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2013 (3) TMI 894
The Supreme Court of India (Larger Bench), through Justices Altamas Kabir, Anil R. Dave, and Vikramajit Sen, issued notice on both the special leave petition and the application for condonation of delay. The Court ordered that the matter be heard together with Civil Appeal No. 3345 of 2012.
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2013 (3) TMI 893
Issues Involved:
1. Sanction of the scheme of arrangement u/s 391 to 394 of the Companies Act, 1956.
2. Compliance with procedural requirements for reduction of share capital and reserves.
3. Protection of interests of shareholders and creditors.
4. Application of the Duomatic Principle.
Summary:
1. Sanction of the Scheme of Arrangement:
Company Petition No. 90 of 2012 was filed by the demerged company and Company Petition No. 91 of 2012 by the resulting company seeking the court's sanction u/s 391 to 394 of the Companies Act, 1956 for a scheme of arrangement. The scheme proposed the transfer of the vaccines and wind energy divisions from the demerged company to the resulting company. The demerged company was incorporated on 01.02.1988 and had undergone several name changes, while the resulting company was incorporated on 11.03.2010.
2. Compliance with Procedural Requirements:
The court directed meetings of shareholders and creditors to consider the scheme. The demerged company's shareholders unanimously approved the scheme in a meeting convened on 02.06.2012. For the resulting company, the court dispensed with the meeting of shareholders as all ten shareholders consented to the scheme. The demerged company's sole secured creditor, the State Bank of Hyderabad, conveyed its 'no objection' to the scheme. Meetings of unsecured creditors were also held, and the requisite majority approved the scheme. The court noted that the Articles of Association of both companies authorized the reduction of share capital and reserves by way of a special resolution.
3. Protection of Interests of Shareholders and Creditors:
The court examined the scheme, which included clauses on demerger, transfer of liabilities, protection of employees' benefits, and issuance of shares by the resulting company to the shareholders of the demerged company. The court ensured that the interests of shareholders and creditors were protected and that they were duly informed of the scheme. The shareholders of the demerged company would receive 374 fully paid-up equity shares of Rs. 10 for every 100 fully paid-up equity shares of Rs. 10 held by them.
4. Application of the Duomatic Principle:
The court applied the Duomatic Principle, which allows for the dispensation of strict adherence to statutory requirements if the substance of such requirements is fulfilled indirectly. The court found that the statutory requirements for reduction of share premium/capital were substantially complied with by both companies. The shareholders were aware of the reduction of the company's share premium reserves, and the requisite majority approved the scheme. The court noted that neither company was listed, and the members and creditors were informed and took an informed decision.
Conclusion:
The court sanctioned the scheme of arrangement involving the reduction of the demerged company's reserves and the reduction and reconstruction of the resulting company's capital. The resulting company was required to issue equity shares to the shareholders of the demerged company, and proof of stamp duty payment was to be enclosed with the certified copy of the sanction order. The court ordered the registration of the order with the Registrar of Companies, Andhra Pradesh, and publication of the notice in specified newspapers.
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2013 (3) TMI 891
In the case cited as 2013 (3) TMI 891 - Supreme Court, the Supreme Court of India, comprising Hon'ble Justices Chandramauli Kr. Prasad and V. Gopala Gowda, addressed an appeal by the Securities and Exchange Board of India (SEBI). The appellant challenged an order by the Securities Appellate Tribunal (SAT), which had set aside SEBI's directive prohibiting Roopram Sharma from accessing the capital market and dealing in securities for three years. The Tribunal had acknowledged that the company's public issue was fraudulent and manipulated, implicating Sharma, but found the order akin to a penalty, which Section 11B of the Securities and Exchange Board of India Act, 1992, does not authorize, referencing Sterlite Industries (India) Ltd. v. SEBI.
SEBI's counsel, Mr. Altaf Ahmed, argued that the Tribunal's view contradicted the Supreme Court's decision in SEBI v. Ajay Agarwal, asserting that the Tribunal's interpretation was incorrect. The Supreme Court concurred with SEBI, referencing the Ajay Agarwal case, and concluded that the Tribunal's judgment lacked legal support. Consequently, the Supreme Court allowed the appeal, overturning the Tribunal's decision, but did not award costs.
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2013 (3) TMI 890
1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment include: - Whether the Port has a lien over the contractor's machinery and equipment at the Haldia Dock Complex.
- Whether the contractor abandoned the work due to commercial reasons or was forced to terminate the agreement due to external pressures and law and order issues.
- Whether the Port is entitled to an order of attachment before judgment to secure its claim for damages against the contractor.
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Lien Over Contractor's Machinery and Equipment - Relevant legal framework and precedents: The Port relied on clause 4.19 of the general conditions of the contract, which suggests a lien on constructional plants and materials brought to the site. The contractor argued that this clause does not apply to their contract, which is not a construction contract.
- Court's interpretation and reasoning: The court found that the definition of "constructional plant" in the general conditions suggests a building or civil construction context, which does not apply to the contract for cargo-handling equipment. The court also noted that the Port did not assert a lien at the ad interim stage or in its immediate response to the contractor's termination notice.
- Key evidence and findings: The Port failed to demonstrate any express assertion of lien over the contractor's equipment. The contractor's machinery was hypothecated to its bankers, creating a prior charge over the equipment.
- Application of law to facts: The court concluded that clause 4.19 does not apply to the contractor's equipment, and even if it did, the lien would be for ensuring satisfactory completion of work, which is no longer applicable after the agreement's termination.
- Treatment of competing arguments: The court dismissed the Port's claim of lien, finding it unsupported by the contract's terms and the nature of the work.
- Conclusions: The Port does not have a lien over the contractor's machinery and equipment.
Issue 2: Abandonment of Work by Contractor - Relevant legal framework and precedents: The Port alleged that the contractor abandoned the work for commercial reasons, while the contractor argued that external pressures and law and order issues forced the termination.
- Court's interpretation and reasoning: The court considered the correspondence between the parties and third parties, which revealed significant external pressures and law and order issues at the Haldia Dock Complex.
