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1995 (12) TMI 339
Issues Involved:
1. Legality of the initial investment in Vasavi and Co.
2. Legality of the gold jewellery weighing 1,170.500 gms.
3. Adequacy of the opportunity provided to the appellant for defense.
4. Delay in proceedings by the Competent Authority.
Issue-wise Detailed Analysis:
1. Legality of the initial investment in Vasavi and Co.:
The appellant's initial investment in Vasavi and Co. was scrutinized by the Competent Authority. The appellant provided a detailed explanation supported by documentary evidence, including purchase vouchers for gold jewellery and silver items, which were stamped by the Superintendent of Central Excise. The Competent Authority accepted the authenticity of these documents but questioned whether the jewellery sold was legally acquired. Despite the appellant's detailed explanation and the submission of purchase vouchers, the Competent Authority concluded that the appellant failed to prove the lawful acquisition of the jewellery. However, the Tribunal found that the appellant had sufficiently demonstrated the existence of family jewellery through a declaration made to the Central Excise authorities on June 30, 1969, and had shown the correlation of the investments made to the said sales. The Tribunal held that the forfeiture of the credit balance in Vasavi and Co. was not sustainable.
2. Legality of the gold jewellery weighing 1,170.500 gms.:
The second issue involved the forfeiture of gold jewellery weighing 1,170.500 gms., declared before the Central Excise authorities on June 30, 1969. The Competent Authority held that the appellant failed to explain the source of the jewellery and its lawful acquisition. The Tribunal noted that despite the declaration, the jewellery was not seized during raids in 1967 and 1975, indicating that the authorities did not suspect it to be illegally acquired. The Tribunal emphasized that the appellant had provided prompt and detailed information and that the Competent Authority had not utilized its powers under sections 15 and 16 of the Act to verify the facts further. The Tribunal concluded that the forfeiture of the gold jewellery was not justified on the facts of the case.
3. Adequacy of the opportunity provided to the appellant for defense:
The appellant contended that the Competent Authority failed to afford a proper opportunity for defense after the proceedings were resumed following the Supreme Court judgment. The Tribunal observed that the appellant had been prompt in supplying information and had not been wanting in this regard. The Tribunal found that the Competent Authority did not adequately utilize its powers to summon witnesses or seek additional information, which could have clarified any doubts.
4. Delay in proceedings by the Competent Authority:
The Tribunal noted significant delays in the proceedings initiated by the Competent Authority. The detention order under the COFEPOSA Act was passed on October 26, 1975, but the decision to initiate proceedings under the Act was taken only in 1988, with the first show-cause notice issued on December 15, 1988. The Tribunal highlighted that the appellant had made the declaration regarding the possession of gold jewellery as far back as June 30, 1969, and that the delay in initiating proceedings was unreasonable. The Tribunal referred to previous decisions where inordinate delays led to the quashing of forfeiture orders.
Conclusion:
The Tribunal found that the initial investment in Vasavi and Co. was duly explained and that the forfeiture of the credit balance and subsequent accretions was not sustainable. Similarly, the forfeiture of the gold jewellery weighing 1,170.500 gms. was also not justified. The Tribunal set aside the impugned order and allowed the appeal, directing that a copy of the order be forwarded to all Competent Authorities for their information and guidance.
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1995 (12) TMI 338
Issues Involved:
1. Applicability of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976.
2. Validity of the forfeiture order based on the revocation of the detention order.
3. Legitimacy of the properties acquired by the appellant.
4. Specific conditions for the non-forfeiture of "Hotel Saira."
Issue-wise Detailed Analysis:
1. Applicability of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976:
The appellant contested the applicability of the Act, arguing that the revocation of the detention order by the State of Gujarat should exempt her and her deceased husband from the Act's provisions. The Tribunal noted that the revocation order was issued under section 11(1)(a) of the COFEPOSA after the Advisory Board had confirmed the detention order. The Tribunal concluded that revocation under section 11(1)(a) does not equate to setting aside or quashing by a court, as contemplated by the provisos to section 2(2)(b) of the Act. Therefore, the forfeiture proceedings were rightly continued against the appellant.
