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2008 (2) TMI 936
Issues:
1. Technical knowhow expenditure treated as revenue expenditure.
2. Taxability of profit from US and UK branches.
3. Taxability of sale tax exemption benefit.
Analysis:
1. The appeal challenges the Tribunal's order regarding the treatment of technical knowhow expenditure as revenue expenditure. The Revenue argues that the expenditure should be considered a capital expenditure due to the amended provisions of Section 32, which classify technical knowhow as an intangible asset. The Tribunal's decision to treat it as revenue expenditure is disputed, raising a substantial question of law.
2. Another issue raised is the taxability of profits from US and UK branches, with the Revenue contending that these profits should be included in the taxable profit of the assessee in India. The Tribunal's decision to exclude these profits from taxation in India is under scrutiny, posing a significant legal question for consideration.
3. The third issue pertains to the taxability of the sale tax exemption benefit amounting to Rs. 58 crores availed by the assessee. The Tribunal restored this issue to the Assessing Officer for fresh consideration, a decision disputed by the Revenue. The Assessing Officer's failure to act on the Tribunal's order led to confusion during the proceedings, highlighting the importance of accurate information dissemination in legal matters.
4. The Court emphasized the importance of factual accuracy and fairness in legal proceedings, expressing concern over incorrect instructions provided to the Counsel by the Assessing Officer. The Court directed the Assessing Officer to submit an affidavit explaining the circumstances leading to the misinformation, aiming to prevent wastage of time and resources in future proceedings.
5. To address the issue of inaccurate briefing, the Court adjourned the hearing to allow the filing of the affidavit and directed the Counsel to serve a copy of the order to the relevant Chief Commissioners of Income Tax. This directive aimed to ensure that Officers are well-informed and adequately brief the Counsel to represent the Revenue effectively during appeal hearings, promoting efficiency and fairness in the legal process.
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2008 (2) TMI 935
Issues involved: Whether the appellant, a registered stock broker, failed to exercise due diligence, care, and skill thereby violating his code of conduct.
Facts: The Securities and Exchange Board of India (SEBI) ordered investigations into alleged irregularities in trading in the scrip of a company, where more than 37 lakh shares were forfeited due to non-payment of call money. It was found that certain entities, including Mayekar and KP, created artificial volumes in the market through matched trades.
Legal Analysis: The appellant, a member of the Bombay Stock Exchange and a registered stock broker, was served with a show-cause notice alleging contravention of various regulations. The charge against the appellant was that he failed to exercise due skill, care, and diligence in conducting his business as a stock broker. The Board suspended the appellant's registration based on the investigations and joint statement of the appellant and a partner of the firm.
Decision: The Securities Appellate Tribunal found that the appellant could not be held responsible for the actions of the sub-broker (the firm) unless it was alleged and established that the sub-broker had done something wrong. The Tribunal noted that there was no specific allegation or finding that the firm had engaged in any wrongdoing. It emphasized that the appellant, as the principal, could not be held accountable for the sub-broker's actions without evidence of wrongdoing. The Tribunal also highlighted the lack of specific instances where the appellant failed to carry out due diligence, care, and skill. As a result, the Tribunal allowed the appeal and set aside the suspension order.
Conclusion: The appeal was allowed, and the suspension order was set aside with no order as to costs.
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2008 (2) TMI 934
Issues Involved:
1. Validity of Union Government's approval under Section 5(1) of MMDR Act.
2. Compliance with Section 2 of the Forest Conservation Act, 1980.
3. Preferential rights under Section 11(2) of the MMDR Act.
4. Maintainability of the writ petition.
Detailed Analysis:
1. Validity of Union Government's Approval under Section 5(1) of MMDR Act:
The Petitioner challenged the approval granted by the Union Government under Section 5(1) of the MMDR Act for a prospecting license over 2500 hectares in Bailadila Reserve Forest. The Petitioner argued that the Union Government had no jurisdiction to issue the impugned order due to non-compliance with the mandatory provisions of the Forest Act. The court noted that the approval was given without prior consultation with the Central Government, as required by Section 5 of the MMDR Act. The court also observed that the special condition imposed by the state, requiring the third Respondent to set up a steel plant, was waived by the Central Government, which directed the state to comply with the Forest Conservation Act.
2. Compliance with Section 2 of the Forest Conservation Act, 1980:
The Petitioner contended that the impugned order violated Section 2 of the Forest Act, which mandates prior approval from the Central Government for any non-forest activity. The court highlighted the overriding effect of Section 2, which prohibits any order permitting the use of forest land for non-forest purposes without prior approval. The court cited various Supreme Court judgments, emphasizing that the approval under the Forest Act is a sine qua non before any non-forest activity, including the grant of a prospecting license. The court rejected the Respondents' argument that the approval under the Forest Act is required only when the prospecting license is actually granted and operations begin. The court held that the impugned order was issued without jurisdiction and contrary to law due to the lack of prior approval under the Forest Act.
3. Preferential Rights under Section 11(2) of the MMDR Act:
The Petitioner argued that the impugned order ignored its preferential right under Section 11(2) of the MMDR Act. The court noted that the Petitioner had applied for a prospecting license in 1991, and the area recommended for the third Respondent overlapped with the area applied for by the Petitioner. The court observed that the special condition for ignoring the Petitioner's preferential right was waived by the state, which was improper and without authority.
4. Maintainability of the Writ Petition:
The Respondents objected to the maintainability of the writ petition, arguing that the Petitioner had not disclosed the pendency of a related writ petition in the Chhattisgarh High Court. The court acknowledged the principle of comity of courts but noted that the subject matter of the present writ petition was different, focusing on the jurisdiction of statutory authorities under the Forest Act. The court found that the Petitioner had acted in good faith and had not abused the judicial process. The court held that the pendency of proceedings before the Chhattisgarh High Court did not bar the present petition and that the issues raised involved the legality and jurisdiction of statutory authorities.
