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Showing 41 to 60 of 254 Records
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1988 (4) TMI 401
Issues Involved:
1. Illegal retention of seized exercise books beyond the prescribed period without the Commissioner's approval.
2. Failure to determine the date of liability for payment of sales tax under Section 6(2) of the Haryana General Sales Tax Act, 1973.
Issue-wise Detailed Analysis:
1. Illegal Retention of Seized Exercise Books:
The petitioner, a karyana merchant, claimed that the Assessing Authority, Faridabad, seized 12 exercise books from his business premises on 20th December, 1978, under Section 36 of the Haryana General Sales Tax Act, 1973. According to the Act, these books should have been returned within 60 days. Despite repeated requests, the books were not returned, and instead, a notice was issued on 21st May, 1979, proposing a gross turnover based on the seized books. The petitioner contended that without the return of the books, he could not understand the basis of the calculations. The Assessing Authority justified the non-return by stating that the petitioner needed to attest the entries and make a statement. The approval for retention of the books was obtained only on 27th June, 1979, after the best judgment assessment order was passed on 15th June, 1979. The court found that the retention of the books beyond 60 days without the Commissioner's approval rendered the assessment order illegal. The refusal to return the books and the insistence on attestation were deemed unjustified, denying the petitioner the opportunity to provide a proper explanation.
2. Failure to Determine Date of Liability for Payment of Sales Tax:
The petitioner argued that the Assessing Authority failed to determine the date on which his gross turnover first exceeded the taxable quantum, as required under Section 6(2) of the Act. This determination is crucial because the liability to pay tax arises 30 days after this date. The court found that the Assessing Authority did not comply with this mandatory provision, and the Tribunal erred in rejecting this contention on the basis that it was not raised at earlier stages. The court emphasized that the Tribunal should have entertained the law point, as it goes to the root of the jurisdiction of the Assessing Authority. The Tribunal's refusal to consider this point was deemed illegal.
Conclusion:
The court allowed the writ petition, quashing the impugned orders (annexures P/6, P/7, and P/9) due to the illegal retention of the exercise books and the failure to determine the date of liability for sales tax. The court clarified that the Assessing Authority could take proceedings in accordance with the Act. Costs were assessed at Rs. 500. The writ petition was allowed.
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1988 (4) TMI 400
Issues:
1. Justification for demanding security deposit from a partnership firm under the Andhra Pradesh General Sales Tax Act.
2. Validity of the notice issued under section 12(e) of the Act.
3. Relationship between two partnership firms and their managing partners.
4. Legal implications of forming multiple partnership firms to evade tax liabilities.
5. Procedural fairness in imposing security deposit requirements.
6. Misuse of writ jurisdiction by fraudulent petitioners.
Analysis:
1. The judgment addresses the justification for demanding a security deposit from a partnership firm under the Andhra Pradesh General Sales Tax Act. The firm in question, Ganesh Cocoanut Company, received a notice to deposit a sum of Rs. 1,00,000 within a week due to the default in payment of sales tax by another firm, Uma Sankar Cocoanut Company, of which the managing partner of Ganesh Cocoanut Company was also a part. The court found that the authorities were justified in demanding security to ensure proper and timely tax payment, as the two firms were interconnected, and there were concerns of tax evasion.
2. The validity of the notice issued under section 12(e) of the Act was challenged by the partnership firm through a writ petition. The court observed that the firm had submitted an explanation in response to the notice, which was considered by the authorities before imposing the security deposit requirement. The court rejected the argument that the firm was not given an opportunity to show cause, stating that both parties understood the notice as a show cause notice, and the firm had the chance to provide its explanation.
3. The judgment delves into the relationship between the two partnership firms and their managing partners. It was noted that the managing partner of Ganesh Cocoanut Company was also associated with Uma Sankar Cocoanut Company, which had defaulted in tax payments. The court highlighted the interconnected nature of the firms and the managing partner's role in both entities, indicating a deliberate attempt to evade tax liabilities through the formation of multiple firms.
