1972 (9) TMI 87 - HC - Companies Law

Issues Involved:

1. Preliminary objection regarding the maintainability of cross-objection by the respondents.
2. Capital expenditure incurred by the Syndicate.
3. Price of coal stock and guaranteed profits.
4. Expenditure on Incline No. 4.
5. Various disputed items of expenditure and their justification.
6. Interest on the amount due from the Syndicate.

Issue-wise Detailed Analysis:

1. Preliminary Objection Regarding Cross-Objection:

The appellant contended that the cross-objection filed by the respondents was not maintainable under section 202 of the Companies Act, 1913, as there was no provision corresponding to Order 41, rule 22, of the Code of Civil Procedure. The respondents argued that appeals under section 202 are governed by the same procedure as appeals under the Code of Civil Procedure. The court held that the right to file a cross-objection is a procedural right and is applicable to appeals under section 202 of the Act, thereby making the cross-objection maintainable.

2. Capital Expenditure Incurred by the Syndicate:

The Syndicate claimed various amounts as capital expenditure, including office staff quarters, underground water dam, nala diversion, underground stoppings, boring and prospecting, and a new incline. The trial court disallowed certain items, treating them as revenue expenditure essential to normal mining operations. The court agreed with the trial court's view, holding that expenses on underground water dam, nala diversion, underground stoppings, and underground stowing were revenue expenditures. However, the expenditure on Incline No. 4 was treated as capital expenditure, necessary for keeping the coal mine productive.

3. Price of Coal Stock and Guaranteed Profits:

The trial court found that the Syndicate did not account for the price of 5,320 tons of coal stock when it took over the mine. The court agreed with this finding but adjusted the raising charges, determining that the judgment-debtor company was entitled to Rs. 4,987-8-0 instead of Rs. 14,630. Additionally, the Syndicate was liable to pay guaranteed profits on 7,714 tons of coal in stock on January 7, 1941, as the Syndicate continued to sell the coal and appropriate its price.

4. Expenditure on Incline No. 4:

The Syndicate claimed a total sum of Rs. 59,247-14-3 for the construction of Incline No. 4. The trial court allowed Rs. 52,521-5-6, but the court held that the Syndicate was entitled only to an expenditure of Rs. 3,000 over the incline after April 5, 1941, based on an express order of the court. Thus, the total amount allowed for Incline No. 4 was Rs. 47,521-5-6.

5. Various Disputed Items of Expenditure and Their Justification:

- Price of 5,320 tons of coal: The court adjusted the raising charges and held the Syndicate liable for Rs. 4,987-8-0.
- Guaranteed profits on 7,714 tons of coal: The court upheld the trial court's decision to allow Rs. 1,205-5-0.
- Price of coal consumed in boilers: The court agreed with the trial court that the Syndicate was not entitled to charge for coal consumed in the boilers, disallowing Rs. 26,903.
- Price of shale: The court agreed with the trial court that the Syndicate was liable for Rs. 6,791.
- Payment to Shukla: The court upheld the trial court's decision to disallow Rs. 5,062-8-0 due to lack of evidence.
- Extra payment for transportation charges: The court agreed with the trial court that the Syndicate had no business to be over-generous at the cost of the judgment-debtor company, disallowing Rs. 6,737-0-9.
- Rebate and commission: The court disagreed with the trial court and allowed Rs. 6,087-8-9 as it was proper incidental expenditure.
- Expenses from January 1 to January 6, 1941: The court upheld the trial court's decision to disallow Rs. 1,256-5-6.
- Pay to Mr. Gandhi: The court upheld the trial court's decision to disallow Rs. 660 as there was no justification for retaining him after the colliery was sold.
- Goods sold to auction-purchasers: The court held that Rs. 4,196-6-6 was wrongly debited to the Syndicate by the trial court due to lack of satisfactory evidence.

6. Interest on the Amount Due from the Syndicate:

The trial court allowed interest at 3% on the amount due from the Syndicate up to the date of the order and 5% thereafter till payment. The court found the rate of interest reasonable and saw no good reason to interfere with it.

Conclusion:

The appeal and cross-objection were partly allowed. The total amount due from the Syndicate on February 21, 1945, was determined to be Rs. 82,891.74 instead of Rs. 97,818.19 as determined by the trial court. The Syndicate was directed to return the said amount with interest at 3% from February 21, 1945, to January 22, 1963, and at 5% thereafter till realization. The appellant was to bear its own costs of the appeal and that of the respondents, with the parties bearing their own costs regarding the cross-objection.

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