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2006 (7) TMI 339
Issues Involved:
1. Request for issuance of duplicate share certificates.
2. Jurisdiction of the company court under Section 84(2) of the Companies Act, 1956.
3. Dispute over the title and ownership of shares.
4. Compliance with procedural requirements for issuing duplicate share certificates.
Issue-wise Detailed Analysis:
1. Request for Issuance of Duplicate Share Certificates:
The applicant sought directions for Godfrey Philips India Ltd. to issue duplicate share certificates for 8,350 equity shares. The applicant claimed to hold 33,400 equity shares but found only 25,050 shares in their records, attributing the discrepancy to missing bonus shares issued in 1992. Despite submitting the required indemnity bond and other formalities, the respondent did not issue the duplicate certificates. The applicant argued that under Section 84(2) of the Companies Act, 1956, and the listing agreement with the Stock Exchange, the respondent was obligated to issue the certificates within six weeks.
2. Jurisdiction of the Company Court:
The respondent and the intervener argued that the company court lacked jurisdiction to entertain the application due to the complex and disputed nature of the title to the shares. They contended that such matters should be resolved in a civil court. The intervener cited prior judgments, including the Supreme Court decision in K.K. Modi v. K.N. Modi, to support this argument.
3. Dispute Over Title and Ownership of Shares:
The respondent highlighted ongoing litigation between the parties, indicating that the ownership of the shares was contested. They argued that the applicant should seek resolution in civil court rather than through the company court. The intervener emphasized that the Supreme Court had previously ruled in favor of the objector's group regarding the shares in question.
4. Compliance with Procedural Requirements:
The court noted that the applicant did not claim that the original share certificates were lost, destroyed, mutilated, or defaced, as required under Section 84(2) for issuing duplicates. The applicant merely stated that their records did not account for the 8,350 shares. The court emphasized that without proving the existence and subsequent loss or destruction of the original certificates, the application could not be entertained under Section 84(2).
Judgment:
The court dismissed the company application, concluding that the applicant failed to meet the requirements of Section 84(2) of the Companies Act, 1956. The court found that the request for duplicate certificates was not substantiated by evidence of loss or destruction of the original certificates. The court also refrained from addressing the jurisdictional issue, as the application did not fall within the scope of Section 84(2). The dismissal was without prejudice to the applicant's right to seek appropriate reliefs regarding the title of the shares in a civil court or to invoke Section 84(2) in the future if they could establish the necessary conditions.
The court also disposed of the intervener's application, which sought intervention and had already been granted, without passing separate orders. No order as to costs was made.
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2006 (7) TMI 338
Issues Involved:
1. Whether the official liquidator's possession of the 13 medical equipments is valid.
2. Whether the order of confiscation by the customs authority is valid.
3. Whether the applicant needs to seek leave of the court under section 446 of the Companies Act, 1956.
4. Priority of claims between the customs authority and secured creditors.
Issue-wise Detailed Analysis:
1. Validity of Official Liquidator's Possession:
The applicant-Commissioner of Customs sought a direction for the official liquidator to hand over possession of 13 medical equipments, arguing that these were vested in the Central Government from October 30, 1999, under section 126 of the Customs Act, 1962. The court noted that the official liquidator was appointed as provisional liquidator on February 16, 1999, and took charge of all assets, including the medical equipment. The court held that the official liquidator's possession was valid and legal, as all assets and properties of the company came into the custody of the provisional liquidator upon appointment. The court emphasized that the official liquidator's powers under sections 456 and 457 of the Companies Act, 1956, were extensive and included taking control of the company's assets.
2. Validity of the Order of Confiscation:
The court examined the timeline and found that the provisional liquidator was appointed before the customs authority passed the confiscation order on October 30, 1999. The court ruled that the order of confiscation was void since it was passed after the appointment of the provisional liquidator without seeking the court's permission as required under section 446 of the Companies Act, 1956. The court reiterated that once the provisional liquidator is appointed, the assets and properties of the company are in the custody of the liquidator, and any subsequent orders by other authorities without the court's leave are nullities.
3. Requirement of Leave under Section 446:
The applicant contended that leave of the court was not required since the confiscation order was passed before the winding-up order. However, the court clarified that section 446(1) applies to suits or proceedings pending at the date of the winding-up order and bars their continuation without the court's permission. The court emphasized that the provisional liquidator's appointment on February 16, 1999, meant that all proceedings against the company required the court's leave from that date. Therefore, the customs authority's failure to seek leave rendered the confiscation order invalid.
4. Priority of Claims:
The court addressed the priority of claims, citing the Supreme Court's decision in Dena Bank v. Bhikhabhai Prabhudas Parekh & Co., which established that secured creditors' claims prevail over crown debts. The court noted that the applicant's claim was a crown debt and could only be considered under section 530 of the Companies Act, 1956. The court observed that the customs authority had already lodged its claim under section 530, and the official liquidator was requested to take cognizance of this claim. The court concluded that the applicant's claim for the 13 medical equipments must yield to the claims of secured creditors.