- Key evidence and findings: The court found that the contractor faced significant challenges due to vested interests and lack of support from the Port and local administration.
- Application of law to facts: The court determined that the contractor did not abandon the work for commercial reasons but was forced to terminate the agreement due to external pressures.
- Treatment of competing arguments: The court found the Port's argument unpersuasive and concluded that the contractor was hounded out of Haldia.
- Conclusions: The contractor did not wilfully abandon the work; external factors led to the termination of the agreement.
Issue 3: Attachment Before Judgment - Relevant legal framework and precedents: The Port sought an order of attachment before judgment to secure its claim for damages, invoking principles from Order XXXVIII Rule 5 of the Code.
- Court's interpretation and reasoning: The court noted that an order of attachment before judgment requires a near unimpeachable claim, which the Port failed to demonstrate.
- Key evidence and findings: The Port's claim for damages was unliquidated and based on perceived abandonment, which the court found unsubstantiated.
- Application of law to facts: The court concluded that the Port's claim did not meet the threshold for an attachment order, as the claim was neither liquidated nor sufficiently established.
- Treatment of competing arguments: The court dismissed the Port's application for attachment, emphasizing the lack of a clear entitlement to damages.
- Conclusions: The Port is not entitled to an order of attachment before judgment.
3. SIGNIFICANT HOLDINGS - "The lien that the Port seeks to assert on the basis of the clause 4.19 of the general conditions appears, on a meaningful reading of the entire agreement between the parties, not to cover the machinery and equipment of the contractor."
- "It cannot be accepted that merely commercial reasons prompted the contractor to abandon the agreement. The contractor was hounded out of Haldia and, given the law and order situation and the apathy of the administration to address the same, it was left with no alternative but to terminate the agreement."
- "A claim in damages ordinarily does not excite a court to consider a prayer for security or attachment, though there may not be any express law to prohibit an order of such nature."
- The contractor is entitled to remove its machinery and equipment from the Haldia Dock Complex, and the Port will have no authority to stop the removal.
- The Port is ordered to pay costs for needlessly protracting the matter over the perceived lien.
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2013 (3) TMI 889
1. ISSUES PRESENTED and CONSIDERED The core legal issues considered in this judgment include: - Whether the agreement dated 1.6.1982 (Ex. A-3) was valid and enforceable, or if it was obtained through undue influence.
- Whether the Rectification Deed (Ex. A-6) executed by the father and the Appellant was valid and could affect the rights of the Respondent No. 1.
- The applicability and interpretation of Section 26 of the Specific Relief Act, 1963, concerning the rectification of instruments.
- The applicability of Section 16 of the Contract Act, 1872, regarding undue influence.
- The admissibility and probative value of the documents presented, particularly Ex. A-3 and Ex. A-6.
- The onus of proof regarding the allegations of undue influence and the validity of the documents in question.
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of the Agreement dated 1.6.1982 (Ex. A-3) - Legal Framework and Precedents: The court examined Section 16 of the Contract Act, 1872, which addresses undue influence, and relevant case law such as Bishundeo Narain and Anr. v. Seogeni Rai and Jagernath, which emphasizes the need for specific allegations and evidence to prove undue influence.
- Court's Interpretation and Reasoning: The court found that the Appellant failed to prove the validity of Ex. A-3, as the document was clouded with suspicion and unexplained circumstances.
- Key Evidence and Findings: The Appellant did not examine the attesting witnesses of Ex. A-3, nor did he prove its contents. The High Court noted that the document appeared to be drafted by an expert, yet lacked the scribe's signature or address.
- Application of Law to Facts: The court applied the principles of undue influence, determining that the Respondent No. 1 was in a vulnerable position at the time of signing Ex. A-3, rendering the document unconscionable.
- Treatment of Competing Arguments: The court rejected the Appellant's argument that the document was executed voluntarily, noting the lack of evidence supporting this claim.
- Conclusions: The agreement dated 1.6.1982 (Ex. A-3) was invalid due to undue influence and lack of proper execution.
Issue 2: Validity of the Rectification Deed (Ex. A-6) - Legal Framework and Precedents: The court referred to Section 26 of the Specific Relief Act, 1963, which allows for rectification of instruments in cases of fraud or mutual mistake.
- Court's Interpretation and Reasoning: The High Court determined that Ex. A-6 could not affect the Respondent No. 1's rights, as she was not a party to the document.
- Key Evidence and Findings: The court noted that the father, who could have sought rectification, was not examined, and the document lacked the necessary legal standing.
- Application of Law to Facts: The court concluded that only the settlor (father) could have sought rectification, and the parties themselves could not rectify the deed under Section 26.
- Treatment of Competing Arguments: The court dismissed the Appellant's reliance on Ex. A-6, emphasizing the lack of legal effect on the Respondent No. 1.
- Conclusions: The Rectification Deed (Ex. A-6) was invalid and could not alter the settlement deeds executed by the father.
Issue 3: Admissibility and Probative Value of Documents - Legal Framework and Precedents: The court cited State of Bihar and Ors. v. Radha Krishna Singh and Ors., emphasizing the distinction between admissibility and probative value.
- Court's Interpretation and Reasoning: The court acknowledged the admissibility of Ex. A-3 but found its probative value lacking due to the absence of corroborating evidence.
- Key Evidence and Findings: The document's execution was not supported by witness testimony or other evidence, leading to its diminished probative value.
- Application of Law to Facts: The court applied the principles of evidence law, focusing on the need for proof of the document's contents and execution.
- Treatment of Competing Arguments: The Appellant's failure to prove the document's authenticity weakened his position.
- Conclusions: The documents lacked sufficient probative value to support the Appellant's claims.
Issue 4: Onus of Proof - Legal Framework and Precedents: The court referred to Thiruvengada Pillai v. Navaneethammal and Anr., highlighting the burden on the party propounding a document to prove its authenticity.