2. Validity of the forfeiture order based on the revocation of the detention order:
The appellant argued that the revocation of the detention order should have the same effect as setting aside by a court, thereby nullifying the forfeiture proceedings. The Tribunal disagreed, emphasizing that the specific provisions of the Act govern the proceedings and that mere revocation under section 11(1)(a) of the COFEPOSA does not meet the conditions set out in the provisos to section 2(2)(b) of the Act. The Tribunal referred to the Supreme Court's distinction between "revocation" and "setting aside" in the case of Ibrahim Bachu Bafan v. State of Gujarat, underscoring that revocation by the same authority does not nullify the original order as a court's setting aside would.
3. Legitimacy of the properties acquired by the appellant:
The Tribunal found that the properties held by the appellant were acquired from her husband, who was detained under COFEPOSA, and were not explained as having come from lawful sources. The Competent Authority's detailed examination, supported by the Settlement Commission's findings under section 245D(4) of the Income-tax Act, revealed that the properties were acquired from the husband's unlawful activities. The appellant failed to provide satisfactory evidence to counter these findings, and the Tribunal upheld the forfeiture order for the properties listed in annexure "A" to the order under section 19(1) of the Act.
4. Specific conditions for the non-forfeiture of "Hotel Saira":
For "Hotel Saira," the Competent Authority found that more than 50% of the investment was from lawful sources, with only Rs. 50,000 unexplained. As per section 9(1) of the Act, the appellant could avoid forfeiture by paying a fine of Rs. 60,000, which is 120% of the unexplained amount. The Tribunal upheld this finding, noting that failure to pay the fine within two months would result in the property's forfeiture.
Conclusion:
The Tribunal concluded that the forfeiture proceedings were valid and correctly applied. The appellant's arguments on the revocation of the detention order and the legitimacy of the properties were rejected. The order for "Hotel Saira" was upheld, with conditions for avoiding forfeiture clearly outlined. The appeal was disposed of accordingly.
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1995 (12) TMI 337
Issues Involved:
1. Inclusion of 50% cost of publicity materials in the assessable value for excise duty.
2. Suppression of facts in the pricelists.
3. Adjudicating authority's conclusions and reasoning.
4. Appellant's contention of separate trading activity.
5. Application of relevant legal precedents.
Detailed Analysis:
1. Inclusion of 50% Cost of Publicity Materials in the Assessable Value for Excise Duty:
The appellant supplied publicity materials (gift articles) to dealers at its own initial cost and later recovered 50% of the cost through separate debit notes. The adjudicating authority held that since these materials promoted the marketability of the appellant's products, the 50% cost recovered from dealers should be included in the assessable value for excise duty. The appellant argued that this was a separate trading activity and should not be included in the assessable value.
2. Suppression of Facts in the Pricelists:
The department claimed that the appellant suppressed the recovery of 50% cost of publicity materials in the pricelists, which amounted to a contravention of Rules 173C, 173F, 173G, and 9(1) of the Central Excise Rules, 1944. The appellant contended that there was no suppression as the department was aware of this practice from previous show cause notices.
3. Adjudicating Authority's Conclusions and Reasoning:
The adjudicating authority concluded that any cost that adds to the marketability of goods should be included in the assessable value. It rejected the appellant's reliance on previous decisions, such as M/s. Mahindra & Mahindra Ltd. v. Union of India and M/s. Standard Electric Appliances v. Superintendent of Central Excise, as those cases did not involve recovery of advertisement costs by the manufacturer. The authority also invoked the proviso to Section 11A(1) of the Central Excises and Salt Act, 1944, due to the suppression of facts in the pricelists.
4. Appellant's Contention of Separate Trading Activity:
The appellant argued that the sale of gift articles was a separate trading activity and not related to the manufacture of motorcycles. They asserted that there was no suppression of facts, as the department had knowledge of this practice from earlier show cause notices. The appellant also contended that sharing the advertising cost did not amount to additional consideration for the sale of motorcycles.
5. Application of Relevant Legal Precedents:
The judgment referenced several key legal precedents to establish the principles applicable to the case:
- Bombay Tyre International Ltd. case: Expenses incurred for advertisement and publicity that promote marketability should be included in the assessable value.
- Mahindra & Mahindra Ltd. v. Union of India: Shared advertisement expenses between manufacturer and wholesaler do not affect the transaction's nature if it is at arm's length.
- Standard Electric Appliances v. Superintendent of Central Excise: Advertising by the wholesaler benefits both parties and does not imply additional consideration.
- Collector of Central Excise v. R. Gac Electrodes (P) Ltd.: Only the money value of additional consideration should be added to the assessable value.
