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2011 (9) TMI 1182
Issues Involved:
1. Adverse Possession by the State
2. Validity of Sale Deed and Mutation
3. Locus Standi and Cause of Action
4. Ownership and Possession Rights
5. Mis-joinder of Necessary Parties
6. Relief
Issue-wise Detailed Analysis:
1. Adverse Possession by the State:
The central issue was whether the State, responsible for protecting life, liberty, and property, could claim ownership of land through adverse possession. The Supreme Court emphasized that the doctrine of adverse possession is perceived as dishonest and should not benefit the State. The Trial Court found that the Plaintiff (State) failed to prove continuous possession for 55 years and lacked documentary evidence, contradicting the revenue records showing the Defendants as owners. The Court cited S.M. Karim v. Mst. Bibi Sakina and Bhim Singh v. Zile Singh, holding that adverse possession must be continuous, public, and hostile, which the Plaintiff failed to establish.
2. Validity of Sale Deed and Mutation:
The Plaintiff sought to nullify a sale deed dated 26th March 1990 and mutation dated 22nd November 1990. The Trial Court ruled that the Plaintiff had no locus standi to challenge these documents as it was neither the owner nor in possession of the property. The Court concluded that the Plaintiff's claim of adverse possession did not grant it the right to contest the validity of these transactions.
3. Locus Standi and Cause of Action:
The Trial Court held that the Plaintiff lacked locus standi and cause of action to file the suit, as it neither owned nor possessed the disputed property. Consequently, the Plaintiff could not challenge the sale deed, mutation, or the previous judgment and decree.
4. Ownership and Possession Rights:
The Trial Court determined that the Defendants were the rightful owners of the disputed property based on the sale deed and mutation. The Plaintiff's claim of adverse possession was rejected, and the Defendants were entitled to possession of the property. The Court emphasized that the Plaintiff's failure to prove continuous and hostile possession invalidated its claim.
5. Mis-joinder of Necessary Parties:
This issue was not pressed and was decided against the Defendants.
6. Relief:
The Trial Court dismissed the Plaintiff's suit and decreed the Defendants' counterclaim, entitling them to possession of the disputed property. The Plaintiff's appeal was dismissed by the Additional District Judge, who criticized the State's conduct and imposed exemplary costs. The High Court upheld this decision, condemning the State's attempt to grab property under the guise of adverse possession.
Conclusion:
The Supreme Court dismissed the Special Leave Petition with costs, criticizing the State's repeated attempts to claim ownership through adverse possession. The Court called for a re-evaluation of the law on adverse possession, suggesting its abolition or substantial amendment to prevent misuse by government entities. The judgment emphasized the need for the State to protect citizens' property rights rather than infringe upon them.
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2011 (9) TMI 1181
Issues Involved:
1. Challenge to the order of the Debts Recovery Appellate Tribunal (DRAT) confirming the sale of immovable property.
2. Fairness and transparency of the sale process.
3. Role and involvement of the Official Liquidator.
4. Adequacy of the price realized from the sale.
5. Compliance with legal norms and procedural fairness.
Detailed Analysis:
1. Challenge to the Order of the DRAT:
Three petitions were filed under Article 226 of the Constitution to challenge the DRAT's order dated 3 March 2011, which restored the confirmation of the sale of immovable property in favor of the First Respondent. The DRAT had set aside the order of the Debts Recovery Tribunal (DRT) and reinstated the sale confirmation.
2. Fairness and Transparency of the Sale Process:
The sale process was scrutinized for fairness and transparency. Initially, public notices were issued, but the immovable property did not receive any offers. Subsequent private bids were received, and the First and Second Respondents enhanced their bid to Rs. 2.50 crores. However, the Central Bank of India was not informed of the confirmation hearing's actual time, leading to its absence during the crucial meeting. The Recovery Officer set aside the sale on 5 December 2006, citing the need for higher price realization and the involvement of the Official Liquidator. A fresh auction was conducted on the same day without public notification, resulting in a bid of Rs. 6.45 crores from Umrah Developers, which was significantly higher than the earlier bid.
3. Role and Involvement of the Official Liquidator:
The Official Liquidator, appointed by the Company Court, argued that the sale should be set aside due to the lack of notice to him. The Supreme Court in Rajasthan State Corporation v. Official Liquidator emphasized that the Official Liquidator must be involved in the sale proceedings to ensure compliance with the Companies Act, 1956. The DRAT's view that the Liquidator's role was restricted to disbursement stages was incorrect.
4. Adequacy of the Price Realized from the Sale:
The initial valuation of the property was Rs. 1.10 crores, later reduced to Rs. 80 lakhs. The bid of Rs. 2.50 crores from the First and Second Respondents was considered fair at the time of confirmation. However, a subsequent bid of Rs. 6.45 crores from Umrah Developers indicated that the property could fetch a much higher price. The DRT found the valuation flawed and directed a public notice for fresh offers, which the DRAT later set aside.