Conclusion:
The court rejected the application, affirming the validity of the official liquidator's possession of the 13 medical equipments and ruling that the confiscation order by the customs authority was void. It held that the applicant needed to seek leave of the court under section 446 of the Companies Act, 1956, and that the claims of secured creditors took precedence over the customs authority's claim. The court directed that the applicant's claim be processed under section 530 of the Companies Act, 1956.
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2006 (7) TMI 337
Issues Involved:
1. Maintainability of the application under sections 446 and 537 of the Companies Act.
2. Role of the Official Liquidator in the auction process.
3. Jurisdiction of the Company Court versus the Debt Recovery Tribunal (DRT).
4. Applicability of the Companies Act vis-a-vis the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (1993 Act).
5. Confirmation and legality of the sale proceedings.
Issue-wise Detailed Analysis:
1. Maintainability of the Application under Sections 446 and 537 of the Companies Act:
The application filed by the Official Liquidator under sections 446 and 537 of the Companies Act was challenged for its maintainability. The argument was that the Official Liquidator should have filed an appeal against the auction order under the provisions of the 1993 Act instead of taking recourse to the Companies Act. The court observed that the jurisdiction of the Company Court under sections 442, 537, and 446 of the Companies Act is ousted by the 1993 Act, as confirmed by the Apex Court in Allahabad Bank v. Canara Bank [2000] 4 SCC 406.
2. Role of the Official Liquidator in the Auction Process:
The Official Liquidator's role was debated, with the contention that the Liquidator should only be involved at the stage of distribution and not during the sale or confirmation of the sale. The court referred to the judgment in Rajasthan State Financial Corpn. v. Official Liquidator [2005] 8 SCC 1901, which emphasized that the Official Liquidator must be associated with the sale process to ensure proper distribution of sale proceeds in accordance with section 529A of the Companies Act.
3. Jurisdiction of the Company Court versus the Debt Recovery Tribunal (DRT):
The exclusive jurisdiction of the DRT for adjudicating liabilities and executing recovery certificates was upheld. The court reiterated that the DRT and the Recovery Officer have exclusive jurisdiction for recovery proceedings under sections 17 and 18 of the 1993 Act. The Company Court's jurisdiction under sections 442, 537, and 446 of the Companies Act is ousted, except for the Supreme Court and High Courts exercising powers under Articles 226 and 227 of the Constitution.
4. Applicability of the Companies Act vis-a-vis the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (1993 Act):
The court highlighted that the 1993 Act has an overriding effect over the Companies Act, as per section 34 of the 1993 Act. The Apex Court in Allahabad Bank's case confirmed that the adjudication of liabilities and execution of recovery certificates fall within the exclusive domain of the DRT and Recovery Officer, and the Company Court cannot interfere except under Articles 226 and 227.
5. Confirmation and Legality of the Sale Proceedings:
The legality of the sale proceedings was upheld, noting that no infirmity was alleged in the process. The sale was conducted after issuing notice to the Official Liquidator and hearing objections. The court emphasized that the sale proceeds must be distributed in accordance with section 529A of the Companies Act, ensuring the rights of workmen and secured creditors are protected.
Conclusion:
The court stayed the impugned order dated 7-10-2005 of the Recovery Officer, DRT I, Delhi, until the disposal of Special Leave to Appeal (Civil) No. 3636/2003 by the Supreme Court. The application was disposed of without any order as to costs, affirming the exclusive jurisdiction of the DRT and the necessity of involving the Official Liquidator in the sale process to ensure proper distribution of proceeds.
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2006 (7) TMI 336
Issues:
1. Disbursement of sale proceeds by Official Liquidator.
2. Possession of assets by secured creditor before winding up order.
3. Application for execution of certificate by respondent-Bank.
4. Allegations against Official Liquidator for not disbursing the amount.
5. Reference to a Supreme Court judgment on the powers of Debt Recovery Tribunal.
Disbursement of Sale Proceeds by Official Liquidator:
The High Court had directed the winding up of a company and appointed the Official Liquidator to handle the assets. Before the winding up order, a secured creditor had taken possession of the assets and sold them, depositing the balance amount with the Official Liquidator. The respondent-Bank filed an application for execution of the certificate to recover the amount. The Bank alleged that despite having the amount since 1997, the Official Liquidator had not disbursed it among the secured creditors as required by law, keeping it in fixed deposits instead. The Bank accused the Official Liquidator of avoiding and frustrating its lawful claim, leading to a dispute over the disbursement of the sale proceeds.
Possession of Assets by Secured Creditor Before Winding Up Order:
The RIICO, a secured creditor, had taken possession of the company's assets before the winding up order was passed. The RIICO sold the assets and deposited the balance amount with the Official Liquidator. This action was taken under the provisions of the State Financial Corporation Act, 1951. The Debt Recovery Tribunal later attached the sale proceeds lying with the Official Liquidator for realization, leading to a complex situation regarding the handling of the funds.
