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1987 (9) TMI 395
Issues:
1. Delay in filing tax case revisions u/s 38 of the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of section 5 of the Limitation Act to appeals preferred under special or local laws.
Issue 1:
The petitions sought to condone a delay of 211 days in filing tax case revisions against the Sales Tax Appellate Tribunal's order dated 29th March, 1986, u/s 38 of the Tamil Nadu General Sales Tax Act, 1959. The last date for filing the revision petition was 28th July, 1986, but the petitions were filed on 24th February, 1987, with a request to condone the delay.
Issue 2:
The applicability of section 5 of the Limitation Act to appeals preferred under special or local laws was examined. The Indian Limitation Act, 1908, did not apply section 5 to appeals under the Tamil Nadu General Sales Tax Act, 1959. However, after the enactment of the Limitation Act, 1963, unless expressly excluded by the special or local law, section 5 would be applicable. The proviso to section 38 was amended in 1986, allowing a further period of forty-five days for filing petitions beyond the initial ninety-day limit. The question was whether this amendment expressly excluded the application of section 5.
Judicial Precedents:
The Supreme Court decision in Mohd. Ashfaq v. State Transport Appellate Tribunal, U.P. AIR 1976 SC 2161, clarified that when a special law like the Motor Vehicles Act provides a specific time frame for actions, the discretion to excuse delay is limited. The decision emphasized that if a provision in the special law explicitly restricts the extension of time, section 5 of the Limitation Act cannot be invoked to excuse delays beyond the specified limit. The petitioner's reliance on other cases was deemed inapplicable to the current situation.
Conclusion:
The High Court dismissed the petitions, stating that the amended proviso to section 38 restricted the power to excuse delays to only forty-five days. The Court clarified that its jurisdiction as a revisional authority was limited to interpreting the provisions of the Act and could not address constitutional validity concerns raised by the petitioner. The petitions were therefore deemed not maintainable and were dismissed.
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1987 (9) TMI 394
Issues:
Interpretation of sub-section (2-A) of section 8 of the Central Sales Tax Act.
Analysis:
The judgment of the High Court of Andhra Pradesh dealt with the interpretation of sub-section (2-A) of section 8 of the Central Sales Tax Act in the context of two writ petitions. The petitions raised a question regarding the tax liability on the turnover of goods sold in inter-State trade or commerce, specifically focusing on the applicability of surcharge under the State Act. The petitioners, a public limited company engaged in the sale of declared goods like cotton yarn, de-oiled cake, and vegetable oils, challenged a notice demanding payment of surcharge on the tax already paid. The key issue revolved around whether the surcharge imposed under the State Act should be included in the calculation of Central sales tax payable on inter-State transactions.
The court examined the relevant provisions of the Central Sales Tax Act, particularly section 8 which outlines the rates of tax on inter-State sales. Sub-section (2-A) of section 8, introduced in 1958 and amended in 1972, restricts the tax payable on goods exempt from State tax or taxed at a lower rate to nil or the lower rate. The court analyzed the language of the sub-section, emphasizing that the term "tax" encompasses not only the basic sales tax but also any additional charges, fees, or surcharges imposed by the State Act. The objective of sub-section (2-A) is to ensure uniformity in tax rates between intra-State and inter-State sales of goods.
The court rejected the petitioner's argument that sub-section (2-A) only pertains to the basic tax rate and does not include surcharge. It highlighted that surcharge, though labeled differently, functions as an additional sales tax under the State Act. Referring to a previous decision by the Sales Tax Appellate Tribunal, the court emphasized the need for consistency in tax treatment across intra-State and inter-State sales. The court also distinguished and disagreed with decisions from the Kerala and Karnataka High Courts, which held that additional sales tax or surcharge should not be considered in the calculation of Central sales tax.
Ultimately, the High Court concluded that surcharge must be factored into the determination of the Central sales tax rate under sub-section (2-A) of section 8. The judgment dismissed the writ petitions, upholding the inclusion of surcharge in the tax liability for inter-State sales to maintain parity with intra-State sales. No costs were awarded in the case.
In summary, the judgment clarified the scope of sub-section (2-A) of section 8 of the Central Sales Tax Act, affirming that surcharge levied under the State Act should be included in the calculation of Central sales tax on inter-State transactions. The decision aimed to prevent discrepancies in tax treatment between intra-State and inter-State sales and ensure consistency in tax rates across different types of transactions.
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1987 (9) TMI 393
Issues:
Interpretation of tax liability for scented supari and gutka under different entries of the M.P. General Sales Tax Act.
Detailed Analysis:
1. Background and Reference: The case involves a reference under section 44(1) of the M.P. General Sales Tax Act regarding the tax treatment of scented supari and gutka. The Commissioner of Sales Tax sought clarification on whether these items should be taxed at 8% under entry No. 39 of Part III or 10% under entry No. 1 of Part VI of Schedule II of the Act.