- Hindustan Photo Films Mfg. Co. Ltd. v. Collector of Central Excise: Advertising expenses by a distributor can be considered additional consideration if they flow back to the manufacturer.
Conclusion:
The Tribunal concluded that the principles from the above cases apply to the cost of gift articles distributed for advertising purposes. The sale of gift articles by the manufacturer to the dealer cannot be regarded as a separate trading activity. The adjudicating authority failed to provide sufficient evidence of disproportionate costs or related persons. Therefore, the Tribunal held that there was no flow back of additional consideration for the sale of motorcycles and set aside the impugned orders, allowing the appeals.
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1995 (12) TMI 336
Issues: Application to amend Final Order under Section 35C of Central Excises and Salt Act, 1944; Consideration of penalty imposition; Interpretation of 'manufacture'; Application of extended period of limitation under proviso to Section 11A; Justification of penalty imposition by Collector; Comparison with judgments quashing penalties.
In the judgment delivered by the Appellate Tribunal CEGAT, New Delhi, the application by the appellants to amend Final Order No. 177/94-C under Section 35C of the Central Excises and Salt Act, 1944 was considered. The appellants sought rectification of a mistake apparent from the record in Appeal No. E/702/93-C against the Collector of Central Excise, Raipur. The issue of penalty imposition was raised, with the appellants arguing that they believed their crushing activity did not amount to manufacture, citing a judgment of the Madhya Pradesh High Court. The Tribunal had previously considered the meaning of 'manufacture' and the extended period of limitation under Section 11A but overlooked the penalty issue. The appellants requested setting aside the penalty based on precedents like the Padmini Products case remanded by the Supreme Court. The Tribunal noted that the appellants did not suppress facts or make wilful misstatements, restricting the duty demand to a normal period of 6 months, leading to the setting aside of the penalty.
The Respondent justified the penalty imposition based on the Collector's reasons in the adjudication order. However, the Tribunal referenced the Madhya Pradesh High Court's judgment quashing penalties in similar circumstances, emphasizing the harshness of penalties. Subsequently, the Tribunal analyzed judgments like the Padmini Products case and the New Polymer Industries case, where penalties were set aside due to findings on duty limitation issues. The Tribunal concluded that since the appellants were not guilty of suppression or wilful misstatement, and in line with the referenced decisions, the penalty was set aside, granting the appellants' application to amend the Final Order.
The judgment highlighted the importance of previous rulings in similar penalty imposition cases, emphasizing the need to consider factors like suppression of facts and wilful misstatements. By referencing relevant judgments and legal principles, the Tribunal justified setting aside the penalty in this case. The decision to amend the Final Order was based on the specific circumstances of the case and the legal precedents cited during the proceedings, ensuring a fair and just outcome for the appellants.
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1995 (12) TMI 335
Issues:
1. Seizure of silver bars under the Customs Act.
2. Allegations of smuggling and contravention of Customs Act provisions.
3. Finding of lower authorities regarding the origin of the seized silver.
4. Contravention of Notification Nos. 50 and 51 under the Customs Act.
5. Imposition of redemption fine and penalties.
Analysis:
1. The appellant, Shri Chail Singh, was found with 7.532 Kgs of silver bars tied around his waist at a railway station. The silver was seized under Section 110 of the Customs Act on suspicion of smuggling from Pakistan. The appellant claimed the silver was given to him for delivery by another individual. The Deputy Collector held the silver was smuggled, leading to its confiscation and imposition of penalties.
2. The appellant contested the allegation of smuggling, arguing that the silver had no foreign markings and the proximity to the border was not conclusive evidence. However, the authorities based their conclusion on the purity of the silver and its proximity to the Indo-Pak border. The appellant's contention against the smuggling charge was not accepted by the lower authorities.
3. The contravention of Notification Nos. 50 and 51 was a key issue. The notifications specified restrictions on the transportation of silver within a 50 Km area from the border without proper documentation. The appellant's argument that Barmer was beyond the specified area was refuted as the silver originated from Jaisindhar, within the restricted zone. The authorities found the contravention of the notifications valid.
4. The judge opined that a redemption fine should have been imposed by the lower authorities considering the circumstances and the increase in silver prices since the purchase in 1979. A redemption fine of Rs. 18,000 was fixed, and the penalties imposed on the appellants were upheld as justified. The judge found no reason to interfere with the penalty orders.