Application for Execution of Certificate by Respondent-Bank:
The respondent-Bank filed an application for execution of the certificate dated 18-5-2001 before the Recovery Officer of Debt Recovery Tribunal-II, Delhi. The Recovery Officer attached the sale proceeds and directed notice for its realization under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Bank sought to recover the certified amount, leading to further legal proceedings and disputes over the disbursement and handling of the funds.
Allegations Against Official Liquidator for Not Disbursing the Amount:
The Bank alleged that the Official Liquidator had not disbursed the amount among the secured creditors as required by law. Despite having the funds since 1997, the Official Liquidator had kept the amount in fixed deposits instead of distributing it. The Bank accused the Official Liquidator of suppressing material facts and frustrating its lawful claim for recovery, leading to a legal battle over the proper handling and disbursement of the sale proceeds.
Reference to Supreme Court Judgment on Powers of Debt Recovery Tribunal:
The High Court referred to a Supreme Court judgment in B. Shoes Ltd. v. Indian Overseas Bank regarding the powers of the Debt Recovery Tribunal to direct the sale of assets of a company that has been wound up and where the Official Liquidator is appointed. The High Court decided not to vacate the interim order in the matter, allowing the parties to approach the Court after the Supreme Court's decision in the referenced case. This reference highlighted the significance of the legal question at hand and its connection to broader legal principles established by higher courts.
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2006 (7) TMI 335
Issues Involved:
1. Application for winding up under sections 433, 434, and 439 of the Companies Act, 1956.
2. Alleged dues and payment disputes between the petitioning-creditor and the respondent company.
3. Counter-claims by the respondent company.
4. Bona fide nature of the disputes raised by the respondent company.
5. Principles governing the exercise of discretion by the Company Court in winding up petitions.
Issue-wise Detailed Analysis:
1. Application for Winding Up:
The appellant filed an application under sections 433, 434, and 439 of the Companies Act, 1956, seeking an order for winding up of the respondent company, National Engineering Industries Limited. The application was based on the allegation that the respondent company owed the appellant a sum of Rs. 3,63,42,795.07, including accrued interest, for goods supplied for the modernization of the Rourkela Steel Plant.
2. Alleged Dues and Payment Disputes:
The appellant claimed that despite repeated requests, the respondent company failed to pay the balance amount due. The appellant alleged that there was a specific admission by the respondent company to pay the dues but they failed to honor the same. The appellant highlighted a meeting where the company committed to pay Rs. 95 lakhs but ultimately paid only Rs. 40 lakhs.
3. Counter-claims by the Respondent Company:
The respondent company contested the application, asserting that no amount was due and payable to the appellant. Instead, they claimed a sum of Rs. 53,88,316 from the appellant as liquidated damages for delay and non-fulfillment of performance guarantees. The respondent also raised issues regarding defective supplies and further deductions made by the Rourkela Steel Plant.
4. Bona Fide Nature of Disputes:
The Company Court, in its impugned order, concluded that due to the allegations and counter-allegations, it could not determine that the disputes raised by the respondent company were not bona fide. Consequently, the application for winding up was dismissed. The appellant argued that the findings were based on no material and that the defense raised by the respondent was a cooked-up defense to avoid winding up.
5. Principles Governing Discretion in Winding Up Petitions:
The judgment emphasized that a petition for winding up should not be entertained unless the court concludes that the company is admittedly a debtor and unable to pay the admitted amount. It was noted that when there are claims and counter-claims, the Company Court should direct the parties to resolve their disputes in an ordinary forum unless the defense is apparently frivolous. The judgment cited the Supreme Court's decision in Pradeshiya Industrial & Investment Corpn. of Uttar Pradesh v. North India Petrochemicals Ltd., which exhaustively dealt with the scope of a petition for winding up.
Conclusion:
The High Court upheld the decision of the Company Court, finding no grounds to interfere with the discretion exercised by the trial judge. The court concluded that the disputes raised by the respondent company were bona fide and required detailed evidence, which could not be resolved in a summary manner. The appeal was dismissed, and it was reiterated that the jurisdiction of the Company Court should not be invoked for winding up as a tool of oppression against the respondent company.
Cited Decisions:
The judgment discussed several cited decisions, including John Herbert & Co. Ltd. v. Pranay Kumar Dutta, Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd., and SRC Steel (P.) Ltd. v. Bharat Industrial Corpn. Ltd. The court found that these decisions did not support the appellant's case and instead reinforced the principles applied by the Company Court in dismissing the winding up application.
Final Order:
The appeal was dismissed with no order as to costs, affirming the decision of the Company Court.
