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1962 (4) TMI 40
Issues: Preferential claim of Union of India under Companies Act, 1956.
The judgment pertains to a petition under section 446 read with section 528 of the Companies Act, 1956, filed by the Union of India against a company in liquidation. The Union of India claimed outstanding amounts related to the sale of machinery, rent for premises, and other dues. The company admitted liability for certain amounts but disputed one specific claim. The key contention was whether the Union of India's claim of Rs. 16,804.27 should be treated as a preferential claim under the Companies Act, 1956.
The Union of India claimed that the outstanding amounts due to them should be treated as preferential claims. They relied on legal precedents and argued that debts due to the Crown should have priority over debts due to private citizens. The petitioner referred to a previous judgment by the same judge in a property tax case to support their claim for preferential treatment.
The official liquidator of the company contested the preferential claim, citing section 530 of the Companies Act, 1956, and referring to past court decisions. The official liquidator argued that the specific debts claimed by the Union of India did not fall under the category of preferential payments as outlined in the Companies Act, 1956. They highlighted that the Act specified certain types of debts that could be considered preferential, and the Union of India's claims did not align with those criteria.
The judge analyzed the arguments presented by both parties and reviewed relevant legal provisions and case law. Referring to past judgments involving similar issues, the judge concluded that the Union of India's claim did not qualify as a preferential claim under the Companies Act, 1956. The judge emphasized that the Act specified certain types of debts that could be prioritized, and the Union of India's claims did not fall within those categories. Therefore, the judge ruled that the Union of India was entitled to receive the outstanding amount of Rs. 16,804.27 from the company as an ordinary creditor, not as a preferential claimant.
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1962 (4) TMI 39
Issues Involved:
1. Allotment of new shares by Jay Engineering Works Limited.
2. Rectification of the register of members.
3. Rights of the petitioner as the holder of shares.
4. Validity of renunciation of new shares by previous holders.
5. Legal interpretation of "holder" vs. "member" under Section 81 of the Companies Act, 1956.
6. Bona fide purchaser for value without notice.
Issue-wise Detailed Analysis:
1. Allotment of New Shares by Jay Engineering Works Limited:
The petitioner requested that Jay Engineering Works Limited allot new shares issued by a resolution dated January 13, 1961, corresponding to the 500 shares held by the petitioner. The company had passed a resolution on October 15, 1960, for increasing share capital and another resolution on January 13, 1961, offering right shares at a ratio of two shares for every three shares held.
2. Rectification of the Register of Members:
The petitioner sought rectification of the register of members to include their name as the registered holder of the new shares corresponding to the 500 shares. The petitioner had purchased these shares in June 1960, and the shares were registered in the name of the petitioner by February 27, 1961.
3. Rights of the Petitioner as the Holder of Shares:
The petitioner argued that as the holder of the shares, they were entitled to the new shares issued by the company. The court examined the legal definition of "holder" and "member" under the Companies Act, 1956, and concluded that the petitioner, as the holder of the shares at the date of the offer, was entitled to the new shares.
4. Validity of Renunciation of New Shares by Previous Holders:
The previous holders, respondents Nos. 2 and 3, allegedly executed letters of renunciation in favor of respondents Nos. 4 and 5. The court found that the respondent No. 3 had no right to accept the offer of new shares or to execute letters of renunciation, as the petitioner was the holder of the shares at the date of the offer. Therefore, the renunciation by respondent No. 3 was invalid and inoperative, and respondents Nos. 4 and 5 acquired no rights through such renunciation.
5. Legal Interpretation of "Holder" vs. "Member" under Section 81 of the Companies Act, 1956:
The court noted a deliberate departure by Parliament in the language of Section 81, which prescribed that new shares should be offered to "holders" of equity shares rather than "members." The court emphasized that a "holder" may not necessarily be a "member" and concluded that the rights under Section 81 should be enjoyed by "holders" of shares at the date of the offer.
6. Bona Fide Purchaser for Value Without Notice:
Respondents Nos. 4 and 5 claimed to be bona fide purchasers for value without notice. However, the court found that there were no specific averments regarding the consideration paid by the purchasers. The affidavits were silent on the amount paid or the consideration that passed from the purchasers to the sellers. Consequently, the court did not entertain the plea of bona fide purchase for value without notice.
Conclusion:
The court ordered in favor of the petitioner, directing Jay Engineering Works Limited to allot the new shares to the petitioner and rectify the register of members accordingly. The petitioner was awarded costs from respondents Nos. 2 to 5, while the company was to bear its own costs.
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1962 (4) TMI 38
What are the terms and conditions on which the deposits in question were made?