5. Compliance with Legal Norms and Procedural Fairness:
The sale process lacked transparency and adherence to legal norms. The Recovery Officer's immediate fresh auction without public notice was improper. The DRT's directive for a public auction was based on valid reasons, aiming for a fair and transparent process. The DRAT's order was based on misconceptions about the Liquidator's role and the Central Bank's absence.
Conclusion:
The Court found significant irregularities in the sale process, including the lack of transparency and failure to involve the Official Liquidator properly. The price realized was not reflective of the property's fair market value. The petitions were allowed, setting aside the DRAT's order dated 3 March 2011. The Recovery Officer was directed to issue a public advertisement for fresh bids, ensuring transparency and adherence to legal norms. The sale process was to be expedited and completed within three months, with costs borne by the secured creditors.
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2011 (9) TMI 1180
Issues Involved:1. Whether the criminal complaint u/s 138 of the Negotiable Instruments Act is maintainable. 2. Whether the "stop payment" instructions negate the offence u/s 138. 3. Whether the complaint constitutes an abuse of process of law. Summary:Issue 1: Maintainability of the Complaint u/s 138 of the Negotiable Instruments ActThe applicants sought to quash Criminal Complaint No. 6076 of 2006 and the order dated 15.11.2006. The applicants argued that the complaint does not disclose an offence u/s 138 of the Negotiable Instruments Act, as the cheque was not returned due to insufficient funds or exceeding the amount arranged with the bank. The cheque was dishonored due to "stop payment" instructions issued by the applicants because the complainant failed to fulfill obligations under the Service Level Agreement. Issue 2: Impact of "Stop Payment" InstructionsThe applicants contended that "stop payment" instructions do not constitute an offence u/s 138. They relied on several judgments, including Hiten P. Dalal v. Bratindranath Banerjee, S.N. Palanitkar v. State of Bihar, and M/s. M.M.T.C. Ltd. v. M/s. Medcl Chemicals and Pharma (P) Ltd., which discuss the burden of proof and the conditions under which "stop payment" instructions may not lead to an offence u/s 138. Issue 3: Abuse of Process of LawThe applicants argued that the complaint was an abuse of process of law, as the complainant did not disclose the reply to the notice, which would have shown the true facts. The court noted that the complainant failed to disclose complete and correct facts as required under provisos [b] and [c] of Section 138. The court referred to the decision in State of Haryana v. Bhajan Lal, which outlines circumstances where the High Court can exercise power u/s 482 CrPC to prevent abuse of process. Conclusion:The court concluded that the impugned complaint is an abuse of process of law and does not disclose an offence u/s 138 of the Negotiable Instruments Act. Consequently, the criminal complaint and the proceedings initiated were quashed and set aside. The applications were allowed, and the rule was made absolute.
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2011 (9) TMI 1179
Issues involved: Determination of self-occupied property status for flats, treatment of foreign exchange loss as business loss.
Self-occupied property status for flats:
The appellant, a playback singer, appealed against the order of the CIT(A) regarding the treatment of flats as deemed let-out properties. The A.O. estimated house property income at 8% of the cost of acquisition for five residential properties in Mumbai and Pune. The appellant claimed self-occupied status for the flat at Vikas Anand, Khar, as it was more beneficial. The CIT(A) upheld the Maryland property as self-occupied based on the appellant's previous return. The ITAT held that the A.O. should have considered the Vikas Anand property as self-occupied, given the change in ALV computation method and the appellant's benefit. The decision was based on Section 23(4) and the principle against taking advantage of the appellant's ignorance of the law.
Treatment of foreign exchange loss:
The appellant claimed a loss of &8377;24,68,715 on foreign exchange difference, following the cash system of accounting. The A.O. disallowed the loss as notional and not allowable under Section 37(1). The CIT(A) upheld this decision, stating the loss pertained to the appellant's capital account and was not akin to trading loss. The ITAT agreed, emphasizing that consistency in offering notional income in previous years did not entitle the appellant to claim the loss as a deduction. The claim for reversal of income from earlier years was rejected, and the loss on a notional basis was deemed disallowable.
In conclusion, the ITAT partly allowed the appeal, directing the A.O. to consider the Vikas Anand property as self-occupied and dismissing the claim for the foreign exchange loss as a business loss.
[Judgment: Appellate Tribunal ITAT MUMBAI, Citation: 2011 (9) TMI 1179 - ITAT MUMBAI]
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2011 (9) TMI 1178
... ...
... ... ..... . Balaram Das,Adv. For the Respondent Mr. Sameer Parekh,Adv. Mr. Kunal Vajani,Adv. Mr. Ankit Virmani,Adv.Mr. Rajat Nair,Adv. Ms. Suman Yadav,Adv. for M/s. Parekh & Co.,Advs. ORDER Delay condoned. The special leave petition is dismissed.
