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1999 (10) TMI 690
Issues Involved:
1. Whether the petitioner is entitled to a winding-up order under sections 433 and 434 of the Companies Act, 1956.
2. Whether the bills submitted by the petitioner were fraudulent.
3. Whether the respondent's defense is bona fide and substantial.
4. Whether the petitioner should seek remedy through a civil suit.
Detailed Analysis:
1. Entitlement to Winding-Up Order:
The petitioner, United Construction Co., sought a winding-up order against Piccadily Sugar & Allied Industries Ltd. under sections 433 and 434 of the Companies Act, 1956. The petitioner claimed an unpaid debt of Rs. 11,40,246.62 for construction work completed, with the respondent having paid Rs. 88,07,224 out of the approved Rs. 99,47,970.62. The petitioner argued that the respondent had not paid the remaining amount despite notice.
2. Allegation of Fraudulent Bills:
The respondent contested the petition, alleging it was an abuse of the court process. They claimed that two bills (P11 and P13) were never submitted and were fraudulently created by the petitioner. The respondent asserted that the petitioner abandoned the project and failed to adjust a Rs. 25 lakh mobilization advance. The respondent denied the claimed amount, stating that the covering letters were doctored and no actual bills were attached.
3. Bona Fide and Substantial Defense:
The court referred to the Supreme Court's decision in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd., which established that a winding-up order could be made if the debt is undisputed, but if the debt amount is disputed, the court must ensure the company's defense is in good faith and substantial. The court also cited Tata Davy Ltd. v. Steel Strips Ltd. and Gleason Works v. Punjab Tractors Ltd., emphasizing that a bona fide dispute relegates the matter to civil court for resolution.
Revisiting the facts, the court noted that the disputed bills (8-A and 9-A) were out of sequence and appeared forged. The covering letters (P11 and P13) did not have attached bills and referred to road work, not the sugar factory construction. The court observed discrepancies in the letterheads used, indicating potential fabrication. Given these facts, the court found the respondent's defense to be in good faith and substantial.
4. Remedy through Civil Suit:
The court concluded that the nature of the dispute required adjudication through a civil suit rather than a winding-up petition. The court held that the petitioner had not established prima facie proof of the debt and that the defense was bona fide.
Conclusion:
The court dismissed the petition for winding up, stating it was without merit. However, it clarified that this judgment should not influence any civil suit the petitioner might file to resolve the dispute.
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1999 (10) TMI 689
Issues Involved:
1. Jurisdiction of the High Court.
2. Allegations of oppression and mismanagement.
3. Validity of share transfers.
4. Alleged wrongful sale of company assets.
5. Alleged wrongful surrender of sub-tenancy rights.
6. Reliefs and remedies.
Detailed Analysis:
1. Jurisdiction of the High Court:
The jurisdictional challenge was raised by the respondents, arguing that the High Court at M.P. alone would have jurisdiction over Raigarh Trading Co. Ltd., as its registered office is situated outside the jurisdiction of the Calcutta High Court. However, the Division Bench concluded that the Court has wide powers under sections 397 and 398 of the Companies Act, 1956, to investigate the affairs of the company against whom the proceedings have been initiated, including its holding or subsidiary companies.
2. Allegations of Oppression and Mismanagement:
The petitioner alleged oppression and mismanagement by the MPJ group in the affairs of Raigarh Jute & Textile Mills Ltd., primarily through unauthorized transfer of shares and wrongful sale of assets. The Court found that the petitioners made out a case of oppression by the MPJ group against their interests.
3. Validity of Share Transfers:
The Court scrutinized several share transfers:
- Transfer of 1250 shares by Marut in RTC to Aditya Kanoria was declared non est and set aside.
- Transfer of 1150 shares by Sandeep in RTC to SGS was also declared non est and set aside.
- Transfer of 1250 shares by Akshay in RTC to SGS was set aside following the reasoning of the Division Bench in Bajrang Prasad Jalan v. Mahabir Prasad Jalan.
4. Alleged Wrongful Sale of Company Assets:
The petitioner alleged that the MPJ group wrongfully sold the jute mill to Mohan Jute in violation of an injunction order. The Court noted that any such sale without the leave of the Court was invalid and held that the sale would abide by the result of the order that may be passed by the learned trial judge in the related suit.
5. Alleged Wrongful Surrender of Sub-Tenancy Rights:
The petitioner claimed that sub-tenancy rights were surrendered without proper authorization to facilitate MPJ's personal gains. The Court refrained from making any definitive findings on this issue, as it was already subject to a pending civil suit and interim orders.
6. Reliefs and Remedies:
The Court considered the appropriate reliefs, emphasizing that the majority shareholders should be given the first option to buy out the minority shareholders. The Court appointed Price Waterhouse, Chartered Accountants, as special officers to value the shares of the company and its subsidiaries. The valuation would be as of the date of the petition, and the BPJ group was directed to sell their shares to the MPJ group within 30 days of the valuation.
The application was disposed of with the direction for the valuation and sale of shares, and a prayer for stay of operation was refused. Leave was granted for filing an appeal before the Hon'ble Supreme Court of India, considering similar matters were pending there.
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1999 (10) TMI 682
The judgment by Appellate Tribunal CEGAT, New Delhi, in 1999 (10) TMI 682, addressed the assessment of LPG removed in bulk for domestic consumption. The duty liability depends on the price fixed for domestic consumption, not bulk movement. The appeal was allowed, setting aside the orders imposing additional duty liability.