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2006 (7) TMI 334
Issues Involved:
1. Constitutional validity of section 274(1)(g) of the Companies Act, 1956.
2. Alleged violation of Article 14 of the Constitution of India.
3. Classification of debts and disqualification criteria.
4. Impact on directors of companies unable to repay deposits or redeem debentures.
5. Comparison with other disqualification criteria under section 274(1)(a) to (f).
Detailed Analysis:
1. Constitutional Validity of Section 274(1)(g):
The petitioners challenged the constitutional validity of section 274(1)(g) of the Companies Act, 1956, as amended by the Companies (Amendment) Act, 2000. The primary contention was that the provision is ultra vires the Constitution of India, particularly Article 14. The court analyzed the purpose and intention behind the amendment, which aimed to disqualify errant directors, protect investors from mismanagement, and ensure compliance in filing annual accounts and returns. The court emphasized that the primary purpose of the disqualification is not to punish individuals but to protect the public against future misconduct by directors whose past records show a danger to creditors and others.
2. Alleged Violation of Article 14 of the Constitution of India:
The petitioners argued that section 274(1)(g) is discriminatory and violates Article 14 of the Constitution by classifying companies into two classes: those unable to repay deposits or redeem debentures and those able to do so. The court referred to the Statement of Objects and Reasons for the amendment, which aimed to ensure better corporate governance and investor protection. The court upheld the classification, stating that it has a rational relation to the object sought to be achieved, thus not violating Article 14.
3. Classification of Debts and Disqualification Criteria:
The petitioners contended that the provision discriminates between debts in the form of deposits and debentures and other debts, such as those owed to financial institutions. The court noted that the primary object of section 274(1)(g) is to protect investors and ensure good governance. The court held that the classification is in consonance with the object sought to be achieved and does not render the provision ultra vires Article 14.
4. Impact on Directors of Companies Unable to Repay Deposits or Redeem Debentures:
The petitioners argued that directors would resign before the disqualification date to avoid being disqualified, thus rendering the provision ineffective. The court referred to rule 3 of the Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003, which states that directors who have been in office during the relevant period will be disqualified even if they resign before the disqualification date. The court concluded that the provision effectively serves its purpose and does not become invalid due to potential resignations.
5. Comparison with Other Disqualification Criteria under Section 274(1)(a) to (f):
The petitioners contended that section 274(1)(g) is ultra vires Article 14 as it disqualifies directors for no fault of their own, unlike section 274(1)(a) to (f), which disqualifies directors for specific wrongdoings. The court emphasized that the legislature intended to create a separate class of directors who fail to protect investors' interests. The court held that the directors disqualified under section 274(1)(g) belong to a different class and are treated accordingly, thus not violating Article 14.
Conclusion:
The court upheld the constitutional validity of section 274(1)(g) of the Companies Act, 1956, dismissing the petitioners' contentions. The provision was deemed to have a rational relation to the object of ensuring good corporate governance and protecting investors, thus not violating Article 14 of the Constitution of India. The court emphasized that the provision aims to disqualify errant directors and protect investors, rather than punish individuals, and is enacted in larger public interest.
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2006 (7) TMI 333
Issues:
Prayer for employment in State Government or Public Undertaking; Non-absorption of applicants despite sending names multiple times; Discriminatory act by State Government violating articles 14 and 21 of the Constitution of India.
Analysis:
The applicants sought direction from the court to compel the respondents to offer them employment in the State Government or Public Undertaking. They were employees of a corporation that was ordered to be wound up, with all employees to be absorbed in alternative jobs. However, the applicants alleged that despite their names being submitted for absorption on over 12 occasions, they were not provided with any alternative employment, unlike other employees of the corporation.
Upon reviewing the case, the court noted that a committee was formed in a meeting held on 23-7-1992 to determine the absorption/re-employment of surplus employees in public enterprises. Subsequently, some employees were absorbed in different entities. However, the services of the applicants were terminated under the Companies Act, while other employees were provided with alternative employment by the State Government. The court found this differential treatment to be discriminatory and in violation of articles 14 and 21 of the Constitution of India.
In light of the above, the court ruled in favor of the applicants, directing the Chief Secretary of the State of Rajasthan to provide them with employment in any department of the State Government or Public Undertaking. The State was ordered to ensure compliance with this directive within three months from the date of receiving the court's order.
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2006 (7) TMI 332
Issues Involved:
1. Sanction of the scheme of arrangement and amalgamation under sections 100, 101, and 391 to 394 of the Companies Act, 1956.
2. Objections raised by shareholders regarding the scheme's fairness, valuation of shares, and reduction of share capital.
3. Compliance with statutory procedures and requirements under the Companies Act, 1956.
4. Role and jurisdiction of the company court in sanctioning the scheme.
Detailed Analysis:
1. Sanction of the Scheme of Arrangement and Amalgamation:
The petitions sought the court's sanction for a scheme of arrangement, including amalgamation, between Torrent Power AEC Ltd. (TPAL), Torrent Power SEC Ltd. (TPSL), Torrent Power Generation Ltd. (TPGL) (collectively the transferor companies), and Torrent Power Ltd. (TPL) (the transferee company). The scheme aimed to consolidate the power business of the Torrent group to enhance competitiveness and growth opportunities. The scheme included the reorganization of the share capital of the transferee company.