- Court's Interpretation and Reasoning: The court found that the Appellant bore the burden of proof, which he failed to discharge.
- Key Evidence and Findings: The Appellant's inability to provide evidence supporting the document's validity was critical.
- Application of Law to Facts: The court applied the principles of evidence law, emphasizing the Appellant's failure to meet the burden of proof.
- Treatment of Competing Arguments: The court rejected the Appellant's claims due to the lack of evidence supporting his assertions.
- Conclusions: The Appellant failed to meet the burden of proof, resulting in the dismissal of his claims.
3. SIGNIFICANT HOLDINGS - Verbatim Quotes of Crucial Legal Reasoning: "Admissibility of a document is one thing and its probative value quite another - these two aspects cannot be combined."
- Core Principles Established: The judgment reinforced the principles regarding the burden of proof, the distinction between admissibility and probative value, and the limited applicability of Section 26 of the Specific Relief Act for rectification.
- Final Determinations on Each Issue: The court concluded that the agreement dated 1.6.1982 (Ex. A-3) was invalid due to undue influence, the Rectification Deed (Ex. A-6) was ineffective, and the Appellant failed to meet the burden of proof regarding the documents' validity.
The appeals were dismissed, affirming the High Court's decision to reverse the trial court's judgment.
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2013 (3) TMI 888
1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment are: - Whether the arbitration award obtained in the United States requires confirmation by a U.S. court before it can be executed in India.
- Whether the arbitration award is binding and enforceable under the Arbitration and Conciliation Act, 1996, specifically in light of Section 48(1)(e).
- Whether the principle of "double exequatur" applies, necessitating additional procedural steps for the enforcement of a foreign arbitration award in India.
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Confirmation of the Arbitration Award - Relevant Legal Framework and Precedents: The petitioner argued that under Section 9 of the Federal Arbitration Act of the U.S., an arbitration award must be confirmed by a U.S. court to be binding. The respondent countered that this requirement pertains to domestic awards and not to foreign awards, which are governed by the New York Convention, as incorporated into Indian law by the Arbitration and Conciliation Act, 1996.
- Court's Interpretation and Reasoning: The court noted that the New York Convention, adopted under the Arbitration and Conciliation Act, 1996, removes the requirement for double exequatur, which previously necessitated confirmation of an award in the country of origin before enforcement abroad.
- Key Evidence and Findings: The court emphasized that paragraph 7 of the consent order declared the arbitration award as final and binding, and the petitioner had not issued any notice disputing the award within the stipulated time.
- Application of Law to Facts: The court applied the provisions of the New York Convention and the Arbitration and Conciliation Act, 1996, to determine that the award was enforceable in India without further confirmation by a U.S. court.
- Treatment of Competing Arguments: The court rejected the petitioner's argument for the necessity of confirmation under U.S. law, citing the removal of the double exequatur requirement and the binding nature of the award as per the arbitration agreement.
- Conclusions: The court concluded that the arbitration award did not require confirmation by a U.S. court to be enforceable in India.
Issue 2: Binding Nature of the Arbitration Award - Relevant Legal Framework and Precedents: Section 48(1)(e) of the Arbitration and Conciliation Act, 1996, was referenced to determine the binding nature of the award. The petitioner cited a previous judgment to argue that an unconfirmed award is not binding.
- Court's Interpretation and Reasoning: The court interpreted that the binding nature of an award is determined by the arbitration agreement and the consent order, which declared the award final and binding.
- Key Evidence and Findings: The court found that the consent order and the arbitration agreement clearly established the award's binding nature.
- Application of Law to Facts: The court applied Section 48(1)(e) and the relevant provisions of the New York Convention to affirm the award's binding status.
- Treatment of Competing Arguments: The court dismissed the petitioner's reliance on the need for confirmation, emphasizing the finality of the award as agreed by the parties.
- Conclusions: The court concluded that the award was binding and enforceable under Indian law.
3. SIGNIFICANT HOLDINGS - Preserve Verbatim Quotes of Crucial Legal Reasoning: "The submission of Mr. Tripathy, which was emphasised, was that the respondent ought to proceed for confirmation of the award under the US Law and then come to India for execution. In our considered view, the said submission is not tenable in view of the changed law and doing away of the rule of double exequatur."
- Core Principles Established: The judgment reinforces the principle that under the New York Convention, as incorporated into Indian law, foreign arbitration awards do not require confirmation in their country of origin to be enforceable in India.
- Final Determinations on Each Issue: The court dismissed the petitioner's objections, affirming the enforceability of the arbitration award in India without the need for U.S. court confirmation.
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2013 (3) TMI 887
Issues Involved:
1. Whether there is an unequivocal undeniable liability on the part of the respondent to make payment to the petitioner.
2. Whether the disputes raised by the respondent about their liability to pay are bona fide disputes or disputes concocted and invented just for the purpose of depriving the petitioner of their legitimate dues.
Issue-wise Analysis:
1. Liability of the Respondent:
The petitioner filed a petition under Section 433(e) and (f) read with Section 434 of the Companies Act, seeking the winding up of the respondent-Company due to non-payment of admitted liabilities. The petitioner argued that the respondent had entered into four contracts with them for setting up a coal-based power plant. Despite completing their contractual obligations, the respondent delayed payments. The petitioner highlighted that the respondent had acknowledged the liability in various correspondences and meetings, particularly in the Minutes of the meeting dated 10.7.2012, where the respondent agreed to a payment schedule but failed to adhere to it. The petitioner contended that the respondent's failure to pay even the admitted liability indicated financial instability, warranting a winding-up order.
2. Bona Fide Nature of Disputes Raised by the Respondent:
The respondent countered that the non-payment was due to disputes regarding the performance under the contracts. They argued that the agreements included an arbitration clause, and the petitioner had already invoked arbitration, which was subsequently settled in a meeting on 10.7.2012. The respondent asserted that the obligations under the Minutes of the meeting were reciprocal and contingent upon the petitioner fulfilling their part of the obligations, which they allegedly failed to do. The respondent maintained that the disputes were genuine and substantial, not concocted, emphasizing that the petitioner had not completed certain work items and that the performance of some equipment was subpar. They further argued that the petition for winding up was an abuse of process, as the petitioner had not exhausted alternative remedies available under the arbitration agreement.