Conclusion:
The court quashed the impugned order dated 14-2-2007 issued by the Central Government and all proceedings under the MMDR Act leading up to it, as being issued without jurisdiction and contrary to law. The writ petition and pending applications were allowed, with parties bearing their own costs.
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2008 (2) TMI 933
Issues Involved:
1. Legality of the examination process for promotion within the Gramin Bank.
2. Allegations of bias and mala fide against the Chairman of the Gramin Bank.
3. Validity of the inquiry conducted by the State Government.
4. Delay and laches in filing the writ petition.
5. Estoppel due to participation in the examination.
Detailed Analysis:
Legality of the Examination Process for Promotion:
The appellants challenged the examination process for promotion to the posts of Officer Scale I and Officer Scale II in the Gramin Bank, claiming it was conducted improperly. The examination was held on 18.08.2002 by the Institute of Banking Personnel Selection, Mumbai, after approval from the Board of Directors of the Gramin Bank. The High Court found that the written examination was conducted by a reputable body and there was no evidence of any irregularities in the process. The Supreme Court upheld this finding, noting that the appellants had participated in the examination without protest and failed to qualify.
Allegations of Bias and Mala Fide Against the Chairman:
The appellants alleged that the then Chairman, Sri Zameer Hasan, influenced the examination process to benefit his brother and cousin. The High Court dismissed these allegations, stating that the appellants failed to provide sufficient evidence of bias or mala fide. The Supreme Court concurred, emphasizing that the burden of proving mala fide is very heavy and must be supported by specific and convincing evidence. The Court found that the appellants' allegations were vague and unsubstantiated, and there was no proof that the Chairman had manipulated the examination results.
Validity of the Inquiry Conducted by the State Government:
An inquiry was conducted by a committee appointed by the State Government, which reported certain irregularities. However, the High Court noted that the State Government has no authority over the Gramin Bank, which is governed by the Central Government under the Regional Rural Banks Act, 1976. The Supreme Court agreed, stating that the inquiry was ex parte and did not follow due process. The Court also noted that the inquiry report did not point out any specific infirmities in the conduct of the written examination.
Delay and Laches in Filing the Writ Petition:
The Gramin Bank contended that the writ petition was delayed and suffered from laches. The High Court agreed, noting that the appellants had participated in the examination and only challenged the process after failing to qualify. The Supreme Court upheld this view, stating that the appellants were estopped from challenging the examination due to their participation and delay in filing the petition.
Estoppel Due to Participation in the Examination:
The High Court held that the appellants were estopped from challenging the examination as they had participated in it without any protest. The Supreme Court agreed, stating that by participating in the examination, the appellants had accepted its validity and could not later claim it was unfair or biased.
Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's decision. The Court found no evidence of bias or mala fide against the Chairman and noted that the examination process was conducted fairly by a reputable body. The inquiry by the State Government was deemed invalid, and the appellants were found to be estopped from challenging the examination due to their participation and delay in filing the writ petition. The appeal was dismissed with no order as to costs.
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2008 (2) TMI 932
Issues Involved:
1. Temporary Injunction
2. Trademark Infringement
3. Copyright Infringement
4. Disparagement and Denigration
5. Comparative Advertising
6. Balance of Convenience and Irreparable Loss
Issue-wise Detailed Analysis:
1. Temporary Injunction:
The appellant filed an appeal under Order 43 Rule 1(r) of the Civil Procedure Code challenging the order dated 25th October 2007, which dismissed their application for a temporary injunction. The appellant sought to restrain the respondents from airing a TV commercial that allegedly disparaged their product, MOOV.
2. Trademark Infringement:
The appellant argued that their product MOOV, a pain reliever ointment, had a registered trademark and copyright, giving them exclusive rights under the Trademarks Act and Copyright Act. They claimed that the respondent's advertisement used a similar trade dress, color scheme, and arrangement, thus infringing their trademark. The court found that the respondent's use of a violet-colored pack similar to MOOV's could mislead consumers and amounted to trademark infringement under Section 29(8)(a) and (c) of the Trade Marks Act, 1999.
3. Copyright Infringement:
The appellant also claimed copyright infringement, stating that the distinctive artwork and color scheme of MOOV were registered under the Copyright Act. They argued that the respondent's advertisement, which depicted a similar box, infringed their copyright. The court agreed, noting that the respondent's use of similar artwork without permission constituted copyright infringement.
4. Disparagement and Denigration:
The appellant contended that the respondent's TV commercial disparaged and denigrated MOOV by suggesting that it was not an effective pain reliever and promoting VOLINI as a "true pain reliever." The court found that the advertisement's subtle message implied that MOOV was inferior, which amounted to disparagement and denigration of the appellant's product.
5. Comparative Advertising:
The respondent argued that their advertisement was a comparative one, highlighting the superior qualities of VOLINI without disparaging MOOV. They cited several judgments to support their claim that comparative advertising is permissible if it does not defame a competitor's product. However, the court held that the comparison must be between existing products and that the respondent's use of a non-existent product in a similar color pack to MOOV was misleading and not in accordance with honest practices.
6. Balance of Convenience and Irreparable Loss:
The appellant argued that the balance of convenience and irreparable loss lay in their favor, as the respondent's advertisement could harm their market share and reputation. The court agreed, noting that the appellant's product had a significant market presence and that the respondent's misleading advertisement could cause irreparable damage. The court directed the respondent to change the color of the pack in their advertisement to avoid confusion and restrained them from using the appellant's artwork.