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1999 (10) TMI 681
The Appellate Tribunal CEGAT, Mumbai recalled an order due to cross-objections not being considered during the appeal hearing. The matter was referred to another bench for reconsideration.
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1999 (10) TMI 680
Issues:
1. Interpretation of Notification No. 181/88-C.E. regarding exemption of metal containers.
2. Application of Rule 196 of Central Excise Rules for demand of duty.
3. Compliance with Chapter X procedure for duty exemption.
Analysis:
Issue 1: Interpretation of Notification No. 181/88-C.E.:
The case involved a dispute over the applicability of Notification No. 181/88-C.E., which exempts metal containers from duty if used for specific purposes. The appellant contended that their product, "New Sapan Dairy Special," was different from skimmed milk powder and thus, not covered under the notification. The Ld. Collector (Appeals) rejected this argument, emphasizing that the appellant's claims were contradictory and not eligible for the exemption. The Tribunal upheld the appellant's position that their product was indeed different from skimmed milk powder, leading to the conclusion that the exemption under the notification was not available to them.
Issue 2: Application of Rule 196 for duty demand:
The Department alleged that the appellant had not paid Central Excise Duty (CED) for metal containers used for packing their product. The Additional Collector confirmed the demand under Rule 196, stating that the appellant had not fulfilled their duty liability. However, the Tribunal found that Rule 196 could not be invoked as there was no failure to account for the goods under Chapter X, despite the non-applicability of Notification No. 181/88 to the appellant's goods. The demand raised under Rule 196 was deemed inappropriate as there was complete accounting of the goods used for packing the product, and the duty was paid accordingly.
Issue 3: Compliance with Chapter X procedure for duty exemption:
The appellant argued that they followed the Chapter X procedure for obtaining metal containers at a nil rate of duty under Notification No. 181/88. They maintained that the conditions stipulated in Rule 196 for raising a demand were not met in their case. The Tribunal agreed with the appellant, emphasizing that the Chapter X procedure was correctly followed, and there was no violation that warranted invoking Rule 196. The appellant's compliance with the procedure and the absence of any violation of Rule 192 or Chapter X conditions led to the allowance of the appeal.
In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeals. The judgment highlighted the importance of correctly interpreting statutory notifications, following prescribed procedures, and ensuring compliance with relevant rules to determine duty liabilities accurately.
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1999 (10) TMI 679
Issues: Classification of Rubberised Cotton Hose Pipes, Eligibility for exemption under Notification No. 18/74.
Classification of Rubberised Cotton Hose Pipes:
The issue in this judgment revolves around the classification of Rubberised Cotton Hose Pipes, specifically agricultural and fire hose pipes. The appellants argued for classification under T1 16A(3) as unhardened vulcanized rubber pipes, while the Department classified them under T1 19.1(b) as 'Cotton fabrics subjected to rubberizing.' The test report described the product as a cotton hose pipe with a rubbery pink coating but did not confirm unhardened vulcanized rubber. The Collector ruled out classification under T1 16 due to market understanding and lack of evidence on the rubber lining. Relying on the decision of the Hon'ble Madras High Court, the Tribunal concluded that the product falls under T1 19.1(b) as rubberized cotton fabric, affirming the Department's classification.
Eligibility for Exemption under Notification No. 18/74:
The next issue addressed in the judgment is the eligibility of the product for exemption under Notification No. 18/74, which benefits goods manufactured without the aid of power. Evidence, including statements from the Rubber Technologist and Company Manager, confirmed the use of power for steering/mixing the rubber compound during manufacturing. As power was utilized in the production process, the product did not qualify for the exemption under the notification. Consequently, the Tribunal upheld the demand confirmation and the penalty imposed on the appellant, rejecting the appeal.
In conclusion, the Appellate Tribunal CEGAT, New Delhi, in the case concerning the classification of Rubberised Cotton Hose Pipes and eligibility for exemption under Notification No. 18/74, upheld the Department's classification under T1 19.1(b) based on the Madras High Court decision. Additionally, the Tribunal ruled that the product did not qualify for the exemption as power was used in the manufacturing process, affirming the demand confirmation and penalty imposition.
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1999 (10) TMI 678
Issues Involved:
1. Excisability and dutiability of chewing tobacco kimam.
2. Marketability of the product.
3. Limitation and suppression of facts.
4. Applicability of Modvat credit and exemption under Notification No. 121/94-C.E.
5. Compliance with Chapter X Procedure.
6. Quantum of penalties and fines.
Detailed Analysis:
1. Excisability and Dutiability of Chewing Tobacco Kimam:
The Tribunal confirmed that chewing tobacco kimam, manufactured by mixing raw kimam with various ingredients, was excisable and dutiable under sub-heading No. 2404.49 prior to 23-7-1996 and sub-heading No. 2404.40 thereafter. The appellants had not disclosed the manufacturing premises or paid the required central excise duty, leading to a demand of Rs. 16,91,79,394.29 for M/s. Dharampal Satyapal and similar demands for other appellants. The Tribunal upheld the adjudicating authority's view that the chewing tobacco kimam was a manufactured and marketable product, confirming the duty liability.
2. Marketability of the Product:
The Tribunal found that chewing tobacco kimam was a marketable commodity, as evidenced by the fact that it was being sold by other manufacturers who were paying central excise duty. Statements from various manufacturers confirmed that the product was known in the market as chewing tobacco kimam and was sold as such. The Tribunal rejected the appellants' argument that their product was not marketable unless diluted, emphasizing that marketability was established by the fact that similar products were being sold and taxed.