5. In conclusion, the appeals were disposed of with the affirmation of the confiscation of silver, imposition of penalties, and the fixing of a redemption fine. The judgment highlighted the importance of complying with Customs Act provisions and the consequences of contravening notification requirements in restricted areas.
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1995 (12) TMI 334
The appeal was against the order of the Commissioner of Customs (Appeals), Madras. The issue was the appellant's eligibility for duty refund for goods short supplied. The Tribunal held that it had jurisdiction to entertain the appeal and allowed the appeal, setting aside the impugned order.
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1995 (12) TMI 333
Issues:
1. Rejection of nomination for directorship in an annual general body meeting.
2. Allegations of illegality and mala fides in the rejection of the nomination.
3. Compliance with the Companies Act and articles of association regarding the nomination process.
4. Granting of interim injunction restraining the holding of the annual general body meeting.
5. Interpretation of the court order regarding the inclusion of the respondent's candidature in future meetings.
Analysis:
The judgment involves a dispute where the respondent alleged that the rejection of his nomination for directorship in the appellant-company's annual general body meeting was illegal and mala fide. The respondent sought a declaration that the rejection was unjust and that the company should not proceed with the co-option of another director without following proper procedures. The court granted an interim injunction restraining the meeting but allowed the company to reschedule the meeting after rectifying the defects in the nomination process and notifying special business as per the Companies Act. The appellant contested the rejection of the nomination, arguing that it was submitted late and without the required deposit. However, the court found that the rejection was not in accordance with the provisions of the Act as there was no specific time limit mentioned for filing nominations under section 257 of the Companies Act.
Furthermore, the court clarified that the rejection based on the timing of the nomination deposit was erroneous as it did not align with the statutory requirements. The judgment emphasized that the nomination process should adhere to the statutory provisions without additional time constraints imposed by internal company rules. The court also addressed the interpretation of the court order regarding the inclusion of the respondent's candidature in future meetings. It was clarified that the respondent must comply with section 257 if he wishes to be considered as a candidate in subsequent elections, and the erroneous drafting of the decretal order was rectified to reflect this requirement accurately. Ultimately, the appeal was dismissed with observations on the compliance with statutory provisions for future proceedings.
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1995 (12) TMI 329
Power conferred by section 29-A of the Madhya Pradesh General Sales Tax Act, 1958
Held that:- Appeal allowed. Every person who transports goods of the kind notified by the State Government, and it is not disputed that “supari” is notified, must carry with him an invoice, bill or challan or any other document issued by the consignor of the goods that gives particulars relating to the goods. The transporter is obliged to stop the vehicle carrying the goods when required to do so to allow the sales tax authority to verify and check the declarations and documents aforestated and to search the vehicle and inspect the goods. If such search and verification shows that the declaration that has been filed in respect of the goods is false or incorrect in respect of, inter alia, the value thereof, the authority may presume until the contrary is proved that an attempt is being made to evade sales tax. He must then record his reasons in this behalf and supply a copy thereof to the transporter. If after considering the transporter’s explanation, the authority remains unsatisfied, he is required so to record and to serve on the transporter a notice to show cause why a penalty should not be imposed upon him. In the premises, the High Court was plainly in error when it held that the aforesaid provision does not authorise the authorities to question the value of the goods as contained in the documents with reference to market value. The provision clearly does.
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1995 (12) TMI 324
Issues:
1. Unauthorized import of goods without proper documentation and endorsement.
2. Violation of Import Policy conditions and misuse of duty-free import material.
3. Interpretation of conditions for exemption under the Import Policy and imposition of penalties.
Analysis:
1. The appeal was against the order passed by the Collector of Customs, Bangalore, regarding the detention of 157 bales of mulberry raw-silk yarn of foreign origin found at the premises of M/s. Universal Overseas. The officers detained the goods as no licit import documents were produced. The endorsement regarding the intermediate manufacturer was made after the detention date, leading to the seizure of goods for violating Import Policy paras. The company's claims of processing goods at a non-existent factory raised suspicions. The subsequent investigations revealed discrepancies in the information provided by various parties involved.
2. The Respondent contended that the necessary endorsement for the intermediate manufacturer was missing on the Pass Book at the time of the officer's visit, contrary to Import Policy requirements. The duty-free import was deemed unauthorized as the goods were not used in the importer's or declared intermediate manufacturer's factory. The absence of a factory at the provided address and misuse of duty-free imports justified penalties imposed on the appellant.