4. Legal implications of forming multiple partnership firms to evade tax liabilities were discussed in detail. The court emphasized that the managing partner's actions in creating different partnerships to avoid tax obligations were not in good faith. The court found that the partnership firm was essentially an alter ego of the managing partner, created to circumvent tax responsibilities, leading to the justified demand for security deposit to safeguard legitimate tax revenue.
5. The judgment also addressed the procedural fairness in imposing security deposit requirements on the partnership firm. The court dismissed the argument that the firm was not given a fair opportunity to present its case, stating that the firm had responded to the notice without requesting further opportunity. The court upheld the department's decision to impose the security deposit based on the explanation provided by the firm.
6. Lastly, the judgment criticized the misuse of writ jurisdiction by fraudulent petitioners. The court expressed regret over the fraudulent petitioner's misuse of interim orders to continue business without fulfilling the security deposit requirement. The court emphasized the importance of upholding public confidence in the writ jurisdiction and dismissed the writ petition with costs, highlighting the misuse of legal processes by unscrupulous individuals.
In conclusion, the judgment upholds the authorities' decision to demand a security deposit from the partnership firm, emphasizing the interconnected nature of the firms and the managing partner's role in evading tax liabilities. It underscores the importance of procedural fairness and condemns the misuse of legal mechanisms by fraudulent individuals.
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1988 (4) TMI 399
The High Court of Allahabad dismissed a revision filed against an order of the Sales Tax Tribunal directing the appeal to be listed before a single Member Bench. The Court found that the order was not final and did not fall under the provisions allowing for revision. The revision was dismissed as not maintainable.
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1988 (4) TMI 398
Issues Involved:
1. Applicability of Notification No. ST-II-7994/X-6(31)/1975-U.P. Act XV/48, Order-80, dated 30th September 1980.
2. Interpretation of Notification Nos. ST-II-8446/X-1(2)-75, ST-II-8449/X-1(2)-75, and ST-II-8453/X-1(2)-75, all dated 1st October 1975.
3. Classification of 'gulli' and 'silli' as 'utensils' or 'parts thereof' under the aforementioned notifications.
4. Relevance of circulars and prior judicial decisions in interpreting the notifications.
Detailed Analysis:
1. Applicability of Notification No. ST-II-7994/X-6(31)/1975-U.P. Act XV/48, Order-80, dated 30th September 1980:
The learned Standing Counsel argued that this notification, which came into force on 1st October 1980, is not applicable to the assessment years in question, which are up to 1978-79. The court agreed that the Tribunal erred in referring to this notification while deciding the controversy for the relevant assessment years.
2. Interpretation of Notification Nos. ST-II-8446/X-1(2)-75, ST-II-8449/X-1(2)-75, and ST-II-8453/X-1(2)-75, all dated 1st October 1975:
The core issue was whether 'gulli' and 'silli' fall under the term 'utensils' or 'parts thereof' as used in these notifications. The notifications provided exemptions to 'karkhanedars' who manufacture and sell art brasswares, brass utensils, or parts thereof without polishing, buffing, engraving, or coloring. The court examined the definitions and conditions stipulated in these notifications to determine the eligibility for exemption.
3. Classification of 'gulli' and 'silli' as 'utensils' or 'parts thereof':
The learned Standing Counsel contended that 'gulli' and 'silli' are raw materials and do not qualify as 'utensils' or 'parts thereof.' However, the court referred to dictionary definitions and the manufacturing process to conclude that 'gulli' and 'silli' are indeed parts of utensils. The court emphasized that these items are integral to the manufacturing process of utensils and thus qualify for exemption under the notifications.
4. Relevance of circulars and prior judicial decisions:
The court considered various circulars and prior judicial decisions to interpret the notifications. The Standing Counsel cited the case of Commissioner, Sales Tax, U.P. v. Manohar Glass Works, arguing that 'glass tubes and glass rods' are not 'glasswares,' drawing a parallel to 'gulli' and 'silli.' However, the court found this case irrelevant as it dealt with a different context. The court also examined the case of Radha Ballabh Satish Chandra v. Commissioner of Sales Tax, U.P., where 'brass circles' were not exempted due to the lack of a specific notification. The court concluded that this case did not apply to the current context.