3. Limitation and Suppression of Facts:
The Tribunal agreed with the adjudicating authority that the extended period of limitation was applicable due to the appellants' failure to declare their manufacturing premises, obtain proper central excise registration, and follow prescribed procedures. The appellants' argument that they believed no duty was payable was rejected, as they were aware that similar products were dutiable. The Tribunal cited the Supreme Court's decision in Tamilnadu Housing Board v. C.C.E. to support the view that suppression of facts with intent to evade duty justified the extended period of limitation.
4. Applicability of Modvat Credit and Exemption Under Notification No. 121/94-C.E.:
The Tribunal held that the appellants could not claim Modvat credit or exemption under Notification No. 121/94-C.E. without first paying the appropriate central excise duty on the inputs. The fiscal benefits were subject to the conditions laid down in the relevant provisions of the law, and the appellants could not presume eligibility without fulfilling these conditions. The Tribunal emphasized that the availability of legal alternatives could not justify an illegal act.
5. Compliance with Chapter X Procedure:
The Tribunal noted that the appellants had not followed the Chapter X Procedure, which was a prerequisite for availing exemption under Notification No. 121/94-C.E. However, the Tribunal acknowledged that substantial compliance with the procedure could be considered in the interest of natural justice. The Tribunal directed the adjudicating authority to re-examine whether there was substantial compliance regarding the receipt and utilization of the chewing tobacco kimam by the appellants' factories, and to reconsider the duty liability and penalties accordingly.
6. Quantum of Penalties and Fines:
The Tribunal directed the adjudicating authority to reconsider the quantum of penalties and fines in light of the re-examination of the applicability of Notification No. 121/94-C.E. The Tribunal emphasized that the appellants should be given an opportunity to present their case before the final order is passed.
Conclusion:
The appeals were disposed of with directions for re-examination of the limited issue of substantial compliance with Chapter X Procedure and reconsideration of duty liability, penalties, and fines. The Tribunal upheld the excisability and dutiability of chewing tobacco kimam and the applicability of the extended period of limitation due to suppression of facts.
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1999 (10) TMI 661
Issues Involved:1. Legality of the meeting dated 25-6-1997 regarding the issue of Rights shares. 2. Enforceability of clause 8 of the MoU restricting the number of Directors to three. Summary:Issue 1: Legality of the Meeting and Rights Shares AllotmentThe Plaintiffs contended that the meeting dated 25-6-1997, which decided to issue Rights shares, was illegal as the nominee-Director of RIL, Baluja, was not given any written notice of the meeting, violating section 286 of the Companies Act, 1956. They also argued that RIL did not receive any Letter of Offer for the Rights shares, and that the meeting on 12-8-1997 lacked quorum as Chetan, an interested Director, voted on the allotment. Upon review, the court found it difficult to accept that the Letter of Offer was not sent to RIL, noting that the Plaintiffs were not interested in contributing any amount to Defendant No. 1 company. The court observed that the Defendants were not acting clandestinely, as evidenced by the correspondence between the brothers. The court held that the allotment of Rights shares to Chetan could not be declared void, and thus, the Plaintiffs were not entitled to restrain the Defendants from implementing the Resolutions regarding the Rights shares. Issue 2: Enforceability of Clause 8 of the MoUThe Plaintiffs argued that the appointment of an Additional Director by Defendant No. 1 company violated clause 8 of the MoU, which restricted the number of Directors to three as long as RIL held shares of the face value of Rs. 10 lakhs. The court noted that Defendant No. 1 is a closely held family company with no restriction in its Articles of Association regarding the number of Directors. The court referenced the Supreme Court's decision in V.B. Rangaraj v. V.B. Gopalkrishnan, which held that any agreement imposing additional restrictions not specified in the Articles of Association is not binding on the company or shareholders. The court emphasized that pooling agreements, which are enforceable regarding shareholders' voting rights, cannot be used to restrict Directors' statutory powers to manage the company. The court concluded that clause 8 of the MoU, which limits the number of Directors, cannot be specifically enforced as it curtails the fiduciary duties of the Directors. Therefore, the Plaintiffs were not entitled to restrain the appointment of an Additional Director. Conclusion:The court dismissed the Appeal and Notice of Motion, stating that the observations made are prima facie for the decision of the Appeal and Notice of Motion and do not affect the rights and contentions of the parties in the suit. The status quo regarding the appointment of the Additional Director will continue for six weeks from the date of the judgment.
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1999 (10) TMI 660
Issues Involved:
1. Validity of the conditions imposed by the Government of Tamil Nadu regarding the payment schedule of deferred sales tax.
2. Appointment of a nominee director by the Government on the board of management of the petitioner-mills.
3. Compliance of the Government's actions with the scheme sanctioned by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).
Issue-wise Detailed Analysis:
1. Validity of the Conditions Imposed by the Government of Tamil Nadu Regarding the Payment Schedule of Deferred Sales Tax:
The petitioner-mills sought a writ of certiorarified mandamus to quash the Government Orders (G.O. Ms. No. 304, dated 12-10-1990, and G.O. Ms. No. 97, dated 25-2-1991) and the consequential orders passed by the Commercial Tax Officer (CTO) regarding the payment schedule of deferred sales tax. The petitioner argued that the conditions for repayment commencing from the fourth year (i.e., 1993-94) instead of after March 2000, as provided in the sanctioned scheme, were contrary to the terms of the scheme and violated their fundamental and constitutional rights.