Conclusion:
The court allowed the appeal, modifying the order of the City Civil Judge to the extent that the respondent must change the color of the pack in their advertisement. The court restrained the respondent from using the appellant's artwork and color scheme, thereby granting the temporary injunction sought by the appellant. The request for a stay of the order was rejected, emphasizing the need to protect the appellant's trademark and prevent misleading advertising.
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2008 (2) TMI 931
Issues Involved:
1. Whether the use of the trademark/logo 'LNT' by the defendant is likely to create confusion and is not bonafide.
2. Whether the defendant should be allowed to use the trademark/logo 'LNT' in an extended form.
3. Whether the dissimilarity in some of the products in which the parties trade affects the grant or refusal of injunction.
Summary:
Issue 1: Whether the use of the trademark/logo 'LNT' by the defendant is likely to create confusion and is not bonafide.
The plaintiff, Larsen and Toubro Ltd. ('LandT'), engaged in diverse business activities, claimed that the abbreviation 'LandT' had acquired a secondary meaning associating it exclusively with the plaintiff. The plaintiff alleged that the defendant's use of 'LNT' and 'ELENTE' for electrical goods was intended to capitalize on the plaintiff's goodwill. The learned Single Judge found that the plaintiff is a market leader, the abbreviation 'LandT' is well-known, and its use by the defendant was not bonafide. The Judge noted that the defendant's use of 'LNT' was likely to create confusion among consumers.
Issue 2: Whether the defendant should be allowed to use the trademark/logo 'LNT' in an extended form.
The learned Single Judge allowed the defendant to use 'LNT/ELENTE-Lachmi Narain Traders' to avoid confusion. However, the appellant argued that this conflicted with the finding that 'LandT' or 'ELENTE' were associated with the plaintiff's goods. The Court agreed with the appellant, stating that allowing the defendant to use 'LNT/ELENTE' even in an extended form would continue to create confusion. The Court held that the use of 'LNT/ELENTE' was not permissible, and the learned Single Judge's decision to allow it was a mistake that needed correction.
Issue 3: Whether the dissimilarity in some of the products in which the parties trade affects the grant or refusal of injunction.
The Court rejected the argument that the dissimilarity in products marketed by the defendant justified the use of 'LNT/ELENTE'. Citing precedents, the Court emphasized that the likelihood of confusion or deception among consumers and the resultant damage to the plaintiff were the primary considerations. The Court held that the dissimilarity in products did not make a material difference in granting the injunction.
Conclusion:
The appeal was allowed, and the order of the learned Single Judge was modified to make the ex parte ad interim order dated 27th June 2003 absolute. The defendants were restrained from using the trademark/names 'LNT/ELENTE' or any deceptively similar name in relation to any of its products. The defendants were, however, allowed to use 'Lachmi Narain Trades' only in its full and extended form as a trademark/logo for marketing its goods. The cross-objections filed by the defendant were dismissed.
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2008 (2) TMI 930
Issues Involved:
1. Dispossession without proper notice u/s 13(4) of the Securitization Act.
2. Status of Maharshi Housing Development Finance Corporation Ltd. as a financial institution.
3. Maintainability of the writ petition despite alternative remedies.
Summary:
Dispossession without proper notice u/s 13(4) of the Securitization Act:
The petitioner challenged the dispossession from his residential house, alleging that no notice u/s 13(4) of the Securitization Act was given. The Court found that no separate notice u/s 13(4) was issued, which is mandatory before taking any measures specified in the said sub-section. This omission was deemed fundamental, as it affects the right of appeal u/s 17 of the Act.
Status of Maharshi Housing Development Finance Corporation Ltd. as a financial institution:
The agreements for the loan were dated 26.5.2001 and 13.2.2002, while the notification declaring Maharshi Housing Development Finance Corporation Ltd. as a financial institution was issued on 10.11.2003. The Court held that since the institution was not a financial institution at the time of the agreements, it could not invoke the provisions of Section 13 of the Securitization Act. The definitions of "secured creditor" and "security interest" were analyzed, concluding that the institution did not meet these criteria at the relevant times.
Maintainability of the writ petition despite alternative remedies:
The Court addressed the argument that the writ petition was not maintainable due to the availability of an alternative remedy u/s 17 of the Securitization Act. Citing the Supreme Court's judgment in (Mrs.) Sanjana M. Wig v. Hindustan Petro Corporation Ltd., the Court held that the writ petition is maintainable when the proceeding is without jurisdiction. The Court found the dispossession action to be without jurisdiction and authority of law, thus maintaining the writ petition.
Conclusion:
The Court quashed the notices u/s 13(2) and any purported notice u/s 13(4) of the Securitization Act, declaring the actions of Maharshi Housing Development Finance Corporation Ltd. unauthorized, illegal, and bad in law. The Court directed the restoration of possession of the residential house to the petitioner within 10 days and allowed the petitioner to seek damages in a civil court. The writ petition was allowed with costs assessed at Rs. 10,000 to be paid by Maharshi Housing Development Finance Corporation Ltd.
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2008 (2) TMI 929
Issues involved: Bail application rejection, grounds for cancellation of bail, pending trial against the appellant, political rivalry, completion of trial within a specified period.
Bail Application Rejection: The appellant, accused in a criminal case, had his bail application rejected by the Sessions Court initially. Subsequently, a second bail application was allowed, leading to a challenge by the second respondent in the High Court. The High Court set aside the bail, citing lack of change in circumstances and violation of judicial propriety in granting bail based on similar grounds as the first application.
Pending Trial Against the Appellant: The appellant faced multiple criminal cases, including allegations of attempting to cause death and involvement in various crimes. The appellant's counsel argued that many cases were politically motivated and baseless, with some cases against the appellant being closed by investigating agencies. The appellant also highlighted pending cases against the second respondent, questioning the right to seek cancellation of bail.