3. The Tribunal considered the conditions of the Import Policy, emphasizing the requirement for endorsements and proper utilization of duty-free imports. The Pass Book holder must ensure the material is used in designated factories for export products. The failure to have the required endorsements at the material time constituted a violation of exemption conditions. Despite subsequent fulfillment of export obligations, the initial non-compliance warranted penalties. However, considering mitigating circumstances, the Tribunal reduced the redemption fine and penalty imposed on the appellants, acknowledging the subsequent fulfillment of export obligations as a mitigating factor.
In conclusion, the Tribunal upheld the Collector's decision regarding the violation of conditions for exemption and endorsement requirements. While penalties were justified, the subsequent fulfillment of export obligations led to a reduction in the fines imposed on the appellants.
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1995 (12) TMI 316
Penalty levy - whether the forged certificate was filed along with the returns or at a later point of time?
Held that:- Appeal allowed. Since the matter pertains to penalty and the offence, if proved, is undoubtedly a serious one, the aspect now brought to our notice be looked into and pronounced upon. Accordingly, set aside the judgment of the High Court and remit the matter to the High Court for a fresh disposal according to law. The High Court may also examine whether the certificate dated March 8, 1989, referred to in the order of the Deputy Commissioner aforementioned was indeed filed before the authorities and whether it is true and genuine and its effect.
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1995 (12) TMI 310
Issues Involved:
1. Whether the petition for winding up the respondent-company is maintainable under sections 439(1)(b), 433(e), and 434(1)(a) of the Companies Act, 1956.
2. Whether the debt claimed by the petitioners is bona fide disputed by the respondent.
3. Whether the respondent's defense is substantial and likely to succeed in law.
4. Whether the respondent-company has the financial capability to pay the claimed debt.
Issue-wise Detailed Analysis:
1. Maintainability of the Petition for Winding Up:
The petitioners sought the winding up of the respondent-company under sections 439(1)(b), 433(e), and 434(1)(a) of the Companies Act, 1956. They claimed that the respondent-company owed them Rs. 9,58,966 for advertising services rendered. The respondent disputed the amount and contended that the bills needed reconciliation. The court examined whether the petitioners' claim for winding up was justified based on the alleged outstanding debt.
2. Bona Fide Dispute of Debt:
The court considered the Supreme Court's ruling in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd., which established that if the debt is bona fide disputed and the defense is substantial, the court will not wind up the company. The respondent argued that the petitioners raised bills for unauthorized work and inflated claims. The court found that the respondent had consistently disputed the debt since October 22, 1994, and in response to the statutory notice under section 434 of the Act. The court noted that the debt claimed by the petitioners was not definite, ascertained, or undisputed.
3. Substantial Defense Likely to Succeed in Law:
The court reiterated the principles from Madhusudan Gordhandas and Co., emphasizing that the company's defense must be in good faith, substantial, and likely to succeed in law. The respondent provided detailed reasons for disputing specific bills, such as unauthorized advertisements and incorrect rates. The court found that the respondent's defense was bona fide and substantial, supported by prima facie evidence, including the balance-sheet and statements of account.
4. Financial Capability of the Respondent-Company:
The respondent demonstrated its financial capability by producing its balance-sheet as of March 31, 1995, showing a general reserve of Rs. 2,45,661 and a surplus in the profit and loss account of Rs. 11,05,097. The respondent also paid the admitted liabilities of Rs. 2,90,518 to the first petitioner and Rs. 28,362.55 to the second petitioner in court. The court concluded that the respondent had sufficient and adequate funds to settle the disputed claims.
Conclusion:
The court held that the respondent's defense was bona fide and substantial, and the debt claimed by the petitioners was not definite or undisputed. Consequently, the court dismissed the petition for winding up with costs, allowing the petitioners to establish their claim in an appropriate forum if so advised.
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1995 (12) TMI 309
Issues Involved:
1. Legality of the seizure on April 4, 1989, under FERA.
2. Allegation of re-seizure violating fundamental rights.
3. Compliance with Section 38 of the Foreign Exchange Regulation Act (FERA).
Detailed Analysis:
Issue 1: Legality of the Seizure on April 4, 1989, under FERA
The petitioner challenged the seizure of Rs. 5,55,000 under the Foreign Exchange Regulation Act, 1973 (FERA), arguing that it amounted to re-seizure and violated his fundamental rights. The court previously quashed the initial seizures on February 18, 1986, and February 20, 1986, due to procedural deficiencies. The Division Bench allowed the Enforcement Directorate to take further lawful actions, leading to the contested seizure on April 4, 1989. The court held that the Enforcement Directorate was entitled to seize the currency under Section 38 of FERA, as the previous court orders did not preclude such action.