The court noted that during the AAIFR meeting on 13-6-1990, the Joint Director of Handlooms and Textiles informed that the Government would consider two concessions: power cut exemption for three years and deferment of sales tax for three years. The Government of Tamil Nadu sanctioned these concessions through G.O. Ms. No. 304, dated 12-10-1990. The court observed that the Government had not given any unconditional consent and that the deferment of sales tax for three years was subject to review for extension for another two years. The court held that the Government's actions were discretionary and not obligatory, and the petitioner could not question the mode and time of the concessions granted. Thus, the court found no merit in the petitioner's claims regarding the payment schedule of deferred sales tax.
2. Appointment of a Nominee Director by the Government on the Board of Management of the Petitioner-Mills:
The petitioner contested the Government's condition to appoint a nominee director on the board of management of the mills, arguing that it was unwarranted and opposed to the sanctioned scheme. The petitioner claimed that the IDBI was already appointed as an implementing agency to monitor the company, making the Government's condition redundant.
The court noted that the Government imposed this condition to protect its interests in the funds sanctioned by way of deferment of sales tax. The nominee director was to monitor the utilization of funds and head a sub-committee with the power to veto decisions against the mills' interests. The court found that these conditions were standard practice for mills seeking concessions and were intended to prevent mismanagement and further closures, thereby protecting the interests of the workers and the mills. The court concluded that the appointment of a nominee director did not adversely affect the petitioner's interests and was in line with the Government's commitment to assist the unit.
3. Compliance of the Government's Actions with the Scheme Sanctioned by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR):
The petitioner argued that the Government's conditions were inconsistent with the AAIFR-sanctioned scheme. The court examined the facts and found that the Government had committed to granting two concessions: power cut exemption and deferment of sales tax for three years, subject to review for extension. The AAIFR had recommended these concessions favorably, and the Government had fulfilled its commitment by sanctioning them.
The court held that the Government's conditions were consistent with its commitment before the AAIFR and were imposed to safeguard the interests of the mills, workers, and Government funds. The court emphasized that the Government's actions were discretionary and aimed at ensuring the viability and proper management of the mills. Thus, the court concluded that the Government's conditions did not violate the sanctioned scheme and were justified.
Conclusion:
The court dismissed the writ petition, finding no merit in the petitioner's claims. The conditions imposed by the Government regarding the payment schedule of deferred sales tax and the appointment of a nominee director were upheld as valid and consistent with the sanctioned scheme. The court emphasized that these conditions were in the interest of the mills, workers, and Government funds, and did not adversely affect the petitioner's rights.
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1999 (10) TMI 659
Issues:
1. Opinion of the Board of Industrial and Financial Reconstruction (BIFR) on winding up Varsha Spinning Mills Ltd.
2. Confirmation of the opinion by BIFR regarding the viability of the company.
3. Appeal filed against BIFR's order before the Appellate Authority for Industrial & Financial Reconstruction.
4. Submission and evaluation of the rehabilitation scheme by Varsha Spinning Mills Ltd.
5. Failure to deposit the required amount for rehabilitation.
6. Lack of concrete proposals for rehabilitation and non-compliance with directives.
7. Adjournments and lack of settlement leading to the upholding of the winding-up order.
8. Court's decision based on the company's inability to discharge financial debts.
9. Directions for the Official Liquidator to take over the company's assets and records post winding up.
Analysis:
1. The BIFR conducted an enquiry under the Sick Industrial Companies (Special Provisions) Act, 1985, and opined that Varsha Spinning Mills Ltd. should be wound up, leading to a referral to the High Court for further action. The BIFR found the promoters lacking in seriousness and resources for rehabilitation despite opportunities given.
2. BIFR confirmed its opinion that the company was not likely to become viable in the future and thus recommended winding up in the public interest due to financial constraints.
3. An appeal was filed against BIFR's order before the Appellate Authority, citing the possibility of settlement with financial institutions, but no concrete proposal was presented, leading to the upholding of the winding-up order.
4. Varsha Spinning Mills Ltd. submitted a rehabilitation scheme based on optimistic assumptions, but the required funds were not deposited as directed, resulting in a lack of viable proposals for rehabilitation.
5. Despite multiple directives and opportunities, the company failed to deposit the necessary amount for rehabilitation, leading to the conclusion that the company was not likely to recover financially.
6. Lack of compliance with directives and failure to present worthwhile proposals for rehabilitation resulted in the upholding of the winding-up order by the Appellate Authority.
7. Adjournments and lack of settlement attempts further supported the decision to uphold the winding-up order due to the company's inability to discharge its financial debts.
8. The High Court upheld the orders of BIFR and the Appellate Authority based on the company's financial incapacity, leading to the winding up of Varsha Spinning Mills Ltd.
9. Following the winding up, the Official Liquidator was directed to take over the company's assets and records promptly, concluding the disposal of the company petition.
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1999 (10) TMI 658
Issues Involved:
1. Validity of the petitioner's status as a Director.
2. Wrongful withholding of company property.
3. Jurisdiction and maintainability of petitions under section 482 of the Code of Criminal Procedure.
4. Compliance with the Board of Directors' resolutions.
Detailed Analysis:
1. Validity of the Petitioner's Status as a Director:
The petitioner claimed to be a lifetime Director of the company as per Article 29 of the Memorandum of Articles of Association. However, the respondents argued that the petitioner ceased to be a Director due to his absence from three consecutive Board meetings. The trial court found that the petitioner had indeed absented himself from the meetings and thus ceased to be a Director. This finding was supported by the Board's resolution and the company's records. The petitioner contested this in civil court, which was pending.