2. Contentions of the Parties: The assessee argued that scented supari and gutka should be considered processed betel nuts falling under entry No. 39, while the department contended that they should be classified under the residuary entry as goods not included in any other part of Schedule II.
3. Interpretation of "Processed": The Court analyzed the meaning of "processed" as it was not defined in the Act. Referring to a Supreme Court case, the Court highlighted that processing involves subjecting raw material to a specific treatment for marketability, which does not include mere mixing or adding of ingredients like scent, menthol, sugar, dhania, and aniseed to betel nut. Scented supari and gutka are mixtures of edible ingredients, including betel nut, and cannot be categorized as raw or processed betel nuts.
4. Decision: The Court concluded that scented supari and gutka do not qualify as processed betel nuts under entry No. 39 but fall under the residuary entry in Part VI of Schedule II. Therefore, the Board of Revenue was not justified in taxing them at 8% and instead should be taxed at 10% under entry No. 1. The reference was answered in the negative, favoring the department, with no order as to costs.
5. Outcome: The judgment clarifies the tax liability classification for scented supari and gutka, emphasizing the distinction between processed betel nuts and mixtures containing betel nut. The decision provides clarity on the interpretation of relevant entries in the M.P. General Sales Tax Act, ensuring consistent application of tax rates for similar products in the future.
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1987 (9) TMI 392
Issues: Assessment made in respect of two different assessment years, violation of declaration given by the petitioner, application of second proviso to section 5(2)(A)(a)(ii) of the Act, quashing of impugned assessment, fresh assessment directed.
Analysis:
The judgment by the Orissa High Court pertains to two writ applications concerning assessments made for different assessment years. The petitioner, a registered dealer, purchased scrap iron and engaged in manufacturing operations, producing various steel products for sale. The Sales Tax Officer, upon examining the petitioner's account books, found that the petitioner had utilized raw materials in manufacturing during the assessment years. The assessing officer concluded that the petitioner's actions constituted a violation of the declaration made in form No. XXXIV, leading to the addition of the value of purchased scrap iron to the taxable turnover. However, the petitioner contended that there was no breach of the declaration as the iron and steel purchased were sold as per the prescribed rates of sales tax under the Act.
The High Court referred to a previous decision where it was held that utilizing scrap iron for manufacturing steel products did not breach the declaration given by the dealer. Consequently, the court concluded that the assessing officer erred in applying the second proviso to section 5(2)(A)(a)(ii) of the Act and adding the value of scrap iron to the taxable turnover. The court ordered the quashing of the impugned assessments and directed the assessing officer to conduct fresh assessments in line with the court's observations in the judgment. Both writ applications were allowed by the court, with agreement from the presiding judge.
In summary, the judgment addressed the issue of the assessing officer's incorrect application of the Act's provisions regarding the utilization of scrap iron by the petitioner. The court clarified that such utilization did not violate the declaration given by the petitioner, as per the prescribed rates of sales tax. The decision emphasized the importance of correctly interpreting the statutory provisions and directed a fresh assessment in accordance with the court's findings.
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1987 (9) TMI 391
Issues:
Whether the account books of a dealer engaged in the manufacture and sale of exempted items can be rejected under section 12(2) of the U.P. Sales Tax Act, 1948.
Analysis:
The case involved a dealer engaged in the business of manufacturing and selling wooden carving goods, which are exempted items under section 4 of the Act, 1948. The assessing officer rejected the dealer's book version and made a best judgment assessment, claiming concealed sales of timber and sokhta. The main contention was whether the dealer, exempted from tax on the manufactured items, was required to maintain a manufacturing account under section 12(2) of the Act.
The court analyzed section 12 of the Act, which mandates every dealer to maintain true and correct accounts of goods sold and bought, with a special obligation on a manufacturer-dealer to maintain stock books for raw materials and products. The court emphasized that the obligation to maintain a manufacturing account under sub-section (2) of section 12 applies only to manufacturers liable to pay tax. Since the dealer was not liable to pay tax on the exempted items, the court held that he was not required to maintain a manufacturing account.
The court rejected the argument that not maintaining a manufacturing account could allow sales of raw materials outside the books, stating that the law only requires maintenance of accounts for goods sold and bought. It clarified that while a dealer in timber could have his book version rejected for not maintaining accounts under sub-section (1) of section 12, a manufacturer-dealer of exempted items could not have his accounts rejected for not maintaining a manufacturing account.
Ultimately, the court allowed the revision, set aside the Tribunal's order rejecting the dealer's book version, and sent the case back to the Tribunal to accept the book version of the assessee. The judgment highlighted the distinction between dealers liable to pay tax and those dealing in exempted items, emphasizing the specific obligations regarding account maintenance under the Act.
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1987 (9) TMI 390
The High Court of Madras set aside the interim orders vacating the injunction against the arrest and detention of the petitioners for default in payment of sales tax. The Court ruled that the authorities must follow the prescribed procedure under section 48 of the Revenue Recovery Act before arresting a defaulter, including giving the defaulter an opportunity to show they are not withholding payment willfully. The appeals and writ petitions were allowed, with no order as to costs.