Whether on those terms and conditions there has been a violation of section 4(1) of the Act by the appellant?
Whether the imposition of penalty under section 23(1)(a) of the Act is bad on the ground that the section is in contravention of article 14 and in consequence void?
Held that:- We are satisfied that the deposits in account No. 50180 were made by the German firms on the conditions stated by the appellant. We have reached this conclusion on a consideration of the evidence on record, without reference to any abstract doctrine as to burden of proof. But it is only right to observe, that the proceedings under the Act are quasi-criminal in character and it is the duty of the respondent as prosecutor to make out beyond all s reasonable doubt that there has been a violation of the law
The right of the appellant to the amounts in deposit is, it is argued, contingent on the happening of these events and that until then there was no debt due to him and section 4(1) had no application.
The appellant has only a contingent Tight to the amounts standing in credit in account No. 50180 and that the deposits were made in the bank not in the course of normal banking business but under a special arrangement, it must be held that there was no lending of those amounts by the appellant to the bank within section 4(1) of the Act and the order of the Appellate Board imposing a fine of ₹ 5 lakhs on him under section 23(1)(a) must be held to be illegal and set aside.
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1962 (4) TMI 29
Issues:
1. Appointment of an administrator to conduct the affairs of a private limited company.
2. Dispute over ownership of shares and management control.
3. Allegations of oppression and deadlock in company management.
4. Just and equitable winding up of the company.
5. Jurisdiction of the court to appoint an administrator without invoking specific provisions of the Companies Act.
Detailed Analysis:
1. The judgment arose from a dispute regarding the appointment of an administrator to manage the affairs of a private limited company, Gitanjali Press (Private) Ltd., during certain pending appeals. The company was incorporated under the Indian Companies Act, 1913, and issues arose following the death of the managing director, leading to disagreements among the heirs and other shareholders.
2. The dispute primarily revolved around the ownership of shares, with the heirs of the deceased claiming exclusive rights to the shares held by the deceased managing director. Allegations of oppression and mismanagement by the current managing director were raised, leading to a petition for winding up the company under the Companies Act, 1956, citing inability to pay debts and deadlock in management.
3. The court found that while there were no grounds for winding up the company, there were concerns regarding the management and control exercised by the current managing director, who was accused of oppressing the other shareholders despite holding a minority of shares. The court appointed an administrator to oversee the company's affairs, citing the need to prevent sole control by the managing director.
4. The judgment emphasized the importance of following the procedures outlined in the Companies Act, specifically sections 397 and 398, for addressing internal management disputes within a company. It highlighted that the court's intervention should be based on specific conditions and circumstances justifying such actions, rather than appointing an administrator without proper invocation of relevant provisions.
5. The court concluded that the appointment of an administrator without keeping the winding-up petition pending was not in line with the provisions of the Companies Act. It allowed the appeal, emphasizing the need for shareholders to follow the appropriate legal procedures under sections 397 and 398 if seeking court intervention in company management matters. The judgment clarified the limitations of the court's jurisdiction in such cases and highlighted the importance of adhering to the statutory framework for addressing internal disputes within a company.
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1962 (4) TMI 28
Conviction under section 120B read with section 409, Indian Penal Code and section 477A, Indian Penal Code - Held that:- The vouchers were falsified with one intention only and that was to let it go unnoticed that the Union Agencies had got funds from the Insurance Company. If they had shown the money received and paid to Bhagwati Trading Company, it was possible to trace the money back to the Insurance Company through Bhagwati Trading Company which received the money from the Insurance Company through crossed cheques as well. Whoever would have tried to find out the source of the money would have been deceived by the entries. The Union Agencies made wrongful gain from the diversion of the Insurance Company's funds to it through Bhagwati Trading Company and the insurance Company suffered loss of funds. The false entries were made to cover up the diversion of funds and were thus to conceal and, therefore, to further the dishonest act already committed.
In the present case, introduction of Bhagwati Trading Company in the transactions was the first step to carry out deception about the actual payment of money out of the funds of the Insurance Company to the Union Agencies.
The second step of suppressing the name of Bhagwati Trading Company in the papers of the Union Agencies, Delhi, made it more difficult to trace the passing of the money of the Insurance Company to the Union Agencies and, therefore, the falsification of the journal vouchers related back to the original diversion of the Insurance Company's moneys to the Union Agencies and was with a view to deceive any such person in future who will be tracing the source of the money received by the Union Agencies.
We are therefore of opinion that Gurha has been rightly held to have been in the conspiracy and to have abetted the making of the false journal vouchers.In view of the above, we are of opinion that the appellants have been rightly convicted of the offences charged.