The court also considered a circular issued by the Commissioner of Sales Tax, which suggested that the process of making 'sillis' and 'gullis' could be included under the term 'utensils' or 'parts thereof.' The court found this circular persuasive, although it acknowledged that such circulars do not have statutory force.
Conclusion:
The court concluded that 'sillis' and 'gullis' manufactured by 'karkhanedars' are parts of utensils within the meaning of the notifications in question. The court emphasized the need for a liberal interpretation of welfare statutes aimed at benefiting specific industries, such as the brassware industry in Moradabad. Consequently, all revisions filed by the Commissioner of Sales Tax were dismissed, and the exemptions granted by the Sales Tax Tribunal were upheld.
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1988 (4) TMI 397
The High Court allowed the writ application to quash orders rejecting a refund application under section 14-A of the Orissa Sales Tax Act. The application was rejected based on previous court decisions, but later Supreme Court rulings declared section 14-A valid. The matter was remanded to the Commissioner for reconsideration of the refund application.
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1988 (4) TMI 396
Issues:
Determining whether watery coconuts are liable to purchase tax or sales tax under the Orissa Sales Tax Act, 1947.
Analysis:
The judgment involved five reference cases under section 24(1) of the Orissa Sales Tax Act, 1947, addressing the liability of watery coconuts to purchase tax or sales tax. The dealers argued that coconuts, being declared goods under section 3-B of the Act, should not be subjected to sales tax. The legislative history of declarations under section 3-B was examined, highlighting the notification that included coconut as an item under "oil-seeds" subject to purchase tax. The notification differentiated between copra excluding tender coconuts, implying that only specific types of coconuts were intended to be taxed.
The judgment referred to previous cases and High Court decisions regarding the classification of coconuts as oil-seeds. Various High Courts had differing opinions on whether coconuts and copra should be considered oil-seeds. The terminology used in the Central Sales Tax Act was compared to the Orissa notification to determine the scope of the term "oil-seed" and its application to coconuts. The dictionary meanings of "cocos nucifera" and "copra" were also considered in the context of the case.
The nature of coconuts dealt with by the dealers was described as fully grown coconuts with developed kernels, not falling under the category of tender or dried coconuts. The judgment cited observations from the Karnataka High Court and the Andhra Pradesh High Court regarding the characteristics and uses of coconuts at different stages. The Supreme Court's distinction between watery coconuts and dried coconuts was discussed, emphasizing the commercial differences between the two commodities.
Ultimately, the court concluded that the Orissa Act's notification under section 3-B excluded only tender coconuts containing mostly water and no kernel from the category of oil-seeds. Based on the object and purpose of the Act, the judgment favored the dealers, ruling that watery coconuts were not liable to purchase tax or sales tax. The reference was answered in favor of the dealers, and each party was left to bear their own costs.
In a concurring opinion, Justice G.B. Patnaik agreed with the decision to answer the reference in favor of the dealers, concluding the analysis of the case.
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1988 (4) TMI 395
The High Court of Andhra Pradesh ruled in favor of Chandamama Printing Press (Hyd.) Pvt. Ltd., stating that the labels and wrappers they produce do not fall under the category of packing or wrapping paper as per entry 143 of the Andhra Pradesh General Sales Tax Act. The court emphasized that if paper is printed and cut for specific use as a label or wrapper for particular goods, it does not qualify as packing or wrapping paper. The tax revision case was allowed with no costs.
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1988 (4) TMI 394
Whether charges locally called tulai is a part of "purchase price" liable to tax?