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1987 (9) TMI 389
Issues Involved:
1. Discrimination in Taxation
2. Violation of Articles 14, 301, and 304(a) of the Constitution
3. Interpretation of Part XIII of the Constitution
4. Validity of Entry 24(a) of the First Schedule to the Andhra Pradesh General Sales Tax Act
Issue-wise Detailed Analysis:
1. Discrimination in Taxation:
The primary issue in this case was whether the taxation of imported refined oil at 6 1/2 paise per rupee, while locally produced refined oil from groundnuts that had already met sales tax was taxed at 2 1/2 paise per rupee, constituted discrimination. The petitioners argued that this differential treatment violated the principle of equality and impeded the free flow of trade and commerce.
2. Violation of Articles 14, 301, and 304(a) of the Constitution:
The petitioners contended that the differential tax rates violated Articles 14 (Right to Equality), 301 (Freedom of Trade, Commerce, and Intercourse), and 304(a) (Non-Discrimination in Taxation) of the Constitution. They argued that the higher tax rate on imported refined oil was discriminatory and impeded the free flow of trade, commerce, and intercourse as guaranteed under Part XIII of the Constitution.
3. Interpretation of Part XIII of the Constitution:
The court discussed the complexity and historical context of interpreting Part XIII of the Constitution, which includes Articles 301 to 306. The Supreme Court had previously noted that these articles were "defectively" conceived and "badly drafted," leading to various interpretative challenges. The court referred to several landmark cases, including the Atiabari case (AIR 1961 SC 232) and the Automobile case (AIR 1962 SC 1406), to understand the principles governing the free flow of trade and commerce.
4. Validity of Entry 24(a) of the First Schedule to the Andhra Pradesh General Sales Tax Act:
The petitioners challenged the vires of Entry 24(a) of the First Schedule, which imposed a higher tax rate on imported refined oil. The court examined whether this entry was discriminatory and violated constitutional provisions. The court also considered the State's argument that the tax did not impede the movement of goods and was uniformly applied to both imported and locally processed refined oil.
Comprehensive Analysis:
Discrimination in Taxation:
The court acknowledged the petitioners' argument that the tax rate of 6 1/2 paise per rupee on imported refined oil was discriminatory compared to the 2 1/2 paise per rupee tax on locally produced refined oil from groundnuts that had already met sales tax. The court noted that the State did not provide a satisfactory reason for this differential treatment, thereby overlooking the "cutting edge of the issue."
Violation of Articles 14, 301, and 304(a) of the Constitution:
The court referred to the Supreme Court's judgment in the "lottery tickets" case (H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165 (SC); AIR 1986 SC 63), where it was held that discriminatory tax treatment on imported goods hampers the free flow of trade, commerce, and intercourse, thereby violating Articles 301 and 304(a). Applying this principle, the court found that the higher tax rate on imported refined oil was discriminatory and violated the constitutional guarantees.
Interpretation of Part XIII of the Constitution:
The court discussed the historical context and interpretative challenges of Part XIII of the Constitution, referring to landmark cases like Atiabari and Automobile. The court noted that the Supreme Court had clarified that not all taxes impede the free flow of trade, but only those that directly and immediately restrict or hamper it. The court concluded that the differential tax rates on refined oil did impede the free flow of trade and commerce.
Validity of Entry 24(a) of the First Schedule to the Andhra Pradesh General Sales Tax Act:
The court held that Entry 24(a) was discriminatory and violated Articles 301 and 304(a) of the Constitution. However, instead of striking down the provision, the court directed that when refined oil sold in Andhra Pradesh is shown to have been extracted from groundnuts that met tax outside the State, the tax rate should be 2 1/2 paise per rupee, not 6 1/2 paise per rupee. The Commercial Tax Officer was directed to ascertain whether the groundnuts of the turnover met tax in Karnataka and pass orders accordingly.
Separate Judgments:
- Raghuvir, J.: Held that Entry 24(a) was discriminatory and violated constitutional guarantees but did not strike down the provision. Directed the Commercial Tax Officer to ascertain the tax status of groundnuts in Karnataka and apply the lower tax rate if applicable.
- Amareswari, J.: Held that Entry 24(a) was not discriminatory and did not offend any constitutional provisions. Dismissed the writ petition.
- Jayachandra Reddy, J.: Agreed with Amareswari, J., and held that Entry 24(a) was not violative of the Constitution. Dismissed the writ petition.
Final Order:
In view of the majority judgment, the writ petition was dismissed. No costs were awarded, and the advocate's fee was set at Rs. 250.
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1987 (9) TMI 388
Whether there were any subsequent sales effected by the assessee which would become chargeable under the proviso to section 9(1)?
