2012 (12) TMI 710 - HC - Companies Law

Imposition of Penalty - lift the material sold to the applicant more than it was allowed - Held that - The Court finds that merely on the basis of an affidavit filed by one person (Shri Jivanlal F. Parmar) and in absence of any other convincing material coming on record to establish that the appellant-society has lifted the goods more than the appellant was allowed to lift, such penalty count not have been imposed. As mentioned in the judgement of court regarding lifting of material that, shareholders of the applicant Society are poor persons and the Society is suffering from shortage of fund. At this stage, learned Senior Advocate for the appellant-society submitted that the appellant-society has gone in liquidation and an Administrator is appointed and submitted that if this stands, out of the assets of the society in liquidation, an amount of Rs. 2 lacs will be paid to the Official Liquidator, which will result into depriving the shareholders of the society from the amount which they may otherwise be getting. Taking into consideration the totallity of the case, the Court finds that judgment and order dated 10.08.2005 deserves to be set aside, to the extent it imposed penalty /fine on the appellant-society of Rs. 2 lacs. It goes without saying that the other direction/s with regard to investigation in the matter stands - At the request of the learned Senior Advocate for the appellant-society, it is clarified that it will be open for the appellant-society to renew its request of extension of time before the learned Company Judge.

Summary

Issues:
Appeal against judgment and order imposing penalty on appellant-society for alleged excessive lifting of goods.

Analysis:
The judgment involved an appeal by Jubilee Mills Limited Employees' Cooperative Society Limited against a judgment and order dated 10.08.2005 passed by the learned Company Judge in Company Application No. 219 of 2004. The appellant-society sought an extension of time for lifting material sold to them without charging any rent. The dispute arose when Shri Jivanlal F. Parmar filed an affidavit alleging excessive lifting of goods by the appellant-society, leading to a penalty of Rs. 2 lacs imposed by the Company Judge. The appellant contended that the penalty was unjust as there was conflicting evidence regarding the location of the goods lifted and the involvement of Calico Mills. The affidavit filed by Shri Jivanlal F. Parmar was deemed vague and unreliable by the appellant's counsel. The Textile Labour Association supported the appellant's request for an extension of time, indicating no objection to the same.

The Official Liquidator's report clarified that the appellant-society had made a bid for various machineries and had paid the full consideration for the purchase. The report detailed the sale process and confirmed that the goods were lifted from the premises of Jubilee Mills, not Calico Mills as alleged. The Court found that the penalty imposed solely on the basis of Shri Jivanlal F. Parmar's affidavit was unjustified. It was noted that a detailed investigation into the gate passes issued for lifting the goods could have verified the allegations before imposing a penalty. The Court highlighted the need for concrete evidence before penalizing the appellant-society. The appellant's counsel argued that the penalty of Rs. 2 lacs was disproportionate to the transaction value and could severely impact the society, especially considering its financial constraints. The Court, after considering the totality of the case, set aside the judgment and order imposing the penalty, allowing the appellant-society to renew its request for an extension of time before the Company Judge. The appeal was allowed in favor of the appellant-society.