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1962 (4) TMI 7
Whether it was competent to the company by a subsequent resolution to reverse an earlier resolution declaring the dividend?
Held that:- Payment made as dividend by a company to its shareholders does not lose that character merely because it is paid out of capital. Under the Income-tax Act, liability to pay tax attaches as soon as dividend is paid, credited or distributed or is so declared. The Act does not contemplate an enquiry whether the dividend is properly paid, credited or distributed before liability to pay the tax attaches thereto. The answer to the contention for reasons already set out by us must be in the negative. Appeal dismissed.
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1962 (4) TMI 6
How far section 35(5) is retrospective and whether it would apply to original assessments completed before April 1, 1952, is no longer res integra?
Held that:- Here, the original assessment was made before the amendment, and to that assessment the amended, provision cannot still be made applicable, even though the assessments of the firms were after April 1, 1952. The assessment of the respondents was a final assessment before April 1, 1952, and sub-section (5) has not been made applicable to such assessment, either expressly or by implication. In our opinion, sub-section (5) could not be used in this case, and the decision of the High Court was right.
Being a final assessment, it could be rectified only under the law, as it stood then. That law did not include the fiction enacted by sub-section (5), which, when enacted, could not be used in those cases which had been finally closed before April 1, 1952. Appeal dismissed.
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1962 (4) TMI 5
Whether the U.P. Zamindari Abolition and Land Reforms Act (U.P. Act 1 of 1951) is unconstitutional and void inasmuch as it is beyond the legislative competence of the U.P. Legislature, and this contention raises the question about the construction of entry 49 in List II of the Seventh Schedule of the Constitution?
Held that:- The fact that agricultural income having been specifically provided by entry 46 cannot be deemed to be included in entry 49, does not justify the argument that the word " lands " in the latter entry does not include agricultural lands. There can be no doubt that the Act was within the legislative competence of the U.P. Legislature and so, the challenge to its validity on the ground that it has been passed without legislative competence must be rejected.
Whenever the validity of a taxing statute is challenged on the ground that it contravenes article 14 or article 19, the challenge cannot be thrown out on the preliminary ground that a tax law is beyond such challenge, but its merits must be carefully examined. Therefore, in our opinion the challenge to the validity of the Act on the ground that it contravenes article 31(2) is not well-founded.
The petitioner has not stated the extent of the rent which he is required to pay for his land-holdings. He holds the lands as bhumidar and the respondents contend that the rent recovered from bhumidars is very law. It was even suggested during the course of argument by Mr. Aggarwal that the rent recovered from the bhumidars would not exceed 1% of the gross income and in some cases it may even be less. Unfortunately, the petitioner has not made any statement about this important particular. The operation of the rates prescribed by the Schedule is based on the annual valuation of the lands, and the said valuation is determined ultimately on the basis of the rent, so that unless the rent is known, the extent of the impost cannot be adequately judged. Therefore, in our opinion, on the material adduced by the petitioner before us, it is impossible to accept the argument that the tax levied by the Act is confiscatory. Besides, as we have already seen, the scheme of the present Act does not disclose any constitutional infirmity either in its charging sections or in the sections providing for the procedure for the levy of the tax and its recovery. That is why we feel no hesitation in holding that there is no substance in the plea that the Act is a colourable piece of legislation. Appeal dismissed.
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1962 (4) TMI 4
Whether in computing the profits of a business carried on by a company deduction shall be made in respect of any remuneration to any managing agent where such remuneration is included in the profits of the managing agent's business for the purposes of the war profits tax ?
Held that:- It is unnecessary for our present purpose to consider whether besides section 5(1)(b), already referred to, there are other contingencies in which remuneration received by a director could be held not to be " included " in the latter's profits under the Ordinance, since in the case before us it is admitted that the remuneration received by the managing agent was liable to be included in the computation of his profits for the purposes of the war profits tax and, therefore, neither the fact that the managing agent did not " include " the sum in his return, nor the default of the assessing authority to correct this error by " including " the sum in his assessment, is any reason for depriving the respondent company of the benefit of proviso (b) to rule 4(1). Appeal dismissed.