Held that:- Appeal allowed. As it would be clear that this aspect of the issue between the parties was not gone into by the High Court in the view that it took that the proviso was only applicable in the case of registered dealers. Now that statute has been amended with full retrospective effect to include the case of unregistered dealers as well, it is necessary to examine the facts of the case and examine whether the provisions of the new proviso are applicable thereto. We, therefore, set aside the judgment of the High Court and remand the matter to the High Court for fresh disposal of the writ petitions in the light of the above discussion and in accordance with law.
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1987 (9) TMI 379
Whether as a fact the appellant has paid sales tax on the purchase of sun-baked bricks from the seller as claimed and the appropriate declaration has been produced in the assessment proceedings?
Whether bricks used in the notification of 1973 covered sun-dried bricks?
Held that:- Appeal allowed. It is not disputed by the appellant's counsel that the sale price of bricks which had been purchased as sun-dried bricks and sold for the price of Rs. 1,49,600.92 were burnt by the appellant. On the finding that the appellant had further treated the sun-dried bricks and produced goods of added value, we do not think it would be proper to extend the benefit of total exemption for the turnover of sale of bricks from tax. The notification of the State Government is somewhat misleading; it would thus be appropriate to allow set-off of the tax paid at the time of the purchase of the sun-dried bricks out of the tax exigible on the taxable turnover of burnt bricks. While setting aside the judgment of the High Court we would direct that until appropriate amendment to the notification is made, the State should adopt the modality indicated above. In the instant case if it is found that the appellant had paid sales tax to Sardool Singh, the amount of tax then paid should be given credit and the balance should be recovered.
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1987 (9) TMI 370
Issues involved: Company application for amendment of petition by adding respondents, allegations of oppression and mismanagement, validity of extraordinary general meeting, involvement of new directors in criminal activities, objections to proposed amendments, relevance of subsequent events in deciding the petition, consideration of grievances as shareholders in a company petition.
Amendment of Petition: The company application sought to amend the petition by adding respondents and additional prayers, with the court proposing to consider the amendments on merits despite their length.
Background of Petition: Company Petition No. 573 of 1984 was filed under sections 397 and 398 by shareholders representing 35% of shareholding in the fifth respondent company, alleging oppression and mismanagement by certain respondents who held significant equity shares.
Allegations of Misconduct: The petitioners alleged that certain respondents committed acts of oppression and mismanagement post the filing of the petition, including convening an extraordinary general meeting with questionable validity and appointing new directors amidst criminal charges.
Objections to Amendments: Respondents objected to certain amendments, arguing that subsequent events post the filing of the original petition should not be considered in deciding the case under sections 397 and 398 of the Companies Act.
Legal Precedents: The court discussed legal precedents, emphasizing that amendments incorporating subsequent events are permissible if necessary for the proper determination of issues between parties, as supported by various judgments under the Companies Act and the Code of Civil Procedure.
Grievances as Shareholders: The court addressed the contention that grievances as directors cannot form the subject of a petition under sections 397 and 398, highlighting a case where lack of probity as a shareholder did not entitle relief, but in the present case, the amendments related to acts affecting the petitioners as both directors and shareholders.
Judgment: The judge's summons were made absolute for amending the petition, allowing respondents to file additional affidavits, setting timelines for responses, and scheduling the petition for a hearing after six weeks.
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1987 (9) TMI 369
Issues Involved:
1. Maintainability of the company petition under Section 583 of the Companies Act.
2. Justification for winding up the company based on admitted debt.
3. Objections by the workmen regarding the viability and management of the company.
4. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985.
5. Request for investigation into the affairs of the company under Section 237 of the Companies Act.
Detailed Analysis:
1. Maintainability of the Company Petition under Section 583 of the Companies Act:
A preliminary objection was raised by the company regarding the maintainability of the petition under Section 583 of the Companies Act. This objection was overruled by the court in its order dated August 8, 1986, as referenced in Bangalore Timber Industries v. Madras Sapper Ex-servicemen's Rehabilitation Association [1988] 63 Comp. Cas. 733 (Kar.).
2. Justification for Winding Up the Company Based on Admitted Debt:
The petitioners, creditors of the unregistered company, sought the winding up of the company due to an aggregate admitted debt of Rs. 33,49,262.58. The company did not dispute this debt. The court noted that the company had already resolved to close down its operations and had approached the authorities for necessary permissions. The Union of India and the State Government, as supporting creditors, did not oppose the winding up. Given the admitted debt and the lack of opposition from other creditors, the court found it justifiable to order the winding up of the company.
3. Objections by the Workmen Regarding the Viability and Management of the Company:
The workmen opposed the winding up, arguing that the company was still a viable business undertaking and that proper management and sufficient infusion of working capital could revive it. They attributed the company's losses to mismanagement and lack of professional expertise. The court acknowledged the workmen's concerns but noted that the company had sustained cumulative losses of Rs. 2.50 crores and total liabilities of Rs. 3.25 crores. The court found that the suggestions for better management, while laudable, were not feasible without substantial aid from the Central and State Governments. The court concluded that it could not allow the petitioners to wait indefinitely to recover their debts by refusing an order of winding up.
4. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985:
The court examined the applicability of the Sick Industrial Companies (Special Provisions) Act, 1985 (Sick Companies Act). The Act aims to revive and rehabilitate potentially viable sick industrial companies. However, the court determined that the Sick Companies Act does not apply to unregistered companies like the respondent. Therefore, the provisions of the Sick Companies Act were not relevant to the winding up petition.
5. Request for Investigation into the Affairs of the Company under Section 237 of the Companies Act:
The workmen requested an investigation into the affairs of the company under Section 237 of the Companies Act. The court noted that Section 235, which authorizes the Central Government to appoint inspectors, does not apply to unregistered companies. Consequently, Section 237, which relates to investigations declared by the court, was also deemed inapplicable. The court further observed that the company was managed by a board consisting of Central Government officials, making an investigation unnecessary.
Conclusion:
The court concluded that the objections of the company and the workmen did not merit serious consideration. Given the admitted debt, the cumulative losses, and the lack of a feasible plan for revival without government aid, the court ordered the winding up of the company. The petitioners were directed to deposit Rs. 2,000 with the official liquidator for contingent expenses and to advertise the order in one issue of Deccan Herald. The parties were instructed to bear their own costs.
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1987 (9) TMI 368
Issues Involved:
1. Maintainability of the application.
2. Possession and title of the disputed property.
3. Applicability of section 446 of the Companies Act, 1956.
4. Execution of the decree and eviction process.
Summary:
1. Maintainability of the Application:
The appellant argued that the application was not maintainable as the room was not the property of the company and the official liquidator never took charge of it. The court, however, held that the application was maintainable under section 446(2) of the Companies Act, 1956, which allows the court to entertain any claim or question arising in the course of the winding-up of the company. The court referenced the Division Bench judgment in Indramoni v. Shriram Jute Mills P. Ltd., which supported the maintainability of such applications.
2. Possession and Title of the Disputed Property:
The appellant claimed title through Makhan Lal Sharma, asserting that he was the successor-in-interest. The court found that the appellant failed to prove his right, title, and interest in the said room. The appellant did not avail the opportunity to present evidence, and no substantial proof was provided to establish the devolution of interest from Makhan Lal Sharma to the appellant. Consequently, the court held the appellant to be a trespasser.
3. Applicability of Section 446 of the Companies Act, 1956:
The respondents argued that the application was maintainable under section 446(2), which grants the court jurisdiction over any claim or question arising in the course of the winding-up. The court agreed, stating that the questions raised in the application fell within the scope of section 446(2). The court also noted that the official liquidator would be deemed to be in possession of the property under section 456, even if actual possession was not taken.
4. Execution of the Decree and Eviction Process:
The appellant contended that no person could be evicted without due process of law and that the execution application had been set aside in appeal. The court clarified that proceedings under section 446 constitute due process of law. The court found that the appellant was a trespasser and that the applicants had the right, title, and interest in the property. Therefore, the contention regarding eviction without due process was rejected.
Conclusion:
The court dismissed the appeal with costs, affirming the maintainability of the application and the right of the respondents to the disputed property. The interim order, if any, was vacated.
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1987 (9) TMI 367
Issues Involved:
1. Whether the contravention of the provisions contained in section 220(1)(a) of the Companies Act is a continuing contravention or not.
2. Whether A-2 and A-4 have made out a case for the grant of relief, relieving them wholly of the liability for the default alleged against them, under section 633(1) of the Companies Act.
3. Whether the judgment of convictions and sentences is legal, correct, and proper.
Detailed Analysis:
1. Whether the contravention of the provisions contained in section 220(1)(a) of the Act is a continuing contravention or not:
The court examined whether the failure to file the balance-sheet and profit and loss account under section 220(1) of the Companies Act constitutes a continuing offence. Section 220(1) requires companies to file these documents within 30 days after the annual general meeting or by a specified date if the meeting is not held. The failure to comply with this requirement results in penalties under section 220(3), which refers to section 162 for punishment.
The court referred to various precedents, including the Supreme Court's decision in State of Bihar v. Deokaran Nenshi and CWT v. Suresh Seth, which clarified that a continuing offence is one where the liability continues until compliance is achieved. The court noted that the default in filing the documents was complete once the due date passed and did not continue thereafter. The court also referred to the American Jurisprudence and decisions from the High Courts of Bombay and Calcutta, which supported the view that the failure to file documents by a specified deadline does not constitute a continuing offence.
The court concluded that the contravention of section 220(1) is not a continuing offence. The default is complete when the deadline for filing passes, and the liability does not continue day-to-day thereafter. The court agreed with the reasoning of the Calcutta High Court in National Cotton Mills' case, which held that the offence under section 220(1) is not a continuing one.
2. Whether A-2 and A-4 have made out a case for the grant of relief, relieving them wholly of the liability for the default alleged against them, under section 633(1) of the Act:
Given the court's conclusion that the contravention of section 220(1) is not a continuing offence, it did not find it necessary to determine whether A-2 and A-4 were entitled to relief under section 633(1) of the Act. The court focused on the primary issue of whether the offence was continuing and found that it was not.