Held that:- Appeal allowed. The position that tulai shall be a part of delivery charges and in case it has been separately charged in respect of each of the sale transactions entered into between the customers and the assessee, the same would be entitled to exemption from tax. Otherwise it would come within the definitions of "purchase price" and "taxable turnover". This being the legal position, the matter has to be examined keeping this in view. We vacate the judgment of the High Court and remit the matter to it for a fresh disposal.
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1988 (4) TMI 386
the attachment will continue for a period of four months from today, during which period the Sales Tax Department should complete the fresh assessments. Liberty is granted, however, to the appellant to apply to the Sales Tax Department for release of the bank accounts from attachment.
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1988 (4) TMI 381
Constitutional validity of Notification Nos. STA. 1085/175/RES-8 dated 19th November, 1985 and STA. 1085/175/RES-8 dated 30th June, 1986 issued under the Bombay Sales Tax Act, 1959 challenged
Held that:- Writ petitions are allowed, the Notifications No. STA. 1085/175/RES-8 dated 19th November, 1985 and No. STA. 1085/175/RES-8 dated 30th June, 1986 are quashed in so far as they impose a rate of 4 per cent tax for television sets and antennae, television cameras, television monitors and components, parts and accessories of any of them
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1988 (4) TMI 380
Whether, for the purpose of ensuring the same rate of tax between the petitioners and the local manufacturers, the levy of the higher rate of tax suffered by the petitioners should be quashed and they be held entitled to the levy of the lower rate applied to the local manufacturers or should the higher rate imposed on the petitioners be maintained and the notifications imposing the lower rate on local manufacturers be quashed?
Held that:- Appeal allowed. Notifications No. (GHN-51) GST 1081/(S.49) (109)-TH dated 23rd July, 1981 and No. (GHN-22) GST 1086/(S. 49) (173)-TH dated 29th March, 1986 prescribing a lower rate of tax for local manufacturers in respect of television sets and other electronic goods are quashed
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1988 (4) TMI 379
Whether the materials used by the assessee for the contract works on behalf of the Public Works Department can be taxed under purchase tax under section 5A of the Kerala General Sales Tax Act, 1963?
Held that:- Appeal dismissed. In the instant case, the user must be in the other commodity and the expression "consumed otherwise" must be so construed.
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1988 (4) TMI 378
Wwhether the sales effected by the respondent, were inter-State sales or not?
Held that:- Appeal dismissed. The High Court was correct to found that the goods were moved out of U.P. in pursuance of an agreement for sale entered into between the assessees and their customers. The existence of T.P. form IV was taken note of but that did not conclude the matter. The condition precedent for imposing sales tax under the Central Sales Tax Act, is that the goods must move out of the State in pursuance of some contract entered into between the seller and the purchaser. If that is a correct principle in law, the Tribunal applied this correct principle of law to the facts of this case taking into cognizance the existence of T.P. form.
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1988 (4) TMI 352
Issues Involved:
1. Whether the refusal to extend permission under Section 29(1)(a) of the Foreign Exchange Regulation Act, 1973 (FERA) without a hearing violates the principles of natural justice.
2. Whether the principles of natural justice apply to an alien or foreign entity operating in India.
3. Whether the decision of the Reserve Bank of India (RBI) was arbitrary and lacked sufficient reasoning.
Issue-wise Detailed Analysis:
1. Violation of Principles of Natural Justice:
The petitioners contended that the refusal to extend permission without a hearing violated the principles of natural justice. They argued that they were entitled to a hearing before the RBI made a decision. The court examined Section 29 of FERA, which requires the RBI to provide a reasonable opportunity for making a representation before rejecting an application under Section 29(2)(a) and Section 29(4)(a). However, Section 29(1)(a) does not explicitly provide for such an opportunity. The respondents argued that the exclusion of a hearing under Section 29(1)(a) was implied. The court disagreed, stating that the principles of natural justice are vital to the rule of law and should not be readily discarded. The court cited several Supreme Court decisions emphasizing the importance of the audi alteram partem rule, which requires a hearing before a decision is made. The court concluded that the principles of natural justice were not excluded by necessary implication in Section 29(1)(a) and that the petitioners should have been given a hearing.