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2011 (9) TMI 1177
Issues involved: Appeal against the order of the Commissioner of Income-tax (Appeals)-V, Hyderabad for the assessment year 2004-05 regarding computation of book profit u/s. 115JB of the Income-tax Act, 1961.
Details of the Judgment:
1. Issue 1 - Computation of Book Profit:
The assessee-company, engaged in various businesses, contested the computation of book profit u/s. 115JB by the Assessing Officer, who did not consider prior period expenditure while arriving at the net profit. The assessee argued that the prior period expenditure should be included in the computation of book profit, citing relevant legal precedents such as the decision in Apollo Tyres Ltd. vs. CIT. The CIT(A) agreed with the assessee's contention, emphasizing that all items in the Profit and Loss A/c. should be considered for computing book profits. The CIT(A) directed the Assessing Officer to include the prior period expenditure in the calculation of book profit. The Tribunal upheld the CIT(A)'s decision, citing a similar precedent from the Hyderabad Bench in Gulf Oil Corporation Ltd. vs. ACIT.
2. Decision and Conclusion:
After considering the arguments and legal precedents presented by both parties, the Tribunal found no fault in the CIT(A)'s decision to include the prior period expenditure in the computation of book profit u/s. 115JB. The Tribunal upheld the CIT(A)'s order, dismissing the grounds raised by the Department and ultimately dismissing the appeal of the Department. The decision was pronounced in the Open court on 28th September, 2011.
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2011 (9) TMI 1176
Issues involved: Appeal by revenue related to assessment year 2005-06 challenging the allowance of relief u/s 80JJAA of the IT Act, 1961 for software engineers not falling under the category of 'workers' under the Industrial Disputes Act, 1947.
Summary:
Issue 1:
The revenue challenged the order of the ld. CIT(A) as prejudicial to the revenue, opposing law and facts of the case.
Issue 2:
The ld. CIT(A) allowed relief u/s 80JJAA, holding that the assessee satisfied all conditions for claiming the deduction.
Issue 3:
The contention was that the employees claimed for deduction u/s 80JJAA were software engineers, not falling under the category of 'workers' under the Industrial Disputes Act, 1947.
Issue 4:
It was argued that only workers earning less than &8377; 1600/- p.m are considered workers under the Industrial Disputes Act, 1947.
In the case, the assessee, engaged in the business of design, manufacture, and export of computer software, claimed a deduction u/s 80JJAA of &8377; 11,17,72,181/-. The AO disallowed the deduction stating that the employees, being software engineers, did not qualify as 'workmen' under the Industrial Disputes Act, 1947, and hence, the deduction was not applicable. The AO referred to a previous Tribunal decision but found it unacceptable due to pending appeal in the High Court. On appeal, the CIT(A) directed the AO to reconsider the deduction for employees working less than 300 days in the previous year, following the Tribunal's decision in the assessee's favor for earlier years.
The Tribunal upheld the CIT(A)'s decision, emphasizing that the Tribunal's order retains precedential value despite the pending appeal in the High Court. Therefore, the revenue's appeal was dismissed, affirming the allowance of relief u/s 80JJAA for the assessee's software engineers.
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2011 (9) TMI 1175
Issues Involved:
1. Deletion of adjustment made under Section 92CA(3) of the Income Tax Act.
2. Treatment of advertisement expenditure as revenue expenditure.
3. Allowability of bad debts and sundry debit balances written off.
4. Disallowance of interest on advances given to associate companies.
5. Disallowance under Section 14A of the Income Tax Act.
6. Depreciation on intangible assets.
Detailed Analysis:
1. Deletion of Adjustment Made Under Section 92CA(3) of the Income Tax Act:
The department disputed the deletion of an adjustment amounting to Rs. 29,16,954/- made under Section 92CA(3) based on the Transfer Pricing Officer's (TPO) order. The TPO noted that the assessee, part of Cox and Kings, had given an extra credit period to its associated enterprises compared to unrelated parties, leading to a blockage of funds and higher interest payments. The TPO calculated interest at 15% per annum for the excess credit period, resulting in the adjustment. The CIT (A) deleted the adjustment, considering the higher commission earned from associated enterprises and the overall profitability. The Tribunal, following its earlier orders for assessment years 2002-03 and 2003-04, remanded the issue back to the AO for fresh adjudication.
2. Treatment of Advertisement Expenditure as Revenue Expenditure:
The department challenged the CIT (A)'s direction to treat the entire advertisement expenditure of Rs. 2,22,84,651/- as revenue expenditure. The assessee also appealed against the confirmation of disallowance for the last quarter of the financial year 2003-04. The AO had treated the expenditure as capital, while the CIT (A) considered it revenue, allowing it in the subsequent year. The Tribunal upheld the CIT (A)'s decision, following its earlier orders, and directed that the expenditure be allowed in the assessment year under consideration.