Completion of Trial within Specified Period: The Supreme Court directed the Sessions Judge to expedite the trial within three months. If the trial extended beyond this period for reasons other than the accused's non-cooperation, the appellant could reapply for bail. The Court emphasized that the bail decision should be based on merits, independent of the High Court's observations in the impugned order.
Conclusion: The Supreme Court disposed of the appeal, instructing the completion of the trial within the specified timeframe and allowing the appellant to seek bail again if necessary, with a focus on the merits of the application.
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2008 (2) TMI 928
Issues Involved:
Whether an employee working in an ex-cadre post is entitled to protection of scale of pay.
Summary:
The appellant, initially recruited as an unskilled worker, was promoted through various grades to the position of Diesel Mechanic Grade I. Subsequently, he was reverted to the post of Technician Grade III in the Electrical Division, his parent cadre, by an order of the Railway Administration. The appellant challenged this reversion, claiming entitlement to the pay and allowance of his previous position. The Central Administrative Tribunal and the High Court dismissed his claims, upholding the reversion decision based on his cadre and policy decisions regarding ex-cadre employees.
Central Administrative Tribunal's Decision:
The Tribunal dismissed the appellant's application, emphasizing his initial recruitment as a casual artisan and subsequent promotions to ex-cadre posts. It held that the reversion to his parent cadre was justified, considering the hierarchy of service and the policy of repatriating ex-cadre employees after a specified period.
High Court's Decision:
The High Court upheld the Tribunal's decision, rejecting the appellant's contention regarding passing specific trade tests. It affirmed the legality of the reversion order, noting the appellant's tenure in the ex-cadre post and the need to adhere to the established promotion hierarchy.
Appellant's Argument:
The appellant, supported by legal precedent, argued that after working as a Diesel Mechanic for over 23 years, the reversion to the Electrical Division was arbitrary. He claimed entitlement to the pay and allowance of his previous position, citing his long-standing service in the Mechanical Division.
Respondent's Counter-Argument:
The respondents contended that the reversion was lawful as per the appellant's parent cadre being the Electrical Wing. They asserted that the reversion decision was in line with the qualifications required for the Grade I post in the Mechanical Wing.
Supreme Court's Decision:
The Supreme Court, while upholding the reversion order, acknowledged the appellant's service history and promotions. Considering the balance between legal principles and the appellant's circumstances, the Court invoked Article 142 of the Constitution to protect the appellant's pay at the previous scale, despite the reversion to a lower pay grade. This decision aimed to ensure justice without violating any laws or perpetrating illegality.
Significant Legal References:
- Bhadei Rai v. Union of India
- Inder Pal Yadav v. Union of India
- Secretary, State of Karnataka v. Uma Devi
This summary encapsulates the legal journey of the appellant's dispute over reversion and entitlement to pay protection, culminating in the Supreme Court's decision to balance justice and legality through the invocation of Article 142.
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2008 (2) TMI 927
Issues Involved:
1. Concealment and/or suppression of material facts.
2. Establishment of the ingredients of a passing off action.
Detailed Analysis:
Issue 1: Concealment and/or Suppression of Material Facts
The court examined whether the plaintiff had concealed or suppressed material facts. It was noted that the plaintiff had averred in the plaint that the defendant was not the proprietor of the trademark 'MICO' and had adopted the same without the plaintiff's leave and license. This created an impression that while the plaintiff was the registered proprietor of the trademark 'MICO' under class 4 (including lubricants), the defendant had no such registration. However, it was revealed that the defendant No. 2 also had a trademark registration for 'MICO' in class 4, which includes lubricants, applied for on 06.01.2004 and allowed on 17.10.2005. This fact was not disclosed by the plaintiff, leading to the ex parte ad interim injunction granted on 09.10.2007. The court concluded that the plaintiff had not only failed to disclose material facts but also intentionally withheld information, which disentitled the plaintiff from seeking equitable relief.
Issue 2: Establishment of the Ingredients of a Passing Off Action
The court then examined whether the plaintiff had established the necessary ingredients of a passing off action, which include misrepresentation, made by a trader in the course of trade, to prospective customers, calculated to injure the business or goodwill of another trader, causing actual damage. The court found that there was no misrepresentation by the defendant No. 2 to any prospective customers, nor was there any evidence that the defendant's actions were calculated to injure the plaintiff's business or goodwill. The court noted that the defendant No. 2 had been using the mark 'MICO' for various automotive parts worldwide and was a well-known brand. The plaintiff, on the other hand, failed to provide evidence of its market presence or any material indicating that consumers were being misled into believing that the defendant's goods were those of the plaintiff. Consequently, the court concluded that the plaintiff had not established a prima facie case for passing off.
Conclusion:
The court held that the plaintiff was not entitled to the confirmation of the injunction order passed on 09.10.2007. The defendants, particularly defendant No. 2, had made out a case for the vacation of the said order. The plaintiff's application under Order 39 Rules 1 and 2 of CPC (IA No. 11702/2007) was dismissed, and the defendant No. 2's application under Order 39 Rule 4, CPC (IA No. 12433/2007) was allowed, vacating the order dated 09.10.2007.
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2008 (2) TMI 926
Issues Involved:
1. Violation of Clauses 1, 2, and 7 of the Code of Conduct prescribed in Schedule III to the Securities and Exchange Board of India (Merchant Bankers) Regulations.