Issue 2: Allegation of Re-seizure Violating Fundamental Rights
The petitioner argued that the seizure on April 4, 1989, constituted an illegal re-seizure, violating Article 19(1)(f) of the Constitution of India. The court rejected this argument, distinguishing the case from the Calcutta High Court's decision in Sri Jethanand Tahilram v. Union of India. The court noted that the initial seizure by the Enforcement Directorate was not valid as it did not involve taking possession contrary to the wishes of the person in possession. Therefore, the April 4, 1989, seizure could not be considered a re-seizure. The court also emphasized that it had expressly reserved the right for the Enforcement Directorate to take further lawful actions, thus no fundamental rights were violated.
Issue 3: Compliance with Section 38 of FERA
The petitioner contended that the seizure did not comply with Section 38 of FERA, which requires the authorized officer to have a reason to believe that the seized item is useful for or relevant to any investigation or proceeding under the Act. The court clarified that the reasons for the belief need not be fresh or contemporaneous with the seizure. The reasons that existed on February 20, 1986, were deemed sufficient for the April 4, 1989, seizure. The court found that the petitioner's possession of a large sum of money without satisfactory explanation provided reasonable grounds for the belief that there was a contravention of FERA, thus validating the seizure under Section 38.
Conclusion:
The court rejected both contentions raised by the petitioner, upholding the legality of the seizure on April 4, 1989, under Section 38 of FERA. The petition was dismissed, and the court urged the relevant authority to expedite the pending proceedings related to the seized money.
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1995 (12) TMI 308
Issues:
1. Application for institution of a suit against the respondent-company in the High Court of Judicature at Bombay for realization of amounts due.
2. Appointment of a court receiver for the mortgaged and hypothecated properties of the respondent-company.
3. Recovery of dues by sale of movable and immovable properties of the respondent-company.
Analysis:
The Industrial Development Bank of India filed an application seeking leave under sections 446(1), 453, and 537 of the Companies Act, 1956, to initiate legal actions against the respondent-company. The bank had granted term loans secured by deeds of hypothecation and guarantees. The respondent-company was declared a sick industrial company recommended for winding up. The bank sought permission to file a suit in Bombay for recovery. The official liquidator opposed the application, arguing that all properties were under the court's custody post-winding up, and no receiver should be appointed.
The court analyzed Section 446(1) of the Act, emphasizing that suits post-winding up require court permission. The court noted the bank's secured creditor status and cited precedent requiring leave for suits, even if likely granted. The official liquidator did not object to the suit but suggested it be transferred to the winding-up court. The court allowed the suit to proceed in Bombay, subject to conditions like depositing funds for legal expenses with the official liquidator.
Regarding the appointment of a receiver and sale of properties, the court held that the official liquidator's role resembled that of a receiver. It deemed it inappropriate to grant leave for a receiver appointment or property sale, as the liquidator was responsible for managing company assets for equitable distribution among creditors. The court emphasized maintaining control over winding-up proceedings to ensure fair administration for all creditors.
In conclusion, the court partially allowed the application, granting leave to file a suit in Bombay with conditions. The bank was directed to deposit funds with the official liquidator and obtain further orders before executing any decree. The court highlighted the need to consider the interests of all creditors, including workmen, in the liquidation proceedings. The parties were instructed to bear their own costs for the application.
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1995 (12) TMI 295
Whether the cashew-nut kernels which were exported are "those goods" which were purchased by the assessee in the penultimate transaction?
Held that:- Appeal dismissed. Cashew-nut kernels are not the same goods as raw cashew-nuts. Since raw cashew-nuts can be used for so many purposes and the process of extracting the kernels so elaborate, it cannot be said that the goods (raw cashew-nuts) purchased in the penultimate sale were the same goods (cashew-nut kernels) which were sold for export. It does not appear that either on facts found or in law, the decision in Shanmugha Vilas case [1953 (5) TMI 8 - SUPREME COURT OF INDIA] needs reconsideration.
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1995 (12) TMI 289
Issues:
1. Whether the petitioner has the locus standi to file a winding-up petition under section 433(f) of the Companies Act, 1956.