3. Allowability of Bad Debts and Sundry Debit Balances Written Off:
The department appealed against the allowance of bad debts amounting to Rs. 82,64,594/-, while the assessee disputed the disallowance of Rs. 8,75,505/-. The AO had disallowed the entire claim due to insufficient details. The CIT (A) allowed the claim for business-related bad debts and advances but disallowed the sundry debit balances. The Tribunal confirmed the CIT (A)'s decision for business advances and bad debts but upheld the disallowance of sundry debit balances due to lack of specific details.
4. Disallowance of Interest on Advances Given to Associate Companies:
The assessee disputed the disallowance of interest amounting to Rs. 1,46,34,434/-. The AO disallowed interest on advances given to various parties, including Tulip Hotels Pvt. Ltd., due to the difference in interest rates charged and paid. The CIT (A) confirmed the disallowance, following earlier years' orders. The Tribunal restored the issue to the CIT (A) for fresh adjudication, considering the specific facts and details provided by the assessee.
5. Disallowance Under Section 14A of the Income Tax Act:
The assessee challenged the disallowance of Rs. 9,47,888/- under Section 14A, made by applying Rule 8D. The CIT (A) had applied Rule 8D, following the Special Bench decision in Daga Capital Management (P.) Ltd. The Tribunal, noting the Bombay High Court's decision in Godrej & Boyce Mfg. Co. Ltd., held that Rule 8D is prospective and not applicable for the assessment year 2004-05. The issue was remanded to the CIT (A) for fresh adjudication as per law.
6. Depreciation on Intangible Assets:
The assessee claimed depreciation of Rs. 95,36,727/- on intangible assets, which was not claimed before the AO. The CIT (A) disallowed the claim, following his order for the previous year. The Tribunal, following its earlier order for assessment year 2003-04, restored the issue to the AO for fresh adjudication in accordance with the law, considering relevant material and providing an opportunity for hearing.
Conclusion:
The appeals of both the department and the assessee were allowed in part. The Tribunal remanded several issues back to the AO or CIT (A) for fresh consideration, ensuring that the matters are adjudicated based on the specific facts and applicable legal principles.
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2011 (9) TMI 1174
Issues Involved:
1. Unauthorized and illegal possession by the Defendants.
2. Status of the Defendants as gratuitous licensees.
3. Legal right of possession by the Defendants.
4. Obstruction of possession by the owners.
5. Relief to be granted.
Issue-wise Detailed Analysis:
1. Unauthorized and Illegal Possession by the Defendants:
The Appellants contended that the Respondents were unauthorized encroachers and not tenants. The trial court found that the Respondents failed to prove tenancy and were in possession as gratuitous licensees. The first appellate court, however, reversed this finding, stating that the Appellants did not prove the Respondents were licensees, and dismissed the suit for possession. The Supreme Court noted that the first appellate court wrongly placed the burden of proof on the Appellants and failed to record a finding that the Respondents were tenants, leading to an erroneous conclusion.
2. Status of the Defendants as Gratuitous Licensees:
The trial court held that the Respondents were gratuitous licensees, as evidenced by the testimonies of the Appellants and a neighbor. The first appellate court, however, dismissed this by misinterpreting the burden of proof and the evidence presented. The Supreme Court emphasized that the burden was on the Respondents to prove tenancy, which they failed to do, and the trial court's finding of gratuitous licensees was correct.
3. Legal Right of Possession by the Defendants:
The Respondents claimed tenancy from 1982, which was not supported by any lease deed, tenancy agreement, or rent receipts. The trial court found no evidence of tenancy, while the first appellate court inferred from certain documents that the Appellants failed to prove the Respondents were licensees. The Supreme Court found these inferences unsound and upheld the trial court's finding that the Respondents were gratuitous licensees without any legal right to possession.
4. Obstruction of Possession by the Owners:
The Respondents alleged that the Appellants obstructed their possession by disconnecting electricity and preventing repairs. The trial court found no evidence of such obstruction and held that the Respondents were in possession as licensees, not tenants. The first appellate court did not address this issue directly but inferred from the documents that the Appellants failed to prove licensee status. The Supreme Court found no merit in the obstruction claim and upheld the trial court's findings.
5. Relief to be Granted:
The trial court decreed possession to the Appellants and directed an inquiry regarding damages and mesne profits. The first appellate court dismissed the suit for possession and decreed the suit for injunction by the Respondents, preventing dispossession without due process. The Supreme Court set aside the judgments of the first appellate court and the High Court, restoring the trial court's decree for possession, and directed the Respondents to deliver vacant possession of the suit portions within sixty days.