Court's Analysis:
The Court examined the disputes in three stages: pre-10.7.2012 disputes, the agreement reached on 10.7.2012, and post-10.7.2012 issues. It noted that the disputes before 10.7.2012 were settled in the meeting on 10.7.2012, where a payment schedule was agreed upon. However, the Court found that the obligations under the Minutes of the meeting were not explicitly linked to the payments, but the respondent's refusal to pay was based on alleged non-performance by the petitioner. The Court applied the test from Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries Pvt. Ltd, assessing whether the dispute was bona fide and substantial. The Court concluded that the respondent's dispute was bona fide, as issues had been raised consistently before and after the meeting on 10.7.2012, and the disputes were not invented merely for resisting the winding-up petition.
Conclusion:
The Court found that the respondent had already paid 90% of the contract value, indicating financial capability. The disputes raised were not frivolous but bona fide, and substantial, and the respondent's refusal to pay was not indicative of insolvency. Consequently, the Court dismissed the winding-up petition, finding no grounds to order the winding up of the respondent-Company.
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2013 (3) TMI 886
Issues:
Petition for winding up of a company due to unpaid liability and interest.
Analysis:
The petitioner, a chemical supplier, filed a petition under Sections 433(e), 434(1)(a) and (c) and 439 of the Companies Act, 1956, seeking winding up of the respondent company for their inability to pay the admitted liability amounting to Rs. 10,08,088 along with interest at 36% p.a. The respondent did not dispute the amount due but raised a plea for strict proof of the claim. The respondent cleared the principal amount during the petition's pendency, but the interest remained unpaid, leading the petitioner to seek winding up. The petitioner relied on the Supreme Court judgment in M/s. Vijay Industries vs. NATL Technologies Limited to support their claim that interest payable on the due amount constitutes a debt under the Companies Act. However, the court noted that winding up can be ordered on an undisputed claim, whether principal or interest, and since the principal amount was paid during the petition, it was not just or equitable to wind up the company solely for the interest component. The court emphasized that a winding-up petition is not a means for debt recovery but granted liberty to the petitioner to pursue interest recovery through civil remedy, ultimately dismissing the company petition without costs.
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2013 (3) TMI 885
Issues Involved:
1. Whether the complaints against the accused are barred by limitation as per Section 468(2)(c) Cr.P.C.
2. Whether the complaints make out the ingredients of the penal provisions under Sections 63, 68, and 628 of the Companies Act, 1956.
3. Whether specific overt acts are attributed to accused No.2 regarding the alleged criminal activities.
4. Whether the petitioner-accused No.2 is liable for prosecution under the strict liability imposed by Section 63 of the Companies Act, 1956.
Detailed Analysis:
Issue 1: Limitation under Section 468(2)(c) Cr.P.C.
The petitioner contended that the complaints under Sections 63 and 628 of the Companies Act are barred by limitation, as the punishment prescribed is two years, and under Section 468(2)(c) Cr.P.C., prosecution must be initiated within three years. The Prospectus was issued on 08-12-1999, and the complaint was lodged on 10-03-2010. The court noted that the question of limitation was not raised before the trial court and deemed it inappropriate to entertain this question at this stage. For the offence under Section 68, the punishment is beyond three years, and thus, the prosecution is not barred by limitation.
Issue 2: Ingredients of Penal Provisions under Sections 63, 68, and 628
The court examined whether the complaints sufficiently alleged the ingredients of the penal provisions. Section 63 involves strict liability for misstatements in the Prospectus, while Sections 68 and 628 require mens rea. The court found that the complaints did not establish the necessary mens rea for Sections 68 and 628, as they contained only omnibus allegations against all Directors without specific details. Consequently, the prosecution under these sections was deemed inappropriate.
Issue 3: Specific Overt Acts of Accused No.2
The petitioner argued that no specific overt acts were attributed to accused No.2. The court agreed, noting that the complaints made general allegations against all Directors without detailing the participation of accused No.2 in the issuance of the Prospectus. The court emphasized that for Sections 68 and 628, specific allegations and evidence of mens rea are required, which were absent in this case.
Issue 4: Liability under Section 63 of the Companies Act, 1956
Section 63 imposes strict liability on every person who authorized the issuance of the Prospectus. The court highlighted that such a person could defend themselves by proving the statement was immaterial or believed to be true at the time of issuance. These are questions of fact to be determined at trial. However, due to the lack of specific allegations against accused No.2, the court found that the prosecution failed to establish a prima facie case under Section 63.
Conclusion:
The court concluded that the prosecution of accused No.2 under Sections 63, 68, and 628 of the Companies Act would be an abuse of the court's process. The proceedings against accused No.2 were quashed, and the petitions were allowed, as the complaints did not sufficiently establish the offences under the relevant sections of the Companies Act.
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2013 (3) TMI 884
Issues:
1. Claim for pending salary and interest by an ex-employee post-company winding up.
Analysis:
The judgment pertains to a case where an ex-employee of a company, which was wound up by the court, filed an application seeking the release of pending salary for a period after the company's winding up. The applicant claimed salary for 7 months from December 1995 to June 1996, along with interest at 18% per annum. The Board for Industrial and Financial Reconstruction (BIFR) had recommended the winding up of the company, and the Official Liquidator was appointed to manage the assets. The Official Liquidator contended that as per Section 445(3) of the Companies Act, 1956, no employer-employee relationship existed post the company's winding up on 2.8.1995. The Official Liquidator had already made full and final payments to all employees, including the applicant, as per the court's orders and settlement calculations.