2. Violation of Regulation 24(4) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations.
3. Adequacy and accuracy of disclosures in the letter of offer.
4. Responsibility and due diligence of the merchant banker.
5. Penalty imposition and its justification.
Summary:
1. Violation of Clauses 1, 2, and 7 of the Code of Conduct:
The appellant, HSBC Securities and Capital Markets (India) Private Ltd, was found to have violated Clauses 1, 2, and 7 of the Code of Conduct for Merchant Bankers. Clause 1 mandates protecting investors' interests, Clause 2 requires maintaining high standards of integrity, and Clause 7 emphasizes providing true and adequate information without misleading claims. The appellant's failure to disclose the correct listing status of shares in the letter of offer was seen as a breach of these clauses.
2. Violation of Regulation 24(4) of the Takeover Code:
Regulation 24(4) requires the merchant banker to ensure that the contents of the public announcement and the letter of offer are true, fair, and adequate. The appellant's letter of offer incorrectly stated that all issued shares were listed on multiple stock exchanges, which was not the case. This misrepresentation was a clear violation of Regulation 24(4).
3. Adequacy and Accuracy of Disclosures:
The appellant argued that the non-disclosure of certain shares being unlisted did not impact shareholders' decisions. However, the Tribunal emphasized that the listing status is a relevant factor for shareholders and that disclosures must be true and fair. The incorrect assertion about the listing status was deemed significant and misleading.
4. Responsibility and Due Diligence of the Merchant Banker:
The appellant claimed to have exercised due diligence by relying on various documents, including annual reports and a shareholding pattern certificate. However, the Tribunal found that the appellant had presumed the shares were listed without verifying from the right sources, such as the target company and stock exchanges. The Tribunal criticized the appellant's passive approach and failure to proactively verify the information.
5. Penalty Imposition and Its Justification:
The appellant contended that there was no willful default or gain from the wrong disclosure and that no serious loss or damage occurred. However, the Tribunal referred to the Supreme Court's ruling in Chairman SEBI v. Shriram Mutual Fund and Anr., which stated that intention or mens rea is not required for imposing penalties for statutory civil obligations. The penalty imposed was the minimum prescribed, and the Tribunal found no reason to interfere with it.
Conclusion:
The appeal was dismissed, and the Tribunal upheld the censure imposed on the appellant for violating Regulation 24(4) of the Takeover Code and Clauses 1, 2, and 7 of the Code of Conduct for Merchant Bankers. The judgment emphasized the importance of accurate and diligent disclosures in maintaining market integrity.
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2008 (2) TMI 925
Issues Involved:
1. Nature of the Contract
2. Validity of the Reference to Arbitration
3. Constitution of the Arbitral Tribunal
4. Accord and Satisfaction
Detailed Analysis:
I. Nature of the Contract:
The primary issue was whether the contract was a lump sum contract prohibiting extra claims. The Petitioner argued that the contract was a lump sum contract, and extra claims were barred under Clauses 13.4 and 44.2. The Respondent contended that the contract allowed for variations and extra payments under Clauses 38, 39, 40, 42, and 44.3.
- Legal Principles: The Arbitrator must adjudicate in accordance with the contract, and an award disregarding the contract is liable to be set aside. This principle is supported by Supreme Court decisions in cases like *Associated Engineering Co. v. Government of Andhra Pradesh* and *ONGC v. Saw Pipes*.
- Contractual Provisions: Clause 13.4 stated that the lump sum bid price was fixed and not subject to adjustment. However, Clauses 38, 39, 40, 42, and 44.3 allowed for variations and extra payments. Clause 44.2 prohibited price increases due to compensation events, but Clause 44.3 allowed for price adjustments based on the Engineer's assessment.
- Interpretation: The Court emphasized that contracts must be interpreted as a whole. The contract did not strictly prohibit extra payments, and the Engineer's role included valuing variations and compensation events. The Court rejected the Petitioner's argument that the contract was a strict lump sum contract.
II. Validity of the Reference to Arbitration:
The Petitioner argued that the reference to arbitration was premature as the Adjudicator had not rendered a decision within 28 days, and the Respondent should have sought a replacement. The Respondent contended that arbitration was invoked correctly after the Adjudicator failed to decide within the stipulated period.
- Contractual Provisions: Clauses 24.1 and 25 outlined the procedure for disputes. A decision by the Engineer could be referred to the Adjudicator within 14 days, and the Adjudicator had to decide within 28 days.
- Court's Findings: The Respondent referred the dispute to the Adjudicator within the required period, and the Adjudicator failed to decide within 28 days. Therefore, the Respondent was entitled to invoke arbitration. The Court upheld the arbitral Tribunal's view that the arbitration was validly invoked.
III. Constitution of the Arbitral Tribunal:
The Petitioner challenged the Tribunal's constitution, arguing that the Institution of Engineers erroneously appointed an Arbitrator and only the Chief Justice or a Judicial authority could decide jurisdictional issues.
- Contractual Provisions: Sub-clause (5)(c) of Clause 25(3) allowed the Chairman of the Institution of Engineers to appoint an Arbitrator if a party failed to do so within 30 days.
- Court's Findings: The Petitioner failed to appoint its Arbitrator, and the Institution of Engineers' appointment was valid. The Tribunal's jurisdictional decision was upheld, referencing *You One Engineering and Construction Co. Ltd. v. National Highways Authority of India*.
IV. Accord and Satisfaction:
The Petitioner argued that there was no arbitrable dispute due to accord and satisfaction, as the Respondent had waived extra claims in a letter dated 10th January 2005. The Respondent claimed the letter was written under duress.
- Documentary Evidence: The Respondent's letter dated 10th January 2005 waived extra claims for delays not attributable to the Petitioner. Subsequent letters from the Respondent alleged coercion.
- Court's Findings: The Respondent failed to provide oral evidence of coercion. The Tribunal's decision to not consider the coercion claim was found perverse. The Court held that the Respondent's waiver of claims was clear and the Tribunal's award was set aside.