2. Wrongful Withholding of Company Property:
The petitioner was found guilty under section 630 of the Companies Act, 1956, for wrongfully withholding the company's motor cycle and records. The trial court imposed a fine of Rs. 200 and ordered the return of the properties. The petitioner's revisions were dismissed by the Sessions Court, Coimbatore, and subsequent petitions under section 482 of the Code of Criminal Procedure were also dismissed by the High Court. The court emphasized that the petitioner, as an officer of the company, was obligated to return the property regardless of his directorial status.
3. Jurisdiction and Maintainability of Petitions under Section 482 of the Code of Criminal Procedure:
The petitioner filed multiple petitions under section 482, which were dismissed by the High Court. The court noted that the petitioner should have sought special leave from the Apex Court if aggrieved by the earlier orders. The repeated filing of petitions on the same grounds was deemed an abuse of the process of law. The court highlighted that inherent powers under section 482 should be used sparingly and not to circumvent statutory bars or create multiplicity of proceedings.
4. Compliance with the Board of Directors' Resolutions:
The court found that the company had passed a resolution to recover its property from the petitioner, which was supported by evidence. The petitioner was served with a notice to return the property but failed to comply. The court held that the petitioner was bound by the Board's resolution and his failure to return the property justified the complaints under section 630.
Conclusion:
The High Court dismissed the petitions, affirming the trial court's orders. The court reiterated that the petitioner's repeated attempts to challenge the orders under section 482 without new grounds constituted an abuse of process. The petitioner was directed to comply with the Board's resolutions and return the company property. The pending civil suit was deemed a separate matter and did not affect the criminal proceedings under section 630.
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1999 (10) TMI 657
Issues Involved:
1. Jurisdiction of the High Court vs. Debt Recovery Tribunal (DRT)
2. Interpretation of 'other proceedings' under Section 31 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993
3. Execution of a decree in the context of the Act
4. Transfer of pending cases to the DRT
Issue-wise Detailed Analysis:
1. Jurisdiction of the High Court vs. Debt Recovery Tribunal (DRT):
The primary issue was whether the High Court had jurisdiction to entertain the execution proceedings given the amount involved exceeded Rs. 10 lakhs, which typically falls under the purview of the Debt Recovery Tribunal as per Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
2. Interpretation of 'other proceedings' under Section 31 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:
The applicant's counsel argued that execution proceedings do not fall under 'other proceedings' as mentioned in Section 31 of the Act. He contended that the term 'other proceedings' should not include execution proceedings and supported his argument by referring to various provisions of the Act and Section 44A of the Code of Civil Procedure, 1908. However, the judgment clarified that the term 'debt' includes liabilities payable under a decree or order of any civil court, and thus, execution proceedings are covered under 'other proceedings' in Section 31 of the Act.
3. Execution of a decree in the context of the Act:
The court elaborated that to execute a decree, a decree holder must first move the Tribunal by making an application under Section 19 of the Act and obtain an order to send a certificate under sub-section (7) of Section 19 to the Recovery Officer. The judgment emphasized that the execution of a decree must follow the procedure laid down under Section 19, and a certificate cannot be issued directly by the Tribunal to the Recovery Officer for recovery of the amount if the debt recoverable is a decree.
4. Transfer of pending cases to the DRT:
The judgment discussed the necessity of transferring pending execution proceedings to the DRT. It concluded that execution proceedings already pending in civil courts at the time of the establishment of the Tribunal need not be transferred to the DRT. The court reasoned that transferring such proceedings would cause unnecessary delays and confusion, contradicting the Act's objective of expeditious adjudication and recovery of debts. The judgment acknowledged that while 'other proceedings' in Section 31 include execution proceedings, a pragmatic approach should be taken to allow pending execution proceedings to continue in civil courts.
Conclusion:
The court held that the execution proceedings pending before the civil court as of the date of the establishment of the Tribunal (16-7-1999) need not be transferred to the DRT. Therefore, the High Court retained jurisdiction over the execution proceedings in this case. The receiver was directed to accept the offer of Umang Enterprises and hand over the hypothecated securities upon receiving the payment. The judge's order was disposed of accordingly.
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1999 (10) TMI 656
Issues Involved:
1. Compliance with SEBI and Stock Exchange directives.
2. Validity of allotment basis without considering withdrawal requests.
3. Requirement to deposit application monies in the designated bank.
4. Timeliness and compliance with listing application requirements.
5. Legal interpretation of sections 69 and 73 of the Companies Act.
Issue-wise Detailed Analysis:
1. Compliance with SEBI and Stock Exchange directives:
The petitioner-company did not comply with the directives from the Ludhiana Stock Exchange (LSE) and the Securities and Exchange Board of India (SEBI). Despite instructions to refund the subscription amount and deposit the funds in the State Bank of Patiala, the company failed to do so. SEBI's appellate authority issued orders on 18-2-1997 and 7-4-1997, directing the company to comply with specific conditions, including the deposit of funds in the State Bank of Patiala. The company's non-compliance led to the rejection of its listing application by LSE.
2. Validity of allotment basis without considering withdrawal requests:
The petitioner-company finalized the allotment basis without considering withdrawal requests received after the closure of the public issue. This exclusion of withdrawal requests led to a reduction in the subscription level below 100 percent but above 90 percent. The company argued that consultation with LSE was only required in cases of over-subscription, which was not applicable here. However, the court noted that the company unilaterally finalized the allotment without proper approval from LSE, which was a violation of the established procedures.