Furthermore, the Official Liquidator had disbursed amounts to secured creditors and workers in compliance with court orders. The applicant's claim for pending salary was challenged by the Official Liquidator and another party representing the company, stating that all dues had been settled as per the law. The court noted that the applicant had previously filed a similar application in 2003, which was disposed of with directions to the Official Liquidator to verify the claims. The court reiterated that post-winding up, the applicant was not entitled to any further benefits as per the law. Despite the applicant's arguments that the salary claim was separate from other settlements and that necessary details were not provided by the Official Liquidator, the court upheld the Official Liquidator's position and rejected the applicant's claim for pending salary and interest.
In conclusion, the court dismissed the application, emphasizing that the applicant, as an ex-employee of the wound-up company, was not entitled to claim pending salary for the period after the company's winding up, as per the provisions of the Companies Act, 1956. The court upheld the Official Liquidator's actions and previous settlements, stating that all dues had been cleared, and no further payments were owed to the applicant.
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2013 (3) TMI 883
Issues:
1. Classification of rental income under 'Income from Other Sources' instead of 'Income from House Property'
2. Allowance of 100% depreciation on fork lift
3. Allocation of H.O. expenses to eligible unit under Section 80IB
4. Treatment of expenditure on moulds and dies as revenue expenditure
5. Allowance of professional fees for trademark protection as expenditure
6. Computation of deduction under Section 80HHC including sale of scrap, disposal of empty containers, and indirect expenses
7. Reduction of deduction under Section 80IB from profits for calculating deduction under Section 80HHC
8. Deduction for destruction of obsolete stock-in-trade
9. Treatment of advertisement expenditure as revenue in nature
10. Deletion of penalty imposed under Section 271(1)(c)
Analysis:
1. The Tribunal justified the classification of rental income under 'Income from Other Sources' instead of 'Income from House Property'. The decision was based on the fact that the Tribunal found no requirement for the vehicles to be registered under the Motor Vehicles Act for depreciation benefits. The Tribunal's factual findings were deemed valid, and the appeal was not entertained.
2. The Tribunal allowed 100% depreciation on fork lift, noting that the vehicles operated within the plant and carried goods, meeting the criteria for depreciation benefits. The decision was upheld based on factual findings, and the appeal was dismissed.
3. The Tribunal allowed the claim under Section 80IB without allocating H.O. expenses to the eligible unit. The Tribunal's decision was based on maintaining separate accounts for each unit, leading to a valid allocation. As the facts were similar to a previous case, the appeal was not entertained.
4. The Tribunal treated expenditure on moulds and dies as revenue expenses, considering the short life of these assets and the changing consumer preferences. The decision was upheld based on factual findings, and the appeal was dismissed.
5. The Tribunal allowed professional fees for trademark protection as expenditure, emphasizing the benefit derived by the assessee regardless of trademark ownership. The decision was supported by contractual terms, and the appeal was not entertained.
6. The Tribunal allowed the claim under Section 80HHC based on previous orders and factual similarities with previous cases. As no challenge was presented for a specific year, the appeal was not entertained.
7. The issue regarding the reduction of deduction under Section 80IB from profits for calculating deduction under Section 80HHC was settled in favor of the assessee based on a previous court decision. The appeal was not entertained.
8. The Tribunal upheld the deduction for destruction of obsolete stock-in-trade, following previous decisions and lack of challenge from the revenue department. The appeal was not entertained.
9. The issue of treating advertisement expenditure as revenue in nature was settled in favor of the assessee based on a previous court decision. The appeal was not entertained.
10. The Tribunal deleted the penalty imposed under Section 271(1)(c) based on complete disclosure of facts and a change in the head of income. The decision was supported by a previous court ruling, and the appeal was not entertained.
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2013 (3) TMI 882
Issues:
1. Condonation of delay in re-filing the petition.
2. Petition for winding up a company under Section 433(e) of the Companies Act, 1956.
3. Appointment of Provisional Liquidator.
Analysis:
1. The judgment begins with the court condoning the delay in re-filing the petition, thus disposing of the application swiftly.
2. The Petitioner sought the winding up of the Respondent company under Section 433(e) of the Companies Act, 1956, citing the inability of the company to pay the debt owed to him. The Petitioner, a former employee, claimed arrears of salary and benefits, contending that the company was unable to meet its financial obligations.
3. The court examined the details of the employment agreement, salary reductions, and the subsequent resignation of the Petitioner due to salary disputes. The Respondent company disputed the claims made by the Petitioner regarding salary arrears, asserting that all dues were settled. The court highlighted the legal principles regarding the inability of a company to pay its debts, emphasizing the need for undisputed debts to warrant a winding-up order.
4. The court referenced legal precedents to explain the criteria for winding up a company, emphasizing that the debt must be undisputed, and the company's defense must lack substance for such an order to be granted. The burden of proof lies with the Petitioner to establish the undisputed nature of the debt and the company's inability to pay.
5. The court concluded that the Petitioner failed to establish a prima facie case under Section 433 of the Companies Act for granting the relief sought. The judgment dismissed the petition and the pending application, advising the Petitioner to explore other legal remedies available to him for recovery of the claimed debt.
6. The judgment clarified that a winding-up petition cannot be transformed into a mere money recovery claim without meeting the essential conditions specified under Section 433 of the Companies Act, citing relevant legal precedents to support this stance.
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2013 (3) TMI 881
Issues:
1. Whether the order of the second respondent and the consequential order of the first respondent, demanding damages for belated payment of contribution, should be quashed?
2. Whether the BIFR order for changing the cut-off date for payment of outstanding dues to ESI Corporation from 31.3.2001 to 31.3.2003 is binding on the respondents?
3. Whether the respondents were justified in refusing to waive the damages for belated payment as per the BIFR order?
Analysis:
Issue 1:
The petitioner sought a writ to quash the order demanding damages for belated payment of contribution and to direct the respondents to waive the damages. The petitioner, a sick industrial company under BIFR, had a rehabilitation scheme where ESI Corporation dues were to be paid in installments. The BIFR order changed the cut-off date for payment to 31.3.2003. The respondents refused to waive damages, claiming it was at their discretion under ESI regulations. The court held that the BIFR order had statutory force, and the respondents could not go against it. The demand notice was deemed arbitrary and against the law, leading to the quashing of the impugned order.