2. Objections Raised by Shareholders:
Several shareholders raised objections against the scheme. The main objections included:
- Pending Litigation: One objector challenged a Government resolution affecting 28.89% of equity shares in Torrent Power AEC Ltd., which was pending in court.
- Erosion of Share Capital: The scheme's reduction in the face value of shares was alleged to result in financial losses for shareholders.
- Public Institutions' Role: The objectors argued that public institutions failed to protect investors' interests.
- Valuation Discrepancies: There were concerns about differing valuations of shares by two firms of chartered accountants within a short span.
- Reduction of Share Capital: The objectors claimed that mandatory provisions of sections 101 and 102 of the Companies Act were bypassed.
- Monopoly Concerns: The scheme was alleged to create a monopoly and accumulate reserves unfairly.
3. Compliance with Statutory Procedures and Requirements:
The court examined whether the statutory procedures under sections 391 to 394 of the Companies Act, 1956, were complied with:
- Meetings and Voting: Separate meetings of equity shareholders, unsecured creditors, and secured creditors were convened, and the scheme was approved by an overwhelming majority.
- Notices and Explanatory Statements: Notices with explanatory statements were sent to all stakeholders, and relevant documents were made available for inspection.
- Reports and Affidavits: Reports from the chairman of the meetings, the official liquidator, and the Regional Director were submitted, indicating no objections to the scheme.
4. Role and Jurisdiction of the Company Court:
The court's role in sanctioning the scheme is supervisory, ensuring compliance with statutory procedures and that the scheme is fair and reasonable. The court does not sit in appeal over the commercial wisdom of the shareholders. The court referred to several precedents, including Miheer H. Mafatlal v. Mafatlal Industries Ltd., which outlined the broad parameters for sanctioning a scheme:
- Compliance with statutory procedures.
- Fair representation and bona fide actions by the majority.
- Provision of relevant material for informed decision-making.
- The scheme should not be violative of any law or public policy.
Judgment:
The court found that the scheme complied with all statutory requirements and was approved by an overwhelming majority of stakeholders. The objections raised were not sufficient to deny the scheme's sanction. The court held that the scheme was fair, reasonable, and in the public interest. Consequently, the scheme of arrangement and amalgamation was sanctioned, and the reduction of share capital was approved as an integral part of the scheme. The court rejected the request to stay the operation of the order and quantified the fees for the learned Assistant Solicitor General of India at Rs. 3,500 to be paid by the petitioner-company.
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2006 (7) TMI 331
Issues:
Application for winding up under sections 433 and 434 of the Companies Act, 1956 based on non-payment of dues by the company.
Analysis:
The petitioner entered into an agreement with the company for construction work, claiming non-payment of dues amounting to Rs. 37,27,972.71. The petitioner sought winding up of the company due to outstanding payments. The company disputed the claim, alleging violations by the petitioner, including non-compliance with statutory requirements and poor workmanship. The company also claimed expenses exceeding Rs. 15 lakhs due to the petitioner's actions. The petitioner issued a notice, but the company reiterated its demand for payment from the petitioner.
During the hearing, the petitioner argued for winding up based on the agreement and unpaid bills, while the company contended that the dispute was bona fide and the defense substantial. The legal provisions under sections 433(e) and 434 of the Act regarding inability to pay debts were highlighted. The company cited legal precedents to support its position that a bona fide dispute prevents winding up.
Referring to the Supreme Court decision in a similar case, the judge emphasized that a debt must not be bona fide disputed with a substantial defense for the court to reject a winding-up petition. In this case, the company had raised a cross-claim of over Rs. 15 lakhs even before receiving the petitioner's notice, indicating a genuine dispute. Therefore, the judge concluded that ordering winding up would contradict established legal principles.
Based on the facts and legal arguments presented, the judge dismissed the petition for winding up the company, stating that doing so would go against the settled legal position. Consequently, the application for winding up was rejected, and the case was dismissed.
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2006 (7) TMI 330
Issues Involved:
1. Winding up petitions under Section 433(e) and 433(f) of the Companies Act, 1956.
2. Liability of the principal borrower and guarantors under the agreement dated 17-2-2000.
3. Validity and implications of the arbitration award dated 3-12-2003.
4. Requirement of notice under Section 434 of the Companies Act, 1956.
5. Contingent creditor status and the need for leave of the court under Section 439(1)(b) and 439(8) of the Companies Act, 1956.
Detailed Analysis:
1. Winding up petitions under Section 433(e) and 433(f) of the Companies Act, 1956:
The petitioner filed petitions for the winding up of the respondents, M/s. Sahajanand Investment (P.) Ltd. (principal borrower) and M/s. Pinto Trade Commerce (P.) Ltd. (guarantor), under Section 433(e) on the ground of indebtedness amounting to Rs. 82,36,027 and under Section 433(f) on the ground that it is just and equitable as the respondent-companies are running into losses.