3. Whether the judgment of convictions and sentences is legal, correct, and proper:
The court examined the legality of the convictions and sentences passed by the trial court. The trial court had convicted the company and its directors (A-2 to A-4) for failing to file the required documents and sentenced them to a fine and imprisonment in default of payment. The court noted that the complaint was filed on January 25, 1982, beyond the prescribed period of limitation under section 468 of the Code of Criminal Procedure.
Since the court determined that the offence was not a continuing one, it concluded that the prosecution was barred by limitation. The trial court's cognizance of the offence was illegal, and the subsequent trial and convictions were vitiated.
Conclusion:
The court allowed the criminal revision petition, setting aside the convictions and sentences passed against the company and A-2 to A-4. The company and its directors were acquitted of the default alleged against them. The court emphasized that the default in complying with section 220(1) of the Companies Act is not a continuing offence, and the prosecution was barred by limitation.
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1987 (9) TMI 344
Issues:
1. Allegations of misfeasance and breach of trust by managing director and director of a company.
2. Failure to take action for realization of time-barred debts.
3. Liability of directors to reimburse the company for losses.
4. Claim for interest on the amount owed.
Detailed Analysis:
1. The judgment pertains to a case where a company was ordered to be wound up, and the official liquidator was appointed. Allegations were made against the managing director and director for not actively participating in the company's functioning, engaging in fraudulent acts, and acting against the company's interests. The court found them guilty of misfeasance and breach of trust in relation to the company, as per Section 543 of the Companies Act. The Supreme Court's definition of misfeasance and breach of trust was cited, emphasizing that any breach of duty resulting in loss to the company makes the director liable to reimburse the company. The respondents were held personally liable for the company's loss amounting to Rs. 4,056.77.
2. It was argued that the debts due to the company from various parties had become time-barred before liquidation, and the respondents failed to take any action for their realization. The court noted that the respondents did not initiate proceedings against debtors for recovery, allowing the debts to become time-barred. The court highlighted the duty of directors to act in the company's best interests and recover debts owed to the company, emphasizing their liability for losses incurred due to their inaction.
3. The judgment emphasized that directors are obligated to reimburse the company for losses resulting from their breach of duty. In this case, the respondents were held liable to repay the company Rs. 4,056.77 due to their failure to take action for debt recovery, leading to losses for the company. The court passed a decree for the recovery of the said amount jointly and severally against the respondents, holding them personally responsible for the company's financial loss.
4. Additionally, the petitioner sought interest on the amount owed from the date of filing the petition. The court agreed with the petitioner's claim for interest at the rate of 12% per annum from the date of the petition filing until the realization of the amount. The judgment granted the petitioner's claim for interest along with the principal amount, further establishing the respondents' liability for the financial consequences of their actions.
Overall, the judgment found the respondents guilty of misfeasance and breach of trust, holding them personally liable for the company's losses and granting the petitioner's claim for interest on the amount owed.
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1987 (9) TMI 343
Issues Involved:
1. Applicability of Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947.
2. Right to receive foreign exchange as a legal representative.
3. Requirement of Reserve Bank of India's permission.
4. Penalty imposition under Section 23(1)(a) of the Act.
5. Interpretation of Section 10(2) of the Act.
6. Appropriateness of the penalty amount.
Detailed Analysis:
1. Applicability of Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947:
The primary issue was whether Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947, applied to the appellant's case. The appellant contended that this section was not applicable because he received the amount as a legal representative of his deceased brother and not in his own right. The court held that the appellant, as the legal heir, had the right to receive the foreign exchange and thus Section 10(1)(b) was applicable. The court stated, "Therefore, there could be no hesitation in coming to the conclusion that the appellant had the right to receive the amount as legal heir of his deceased brother."
2. Right to Receive Foreign Exchange as a Legal Representative:
The appellant argued that his right to receive the foreign exchange was as a legal representative and not a personal right, and hence Section 10(1)(b) should not apply. The court rejected this argument, stating that the appellant, as the legal heir, had the right to receive the foreign exchange due to his deceased brother. Thus, the appellant's right to receive the foreign exchange was recognized under Section 10(1)(b).
3. Requirement of Reserve Bank of India's Permission:
The court noted that the appellant failed to obtain the necessary permission from the Reserve Bank of India for receiving the foreign exchange. The judgment emphasized, "For receiving such amount, the appellant failed to get permission from the Reserve Bank of India." This failure constituted a contravention of Section 10(1)(b) of the Act.
4. Penalty Imposition under Section 23(1)(a) of the Act:
The Additional Director, Enforcement Directorate, found the appellant guilty of contravening Section 10(1)(b) and imposed a penalty of Rs. 20,000 under Section 23(1)(a) of the Act. The Appellate Board reduced the penalty to Rs. 10,000. The court upheld the finding of contravention but further reduced the penalty to Rs. 5,000, considering the circumstances of the case.