2. Whether there is an alternative remedy available to the petitioner under sections 397 and 398 or section 235 for investigation by the Central Government.
Detailed Analysis:
1. The petitioner, a private limited company, filed a petition seeking the winding up of the respondent-company under section 433(f) of the Companies Act, 1956, on the grounds of just and equitable reasons. The petitioner alleged that there was a partnership firm prior to the formation of the company, and after retirement deeds, assets were transferred to the respondent-company. The petitioner claimed to hold shares in the respondent-company and accused certain individuals of fraud and exclusion from shareholding and profits. The respondent countered, denying the petitioner's shareholding and presenting a different version of events, including agreements for transfer of shares and retirement of directors. The court noted the dispute regarding shareholding but found that a full inquiry was necessary to determine the actual shareholding status, leading to the rejection of the first objection raised by the respondent regarding locus standi.
2. The respondent argued that the petitioner had an alternative remedy available under sections 397 and 398 or section 235 for investigation by the Central Government, as per section 443(2) of the Companies Act. The court cited precedents such as Lokenath Gupta v. Credits Pvt. Ltd. and Atul Drug House Ltd., emphasizing the need for the petitioner to demonstrate a just and equitable ground for winding up and the absence of an alternative remedy. Referring to Jose J. Kadavil v. Malabar Industrial Co. Ltd., the court highlighted the discretion to refuse winding up if another remedy is available and if seeking winding up is deemed unreasonable. Ultimately, the court dismissed the petition on the basis of the availability of alternative remedies under the Act, such as approaching the Company Law Board under sections 397 and 398 or section 235, and cited the lack of evidence from the petitioner to support a different interpretation of the law.
In conclusion, the court dismissed the winding-up petition on the grounds of the petitioner having alternative remedies available under the Companies Act, specifically under sections 397 and 398 or section 235 for investigation by the Central Government. The judgment highlighted the importance of demonstrating a just and equitable ground for winding up and the necessity of exhausting alternative remedies before seeking winding up.
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1995 (12) TMI 288
Issues Involved:
1. Criminal liability under Section 63(1) of the Companies Act, 1956 for misstatements in the prospectus.
2. Relief under Section 633(2) of the Companies Act, 1956 from liability for the directors of the company.
3. Jurisdiction of the High Court to entertain the petitions.
Issue-Wise Detailed Analysis:
1. Criminal Liability under Section 63(1) of the Companies Act, 1956:
The petitioners were prosecuted under Section 63(1) of the Companies Act, 1956, for allegedly making untrue statements in the prospectus issued by the company. The specific statements in question were that Progressive Constructions Ltd. (PCL) had a proven track record in the construction industry for two and a half decades and that the company was expected to commence commercial production in November 1990. The petitioners argued that PCL's experience was derived from its promoters who had been involved in the construction business through a partnership firm since 1966. The delay in commencing production was due to unforeseen circumstances, such as delays in shipping machinery from Japan and the reluctance of Japanese engineers to travel due to the Gulf War.
2. Relief under Section 633(2) of the Companies Act, 1956:
The petitioners sought relief under Section 633(2) of the Companies Act, 1956, which allows the court to relieve officers of a company from liability if they acted honestly and reasonably. The court noted that the petitioners had acted without any mala fide intention and had taken reasonable care in issuing the prospectus. The court found that the statements in the prospectus were not made with the intention to mislead the public and that the delays in production were due to circumstances beyond the petitioners' control. The court cited previous judgments, such as East India Hotels Ltd. and Ashok Bhatia v. Registrar of Companies, to support the argument that directors could be relieved from liability if they acted honestly and reasonably.
3. Jurisdiction of the High Court:
The respondent argued that the High Court did not have jurisdiction to entertain the petition under Section 633(2) once the prosecution had been launched. However, the court held that the petitioners had a legitimate apprehension of prosecution when they filed the petition, and the subsequent launching of prosecution did not invalidate their right to seek relief under Section 633(2). The court also addressed the procedural aspect, noting that the Chief Justice had directed the criminal petition to be heard along with the company petition, thus consolidating the matters for judicial efficiency.
Conclusion:
The High Court allowed both the company petition and the criminal petition, quashing the proceedings in C.C. No. 16 of 1993 on the file of the Special Judge for Economic Offences, City Criminal Courts, Hyderabad. The court found that the petitioners had not made any untrue statements with a mala fide intention and had acted honestly and reasonably, thereby entitling them to relief under Section 633(2) of the Companies Act, 1956.