3. Requirement to deposit application monies in the designated bank:
The court emphasized the requirement under sections 69 and 73 of the Companies Act to deposit all monies received from applicants for shares in a separate bank account with the banker to the issue, which in this case was the State Bank of Patiala. The petitioner-company deposited the funds in Vyasa Bank instead and withdrew almost the entire amount shortly after, leaving only Rs. 4,940. This action was deemed a violation of the statutory provisions, as the funds were not kept intact for the purposes stipulated by the Act.
4. Timeliness and compliance with listing application requirements:
The listing period for the equity shares expired on 2-5-1996, but the petitioner-company filed the listing application with LSE on 11-6-1996, more than a month late. Additionally, the company did not publish the basis of allotment in two newspapers, as required, and failed to provide necessary confirmations from banks regarding the realization of cheques/drafts and stock investments. These failures contributed to LSE's decision to reject the listing application.
5. Legal interpretation of sections 69 and 73 of the Companies Act:
Sections 69 and 73 mandate that application monies must be deposited in a scheduled bank account maintained by the banker to the issue until the listing permission is granted or the funds are refunded to applicants. The court held that the petitioner-company's actions contravened these provisions, as the funds were not kept in the designated account, and the company attempted to manipulate the application monies. The statutory objective is to protect investors by ensuring that their funds are managed transparently and securely until the company's compliance with all legal requirements.
Conclusion:
The court dismissed the writ petition, affirming that the actions of LSE and SEBI were in accordance with the law to protect investors' interests. The petitioner-company's failure to comply with statutory requirements and directives from regulatory authorities justified the rejection of its listing application. The judgment underscores the importance of adhering to legal provisions and regulatory instructions in public share offerings.
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1999 (10) TMI 653
Issues Involved:
1. Right of the transferee to get shares registered in his name.
2. Grounds on which a public limited company can refuse to register shares.
3. Compliance with Section 292 of the Companies Act.
4. Compliance with Section 22A of the Securities Contracts (Regulation) Act.
5. Entitlement to dividends and other consequential reliefs.
Issue-wise Detailed Analysis:
1. Right of the transferee to get shares registered in his name:
The court affirmed that shares of a public limited company quoted at the stock exchange are freely transferable. The transferee is entitled to have the shares transferred in his name to exercise shareholder rights. The company cannot refuse to register shares arbitrarily or for collateral purposes but only for bona fide reasons in the interest of the company and shareholders. The petitioner-company had complied with all necessary requirements, and the respondent-company's refusal to register the shares was deemed unjustified and not bona fide.
2. Grounds on which a public limited company can refuse to register shares:
The respondent-company initially raised objections regarding discrepancies in the transfer documents, such as notarization issues, incorrect names, and incomplete information. However, these were rectified by the petitioner-company. The respondent later cited non-compliance with Section 292 of the Companies Act as a reason for refusal. The court found this ground to be an afterthought and not a valid reason for refusal. The Supreme Court's ruling in Luxmi Tea Co. Ltd. v. Pradip Kumar Sarkar was cited, emphasizing that refusal must be based on specified bona fide grounds and not arbitrary or collateral purposes.
3. Compliance with Section 292 of the Companies Act:
The court held that Section 292 pertains to the internal management of a company and does not relate to the transfer of shares. The respondent-company failed to provide specific evidence of non-compliance with Section 292 by the petitioner-company. The court noted that the respondent-company should have assumed compliance in the absence of contrary evidence. The refusal based on alleged non-compliance with Section 292 was deemed unjustified.
4. Compliance with Section 22A of the Securities Contracts (Regulation) Act:
Section 22A allows a company to refuse share transfer only on specific grounds, such as improper transfer instruments, contravention of law, prejudicial changes in the Board of Directors, or prohibition by court order. The court found no evidence that the petitioner-company violated any conditions under Section 22A. The respondent-company's refusal did not meet any of the stipulated grounds, making it unjustified.
5. Entitlement to dividends and other consequential reliefs:
The court ruled that the petitioner-company is entitled to dividends accrued on the shares from the date of purchase. The respondent-company's claim to appropriate dividends against amounts due from its former managing director was rejected as illegal. The court cited the Punjab and Haryana High Court's decision in Ambala Electric Supply Co. Ltd. v. Walaiti Lal Kohli, which supported the entitlement to dividends as incidental and consequential to the transfer of shares.
Conclusion:
The court directed the respondent-company to rectify its register of members to include the petitioner-company as the transferee of the shares. The respondent-company was also ordered to pay accrued dividends with interest at 12% per annum from the due date until repayment. The petition was allowed with costs of Rs. 10,000, and the respondent-company was instructed to file a notice of rectification with the Registrar of Companies within 30 days.
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1999 (10) TMI 652
Whether it was necessary to detain the appellant under the COFEPOSA?
Held that:- Writ allowed. The conclusion of the detaining authority on the facts of the present case, ‘there is likelihood of his being released on bail’ could not be said to be based on no relevant material.
However, in view of our findings, viz., non-placement of two material documents, one letter dated 19-4-1999 by the advocate of the detenu to the sponsoring authority and the other, letter dated 23-4-1999 by the detenu, before the detaining authority which were relevant and were likely to affect the satisfaction, hence we have no hesitation to hold that the detention of the petitioner under section 3(1) of the COFEPOSA vitiates and the detention order is unsustainable in law.
Accordingly the impugned detention order dated 28-4-1999 passed by the detaining authority under section 3(1)(i) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 quashed.
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1999 (10) TMI 649
Issues Involved:
1. Applicability of Section 34 of the Arbitration Act, 1940 in staying winding-up proceedings under Sections 433, 434, and 439 of the Companies Act, 1956.