5. Interpretation of Section 10(2) of the Act:
The appellant argued that Section 10(2) should be followed for any failure under Section 10(1) and that penalty could be levied only if Section 10(2) was not obeyed. The court found this argument unconvincing, stating that Section 10(1) imposed an obligation on persons entitled to receive foreign exchange to secure its receipt without delay and with the permission of the Reserve Bank of India.
6. Appropriateness of the Penalty Amount:
The appellant contended that the penalty amount of Rs. 10,000 was unjustified and lacked proper determination of the value of the foreign exchange involved. The court dismissed this contention but reduced the penalty to Rs. 5,000, taking into account the facts and circumstances of the case.
Conclusion:
The court concluded that the appellant had indeed contravened Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947, by failing to obtain the requisite permission from the Reserve Bank of India and not securing the full receipt of the foreign exchange. The penalty was reduced to Rs. 5,000 considering the circumstances, and the appeal was dismissed in other respects.
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1987 (9) TMI 342
Issues Involved:
1. Whether the criminal proceedings can be stayed in exercise of powers under section 391(6) of the Companies Act.
2. If yes, whether this is a fit case for staying criminal proceedings.
Issue-wise Detailed Analysis:
1. Whether the criminal proceedings can be stayed in exercise of powers under section 391(6) of the Companies Act:
The court examined the scope of section 391(6) of the Companies Act, which allows the court to stay the commencement or continuation of any suit or proceeding against the company. The term "proceeding" was debated, with the applicants arguing it includes criminal proceedings, while the respondent contended it only covers civil proceedings.
The court referred to the general meaning of "proceeding" and various judicial interpretations, concluding that the term is of wide import and includes criminal proceedings. The court cited the Punjab and Haryana High Court's decision in Workmen of M/s. Bali Singh v. Management of M/s. Bali Singh, which defined "proceeding" broadly to include all forms of legal actions, whether procedural or substantive. The court also referenced sections 446 and 633 of the Companies Act, which support the inclusion of criminal proceedings under the term "proceeding."
The court disagreed with the Bombay High Court's decision in Uma Investments Pvt. Ltd., which had excluded criminal proceedings from the ambit of section 391(6). The court reasoned that the wide wording of section 391(6) allows for the stay of criminal proceedings to ensure the effective consideration and implementation of the scheme of compromise and arrangement.
2. If yes, whether this is a fit case for staying criminal proceedings:
The court then considered whether the specific criminal proceedings against the directors of Divya Vasundhara Financiers Pvt. Ltd. should be stayed. The applicants argued that staying the criminal proceedings is necessary to avoid frustrating the scheme of compromise and arrangement and to prevent multiplicity of proceedings. They contended that the directors would not have agreed to the scheme without assurance that all pending civil and criminal proceedings would be stayed.
The court noted that the earlier order by B.K. Mehta J. had stayed various civil and criminal proceedings to facilitate the working of the scheme. However, the court found that this did not automatically extend to all future criminal cases. The court emphasized the need for a balanced approach, considering the potential loss of evidence and the possibility of proceedings abating due to the death of parties involved.
The court decided to grant a partial stay. The Additional Chief Metropolitan Magistrate, 37th Court, Esplanade, Bombay, was allowed to proceed with hearing the complaint and recording evidence. However, the proceedings would then be stayed for a period of two years, pending further orders from the court. This approach aimed to balance the interests of justice, ensuring the scheme's effective implementation while not indefinitely delaying the criminal proceedings.
Conclusion:
The court concluded that section 391(6) of the Companies Act does allow for the stay of criminal proceedings in appropriate cases. In this specific case, a partial stay was deemed appropriate to balance the interests of justice and the effective implementation of the scheme. The stay would be in effect for two years, with the possibility of extension if the scheme proceedings were not finalized by then.
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1987 (9) TMI 341
Issues Involved:
1. Whether the offence of not filing returns under Rule 10 of the Companies (Acceptance of Deposits) Rules, 1975, is a continuing offence.
2. Whether the complaints were filed within the limitation period as prescribed by Section 468 of the Criminal Procedure Code.
Issue-wise Detailed Analysis:
1. Whether the offence of not filing returns under Rule 10 of the Companies (Acceptance of Deposits) Rules, 1975, is a continuing offence:
The court examined Rule 10, which mandates every company to file a return by June 30 of each year, and Rule 11, which prescribes penalties for non-compliance. The primary contention was whether the failure to file returns constitutes a continuing offence. The learned counsel for the petitioner argued that the offence is committed once for all by June 30 each year and is not a continuing offence, citing the Supreme Court decision in State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908. The Supreme Court in that case distinguished between offences committed once and for all and continuing offences, stating that a continuing offence involves a failure to comply with a rule, with liability continuing until compliance.