Conclusion:
The Court quashed and set aside the arbitral award, finding that the contract allowed for extra payments, the arbitration was validly invoked, the Tribunal was correctly constituted, and the Respondent had waived its claims, making the award contrary to the express terms of the contract. The Arbitration Petitions were made absolute in terms of prayer Clause (a).
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2008 (2) TMI 924
The Bombay High Court admitted the appeal based on the questions of law raised by the appellant. The respondents waived service. (2008 (2) TMI 924 - BOMBAY HIGH COURT)
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2008 (2) TMI 923
Maintainability of petition - Jurisdiction - the order of detention is shown to have been passed at Gandhinagar (Gujarat). However, the petitioner has come up with a plea that it is being sought to be executed at Ludhiana, where he is residing - Held that: - A person, whose fundamental right to life and liberty is threatened, has every right to approach the Court where any such authority, in the garb of an order of detention, seeks to curtail such life and liberty - the contention that this Court has no jurisdiction to entertain this petition is negated.
The prayer as made by the petitioner for quashing of the detention order, which is not on record, cannot be answered in his favour.
Petition dismissed.
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2008 (2) TMI 922
Issues Involved:
1. Non-sending of notices for general meetings.
2. Non-appraising of affairs of the company.
3. Denying access to registered office of the company and statutory records, books of account, and other records of the company.
4. Non-availability of statutory records, books of account, and other records at the registered office of the company.
5. Sharing of profits of the company among respondents Nos. 2 and 3 and other family members in exclusion of the petitioners and non-payment of any dividend to members.
6. Siphoning off funds and treating of trawlers of the company as if personal assets of the respondents.
7. Illegal attempts for sale of trawlers.
8. Indiscriminate allotments of shares.
9. Transfers of shares in contravention of articles of association of the company.
10. Non-maintenance of board minutes in accordance with requirements of section 193.
Detailed Analysis:
Preliminary Objections:
The petition was initially filed by two petitioners, with one withdrawing later. The Company Law Board permitted the substitution of another petitioner, making the petition maintainable under section 399. The power of attorney executed by the second petitioner, though unstamped and undated, was found valid for filing the petition. The power agent, Mr. Nevil A. Kattar, was deemed to have sufficient authority to represent the petitioners.
1. Non-sending of Notices for General Meetings:
The company provided evidence of convening annual general meetings and maintaining statutory records. The petitioners failed to demonstrate any prejudice from non-receipt of notices. The petitioners' delayed complaints and lack of initiative in obtaining company records weakened their case. The Board found no merit in the petitioners' claims regarding non-sending of notices.
2. Non-appraising of Affairs of the Company:
The company had been maintaining proper books of account and statutory records, as evidenced by compliance certificates and auditor reports. The petitioners' lack of diligence in exercising their rights as shareholders and the absence of any material prejudice led to the dismissal of this grievance.
3. Denying Access to Registered Office and Statutory Records:
The advocate commissioner's report indicated that statutory records were not available at the registered office but were with the company's chartered accountant. The Board directed appropriate remedial measures to ensure future compliance.
4. Non-availability of Statutory Records at Registered Office:
Similar to the third issue, the Board found that while records were not at the registered office, they were maintained by the chartered accountant. The company was directed to ensure proper maintenance and availability of records.
5. Sharing of Profits Among Respondents and Non-payment of Dividends:
The memorandum of understanding among certain family members to share profits was found oppressive to other shareholders. The Board noted that the company had accumulated losses and any failure to declare dividends was not considered oppressive. The respondents were held accountable for the operations and financial dealings since November 1994.
6. Siphoning off Funds and Treating Trawlers as Personal Assets:
Evidence indicated that respondents treated company trawlers as personal assets and shared profits among themselves. The Board found this conduct oppressive and against the interest of the company and its shareholders. The respondents were directed to reimburse any diverted funds.
7. Illegal Attempts for Sale of Trawlers:
Attempts to sell trawlers without proper authorization were deemed illegal. The Board mandated that any decision regarding the sale of trawlers must be taken at a general meeting of members.
8. Indiscriminate Allotments of Shares:
The company had historically allotted shares disproportionately. The petitioners' delayed challenge to the allotments made in 1987 and 1992 was dismissed due to acquiescence and lack of timely action.
9. Transfers of Shares in Contravention of Articles of Association:
The petitioners failed to provide specific details regarding the impugned share transfers. The Board found the allegations vague and unsupported by necessary particulars, leading to the dismissal of this grievance.
10. Non-maintenance of Board Minutes:
The Board found that the company had been maintaining statutory records and books of account as required by law. The petitioners' allegations of non-compliance with section 193 were not substantiated.
Conclusion:
The Company Law Board directed the appointment of a chartered accountant to scrutinize the company's financial transactions since April 1, 1994. The respondents were ordered to reimburse any diverted funds. The company was instructed to maintain statutory records and send notices of general meetings to the petitioners by registered post. The main petition and connected applications were disposed of, with no costs awarded.
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2008 (2) TMI 921
Issues Involved:
1. Shareholding
2. Non-convening of board or general meetings and non-sending of notices to board or general meetings
3. Appointment of the second respondent as Chairman and Managing Director and fixation of his remuneration
4. Appointment of additional directors
5. Operation of the bank account solely by the second respondent
6. Financial irregularities at the instance of the second respondent
7. Diversion of funds as well as business orders of the partnership firm to the Company
8. Allotment of shares to outsiders
9. Impugned transfers, namely, 15000 shares of MJR and 28500 shares of the petitioner in favour of the second respondent
10. Removal of the petitioner from the office of director
Detailed Analysis:
1. Shareholding:
The Company was incorporated in May 1998 by the petitioner and the second respondent, initially holding equal shares. Over time, the shareholding changed due to impugned transfers and further allotments. The petitioner's shareholding decreased due to the disputed transfer of 28500 shares to the second respondent. The principle of quasi-partnership was found applicable to the Company, given the equal status and mutual trust between the petitioner and the second respondent.