2. Application of Principles of Natural Justice to Aliens:
The respondents argued that the petitioners, being an alien entity, had no legal right to carry on business in India and therefore could not claim the protection of natural justice principles. The court rejected this argument, stating that the principles of natural justice apply universally and are not limited by national frontiers. The court emphasized that a State governed by the rule of law must ensure that its authority is not used arbitrarily, whether against a citizen or an alien. The court cited several cases, including Union of India v. Tulsiram Patel and Attorney General of Hong Kong v. Ng Yuen Shiu, to support the view that aliens are entitled to the protection of natural justice principles. The court also noted that the petitioners had a legitimate expectation of being heard before their permission was denied, based on the long history of routine extensions granted to them.
3. Arbitrariness and Lack of Reasoning in RBI's Decision:
The petitioners argued that the RBI's decision was arbitrary and lacked sufficient reasoning. They contended that the refusal to extend permission disrupted important contracts with various government agencies and public sector undertakings. The court noted that the RBI's affidavit-in-reply raised new allegations about the petitioners' financial practices, which were not previously communicated to the petitioners. The court found that these allegations should have been addressed through a hearing. The court also questioned the respondents' claim that Indian technical know-how was available, given that government agencies continued to contract with the petitioners. The court concluded that there was no compelling necessity to exclude the principles of natural justice in this case and that the petitioners should have been given an opportunity to make a representation.
Conclusion:
The court ruled in favor of the petitioners, holding that the refusal to extend permission without a hearing violated the principles of natural justice. The court directed the respondents to give the petitioners a proper hearing before deciding on their application for extension of permission. The petitioners were allowed to carry on their work under an existing contract until the final decision of the respondents and for two weeks thereafter. No order as to costs was made.
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1988 (4) TMI 344
Issues Involved:
1. Inability to pay debts
2. Validity of the statutory notice under Section 434(1)(a) of the Companies Act, 1956
3. Admission of liability by the company
4. Commercial insolvency of the company
Issue-wise Detailed Analysis:
1. Inability to Pay Debts:
The petitioning creditor, N.K. Gossain and Co. Pvt. Ltd., sought the winding up of Dytron (India) Ltd. due to its inability to pay debts. The creditor had completed a printing job for the company and raised bills amounting to Rs. 3,68,670.02 on March 28, 1986. Despite a part payment of Rs. 50,000 on September 20, 1986, the company failed to settle the remaining dues. The company acknowledged its debt and assured payment upon receiving funds from financial institutions, but no payment was made, leading to the issuance of a statutory notice under Section 434 of the Companies Act on October 17, 1987. The creditor filed the petition for winding up on December 18, 1987, after not receiving any reply.
2. Validity of the Statutory Notice under Section 434(1)(a) of the Companies Act, 1956:
Mr. Sarkar, representing the petitioning creditor, argued that the statutory notice did not need to specify a 21-day period for payment. The true import of Section 434(1)(a) is that a company is deemed unable to pay its debts if it neglects to pay within three weeks after service of the notice. The notice's validity remains unaffected even if a shorter period is mentioned. Mr. Sarkar cited the case of Babu Ram v. Krishna Bharadwaj Cold Stores and General Mills Co. P. Ltd. to support his argument, emphasizing that the demand remains valid irrespective of the period mentioned in the notice.
Conversely, Mr. Mitra, representing the company, contended that the notice was invalid as it mentioned a period shorter than 21 days. He relied on the case of Parry and Co. Ltd. v. India Machinery Stores (P.) Ltd., which held that a notice allowing less than the statutory period is not valid. However, the court found that the notice was served correctly and the company had 55 days to pay the dues, thus validating the notice.
3. Admission of Liability by the Company:
The company admitted its liability in letters dated December 11, 1986, and January 28, 1987, acknowledging the debt and explaining delays in receiving funds from financial institutions. Mr. Sarkar argued that these admissions were unqualified and unconditional, proving the company's inability to pay its debts. Mr. Mitra countered that these admissions did not prove insolvency and that negligence to pay was not equivalent to an inability to pay. The court, however, found that the company's admissions and failure to dispute the claim supported the creditor's case.