The court also referenced Bhagirath Kanoria v. State of M.P., AIR 1984 SC 1688, where the Supreme Court held that non-payment of Provident Fund contributions was a continuing offence due to the nature of the contravention. However, the court found that the non-filing of returns under Rule 10 is distinct from such cases. Rule 10 requires returns to be filed by June 30 each year, and failure to do so completes the offence. The court concluded that the offence under Rule 10 is not continuing, as the obligation to file the return does not persist beyond the due date.
2. Whether the complaints were filed within the limitation period as prescribed by Section 468 of the Criminal Procedure Code:
Section 468(2)(a) of the Criminal Procedure Code prescribes a limitation period of six months for offences punishable with fine only. The court noted that the offence of not filing returns is punishable with a fine under Rule 11. The period of limitation, therefore, commences from the date of the offence, i.e., June 30 of each year. In these cases, the complaints were filed after the expiry of six months from the due date.
The learned Senior Central Government Standing Counsel argued that non-compliance with Rule 10 undermines its purpose, but the court held that it is the responsibility of the rule-making authorities to address such issues. The court cannot extend the limitation period beyond what is prescribed by law.
Conclusion:
The court found that the offence of not filing returns under Rule 10 is not a continuing offence and that the complaints were time-barred as they were filed beyond the six-month limitation period. Consequently, the convictions and sentences imposed on the accused were set aside, and all the revisions were allowed, resulting in the acquittal of the accused in all cases.
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1987 (9) TMI 317
Issues:
Validity of requisition for calling an extraordinary general body meeting; Granting of interim injunction restraining the meeting; Compliance with notice requirements under the Companies Act, 1956.
Analysis:
The case involved a dispute where the respondent filed a suit seeking a declaration that a requisition for an extraordinary general body meeting was invalid and unlawful. The respondent also sought a permanent injunction to prevent the meeting from being convened. The trial court granted an interim injunction, which the appellant challenged in this appeal. The appellant failed to provide a copy of the trial court's judgment, claiming it was not yet available. The appellant argued that the matter was of vital importance as the trial court's order prevented them from holding the meeting. The court heard arguments from both parties and examined various objections raised by the respondent against convening the meeting.
The objections raised by the respondent included the non-membership of one signatory, lack of an explanatory note as required by the Companies Act, improper venue selection, non-compliance with the association's constitution, insufficient signatories on the requisition notice, ambiguity regarding proxy voting, and inadequate notice period for members. The court specifically focused on the issue of notice period compliance, as it was crucial for a valid meeting requisition. The court analyzed the postal dates of notices sent to association members and determined that the notices did not provide a clear 21 days' notice as required. Despite the appellant's argument of hand-delivery and posting of notices, the court found discrepancies in the delivery timelines that did not meet the statutory requirements.
Ultimately, the court concluded that the appellant failed to establish a prima facie case to overturn the trial court's order. Due to the lack of compliance with notice requirements, the court dismissed the appeal and the civil application. The judgment emphasized the importance of adhering to statutory provisions for meeting requisitions to ensure fairness and compliance with legal standards.
In summary, the court's decision hinged on the crucial issue of notice compliance under the Companies Act, 1956, highlighting the significance of providing sufficient and clear notice to association members for convening meetings. The judgment underscored the need for strict adherence to legal requirements in such matters to maintain transparency and uphold the integrity of organizational processes.
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1987 (9) TMI 316
Whether the provisions contained in subsection (1) of section 630 which provide for the launching of a prosecution against an officer or employee of a company for wrongful possession of such property under clauses (a) and (b) of sub-section (1) of section 630 and for the recovery of such property by the issue of process under subsection (2), also extend to past officers and employees of the company?
Whether the court trying the offence has the power to issue process under sub-section (2) against such officer or employee?
Held that:- Appeal dismissed. Considering the facts of present case it cannot be disputed that the flat in question is owned by the company and it also cannot be disputed that the petitioner came to occupy the said flat by virtue of his being in the employment of respondent No. 1 company. It follows that on his retiring from the company, the provisions of section 630 of the Companies Act will become applicable. This case, therefore, is neither one which deserves to be quashed nor one which is liable to be stayed pending the declaratory suit in the Court of Small Causes. In any event, I do not find this case which calls for interference in exercise of the jurisdiction either under article 227 of the Constitution of India or section 482 of the Criminal Procedure Code.
Thus no merit in the petition and the same is dismissed. Rule discharged. Smt. Shenoi applies for continuation of stay for a period of three weeks in order to enable the petitioner to approach the Supreme Court. Shri Vashi objects to the grant of time. I find the request of Smt. Shenoi to be reasonable. Stay to continue for a period of three weeks from today.
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1987 (9) TMI 302
Whether the High Court was justified in dismissing the writ petition of the appellant on the ground of availability of an alternative remedy?
Held that:- Appeal allowed. As the impugned order of the Vice-Chancellor is a nullity, it would be a useless formality to send the matter back to the High Court for disposal of the writ petition on merits. We would, accordingly, quash the impugned order of the Vice-Chancellor dated March 7, 1987 and direct the reinstatement of the appellant forthwith to the post of Principal of the Institution. The judgment of the High Court is set aside
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