2. Non-convening of Board or General Meetings and Non-sending of Notices:
The petitioner claimed no formal board or general meetings were held before August 2004. However, the search report from the Registrar of Companies indicated that the Company had been convening meetings periodically. The petitioner's belated accusations lacked merit, and the non-production of attendance sheets for meetings prior to August 2004 was not considered fatal.
3. Appointment of the Second Respondent as Chairman and Managing Director and Fixation of His Remuneration:
The petitioner was aware of the appointment of additional directors and the second respondent as Chairman and Managing Director at the board meeting on 11-8-2004. The petitioner's challenge to these appointments and the terms of remuneration was dismissed as he had participated in the meetings and decisions.
4. Appointment of Additional Directors:
The appointment of additional directors at the board meeting on 11-8-2004 and their subsequent confirmation at the AGM on 21-8-2004 was upheld. The petitioner's challenge to these appointments was dismissed as he had participated in the meetings and decisions. The petitioner's claim that the directors ceased to be directors after the AGM was also dismissed.
5. Operation of the Bank Account Solely by the Second Respondent:
The board meeting on 11-8-2004 authorized the second respondent to operate the bank account solely. Despite the petitioner's objections, the circular resolution dated 16-12-2005 confirmed this authorization. The petitioner's challenge to this resolution was dismissed.
6. Financial Irregularities at the Instance of the Second Respondent:
The petitioner's allegations of financial irregularities were not substantiated by evidence. The remittance of US$ 1092 was found to be for the purchase of a laptop for the Company. The unsigned guarantee letters for the second respondent's son's education lacked evidentiary value. The bank statement did not indicate any financial irregularities.
7. Diversion of Funds and Business Orders of the Partnership Firm to the Company:
The petitioner's complaint about the wrongful collection of funds due to the partnership firm and diversion of business orders was dismissed as the partnership firm had been closed, and the unit sold by KSFC. The grievances related to the partnership firm were not within the scope of section 397/398 proceedings.
8. Allotment of Shares to Outsiders:
The allotment of shares to outsiders was not challenged by the petitioner at the relevant time. The petitioner's belated challenge to these allotments was dismissed. The petitioner's acquiescence in the matter disentitled him from challenging the allotments.
9. Impugned Transfers:
- 15000 Shares of MJR: The evidence indicated that MJR had invested in the Company's share capital, and the transfer of 15000 shares to the second respondent was approved by the board. The petitioner's challenge was dismissed.
- 28500 Shares of the Petitioner: The transfer of 28500 shares to the second respondent was found to be invalid due to discrepancies in the transfer deed and lack of evidence of consideration. The transfer was set aside.
10. Removal of the Petitioner from the Office of Director:
The petitioner's removal from directorship was found to be oppressive and not in conformity with section 284 of the Act. The removal was based on an invalid notice and denied the petitioner adequate opportunity to defend himself. The removal was set aside.
Conclusion:
The petitioner's grievances regarding shareholding, financial irregularities, and removal from directorship were partly upheld. The transfer of 28500 shares to the second respondent was set aside, and the petitioner's removal from directorship was found to be oppressive and set aside. The valuation of shares was ordered to facilitate the exit process for the parties, ensuring an equitable resolution.
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2008 (2) TMI 920
Issues involved: Challenge to order under Section 18 of Rajasthan High Court Ordinance 1949, constructive res judicata in execution proceedings.
Summary:
1. The appeal challenged the order of Rajasthan High Court dismissing a special appeal under Section 18 of the Ordinance against a judgment in a mortgage suit. The decree holder sought recovery from the judgment-debtor through multiple execution applications, with the final one filed in 1971. Objections raised by the judgment-debtor after the issuance of a warrant of attachment were dismissed as barred by constructive res judicata. The appeal to the High Court was also dismissed on the same grounds.
2. The executing Court found objections raised after the warrant of attachment was issued to be barred by constructive res judicata, a decision upheld by the Division Bench.
3. The contention regarding objections raised after the warrant of attachment was reiterated before the Supreme Court.
4. Order XXI Rule 22 CPC marks the end of one stage before property attachment in execution proceedings. The Court's order to proceed with attachment, after finding no objections raised, operates as a decree under Section 47 of CPC. Such orders are final unless appealed, preventing objections at later stages.
5. The principles of res judicata apply not only to separate proceedings but also to subsequent stages within the same proceedings, preventing re-agitation of decided matters.
6. Citing legal precedents, the Court affirmed that res judicata applies to different stages of the same suit, preventing re-litigation of matters already decided.
7. The High Court's dismissal of the special appeal and confirmation of the Single Judge's order were deemed justified based on the principles of res judicata. The appeal was found to be without merit and was dismissed accordingly.
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2008 (2) TMI 919
Issues involved: Interpretation of Rule 6(2) and 6(3) of Cenvat Credit Rules, 2004 regarding maintenance of separate accounts for inputs used in exempted and dutiable products, and the requirement to pay duty if separate accounts are not maintained.
Summary:
The case involved an appeal by the Revenue against M/s. Mahindra & Mahindra Ltd. for not maintaining separate inventory of inputs used for manufacturing Hydraulic Vary Touch Units (VTUs) and not paying duty as required under Rule 6(3) of Cenvat Credit Rules, 2004. The Revenue contended that failure to maintain separate accounts necessitated payment of duty at 10%. The respondents argued that as per Tribunal decisions and Supreme Court ruling, reversal of credit at the time of clearance exempts the duty payment requirement under Rule 6(3).