4. Commercial Insolvency of the Company:
Mr. Mitra argued that the petitioning creditor had not proven the company's commercial insolvency, which is necessary for a winding-up order under Section 434(1)(c). He contended that the company must be shown to be unable to pay its debts, considering its contingent and prospective liabilities. Mr. Sarkar cited cases like Bengal Luxmi Cotton Mills Ltd. v. Mahaluxmi Cotton Mills Ltd., which held that insolvency could be presumed from failure to pay a debt following a statutory notice. The court agreed with Mr. Sarkar's submissions, holding that the company's failure to pay within the statutory period indicated insolvency.
Judgment:
The court held that the statutory notice under Section 434(1)(a) of the Companies Act was valid, as the mention of a lesser period did not invalidate it. The company had more than 21 days to pay the dues, and its failure to do so supported the creditor's petition for winding up. The court ordered the company to pay the principal sum of Rs. 2,08,670.00 in monthly installments of Rs. 25,000, along with interest at 12% per annum on the reducing balance and costs of the application. If the company failed to make any two consecutive installments or the last installment, the creditor could execute the order as a decree of the court. The winding-up petition would remain permanently stayed if payments were made as ordered.
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1988 (4) TMI 343
Issues Involved:
1. Transfer of shares and compliance with Articles of Association.
2. Discretion of the Board of Directors in rejecting share transfer applications.
3. Compliance with Section 108 of the Companies Act, 1956.
4. Jurisdiction of the court to interfere with the discretion of the Board of Directors.
Issue-wise Detailed Analysis:
1. Transfer of Shares and Compliance with Articles of Association:
The controversy arose from the appellant's purchase of 705 shares from the second respondent and the subsequent rejection of the transfer request by the first respondent company. The company's Articles of Association, particularly clauses 33 to 41, govern the transfer of shares. The appellant contended that the transfer should have been registered as the company did not find a member to purchase the shares within the stipulated period. However, the company argued that the appellant did not comply with the mandatory requirements, including sending the share certificates and remitting Rs. 2 for registration.
2. Discretion of the Board of Directors in Rejecting Share Transfer Applications:
Clause 40 of the Articles of Association grants the Board of Directors absolute discretion to reject any application for transfer without stating reasons. The court held that unless it is proved that the directors acted oppressively, capriciously, arbitrarily, or in bad faith, the court cannot interfere with the discretion exercised by the company. The appellant failed to provide positive evidence that the Board acted in such a manner. The court referenced previous decisions, including Teekoy Rubbers' case and South Indian Bank Ltd. v. Joseph Michael, to support this view.
3. Compliance with Section 108 of the Companies Act, 1956:
Section 108 mandates that a proper instrument of transfer, duly stamped and executed, must be delivered to the company along with the share certificate. The appellant did not comply with these procedural requirements, which justified the company's rejection of the transfer application. The court cited the Supreme Court's decision in Mannalal Khetan v. Kedar Nath Khetan, affirming that the provisions of Section 108 are mandatory.
4. Jurisdiction of the Court to Interfere with the Discretion of the Board of Directors:
The court's jurisdiction under Section 155(2) or (4) of the Companies Act to interfere with the Board's discretion is limited. The court can only intervene if it is proved that the Board acted corruptly, oppressively, capriciously, arbitrarily, or in bad faith. The appellant did not meet this burden of proof. The court emphasized that a private limited company, being a closed corporation, has greater discretion in determining its members.
Conclusion:
The court dismissed the appeal, affirming that the company's rejection of the share transfer application was justified due to non-compliance with procedural requirements and the discretionary powers granted to the Board of Directors. The appellant failed to provide sufficient evidence to prove that the Board acted in bad faith or against the interests of the company.