Conclusion:
The Supreme Court allowed the appeal, set aside the judgments of the High Court and the first appellate court, and restored the trial court's decree for possession, finding that the Respondents were gratuitous licensees and not tenants. The Appellants were entitled to possession of the suit portions, and the Respondents were directed to vacate within sixty days.
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2011 (9) TMI 1173
The Supreme Court dismissed the Special Leave Petition after condoning the delay. (Citation: 2011 (9) TMI 1173 - SC)
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2011 (9) TMI 1172
Issues Involved:
The judgment involves a common issue in all the assessee's appeals regarding the validity of the reassessment u/s 147 and the jurisdiction of the AO.
Validity of Reassessment u/s 147:
The AO reopened the assessment for the A.Y. 2001-02 based on a survey conducted, alleging failure by the assessee to disclose correct income particulars. The assessee contended that the reassessment was bad in law as the AO did not pass an order rejecting objections raised, citing the GKN Driveshafts case. The CIT(A) upheld the AO's action, stating that discrepancies revealed during the survey provided prima facie reasons for reassessment. The assessee appealed, arguing that objections were not disposed of by the AO, as required by law. The Tribunal noted that the AO did not pass a speaking order on the objections, following the GKN Driveshafts case, and remanded the case back to the AO for proper disposal of objections before proceeding with reassessment.
Other Grounds:
The Tribunal did not delve into other grounds raised by the assessee on the merits of the case, as the primary issue of objection disposal needed resolution first. The decision on this issue was deemed applicable to other assessment years as well. The department's appeals were also remanded to the AO for consideration in light of the decision on the primary issue.
In conclusion, the appeals by both the assessee and the department were allowed for statistical purposes, with the case remanded back to the AO for proper disposal of objections raised by the assessee before reassessment proceedings.
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2011 (9) TMI 1171
The Supreme Court order in 2011 (9) TMI 1171 states that the appeals are withdrawn as the issue is pending before the Rajasthan High Court regarding duty payable for EOUs and Customs Act provisions. The appellant has the liberty to approach the High Court on the same matter. The respondent will not challenge the High Court's jurisdiction.
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2011 (9) TMI 1170
Issues involved:
The judgment involves issues related to the incorrect determination of deduction u/s 80IA of the Act, disallowance of interest expenditure, disallowance of staff welfare expenses, disallowance of conveyance and telephone expenses, restriction of depreciation claim, and disallowance of certain business expenses.
Determination of deduction u/s 80IA of the Act:
The appellant contested the action of the CIT(A) in confirming the AO's incorrect determination of the quantum of deduction u/s 80IA of the Act. The AO reduced the profits of the project eligible for claiming deduction by an amount of interest expenditure, which the appellant argued was not utilized for the project. The CIT(A) also disallowed the interest claimed by the appellant u/s 36(1)(iii) of the Act. The Tribunal directed the issue to be decided afresh by the AO based on previous decisions, allowing the grounds raised by the assessee for statistical purposes.
Disallowance of staff welfare expenses:
The CIT(A) confirmed the disallowance of a specific amount as staff welfare expenses. Following previous decisions, the Tribunal restored this issue to the AO for reevaluation and directed the AO to determine the disallowance accordingly. The ground was treated as allowed for statistical purposes.
Disallowance of conveyance and telephone expenses:
The CIT(A) upheld the disallowance of certain percentages of total conveyance and telephone expenses. The Tribunal referred to past decisions and directed the AO to examine the factual position regarding these expenses and decide afresh. Both grounds were treated as allowed for statistical purposes.
Restriction of depreciation claim:
The CIT(A) confirmed the action of the AO in restricting the claim of depreciation on office equipment. The appellant chose not to press this ground, leading to its dismissal.
Disallowance of certain business expenses:
The CIT(A) partly confirmed the disallowance of expenses and entertainment expenses claimed by the appellant as business expenditure due to inadequate details. The Tribunal directed this issue back to the AO for further investigation and verification of the nature of expenses. The ground was treated as allowed for statistical purposes.
General grounds:
Other grounds related to charging of interest and initiation of penalty proceedings were deemed general in nature and did not require independent adjudication at that stage.
In conclusion, the appellant's appeal was partly allowed on certain grounds, with directions for the AO to reevaluate and decide on various issues based on previous decisions and factual considerations.
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2011 (9) TMI 1169
Shares acquired without making any public announcement - Violation Of the Regulation 11(1) of the Securities and Exchange Board of India Regulations, 1997 (the takeover code) - acquired 6.17 per cent of the equity capital - Appellant crossed the permissible creeping acquisition limit of 5 per cent in a financial year - HELD THAT:- The shares acquired by the Appellant company and the holding of the two Naras has to be clubbed for the purposes of Regulation 11(1) of the takeover code as they were acting in concert. When we do this, it becomes clear that the Appellant crossed the permissible creeping acquisition limit of 5 per cent thereby triggering Regulation 11(1) of the takeover code and not having made a public announcement, violated the said provision. The learned senior counsel for the Appellant is right only to the extent that the Appellant company did not act in concert with any promoter of the target company other than the Naras and that is of No. consequence. Even if the shareholding of the other promoters is excluded, the shareholding of the Naras and the Appellant together is enough to trigger Regulation 11(1). In this view of the matter, No fault can be found with the conclusion arrived at by the whole time member that Regulation 11(1) got triggered and the Appellant by not making a public announcement violated the said provision. The question posed in the opening part of the order is answered in the affirmative.