2. Jurisdiction of the High Court in winding-up proceedings versus arbitration proceedings.
3. Bona fide disputes and their impact on winding-up petitions.
Detailed Analysis:
1. Applicability of Section 34 of the Arbitration Act, 1940:
The primary issue revolves around whether a winding-up application under Sections 433, 434, and 439 of the Companies Act, 1956, can be stayed based on an arbitration agreement between the petitioning creditor and the respondent company. The learned Single Judge had stayed the winding-up proceedings, allowing arbitration to proceed. However, the appellant contended that the jurisdiction to wind up a company is a special jurisdiction conferred on the High Courts under the Companies Act, which cannot be overridden by an arbitration agreement. The Supreme Court in Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. held that an arbitrator has no jurisdiction to order the winding-up of a company, as this power is conferred exclusively on the court under the Companies Act.
2. Jurisdiction of the High Court in Winding-Up Proceedings:
The judgment emphasizes that winding-up proceedings are distinct from arbitration disputes. The winding-up jurisdiction is a special jurisdiction conferred on the High Court to address the insolvency of a company, which is a matter of public interest and involves the collective interests of all creditors, shareholders, and contributories. The court's order in winding-up proceedings is an order in rem, affecting the company's status and its ability to continue operations. The Division Bench in Pure Drinks (New Delhi) Ltd. v. Goetze India Ltd. emphasized that the existence of an arbitration clause does not automatically stay winding-up proceedings, as the company court has the jurisdiction to consider the overall interests of all stakeholders.
3. Bona Fide Disputes and Their Impact on Winding-Up Petitions:
The existence of a bona fide dispute between the petitioning creditor and the respondent company is crucial in deciding whether to stay winding-up proceedings in favor of arbitration. The court must be satisfied that a genuine dispute exists and that it falls within the scope of the arbitration agreement. The Division Bench in Pure Drinks (New Delhi) Ltd. v. Goetze India Ltd. and S.N. Enterprises (P.) Ltd., In re, held that the winding-up proceedings cannot be stayed merely because an arbitration agreement exists. The court must examine whether the dispute is bona fide and whether it justifies staying the winding-up proceedings.
Conclusion:
The High Court held that the learned Single Judge erred in staying the winding-up proceedings solely based on the existence of an arbitration agreement. The court emphasized that the jurisdiction to wind up a company is a special jurisdiction that cannot be overridden by an arbitration agreement. The court must consider whether a bona fide dispute exists and whether it justifies staying the winding-up proceedings. The appeal was allowed, and the order under appeal was set aside, reviving the winding-up application to its original position. The Company Judge was directed to examine the existence of an arbitration agreement and the bona fide nature of the dispute before deciding whether to stay the winding-up proceedings.
Judgment:
The appeal is allowed, the order under appeal is set aside, and the winding-up application is revived to its original position. The Company Judge is to examine the existence of an arbitration agreement and the bona fide nature of the dispute before deciding on the stay of winding-up proceedings. No order as to costs.
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1999 (10) TMI 647
The High Court of Calcutta upheld the Company Law Board's order reconstituting the board of directors of Graphic Machinery and Appliances Pvt. Ltd. The appellant's appeal was dismissed due to lack of cooperation and failure to finalize accounts. The court found no legal infirmity in the order under appeal. The appeal was dismissed.
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1999 (10) TMI 646
Issues Involved:1. Whether a writ under Article 226 of the Constitution can be issued against the Stock Exchange, Mumbai. 2. Merits of the case concerning the Arbitration Committee's award and the requirement for the petitioner to deposit a sum for appeal. Issue-wise Detailed Analysis:1. Whether a writ under Article 226 of the Constitution can be issued against the Stock Exchange, Mumbai:2. A preliminary objection was raised by respondent No. 2, contending that a writ under Article 226 of the Constitution would not lie against respondent No. 1, the Stock Exchange, Mumbai. 3. The Stock Exchange, Mumbai, is a recognized Stock Exchange under the Securities Contracts (Regulation) Act, 1956, and is governed by its own rules, bye-laws, and regulations. The Central Government recognizes the Exchange under sections 3 and 19 of the Act and has the power to withdraw recognition under section 5. The Exchange must file periodical returns and annual reports with the Central Government and SEBI, and its rules and bye-laws must be approved by SEBI and the Central Government. SEBI can nominate members to the Governing Board, and the Central Government can supersede the Board and suspend business under sections 11 and 12, respectively. An appeal against refusal to list securities lies with the Central Government under section 22. 4. SEBI regulates the business and functions of the Exchange under section 11 of the SEBI Act, 1992, and the Central Government has control over SEBI under sections 16, 17, and 18. The appointment of the Exchange's Executive Director requires SEBI's approval. 5. Respondent No. 2's counsel cited several judgments to argue that no writ under Article 226 can be issued against the Stock Exchange, Mumbai, including Chander Mohan Khanna v. NCERT, Satish Nayak v. Cochin Stock Exchange Ltd., R. Jagadeesh Kumar v. P. Srinivasan, Rakesh Gupta v. Hyderabad Stock Exchange Ltd., and Tekraj Vasandi v. Union of India. 6. Conversely, the counsel for the petitioner and respondent No. 1 argued that the Stock Exchange, Mumbai, is amenable to writ jurisdiction under Article 226, citing various facts and circumstances and relying on judgments such as Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani and Mrs. Sejal Rikeen Dalal v. Stock Exchange. 7. The Supreme Court in Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust held that a writ under Article 226 can be issued against any person or body performing public duty. This Court in Mrs. Sejal Rikeen Dalal's case concluded that the Stock Exchange, Bombay, is amenable to writ jurisdiction under Article 226 due to its statutory functions and public interest objectives. 