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1988 (4) TMI 327
Issues Involved:
1. Is the petition for winding up maintainable?
2. Is the company, Utkal Flour Mills (P.) Ltd., in substance and reality, a partnership with an outer corporate veil?
3. Is the petitioner a victim of oppression or fraud of the majority of shareholders of the said company?
4. Is the formation of the partnership as aforesaid legal and justified and the transactions done in the name of the said partnership valid in law and binding on the company?
5. Is the petition for winding up bona fide and is the petitioner entitled to invoke the jurisdiction for winding up under the just and equitable clause having regard to the provisions of section 443(2) of the Companies Act?
6. Has the board of directors, representing the majority of shareholders, acted fraudulently in managing the affairs of the company in a manner destroying the probity and mutual trust and confidence of the shareholders?
7. Whether the extraordinary general meeting dated February 2, 1982, was legally convened and whether the resolutions adopted therein are valid and binding in law?
8. Is the company liable to be wound up?
9. To what reliefs?
Summary:
Issue No. 2:
The petitioner argued that the company is essentially a partnership and thus the principles of dissolution of a partnership should apply u/s 44(5) of the Indian Partnership Act. However, the court held that the mere conversion of a partnership into a private limited company does not mean that the company retains its partnership character. The rights and obligations of the parties are governed by the articles of association of the company, not by the terms of the dissolved partnership. The court referenced Hind Overseas Private Ltd. v. Raghunath Prasad Jhunjhunwalla and other cases to affirm that a company is a separate legal entity distinct from its shareholders. Therefore, Issue No. 2 was answered against the petitioner.
Issues Nos. 3 to 7:
These issues were addressed together, focusing on whether it is "just and equitable" to wind up the company u/s 433(f) of the Companies Act, 1956. The court noted that the "just and equitable" clause is discretionary and should be a last resort. The petitioner alleged mismanagement, fraud, and oppression by the majority shareholders, but the court found these allegations vague and lacking material particulars. The petitioner failed to provide sufficient evidence of the alleged diversion of funds to Utkal Roller Flour Mills or other fraudulent activities. The court emphasized that mere allegations without proof do not warrant winding up a company. The court also noted that the petitioner had not raised objections during his tenure as a director and that his resignation appeared voluntary. The court concluded that the allegations did not justify winding up the company and that alternative remedies should be pursued.
Conclusion:
The court refused to pass an order for winding up the company on "just and equitable" grounds but allowed the petitioner to seek redress in accordance with the law. There was no order as to costs.
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1988 (4) TMI 319
The High Court of Karnataka rejected the application to stay further proceedings in a company petition for winding up an unregistered company, stating that the Arbitration Act does not apply to such proceedings as they are not civil suits but special proceedings for winding up entities under the Companies Act. The court found that the Arbitration Act's section 34, which pertains to legal proceedings against parties to an agreement, does not apply to winding-up proceedings. (Case citation: 1988 (4) TMI 319 - HIGH COURT OF KARNATAKA)
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1988 (4) TMI 318
Issues Involved:
1. Jurisdiction of the court u/s 536(2) of the Companies Act, 1956.
2. Validity of the disposition of property during the pendency of winding-up petitions.
3. Examination of good faith and honesty in the company's application.
Summary:
1. Jurisdiction of the court u/s 536(2) of the Companies Act, 1956:
The applicant, Travancore Rayons Ltd., approached the court u/s 536(2) of the Companies Act, 1956, seeking leave to create a charge over its movable properties. The court examined whether it had the jurisdiction to grant such leave before an actual winding-up order was passed. The court referred to precedents, including decisions from English Law and Indian High Courts, which established that the court has jurisdiction to authorize dispositions during the pendency of winding-up petitions. The court concluded that it possesses the jurisdiction to grant leave for disposition of assets even before a winding-up order is passed.