Direction issued - The Board need not give reasons as to why such a direction is being issued because that is the mandate of Regulations 10, 11 and 12. However, if the issuance of such a direction is not in the interest of the securities market or for the protection of interest of investors, the Board may deviate from the normal rule and issue any other direction as envisaged in Regulation 44 of the takeover code. In that event, the Board should record reasons for deviation. In the case before us No reasons have been recorded for deviating from the normal rule and we find No ground for deviation.
Thus, we modify the direction issued by the whole time member and direct the Appellant to make a public announcement to acquire the shares of the target company in accordance with the provisions of the takeover code. For this limited purpose, the Appellant shall now approach the Board within one week to comply with the procedural requirements in this regard.
In the result, the appeal is dismissed and the direction issued by the whole time member modified as stated. There is No order as to costs.
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2011 (9) TMI 1168
Issues involved: Disallowance u/s 14A of the IT Act by wrongly applying Rule 8D of the IT Rules, 1962 for assessment year 2006-07.
Summary:
The appeal was against the Ld. Commissioner of Income Tax (Appeals) order upholding the disallowance made by the Assessing Officer u/s. 14A of the IT Act by wrongly applying Rule 8D of the IT Rules, 1962. The Assessing Officer disallowed amounts u/s. 14A read with rule 8D of the IT Rules. The Ld. Commissioner of Income Tax (Appeals) confirmed the addition. The ITAT referred to a precedent set by the Hon'ble Mumbai High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT, stating that Rule 8D was applicable only from Assessment year 2008-09, not for the present year A.Y. 2006-07. It was emphasized that even before A.Y. 2008-09, the Assessing Officer had to determine the expenditure incurred in relation to income not forming part of the total income under the Act, using a reasonable basis or method after providing the assessee with an opportunity to present relevant material. Consequently, the issue was set aside for reconsideration by the Assessing Officer in line with the High Court decision. As a result, the appeal by the assessee was allowed for statistical purposes.
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2011 (9) TMI 1167
Issues Involved:
1. Allegations of oppression and mismanagement under sections 397/398 of the Companies Act, 1956.
2. Annulment of unauthorized actions by respondent No. 1.
3. Increase in share capital and allotment of shares.
4. Appointment of additional directors.
5. Deadlock in the company.
6. Unauthorized changes in company records and registered office.
7. Misuse of fiduciary powers by respondent No. 1.
8. Maintainability of the petition under section 399 of the Act.
9. Defiance of Company Law Board (CLB) orders and sale of company assets.
10. Breach of fiduciary duties by respondent No. 1.
Detailed Analysis:
1. Allegations of Oppression and Mismanagement:
The petitioner, a promoter director holding 50% shares, alleged oppression and mismanagement by respondent No. 1, who took unauthorized actions, including fabricating and forging documents, and manipulating company records. The petitioner sought annulment of these actions under sections 397/398 of the Companies Act, 1956.
2. Annulment of Unauthorized Actions:
The petitioner sought to annul all actions taken by respondent No. 1 on behalf of the company, including the increase in share capital and the allotment of shares, as these actions were taken without proper authority and in violation of legal procedures.
3. Increase in Share Capital and Allotment of Shares:
The petitioner challenged the increase in share capital from Rs. 1 lakh to Rs. 10 lakh and the allotment of 90,000 shares to respondent Nos. 3 and 4, alleging these were done without proper notice and for fraudulent purposes. The CLB found that these actions were indeed taken without proper Board meetings and were intended to marginalize the petitioner.
4. Appointment of Additional Directors:
The petitioner contested the appointment of respondent Nos. 2 and 3 as additional directors, claiming these appointments were backdated and done without proper authority. The CLB noted that no valid Board meetings were held for these appointments, and they were part of a scheme to take control of the company.
5. Deadlock in the Company:
The company faced a deadlock due to the non-cooperation of respondent No. 1, who failed to attend meetings and sign necessary documents, preventing the company from functioning effectively. The petitioner had to apply to the CLB for permission to convene an extraordinary general meeting (EGM) to resolve this deadlock.
6. Unauthorized Changes in Company Records and Registered Office:
Respondent No. 1 made unauthorized changes to the company's records, including changing the registered office and the company's email ID, without proper Board resolutions. These actions were found to be fraudulent and intended to take control of the company.