8. The petitioner's counsel also relied on Rajasthan State Electricity Board v. Mohan Lal and Ajay Hasia v. Khalid Mujib Sehravardi, where the Supreme Court gave a wide interpretation to the term 'authorities' under Article 12 to include various statutory corporations. 12. The respondent No. 1's counsel further supported the amenability of the Stock Exchange to writ jurisdiction under Article 226 by citing U.P. State Co-op. Land Development Bank Ltd. v. Chandra Bhan Dubey and other significant judgments like Dwarka Nath v. ITO and Praga Tools Corpn. v. C.A. Imanual. 21. From the judgments cited, it is clear that the jurisdiction under Article 226 can be exercised against any person or authority rendering a public utility service. The objective of a writ of mandamus is to reach injustice wherever it is found. 22. Based on the facts and circumstances and the judgments cited, the Court held that a writ of mandamus under Article 226 would lie against the Mumbai Stock Exchange. 2. Merits of the case concerning the Arbitration Committee's award and the requirement for the petitioner to deposit a sum for appeal:23. In an Arbitration proceeding before the Arbitration Committee of Mumbai Stock Exchange, an award was passed in favor of respondent No. 2, directing the petitioner to pay Rs. 1,14,38,467.75 by the award dated 26-6-1999. 24. The petitioner filed an appeal against the award. Bye-law 291A of Mumbai Stock Exchange requires a full deposit of the amount unless exempted by the Governing Body or the President. The petitioner sought full exemption from deposit due to financial constraints and the value of her membership card. 25. The Mumbai Stock Exchange informed the petitioner that the Governing Board decided her appeal would be considered if she deposited Rs. 50 lakhs. 26. The petitioner made another plea for total exemption, citing her financial condition. The Board allowed her to deposit securities worth Rs. 50 lakhs instead of cash and considered her existing deposits with the Exchange. 27. The Stock Exchange counsel pointed out that full deposits are typically required, and the petitioner had already received more than a 50% concession and the option to deposit securities. 28. Respondent No. 2's counsel emphasized that the award becomes a decree under the Arbitration and Conciliation Act, 1996, and the full amount should be deposited to secure his client's interests. 29. The Court found that the petitioner had already been given a significant concession and the option to deposit securities. Therefore, the Governing Board's decisions were not unreasonable, illegal, or arbitrary. 30. The petition was dismissed as devoid of merits.
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1999 (10) TMI 644
Issues: Modification of court order for deposit, discrepancies in material supplied, inability to pay debts, dishonored cheques, receipt of payment from Delhi Jal Board, rectification of defects in supplied equipments, direction for deposit and security, inspection of equipments, disposal of application.
1. Modification of Court Order for Deposit:
The respondent filed an application seeking modification of the court order passed in C.A. No. 1887 of 1998, directing them to deposit Rs. 50 lakhs within two weeks. The respondent argued that they were unable to pay as the petitioner did not rectify discrepancies pointed out by the Delhi Jal Board, withholding about Rs. one crore due to financial constraints. The petitioner contended that the respondent received Rs. 50 lakhs from the Delhi Jal Board, issued dishonored cheques, and was unable to pay debts, opposing any modification of the order.
2. Discrepancies in Material Supplied:
The respondent claimed that no amount was due as the petitioner had not rectified discrepancies in the material supplied, as requested by the Delhi Jal Board. The financial constraint due to the petitioner's failure to rectify defects led to the inability to deposit the amount as per the court order, necessitating modification.
3. Inability to Pay Debts:
The petitioner filed a winding-up petition against the respondent under the Companies Act, alleging the respondent's inability to pay debts. The respondent acknowledged dishonored cheques and financial constraints, proposing to pay Rs. 25 lakhs and provide security for the balance amount upon rectification of defects, as per the court's directions.
4. Receipt of Payment from Delhi Jal Board:
It was established that the respondent received Rs. 50 lakhs from the Delhi Jal Board for supplies made by the petitioner, corroborated by documents. The petitioner supplied equipment worth around Rs. 60 lakhs for which defects were pointed out by the Delhi Jal Board, necessitating rectification by the petitioner.
5. Rectification of Defects in Supplied Equipments:
The court directed the respondent to deposit Rs. 25 lakhs within three weeks and furnish security for the balance amount, contingent on the petitioner rectifying defects in supplied equipment. Representatives of both parties were to inspect the equipment at the Delhi Jal Board's office, ensuring rectification of any defects to release withheld payment.
6. Direction for Deposit and Security, Inspection of Equipments:
In compliance with the respondent's undertaking, the court directed the deposit of Rs. 25 lakhs within a specified timeframe, releasing the amount to the petitioner upon satisfactory security. The balance amount required security for restitution, with both parties' representatives inspecting and rectifying defects in the supplied equipment.
7. Disposal of Application:
The court disposed of the application based on the directions issued for deposit, security, and inspection of equipment, ensuring rectification of defects and release of withheld payment, thereby resolving the dispute between the parties.
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1999 (10) TMI 641
Whether the order for eviction should be passed or not?
whether an application for eviction under the Rent Control Act was maintainable notwithstanding the provisions of section 22?
Held that:- Appeal dismissed. The High Court and the Appellate Bench of the Small Causes Chief Court, are, therefore, right in coming to the conclusion that the provisions of section 22 did not in any way prevent the filing of an eviction petition on the ground of non-payment of rent and the order under section 11(4) of the Bombay Rent Act could be passed.
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