2. Liability of the principal borrower and guarantors under the agreement dated 17-2-2000:
The agreement stipulated that M/s. Sahajanand would repay Rs. 50,00,000 with financing charges at 2% per month by 17-2-2001. In case of default, compensation at 4% per month on the outstanding amount was agreed upon. M/s. Pinto Trade Commerce and Mr. Rui Pinto stood as guarantors. Upon default by M/s. Sahajanand, the petitioner was entitled to demand payment from the guarantors. The respondents failed to fulfill their obligations, leading to the issuance of a notice demanding payment.
3. Validity and implications of the arbitration award dated 3-12-2003:
The parties went for arbitration, resulting in a settlement where the liability of Rs. 50,00,000 was met by delivering built-up premises and agreeing to pay Rs. 85,00,000 in installments. Despite partial payments, defaults occurred, leading to a claim of Rs. 2,43,22,153 as per clause 7 of the award. The court observed that the earlier liabilities were replaced under the award, and the respondents failed to discharge their obligations as per the award.
4. Requirement of notice under Section 434 of the Companies Act, 1956:
The petitioner issued notices to the respondents, but only M/s. Sahajanand replied without specifically denying liability. The court discussed whether a fresh notice was required after the arbitration award. It concluded that the award could be seen as a subsequent event, and the petitions should be decided based on the respondents' indebtedness under the award. The court noted that the respondents were aware of the defaults and the ongoing proceedings, making a formal notice unnecessary.
5. Contingent creditor status and the need for leave of the court under Section 439(1)(b) and 439(8) of the Companies Act, 1956:
The court rejected the argument that the petitioner was a contingent creditor requiring leave of the court. It held that the petitioner had an existing obligation to pay, and there was no contingency to be met. The liability of the guarantors was co-extensive with that of the principal debtor, allowing the petitioner to proceed against both.
Conclusion:
The court admitted the petitions and ordered them to be advertised with interim relief, recognizing the respondents' prima facie liability to pay Rs. 2,43,22,153 with interest as per clause 7 of the arbitration award. The ground under Section 433(f) would be considered at the final disposal of the petitions.
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2006 (7) TMI 329
Issues:
Challenge to order of the Company Law Board regarding repayment of deposits before approval of scheme of arrangement.
Analysis:
The appellant, a non-banking financial company, faced financial difficulties due to defaults by another company in 2002, leading to mass withdrawals and demands for repayment. To address this, the appellant proposed a scheme of arrangement before the court. Meanwhile, depositors sought repayment before the Company Law Board, which issued an order on June 16, 2003, challenged in the present petitions.
The Company Law Board ordered repayment of deposits under section 45QA(2) of the Reserve Bank of India Act, subject to the scheme's approval by the High Court. The Board's decision was based on the interpretation of section 45QA and its implications on pending proceedings under section 391 of the Companies Act. The High Court found the Board's decision to order repayment during the pendency of the section 391 application as unwarranted and not in the interest of the members, in line with a similar ruling by the Kerala High Court in a related case.
The High Court accepted the appeal, setting aside the Company Law Board's order. It reserved liberty for respondents to approach the Board if the scheme is not approved by the High Court eventually. The High Court's decision was based on the principle that the Board should await the outcome of the section 391 application before ordering repayments, ensuring a better status for all parties involved.
In conclusion, the High Court's judgment focused on the proper exercise of discretion by the Company Law Board in matters of repayment of deposits in the context of pending scheme of arrangement proceedings. The ruling emphasized the need for coherence between different legal provisions and the importance of considering the overall interests of the stakeholders involved.
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2006 (7) TMI 328
Issues Involved:
1. Legality of SEBI's order dated 27-4-2006.
2. Interpretation of Section 11(4) of the SEBI Act.
3. Compliance with natural justice principles.
4. Proportionality of SEBI's order.
5. SEBI's jurisdiction to investigate and pass orders.
6. Discriminatory treatment by SEBI.
Detailed Analysis:
1. Legality of SEBI's Order Dated 27-4-2006:
The petitioners challenged SEBI's order dated 27-4-2006, which restrained them from buying, selling, or dealing in securities. The order was based on findings of manipulation in IPOs, involving fictitious/benami entities and key operators. SEBI's investigation revealed that these entities cornered shares meant for retail investors, transferring them to financiers who sold them for profit.
2. Interpretation of Section 11(4) of the SEBI Act:
The petitioners argued that SEBI's order was beyond the scope of Section 11 of the SEBI Act. They contended that SEBI could only take measures under Section 11(4) if an investigation or inquiry was pending against them. The court, however, interpreted that SEBI could investigate "transactions" and take action if the investigation revealed material warranting such measures. The court held that SEBI's power to investigate transactions and take necessary measures was within its mandate to protect investors and regulate the securities market.