7. Misuse of Fiduciary Powers:
Respondent No. 1 misused his fiduciary powers by taking actions that were detrimental to the company and the petitioner. This included unauthorized withdrawals of funds and delaying the completion of a construction project, leading to financial losses for the company.
8. Maintainability of the Petition:
The respondents argued that the petition was not maintainable as the petitioner held only 5% shares. However, the CLB held that the reduction in shareholding was itself an oppressive act, and the petition was maintainable. The petitioner was entitled to relief under sections 397 and 398 of the Act.
9. Defiance of CLB Orders and Sale of Company Assets:
Respondent No. 1 sold the company's only immovable asset, the constructed flats, in defiance of the CLB's status quo order. This sale was done clandestinely and for personal profit, breaching fiduciary duties. The CLB found this action to be in contempt of its orders.
10. Breach of Fiduciary Duties:
The CLB concluded that respondent No. 1 had breached his fiduciary duties by acting against the interests of the company and the petitioner. The increase in share capital, allotment of shares, and appointment of additional directors were all done with the intent to oppress the petitioner and were therefore set aside.
Conclusion:
The CLB directed respondent No. 1 to restore the sale consideration received from the sale of flats and other amounts siphoned off from the company's accounts. An auditor and valuer were to be appointed to ascertain the siphoned amounts and the market price of the immovable asset. All unauthorized actions, including the increase in share capital, allotment of shares, and appointment of additional directors, were set aside. Respondent No. 1 was also ordered to pay costs to the petitioner for violating CLB orders. The petition was disposed of with these directions, and all interim orders were vacated.
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2011 (9) TMI 1166
Issues Involved:
1. Validity of the orders of the Board of Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial & Financial Reconstruction (AAIFR).
2. Service of the Draft Rehabilitation Scheme (DRS) to the appropriate authority.
3. Consent under Section 19(2) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
4. Compliance with the Central Board of Direct Taxes (CBDT) Circular No. 683 dated 08.06.1994.
5. Impact of Section 115JB of the Income Tax Act, 1961 on the reliefs and concessions granted to the sick industrial company.
Issue-wise Detailed Analysis:
1. Validity of the Orders of BIFR and AAIFR:
The petitioners challenged the orders of the BIFR dated 01.03.2007 and the AAIFR dated 23.06.2008. The petitioners contended that the sanctioned scheme included reliefs and concessions without proper service of the DRS. The AAIFR dismissed the appeal, concluding that the service on the Assessing Officer was sufficient and that the petitioners' consent was deemed given under Section 19(2) of SICA since no objections were filed within the stipulated 60 days.
2. Service of the Draft Rehabilitation Scheme (DRS) to the Appropriate Authority:
The petitioners argued that the DRS was not served on the Director General of Income Tax (Admn.), as required by CBDT Circular No. 683 dated 08.06.1994. The AAIFR held that service on the Assessing Officer sufficed, but the petitioners contended that the Assessing Officer had no locus standi to grant exemptions under the Income Tax Act, which could only be granted by the CBDT. The court found no proof of dispatch to the Director General of Income Tax (Admn.) or the Secretary, CBDT, as required by the circular.
3. Consent under Section 19(2) of SICA:
Section 19(2) of SICA mandates that the scheme should be circulated to every person required to provide financial assistance for their consent within 60 days. If no consent is received, it is deemed given. The court noted that the BIFR did not serve the DRS on the designated authority as per the CBDT circular, making the deemed consent invalid. The court emphasized the necessity of serving the designated authority to bind the Income Tax Department to the scheme.
4. Compliance with CBDT Circular No. 683 dated 08.06.1994:
The circular designates the Director General of Income Tax (Admn.) as the nodal agency for coordinating with the BIFR and AAIFR regarding financial concessions under Direct Tax Laws. The court found that the BIFR failed to serve the DRS on the designated authority, violating the circular. The court held that the circular's requirements must be followed to ensure valid consent under Section 19(2) of SICA.
5. Impact of Section 115JB of the Income Tax Act, 1961:
The petitioners argued that reliefs and concessions under Section 115JB could not extend beyond the assessment year when the company's net worth turned positive. The court noted that this issue must be considered by the BIFR when reviewing paragraph 14.3(b) of the sanctioned scheme. The court did not comment on this aspect as no specific ground was raised in the writ petition.
Conclusion:
The court set aside the impugned judgments of the BIFR and AAIFR and remanded the matter to the BIFR for reconsideration of paragraph 14.3(b) of the sanctioned scheme. The court directed the parties to appear before the BIFR and ordered the BIFR to pass an order within six weeks. The writ petition was disposed of with these observations.
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2011 (9) TMI 1165
The appeal was dismissed by Appellate Tribunal CESTAT Mumbai due to non-prosecution as no one appeared on behalf of the appellants and no request for adjournment was made.