Issue 2:
The BIFR order changed the cut-off date for payment of dues to ESI Corporation, which was accepted by the ESI Corporation as per the representation made by the company. The court noted that the BIFR order had statutory force and was binding on all parties. The ESI General Regulation did not prohibit complete waiver in extraordinary circumstances, and the consent of ESI Corporation was not contrary to the regulation. The court held that once ESI Corporation consented before the BIFR, they could not rely on regulations to go against the BIFR order. Therefore, the BIFR order changing the cut-off date was held to be binding on the respondents.
Issue 3:
The respondents contended that they had the discretion to waive damages as per ESI regulations, and full waiver was only in extraordinary situations. However, the court found no merit in this defense. The BIFR order, with ESI Corporation's consent, had statutory force and aimed at reconstructing the company. The court held that the respondents could not use regulations to defeat the BIFR order. Therefore, the refusal to waive damages was deemed arbitrary and against the law, leading to the setting aside of the impugned order.
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2013 (3) TMI 880
Issues:
1. Re-computation of interest offered in earlier years and setting off against current year's income.
2. Allowing expenditure claimed under Section 35D of the I.T. Act.
3. Deletion of disallowance made on account of depreciation claimed on certain assets.
4. Disallowance of depreciation claimed on leased assets.
Analysis:
Issue 1:
The Tribunal remanded the issue of re-computation of interest to the Assessing Officer, and the High Court declined to interfere with this decision.
Issue 2:
Regarding the expenditure claimed under Section 35D of the I.T. Act, the Tribunal directed the benefit to be granted based on the principle of consistency. The Tribunal noted that the claim had been allowed in previous years without dispute, and therefore, it could not be suddenly disallowed. Citing a previous court decision, the Tribunal upheld the claim, emphasizing the importance of maintaining consistency in such matters.
Issue 3:
The Tribunal deleted the disallowance made on account of depreciation claimed on certain assets. It observed that the transactions were not merely financial arrangements, and the assessee was entitled to the depreciation benefits. The Tribunal emphasized the rule of consistency and directed the Assessing Officer to allow the claim, as it had been granted in previous years without challenge.
Issue 4:
The issue of disallowance of depreciation claimed on leased assets was also addressed by the Tribunal. It noted that the assessee had not relinquished its interest in the leased equipment, and therefore, the claim was justified. Relying on the rule of consistency and previous court decisions, the Tribunal allowed the claim and directed the Assessing Officer to do the same.
In conclusion, the High Court dismissed the Tax Appeal, upholding the decisions of the Tribunal regarding the re-computation of interest, allowance of expenditure under Section 35D, deletion of disallowance on certain assets' depreciation, and disallowance of depreciation claimed on leased assets. The judgments were based on the principles of consistency and previous practices in granting such claims.
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2013 (3) TMI 879
Issues Involved:
1. Maintainability of the writ petition and locus standi of the petitioners.
2. Legality of the refusal to register the sale deed by the respondents.
3. Applicability of Section 53(6) of the Santhal Parganas Tenancy (Supplementary Provisions) Act, 1949.
4. Validity of the letters issued by the Deputy Commissioner, Deoghar.
5. Requirement for compensation to original raiyats.
Issue-wise Detailed Analysis:
1. Maintainability of the Writ Petition and Locus Standi of the Petitioners:
The court first addressed the locus standi and maintainability of the writ petition. It was determined that the petitioners, having purchased the land and paid consideration, had a legal right to seek relief under Article 226 of the Constitution of India. The court noted, "On perusal of the document (Annexure-11) and various clauses mentioned therein... the present petitioners are having locus to file such writ petition seeking writ of mandamus under Article 226 of the Constitution of India as the petitioners are appears to be aggrieved persons."
2. Legality of the Refusal to Register the Sale Deed by the Respondents:
The court analyzed whether the registering authority had the power to refuse the registration of a validly executed document. It was held that the refusal was not justified. The court referred to the case of Doman Prasad Yadav vs. State of Jharkhand, stating, "Section 20 of the Santhal Parganas Tenancy Act does not put any restriction on the transfer of Basauri land and as such registering authority has erroneously asked for such no objection." The court directed the District Registrar, Deoghar to register the sale deed if no other legal impediments existed.
3. Applicability of Section 53(6) of the Santhal Parganas Tenancy (Supplementary Provisions) Act, 1949:
The court examined the applicability of Section 53(6) and its impact on the land acquired under Section 25A of Regulation II of 1886. It was noted that Section 53(6) of the 1949 Act, which allows the Deputy Commissioner to restore land to original raiyats if not used for the intended purpose within five years, did not apply retrospectively to land acquired before the Act came into force. The court cited the case of Smt. Sugiya Devi vs. Chando Kapri, stating, "The Amending Act 14 of 1949... is not having retrospective effect and the amended Act shall apply prospectively."
4. Validity of the Letters Issued by the Deputy Commissioner, Deoghar:
The court quashed the letters issued by the Deputy Commissioner, Deoghar, which objected to the transfer of land. It was held that the Deputy Commissioner's actions were not supported by law. The court stated, "Annexure-1 & 14 are required to be quashed and set aside. Accordingly, Annexure-1 & 14 are ordered to be quashed and set aside."
5. Requirement for Compensation to Original Raiyats:
The court emphasized the need for fair compensation to the original raiyats whose land was acquired. It directed the petitioners to deposit Rs. 15,00,000 with the Jharkhand State Legal Services Authority for distribution among the original raiyats or their heirs. The court stated, "The petitioner shall deposit Rs. 15,00,000/- before the Member-Secretary, Jharkhand State Legal Services Authority... The said deposited amount be distributed amongst the raiyats or their legal heirs."
Conclusion:
The court disposed of the writ petition with directions to the District Registrar, Deoghar, to register the sale deed, and to the petitioners to compensate the original raiyats. It also directed the State Government to consider amending the law to protect the interests of raiyats in similar cases.