3. Compliance with Natural Justice Principles:
The petitioners argued that SEBI's order violated natural justice principles as they were not given a pre-decisional hearing. The court acknowledged that SEBI had the power to dispense with pre-decisional hearings in urgent situations to protect the securities market. The court noted that the order itself invited affected entities to file objections and avail personal hearings, thereby providing an opportunity for post-decisional hearing.
4. Proportionality of SEBI's Order:
The petitioners contended that SEBI's order was disproportionate and excessively restrictive. They argued that the total ban on their market activities was unjust, arbitrary, and beyond the object of the order. The court, however, found that the order was justified given the grave emergency and the need to protect the market from manipulators. The court emphasized that SEBI's actions were aimed at restoring investor confidence and ensuring market integrity.
5. SEBI's Jurisdiction to Investigate and Pass Orders:
The petitioners claimed that SEBI had no jurisdiction to investigate against them as they were not intermediaries or brokers. The court rejected this argument, stating that SEBI's jurisdiction extended to any person associated with the securities market. The court held that SEBI's investigation into transactions involving the petitioners was within its statutory powers.
6. Discriminatory Treatment by SEBI:
The petitioners alleged discriminatory treatment by SEBI, citing instances where SEBI had varied its orders for other entities. The court noted that SEBI had revised orders after affected parties approached it with explanations. The court encouraged the petitioners to file objections with SEBI, which would consider them in accordance with the law.
Conclusion:
The court upheld SEBI's order, emphasizing SEBI's mandate to protect investors and regulate the securities market. It found SEBI's actions justified and within its statutory powers. The court dismissed the petitions, allowing SEBI to proceed with its measures to maintain market integrity. The court also clarified that its observations were prima facie and directed SEBI to consider any objections filed by the petitioners without being influenced by the court's judgment.
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2006 (7) TMI 327
Decree passed by the State Consumer Disputes Redressal Commission, New Delhi under Consumer Protection Act, 1986 - premature withdrawal - Held that:- Appeal partly allowed by way of remand. In cases of this type, the burden is on the complainant to show the rate of exchange prevalent on the various dates in order to assist the court to arrive at the indicative prices. This has not been done in the present case. Neither the State Commission nor the National Commission has examined this question regarding selection of the appropriate date, the appropriate rate of exchange on that particular date as also the rate of interest which the appellant was required to pay.
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2006 (7) TMI 326
Issues Involved:
1. Maintainability of appeals against adjudication orders passed under FERA before the Special Director (Appeals) under FEMA.
2. Interpretation of Section 49 of FEMA regarding pending proceedings and appeals.
3. Applicability of Sections 17 and 19 of FEMA to appeals against orders passed under FERA.
4. Legislative intent behind the repeal of FERA and enactment of FEMA.
Detailed Analysis:
1. Maintainability of Appeals Against Adjudication Orders Passed Under FERA Before the Special Director (Appeals) Under FEMA:
The core issue addressed is whether appeals against adjudication orders passed by the Assistant Director/Deputy Director of Enforcement under the repealed Foreign Exchange Regulation Act, 1973 (FERA) are maintainable before the Special Director (Appeals) appointed under the Foreign Exchange Management Act, 1999 (FEMA). The court concluded that such appeals are indeed maintainable before the Special Director (Appeals). This conclusion is based on the interpretation that the substantive right of appeal vested in a litigant under FERA is preserved under FEMA, and the appeals should be filed before the corresponding appellate forum constituted under FEMA.
2. Interpretation of Section 49 of FEMA Regarding Pending Proceedings and Appeals:
Section 49 of FEMA deals with the repeal and saving provisions related to FERA. It states that even after the repeal of FERA, all proceedings pending under FERA are saved, and the adjudicating officer can take notice of any contravention under FERA for two years from the commencement of FEMA (i.e., until 31-5-2002). The court noted that the substantive right of appeal vested in a litigant under FERA is not affected by the repeal of FERA, and such appeals must be instituted before the appropriate appellate forum provided under FEMA.
3. Applicability of Sections 17 and 19 of FEMA to Appeals Against Orders Passed Under FERA:
Sections 17 and 19 of FEMA outline the appellate forums for adjudication orders. Section 17 provides that appeals against orders by the Assistant Director/Deputy Director of Enforcement are maintainable before the Special Director (Appeals), while Section 19 provides that appeals against orders by other adjudicating authorities are maintainable before the Appellate Tribunal. The court held that these provisions apply to appeals against orders passed under FERA as well. The interpretation was that the word "Adjudicating Authorities" in these sections includes those under FERA, ensuring that the substantive right of appeal is not destroyed.
4. Legislative Intent Behind the Repeal of FERA and Enactment of FEMA:
The court examined the legislative intent behind the repeal of FERA and the enactment of FEMA. It was found that the legislature intended to preserve the substantive right of appeal against orders passed under FERA while providing new appellate forums under FEMA. The court rejected the revenue's argument that appeals against orders passed under FERA should only be instituted before the Appellate Tribunal constituted under FEMA. Instead, it was held that appeals against orders by the Assistant Director/Deputy Director of Enforcement under FERA are maintainable before the Special Director (Appeals) under FEMA, while appeals against orders by other adjudicating authorities under FERA are maintainable before the Appellate Tribunal.