2. Validity of the disposition of property during the pendency of winding-up petitions:
The court considered whether the disposition of property by the company, while winding-up petitions were pending, would be valid. The court noted that the legislative intent of section 536(2) is to prevent improper disposition of property that could harm the creditors' interests. However, the section also allows the court to validate genuine and honest transactions that are in the best interest of the company. The court emphasized that each case must be examined on its peculiar facts and circumstances, with a focus on good faith and the company's honest intentions.
3. Examination of good faith and honesty in the company's application:
The court scrutinized the company's application to determine if it was made in good faith and with honest intentions. The company had faced financial difficulties due to a strike and a fire, and it sought to rehabilitate itself with the help of a loan from a consortium of financial institutions. The court found that the financiers had carefully assessed the company's situation and were willing to provide substantial loans. The court also noted that the company was included in a notification under the Kerala Relief Undertakings (Special Provisions) Act, 1961, which imposed a moratorium on debt repayments. The court concluded that the company's request was made in good faith and that granting leave for disposition was necessary and expedient in the company's interest.
Conclusion:
The court allowed the petition and permitted Travancore Rayons Ltd. to create a charge of Rs. 511 lakhs over its movable properties in favor of IDBI, ICICI, IFCI, and IRBI. The court held that the reasons provided by the company were reasonable and that the disposition was in the best interest of the company, notwithstanding the opposition from some creditors.
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1988 (4) TMI 303
Issues Involved:
1. Classification of Vicco Vajradanti and Vicco Turmeric Vanishing Cream as Ayurvedic medicinal preparations.
2. Applicability of tariff items 14FF and 14F(1) of the Central Excises and Salt Act, 1944.
3. Legality of excise duty recovery and jurisdiction of orders dated 14-6-1976 and 4-6-1977.
4. Claim for refund of excise duty and entitlement to perpetual injunction.
5. Jurisdiction of the Court and other procedural defenses.
Summary:
Issue 1: Classification of Products
The Plaintiffs claimed that Vicco Vajradanti and Vicco Turmeric Vanishing Cream are Ayurvedic medicinal preparations, supported by certificates from the Commissioner, Food and Drug Administration of Maharashtra. The products were manufactured under an Ayurvedic drugs licence and sold by chemists as Ayurvedic medicines. The trial court accepted this classification based on evidence from experts and practitioners, concluding that the products are indeed Ayurvedic medicinal preparations.
Issue 2: Applicability of Tariff Items
The Defendants argued that Vicco Vajradanti is a tooth paste under item 14FF, and Vicco Turmeric Vanishing Cream is a cosmetic cream under item 14F(1). The trial court rejected these contentions, concluding that the products do not fall under these tariff items but should be classified under Entry 14E as Ayurvedic medicines.
Issue 3: Legality of Excise Duty Recovery
The Plaintiffs proved that the Defendants illegally recovered Rs. 17,95,472.80 as excise duty on Vicco Vajradanti and Rs. 61,21,424.63 on Vicco Turmeric Vanishing Cream. The trial court found the orders dated 14-6-1976 and 4-6-1977 to be without jurisdiction, illegal, and void. The court also held that the recovery of excise duty was without authority of law.
Issue 4: Claim for Refund and Perpetual Injunction
The trial court granted a money decree for the amounts recovered by way of excise levy for the period of three years prior to the filing of the suit. A perpetual injunction was also granted against the Defendants from recovering any excise duty on the products. However, the injunction was limited to the period before the change in excise entries on 28th February 1986.
Issue 5: Jurisdiction and Procedural Defenses
The trial court held that it had jurisdiction to entertain and try the suit. The suit was not premature, barred by limitation, or bad for misjoinder of parties.
Conclusion:
The High Court upheld the trial court's findings that the products are Ayurvedic medicines under Entry 14E but rejected the claim for total exemption from excise duty due to defective pleadings. The court directed the Union of India to pay Rs. 1,12,98,552.43 to the Plaintiffs with interest at 12% per annum from 1st June 1988, subject to further proceedings related to a Civil Application challenging an order dated 17th April 1988. The court also ordered the Union of India to pay half the costs of the suit to the Plaintiffs.
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