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2013 (3) TMI 878
Issues Involved:
1. Whether the payment on account of service charges by NAFED to KSCMFL or procuring societies is in the nature of "commission" within the meaning of section 194H of the Act.
2. Whether NAFED ought to have deducted tax at source on the component of payment made to KSCMFL or procuring societies.
3. Whether failure to deduct tax at source results in NAFED being treated as an assessee in default u/s. 201(1) of the Act.
4. Whether interest u/s. 201(1A) of the Act is applicable.
Summary:
Issue 1: Nature of Payment as "Commission"
The primary issue to be decided is whether the payment on account of service charges by NAFED to KSCMFL or procuring societies is in the nature of "commission" within the meaning of section 194H of the Act. The assessee argued that the payments were not commissions but reimbursements for administrative costs. The Tribunal noted that the transactions between NAFED and SLAs were on a principal-to-principal basis and not principal-agent. The Tribunal referred to clause 16 of the agreement dated 11.04.2008, which explicitly stated that the agreement does not confer the status of an agent of NAFED on the second part. The Tribunal concluded that the service charges were administrative mark-ups and not commissions.
Issue 2: Obligation to Deduct Tax at Source
The Tribunal examined whether NAFED ought to have deducted tax at source on the payments made to KSCMFL or procuring societies. The Tribunal referred to the definition of "commission or brokerage" in clause (i) of the Explanation to section 194H of the Act, which requires an agency relationship. Since the transactions were on a principal-to-principal basis, the Tribunal held that section 194H was not applicable, and therefore, NAFED was not required to deduct tax at source.
Issue 3: Assessee in Default u/s. 201(1)
The Tribunal considered whether NAFED's failure to deduct tax at source would result in it being treated as an assessee in default u/s. 201(1) of the Act. Given that the Tribunal found section 194H inapplicable, it concluded that NAFED could not be treated as an assessee in default.
Issue 4: Interest u/s. 201(1A)
The Tribunal addressed the applicability of interest u/s. 201(1A) of the Act. Since the Tribunal held that NAFED was not liable to deduct tax at source u/s. 194H, the question of charging interest u/s. 201(1A) did not arise.
Conclusion:
The Tribunal allowed the appeals by the assessee, canceling the impugned orders of the Assessing Officer. It held that the provisions of section 194H were not attracted to the disputed payments made by the assessee, and consequently, NAFED could not be treated as an assessee in default u/s. 201(1) of the Act, nor was interest u/s. 201(1A) applicable. The appeals were pronounced in the open court on March 8, 2013.
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2013 (3) TMI 877
Issues Involved:
1. Lapse of preliminary notification u/s 4 of the Rajasthan Land Acquisition Act, 1953.
2. Legality of invoking urgency powers and dispensing with inquiry u/s 5-A after seven years.
Summary:
Issue 1: Lapse of Preliminary Notification u/s 4
The preliminary notification u/s 4 of the Rajasthan Land Acquisition Act, 1953 was issued on 01.05.1980 for acquiring land for a public purpose (construction of a bus stand). The declaration u/s 6 was made on 19.03.1987, after the expiry of two years from the commencement of the Rajasthan Land Acquisition (Amendment and Validation) Act, 1981. The 1981 Amendment Act, effective from 27.06.1981, amended Section 6 to include a proviso that no declaration shall be made after the expiry of three years from the date of notice u/s 4(5). Section 5(2) of the 1981 Amendment Act mandates that no declaration u/s 6 shall be made after the expiry of two years from the commencement of the Act for notices issued before its commencement. The Court held that the preliminary notification dated 01.05.1980 had lapsed, as the declaration u/s 6 was made beyond the prescribed time limit.
Issue 2: Legality of Invoking Urgency Powers and Dispensing with Inquiry u/s 5-A
The state government invoked its powers u/s 17(1) read with Section 17(4) and dispensed with the provisions of Section 5-A on 19.03.1987, seven years after the preliminary notification u/s 4. The Court emphasized that the power of urgency, which takes away the right to file objections, can only be exercised for real urgency that cannot brook delay. The Court noted that the right to file objections u/s 5-A is substantial and cannot be taken away without real urgency. The state government's invocation of urgency powers after seven years was found to be unjustified, as the inquiry u/s 5-A could have been completed within a few months. The dispensation of inquiry u/s 5-A was declared legally unsustainable.
Conclusion:
The Supreme Court allowed the civil appeal, setting aside the impugned orders. It declared that the preliminary notification dated 01.05.1980 had lapsed and the declaration made on 19.03.1987 was legally unsustainable. If possession of the subject land had been taken from the appellants, it was to be restored to them without delay. No orders as to costs.
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2013 (3) TMI 876
Issues Involved:
1. Depreciation on mining and drilling accessories.
2. Depreciation on steel and temporary structures.
3. Depreciation on office appliances.
4. Unabsorbed depreciation.
5. Disallowance of prior period expenditure.
Summary of Judgment:
1. Depreciation on Mining and Drilling Accessories:
The AO contested the allowance of 100% depreciation on mining and drilling accessories, arguing it should be 15%. The CIT(A) had equated these accessories with sand stowing pipes, allowing 100% depreciation, which was disputed by the AO. The Tribunal found that the issue of whether drill rods and pipe casings constitute accessories was not adequately addressed by the CIT(A). The matter was restored to the file of the CIT(A) for fresh consideration.
2. Depreciation on Steel and Temporary Structures:
The assessee claimed 100% depreciation on a steel structure, which the AO allowed at 10%, treating it as a capital expenditure. The CIT(A) upheld this decision, stating that 100% depreciation was only available for temporary structures like wooden structures. The Tribunal agreed with the CIT(A) and AO, confirming that steel structures should only receive 25% depreciation.
3. Depreciation on Office Appliances:
The AO allowed only 10% depreciation on office appliances, categorizing items like air conditioners and water coolers as furniture and fixtures rather than plant and machinery. The CIT(A) upheld this view. The Tribunal confirmed the CIT(A)'s decision, stating that such items do not directly relate to manufacturing or processing activities and should be treated as furniture and fixtures.