Conclusion:
The petitions were allowed, and the impugned orders passed by the Special Director (Appeals) were quashed. The Special Director (Appeals) was directed to hear the appeals filed by the petitioners on merits and in accordance with law. The court concluded that the appeals against adjudication orders passed by the Assistant Director/Deputy Director of Enforcement under the repealed provisions of FERA read with Section 49 of FEMA are maintainable before the Special Director (Appeals). Appeals against orders of all other adjudicating authorities are maintainable before the Appellate Tribunal constituted under FEMA.
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2006 (7) TMI 325
Whether the petitioners could avail of the benefit of section 17(1)(b) of the Limitation Act as they were claiming that they did not get any knowledge of the transaction prior to May, 1987 and that the petition was within time from the date on which they got knowledge of the transaction?
Held that:- Appeal allowed. The Company Petition could not be dismissed on a preliminary issue, namely, as being barred by limitation as the petitioners had not been given opportunity to lead evidence and the finding of the High Court has been reversed on that point, we do not consider it appropriate to examine the aforesaid contention on merits. However, as the High Court has to hear the Company Petition again, the findings recorded by the High Court on the point of continuing wrong and condonation of delay are set aside.
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2006 (7) TMI 324
Whether the petition substantially complies with the requirements?
Even when there is some breach or omission whether it can be fatal to the petition?
Held that:- The learned Judges of the Division Bench has appreciated that the technical plea raised by the respondent regarding defective affidavit was raised after seven years of filing the petition. The learned counsel submitted that the appellant is raising the defence of technical plea to protect himself from the consequence of his default and this plea cannot be considered effective enough to review the order of advertisement. Assuming without admitting that the affidavit was not verified as per the Company Rules, the learned counsel has correctly submitted that if this objection was taken earlier the respondent would have cured the defect.
Thus the appeal has no merit and the order passed by the learned Judges of the Division Bench confirming the order passed by the learned Company Judge does not call for any interference by this Court.
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2006 (7) TMI 323
Whether direction declaring clause (c-1) of sub-section (1) of section 3A of the U.P. Trade Tax Act, 1948 inserted by U.P. Act No. 31 of 1995 of imposing sales tax on the sale of lotteries was ultra vires?
Held that:- The learned Senior Counsel appearing for the respondent fairly concedes that respondents would not claim any refund of the tax, already paid but they would not be liable to pay any further tax.
Appeal is dismissed. Neither the State will be liable to refund the tax, already collected nor collect any further tax for the period prior to the date of the judgment.
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2006 (7) TMI 316
Whether rubber is an agricultural produce?
Held that:- Appeal dismissed. If the Legislature intended to create exception for rubber also it could have done it but it chose not to do it. Simply because the Legislature has included tea, coffee and cotton in the Second Schedule exempting it from payment of entry tax does not mean that all other agricultural produce items which have been excluded from the definition of the agricultural produce would stand included in the Second Schedule to the Act exempting them from payment of entry tax. This would be doing violation to the Act as well as acting contrary to the intent of the Legislature.
The meaning assigned to the agricultural produce in the present Act is different from what was assigned to it in the Karnataka Forest Act, 1963. The same is not relevant.
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2006 (7) TMI 309
Shortage of duty paid input- The question sought to be raised by the appellant revolves around the method of payment, erroneous estimation of shortfall in weight arrived at by the department and that the conclusion that clandestine removal of duty paid inputs. Held that- we do not see any substantial question of law involved in this matter. In the result, appeal is dismissed in limine with no order as to costs.
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2006 (7) TMI 306
Dispute in the present case pertains to the show cause notice issued by the Directorate of Revenue Intelligence unit of the customs department on 22-3-93 in respect of the goods admittedly cleared on provisional assessment basis. – Tribunal by impugned order held that the show cause notice under Section 28 and 124 of the Customs Act, 1962 would not be maintainable in respect of the provisionally assessed goods. The Tribunal further held that where the case is not covered by provisional assessment, the show cause notice issued by D.R.I. cannot be sustained because they are not the proper officers. - in the light of the Judgment of this Court in the case of Electron Textile Exports (P) Ltd. & Anr. the findings recorded by the Tribunal that the officers of D.R.I. are not entitled to issue show cause notice under Section 28 and 124 of the Customs Act cannot be sustained - However, in view of the finding given by the Tribunal that on the date on which the impugned show cause notice was issued, the goods were provisionally assessed, the impugned notice was not maintainable. Therefore, even if the D.R.I, had jurisdiction to issue show cause notice, in the facts of the present case, since the goods were provisionally assessed, there could not be any short levy and consequently show cause notice on the ground of short levy could not be issued.
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