handling the specific performance suit, not the court handling the ejectment suit. The court referenced judgments from various High Courts, including Lachaman Nepak Vs. Badankayalu Syama Babu Subudhi and Jai Singh Rana Vs. Mohinder Mohan Goel, which supported this principle.
5. Relationship of landlord and tenant:
The petitioner/defendant argued that the landlord-tenant relationship ended on 8th July 2004 due to an oral agreement. The court rejected this argument, stating that the alleged agreement was not registered as required by law. Therefore, the tenancy was validly terminated by the notice dated 22nd July 2004.
Conclusion:
The petition was dismissed, and the stay on the ejectment proceedings was vacated. The court directed the Additional District Judge to dispose of the ejectment suit expeditiously. The observations made in this judgment were not to prejudice the specific performance suit.
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