4. Unabsorbed Depreciation:
The AO disallowed the carry forward of unabsorbed depreciation beyond eight years, based on the provisions applicable from AY 1997-98. The CIT(A) reversed this, citing amendments to Section 32(2) that allowed unabsorbed depreciation to be carried forward without a time limit. The Tribunal upheld the CIT(A)'s decision, confirming that the amended provisions were applicable and the unabsorbed depreciation should be allowed.
5. Disallowance of Prior Period Expenditure:
The AO disallowed prior period expenses of Rs. 3.65 lakhs, arguing that they should be accounted for in the year they accrued. The CIT(A) upheld this disallowance. The Tribunal, however, found that the assessee had consistently followed a practice of accounting for such expenses in subsequent years when they crystallized. It ruled that the prior period expenses should be allowed, following precedents from various High Courts.
Conclusion:
- Appeals by the AO for AYs 2006-07, 2007-08, and 2008-09 were partly allowed.
- Appeals by the assessee for AY 2003-04 and 2008-09 were partly allowed.
- Appeal by the assessee for AY 2007-08 was dismissed.
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2013 (3) TMI 875
Issues Involved:
The judgment involves appeals by the revenue against two separate orders of Ld. CIT(A) for the assessment years 2007-08 and 2008-09, addressing issues related to capital expenditure on repairs, interest cost incurred on advances, and disallowance of interest under Rule 8D.
Assessment Year 2007-08:
Issue 1 - Capital Expenditure on Repairs:
The A.O. disallowed an expenditure of Rs.11,17,492 on repairs, treating it as capital expenditure. Ld. CIT(A) deleted the disallowance, leading to the revenue's appeal. The Tribunal found that the basis for considering the expenditure as capital was not clear. The matter was remanded to Ld. CIT(A) for a fresh decision, emphasizing the need for the assessee to establish whether the expenses were for replacement of components or a separate machine. The Tribunal referred to a judgment of the Hon'ble Apex Court for guidance.
Issue 2 - Interest Cost on Advances:
The A.O. disallowed Rs.10,33,460 as interest cost on advances given for non-business purposes. Ld. CIT(A) deleted the disallowance, which was upheld by the Tribunal. The Tribunal noted that the own interest-free funds of the assessee far exceeded the interest-free advances, and no direct nexus was established between interest-free advances and borrowed funds, citing relevant judgments of the Hon'ble Gujarat High Court.
Issue 3 - Disallowance of Interest under Rule 8D:
The A.O. disallowed Rs.2,03,331 under Rule 8D for interest expenditure. The Tribunal found Rule 8D not applicable for the year in question. It held that no disallowance of interest was warranted as the own funds of the assessee substantially exceeded the investment, and there was no direct nexus between interest-bearing borrowed funds and investments. The Tribunal partially allowed the revenue's ground, deleting a portion of the disallowance.
Assessment Year 2008-09:
Issue 1 - Capital Expenditure on Acquiring Assets:
The A.O. disallowed Rs.5,35,707 as revenue expenditure on acquiring assets. The Tribunal remanded the matter to Ld. CIT(A) for a fresh decision, similar to the approach taken for the assessment year 2007-08. The revenue's ground was allowed for statistical purposes.
Issue 2 - Interest Cost on Advances to Sister Concern:
The A.O. disallowed Rs.9,93,805 as interest cost on advances to a sister concern for non-business purposes. The Tribunal rejected the disallowance, citing the excess of own funds over interest-free advances and the lack of a direct nexus between interest-free advances and borrowed funds.
In conclusion, both appeals by the revenue were partly allowed for statistical purposes, with the Tribunal providing detailed reasoning for each issue addressed in the judgment.
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2013 (3) TMI 874
Issues Involved:
1. Conviction and sentencing u/s 302, 364, and 120-B of the Indian Penal Code.
2. Reliance on circumstantial evidence.
3. Last seen theory.
4. Recovery of incriminating articles.
5. Motive for the crime.
6. Discrepancies in witness testimonies.
7. Forensic evidence.
Summary:
1. Conviction and Sentencing u/s 302, 364, and 120-B of the Indian Penal Code:
The appeals challenge the High Court's decision, which upheld the Additional Sessions Judge's conviction of the appellants for kidnapping and murdering a 7-year-old child, sentencing them to life imprisonment u/s 302, along with fines and additional imprisonment for non-payment.
2. Reliance on Circumstantial Evidence:
The prosecution's case was based solely on circumstantial evidence. The Supreme Court reiterated the "five golden principles" for conviction based on circumstantial evidence, as established in Sharad Birdhichand Sarda v. State of Maharashtra.
3. Last Seen Theory:
The prosecution relied on witnesses who testified that the deceased was last seen with the appellants. Witnesses PW-3, PW-4, and PW-10 confirmed seeing the accused with the child on the day of the incident, supporting the last seen theory.
4. Recovery of Incriminating Articles:
Incriminating articles, including blood-stained clothes, were recovered based on information provided by the appellants. The FSL report confirmed the presence of human blood on these items.
5. Motive for the Crime:
The prosecution established a motive, highlighting previous enmity between the families. The accused had threatened the victim's family, which provided a motive for the crime.
6. Discrepancies in Witness Testimonies:
The defense pointed out discrepancies in witness testimonies regarding the condition of the dead body. However, the Court noted that these witnesses were villagers and the body was found days after the incident, partially eaten by animals, which explained the inconsistencies.
7. Forensic Evidence:
Forensic evidence, including the FSL report, supported the prosecution's case by confirming the presence of human blood on the recovered clothes.
Conclusion:
The Supreme Court concluded that the prosecution had established all the necessary circumstances through cogent and acceptable evidence, leading to the conclusion that the appellants kidnapped and murdered the deceased. The trial court's decision, affirmed by the High Court, was upheld, and the appeals were dismissed.
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