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2011 (9) TMI 1164
Issues:
1. Whether the order passed by the Tribunal solely based on a letter from the advocate, without the appellant's application or hearing, is sustainable?
2. Whether the Tribunal's order, ignoring the appellant's defense regarding excess inputs in the manufacturing process, is sustainable?
Analysis:
1. The case involved a physical stock taking by Central Excise officers at the appellant's premises, leading to a show cause notice alleging shortages in finished goods and raw materials. The appellant's reply was deemed unsatisfactory, resulting in a confirmation of duty demand, penalties, fines, and confiscation of materials by the adjudicating authority.
2. The appellant's appeal to the CIT(A) was dismissed, leading to a further appeal to CESTAT. During the hearing, the appellant's counsel submitted a letter requesting the Tribunal to decide on the merits independently. Despite no appearance from the appellant on the hearing date, the Tribunal proceeded and dismissed the appeal. The appellant argued that they did not instruct their counsel to forego arguing the case, causing prejudice due to lack of representation.
3. The appellant contended that their defense, explaining the alleged deficiencies in finished goods, was not adequately considered by the authorities. The High Court acknowledged the appellant's arguable case and the prejudice caused by the absence of counsel, emphasizing that litigants should not suffer due to counsel errors. The Court decided to set aside the Tribunal's order and remand the case for a fresh decision, granting the appellant an opportunity to present their case before the Tribunal for justice to be served.
4. The High Court, considering the circumstances, deemed it necessary to allow the appellant to argue their case before the Tribunal to ensure fairness and uphold the principles of natural justice. Consequently, the appeal was disposed of by setting aside the Tribunal's order and remanding the case for a fresh decision after providing the appellant with the opportunity to present their arguments.
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2011 (9) TMI 1163
Issues Involved:
1. Execution of Consent Order
2. Appointment and Remuneration of Directors
3. Compliance with Family Settlement
4. Allegations of Contempt
Detailed Analysis:
1. Execution of Consent Order:
The petitioners filed C.A. No. 471 of 2009 for execution of the consent order dated June 9, 2009, under section 634A of the Companies Act, 1956. The consent order arose from disputes within the Sekhri family, leading to a broader family settlement. The Company Law Board (CLB) consent order required the respondent group to pay a monthly remuneration of Rs. 2,50,000 each to Vijay Kumar Sekhri and Anil Kumar Sekhri until their remuneration was fixed by Tinna Oil and Tinna Agro. However, the respondent group ceased payments from September 2009, leading to an accumulated amount of Rs. 95,00,000 by March 31, 2011. The petitioners contended that the respondents failed to adhere to the consent order, while the respondents argued that the remuneration was fixed as "0" by the companies on August 12, 2009, thus nullifying further payments.
2. Appointment and Remuneration of Directors:
The consent order mandated the appointment of Vijay and Anil as whole-time directors with remuneration. The respondents argued that the petitioners did not make efforts to get their remuneration fixed, leading to the cessation of payments. The CLB had directed the companies to decide on the remuneration by August 31, 2009, which was fixed at "0". The petitioners argued that the companies did not appoint them as whole-time directors, and the decision to fix the remuneration at "0" was not in line with the consent terms. The CLB noted that the stop-gap arrangement for remuneration was not meant to be indefinite and directed the respondent group to pay a lump sum of Rs. 50 lakhs towards remuneration for the intervening period.
3. Compliance with Family Settlement:
The family settlement involved the transfer of shares and assets among family members. C.A. No. 474 of 2010 addressed the release of shares of Pratham Road Technologies Pvt. Ltd. from the custody of the Bench Officer, contingent on the petitioners receiving 25% shares of Gautam Overseas Ltd. The petitioners alleged that the respondents failed to fulfill their obligations under the family settlement, including the transfer of shares and handling contingent liabilities. The CLB directed the release of shares of Pratham Road Technologies Pvt. Ltd. and required compliance with due procedures for reissuing shares held by Shri R. K. Dhawan.
4. Allegations of Contempt:
C.A. Nos. 500 of 2010, 131 of 2011, and 166 of 2011 involved allegations of contempt by the petitioners for violating the consent order. The respondents accused the petitioners of filing false complaints to the Bombay Stock Exchange, Economic Offences Wing, and Securities Exchange Board of India, causing harm to the respondents. The petitioners countered that the respondents failed to comply with the family settlement, including the appointment of directors and payment of remuneration. The CLB dismissed the contempt applications, emphasizing the importance of implementing the consent decree and resolving disputes in the interest of the companies and the family settlement.
Conclusion:
The CLB directed the respondent group to pay a lump sum of Rs. 50 lakhs to the petitioners towards remuneration and ordered the release of shares of Pratham Road Technologies Pvt. Ltd. The CLB dismissed the contempt applications, urging the parties to comply with the family settlement and consent decree to resolve their disputes amicably.
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