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1962 (4) TMI 3
Issues:
1. Validity of the certificate issued under section 46(2) of the Income-tax Act.
2. Interpretation of the term "arrears due from an assessee" in section 46(2).
3. Applicability of sections 45, 46(1), and 46(2) to legal representatives of an assessee.
Analysis:
The case involved the validity of a certificate issued under section 46(2) of the Income-tax Act to recover tax arrears from a legal representative of a deceased assessee. The respondent, a legal representative, challenged the certificate and the recourse to provisions of the Revenue Recovery Act. The High Court focused on whether the sum demanded from the respondent based on the certificate could be considered "arrears due from an assessee." The High Court relied on a previous decision in Alfred's case, which distinguished between an "assessee" and "other person" under section 29 of the Act. The High Court held that a legal representative cannot be treated as an assessee under section 46(1). Therefore, the High Court quashed the certificate and set aside the notice issued by the Tahsildar.
However, a subsequent decision by the Supreme Court in Additional Income-tax Officer v. Alfred reversed the interpretation given in Alfred's case. The Supreme Court clarified that the legal representative of an assessee is deemed to be an assessee for the purpose of tax assessment, levy, and collection. The distinction between an "assessee" and "other person" under section 29 does not affect the legal representative's liability as an assessee in default. Consequently, the provisions of sections 45, 46(1), and 46(2) apply to legal representatives, and the certificate issued under section 46(2) was deemed valid.
Therefore, the Supreme Court allowed the appeal, setting aside the High Court's judgment and dismissing the writ petition. The court held that both the certificate under section 46(2) and the notice issued were valid, emphasizing the legal representative's liability as an assessee for tax collection purposes. The decision clarified the applicability of tax recovery provisions to legal representatives of deceased assessees, establishing their obligation to pay tax arrears as if they were the assessee themselves.
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1962 (4) TMI 2
Issues Involved:
1. Legality of invoking Section 178-A of the Sea Customs Act.
2. Violation of natural justice in relying on statements recorded behind the petitioner's back.
3. Reasonableness of the Collector's order in confiscating the gold.
4. Grounds for issuance of a writ of certiorari or mandamus.
Issue-wise Detailed Analysis:
1. Legality of Invoking Section 178-A of the Sea Customs Act:
The petitioner challenged the invocation of Section 178-A, arguing that there was no "reasonable belief" that the gold was smuggled at the time of seizure. The court noted that the gold was initially detained by police and later handed over to Customs. The "reasonable belief" was based on the statement from Chunilal of M/s. Amichand Nagindas and the uncommercial conduct of the petitioner. The court held that the Collector's belief was reasonably founded on these circumstances, and thus, Section 178-A was correctly applied.
2. Violation of Natural Justice:
The petitioner contended that the Collector's reliance on Chunilal's statements, recorded behind his back, violated natural justice. The court found that the petitioner was aware of Chunilal's stance and had access to his statements. The petitioner did not request to cross-examine Chunilal, and there was no procedural irregularity or miscarriage of justice. Thus, the court rejected the claim of a breach of natural justice.
3. Reasonableness of the Collector's Order:
The court examined whether the Collector's decision to confiscate the gold was unreasonable. The Collector found the petitioner's explanations for the gold's origin and the transaction with M/s. Amichand Nagindas unconvincing. The court noted that the petitioner's business was run on borrowed capital, making it unlikely for him to incur a loss willingly. The petitioner's conduct, including sending a special messenger and incurring additional expenses, was seen as commercially irrational. The court concluded that the Collector's finding that the gold was contraband was not plainly unreasonable or perverse.
4. Grounds for Issuance of a Writ:
The court considered whether there were grounds for issuing a writ of certiorari or mandamus. The petitioner failed to demonstrate an error of law or excess of jurisdiction by the Collector. The court found no evidence of a decision made with a closed mind or in violation of natural justice. Consequently, the court dismissed the writ petition and the alternative remedy by way of mandamus.
Conclusion:
The court upheld the Collector's order of confiscation, finding the application of Section 178-A appropriate and the Collector's decision reasonable. The court also found no violation of natural justice and no grounds for issuing a writ of certiorari or mandamus. The writ petitions were dismissed.
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1962 (4) TMI 1
Whether the "feed-oats" fell within Item 42 or within Item 32 of the Circular?
Held that:- In the present case it could not be contended that uncrushed oats did not answer the description of "grain" and therefore the decision of the Customs authorities holding that the oats imported fell within Item 32 could not be said to be a view which on no reasonable interpretation could be entertained.
The mere fact therefore that a grain is capable of being used as horse or other cattle feed does not make it "fodder" excluding it from the category of grain to which it admittedly belongs. The decision of the Assistant Collector and of the Collector on appeal holding the oats imported by the respondent to be grain cannot therefore be characterised as perverse or mala fide and in the circumstances we consider that the learned Judges of the High Court erred in interfering with the order of the appellant. Appeal allowed.
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9911796707