The Revenue relied on Tribunal decisions emphasizing the obligation to pay duty if separate accounts are not maintained, while the respondents cited Tribunal decisions and a Supreme Court ruling to support their position that reversal of credit at the time of clearance eliminates the duty payment requirement under Rule 6(3).
The Member (Technical) noted that the issue was settled by the Supreme Court ruling, which stated that reversal of credit at the time of clearance nullifies the need to pay duty, as supported by Tribunal decisions in similar cases. Consequently, the appeal by the Revenue was rejected, and the Commissioner (Appeals) order was upheld, along with the disposal of Cross Objection in support of Order-in-Appeal.
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2008 (2) TMI 918
Issues Involved:
1. Quashing of Criminal Complaint u/s 482 CrPC.
2. Allegation of contravention u/s 56 FERA.
3. Responsibility and liability of the Petitioner as a Director/Guarantor.
4. Adequacy of evidence and averments in the complaint.
Summary:
1. Quashing of Criminal Complaint u/s 482 CrPC:
This petition seeks the quashing of a criminal complaint titled Chief Enforcement Officer v. Ratan Exports & Industries and Ors. pending in the court of the learned Additional Chief Metropolitan Magistrate (ACMM), New Delhi, insofar as it concerns the Petitioner.
2. Allegation of contravention u/s 56 FERA:
The complaint was filed by the Enforcement Directorate u/s 56 of the Foreign Exchange Regulation Act, 1973 (FERA) read with Sections 49(3) and 49(4) of the Foreign Exchange Management Act, 1999 against the company M/s. Ratan Exports & Industries Limited (REIL) and six other persons, including the Petitioner.
3. Responsibility and liability of the Petitioner as a Director/Guarantor:
The complaint alleged that the Petitioner was a Director/Guarantor of REIL during the relevant period and responsible for the conduct of its day-to-day business. However, the Petitioner contended that he resigned as Director on 26th August 1990, and thus, was not liable for any alleged transactions during 1992-96. The Petitioner provided a copy of Form No. 32 filed with the Registrar of Companies to support his claim.
4. Adequacy of evidence and averments in the complaint:
The Enforcement Directorate based its case on a letter from the United Bank of India dated 12th April 2001, which listed the Petitioner as a "Director/Guarantor." The court noted that the complaint must contain specific averments that the individual directors were in charge of the day-to-day affairs of the company. The court found that the Enforcement Directorate did not have sufficient material to conclude that the Petitioner was responsible for the conduct of the business at the time of the alleged offence. The court emphasized that the Enforcement Directorate ignored the Petitioner's reply to the opportunity notice, which denied his liability.
Conclusion:
The court concluded that the complaint did not even prima facie make out a case against the Petitioner for violation of the provisions of FERA. Consequently, the Complaint Case titled Chief Enforcement Officer v. Ratan Exports & Industries and Ors. pending in the court of the learned ACMM, New Delhi, insofar as the Petitioner is concerned, and all proceedings consequent thereto, are hereby quashed. The petition is allowed with no orders as to costs.
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2008 (2) TMI 917
Issues involved:
The issues involved in this case are the termination of services of a probationer by a Society running a school, challenge to the termination order under Section 9 of The Maharashtra Employees of Private Schools (Conditions of Service) Regulation Act, 1977, interpretation of Rules 14 and 15 of The Maharashtra Employees of Private Schools (Conditions of Service) Rules, 1981, and the compliance with sub-Rule (6) of Rule 15 of the MEPS Rules, 1981.
Termination of Services:
The Respondent No.1 was appointed on probation by a Society running a school, and his services were terminated before the completion of the probation period. The Respondent challenged the termination order under Section 9 of The Maharashtra Employees of Private Schools (Conditions of Service) Regulation Act, 1977, contending that his termination was unjustified as his performance was satisfactory, especially in Mathematics where he achieved cent percent results. The School Tribunal found in favor of the Respondent, noting the lack of assessment of his work by the Society as required by Rules 14 and 15 of The Maharashtra Employees of Private Schools (Conditions of Service) Rules, 1981. The Tribunal set aside the termination order and directed the Society to reinstate the Respondent and pay his arrears of salary.
Judicial Review:
The Society challenged the Tribunal's order before the High Court, which affirmed the Tribunal's decision. The High Court considered the provisions of Section 5(3) of the MEPS Act, Rules 14 and 15, and particularly sub-Rule (6) of Rule 15 of the MEPS Rules, 1981. It emphasized the need for proper assessment of the probationer's work before termination. The High Court upheld the Tribunal's findings, leading to the dismissal of the Society's Writ Petition.
Compliance with Rules:
The Society argued that it had complied with Rules 14 and 15, including sub-Rule (6) of Rule 15, in terminating the Respondent's services. It contended that the assessment of the Respondent's performance was duly communicated to him, refuting the Respondent's claim of lack of assessment. However, the Respondent and the Respondent No.2's counsel opposed these arguments, highlighting discrepancies in the documents produced by the Society, particularly the Annual Confidential Report. They raised suspicions about the timing and authenticity of the assessment documents.
Legal Interpretation:
The main issue for determination in the appeal was whether Rules 14 and 15, especially sub-Rule (6) of Rule 15 of the MEPS Rules, 1981, would control the powers of the School Management under Section 5(3) of the MEPS Act. The Court emphasized that while the Rules cannot override the Act, the requirements of sub-Rule (6) of Rule 15 must be considered by the Management before exercising termination powers. The Court found discrepancies in the assessment documents presented by the Society, indicating non-compliance with the Rules before terminating the Respondent's services.
Conclusion:
After considering the submissions and discrepancies in the assessment documents, the Court agreed with the findings of the Tribunal and the High Court, concluding that there were no grounds to interfere with the impugned order. The appeal was rejected, and no costs were awarded.
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