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1995 (12) TMI 280
Issues:
1. Liability of the respondent-company to pay outstanding royalty arrears.
2. Whether non-payment of the arrears constitutes a ground for winding up.
3. Maintainability of the company petition under Rule 21 of the Companies (Court) Rules, 1959.
Analysis:
1. The petitioner sought winding up of the respondent-company for not paying Rs. 2,51,677 in outstanding royalty arrears despite a statutory notice. An agreement required the respondent to pay royalty for technical know-how. The respondent admitted the arrears but disputed certain obligations. The respondent's cheque for Rs. 1,80,000 was dishonored. The court found no bona fide dispute on the liability to pay the arrears, leading to the allowance of the company petition.
2. The court addressed the issue of whether non-payment of the arrears justified winding up the respondent-company. The respondent's actions, including admitting the arrears, issuing a dishonored cheque, and failing to show a bona fide dispute, supported the petitioner's claim. The court ordered the winding up of the respondent-company, directing the official liquidator to take control of its assets.
3. The court examined the maintainability of the company petition under Rule 21. The petitioner initially filed the petition without proper authorization as per the rule. However, the petitioner later sought leave to rectify the deficiency by submitting a resolution authorizing the individual who filed the petition. The court allowed the rectification, emphasizing that the proviso to Rule 21 did not mandate submission of a power of attorney. The court overruled the respondent's objection and permitted the petition to proceed.
This detailed analysis of the judgment from the Andhra Pradesh High Court covers the liability of the respondent-company, the grounds for winding up, and the procedural aspect regarding the maintainability of the company petition under Rule 21 of the Companies (Court) Rules, 1959.
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1995 (12) TMI 279
Issues:
Application under section 392 of the Companies Act, 1956 for direction to issue share certificates and ancillary direction post amalgamation scheme.
Analysis:
The case involved two applications filed under section 392 of the Companies Act, 1956. The first application sought a direction for the issuance of share certificates in accordance with the scheme of amalgamation, and the second application sought a direction to prevent any actions contrary to the amalgamation scheme. The applicant, a company holding shares in a merged entity, alleged that the respondent failed to allot shares as per the approved scheme, leading to a dispute. The respondent contended that the share allotment was done based on information provided by the merged company's director and challenged the maintainability of the application. The court analyzed the contentions and the provisions of the Companies Act to determine the validity of the applications.
The court noted that the dispute primarily revolved around the entitlement to shares post-amalgamation. While the applicant claimed a specific share ratio as per the scheme, the respondent argued that the allotment was based on information provided by the merged company's director. The court emphasized that the dispute regarding the shareholding of the merged entity was beyond the scope of section 392 and should be addressed in the civil court where related suits were already pending. Referring to a previous judgment, the court highlighted that matters not explicitly covered under the Companies Act should be dealt with in the civil court, reinforcing the need to seek appropriate relief through the proper forum.
Ultimately, the court held that the applications were not maintainable under section 392 of the Companies Act due to the nature of the dispute concerning share ownership post-amalgamation. Consequently, both applications were dismissed, with a directive for the parties to pursue the matter in the civil court if necessary. The judgment clarified that its orders did not restrict the parties from seeking recourse in the appropriate legal forum, affirming the principle of seeking relief where specific provisions of the law do not apply.
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1995 (12) TMI 278
Issues:
1. Refusal to transfer suit shares by defendant No. 10.
2. Disputes regarding authorized signatories for transfer deeds.
3. Allegations of malicious actions by defendant No. 10.
4. Buy back arrangement between parties.
5. Consideration of legal infirmities in the decision of defendant No. 10.
6. Application for ad interim relief.
Analysis:
1. The judgment addresses the refusal of defendant No. 10 to transfer suit shares due to discrepancies in signatures on transfer deeds. The court notes that the plaintiffs failed to prove that the transfer deeds were signed by authorized signatories. The defendant No. 10's affidavit regarding the lack of notification of signatory details supports their position.
2. The case involves disputes over authorized signatories for transfer deeds, with the plaintiffs relying on Powers of Attorneys executed by registered holders in favor of defendant No. 2. However, the court highlights the necessity of notifying signatory details to defendant No. 10, which was not done in this case. The court finds the defendant No. 10's procedure for verifying signatures to be convincing.
3. Allegations of malicious actions by defendant No. 10 are raised, suggesting collusion with other defendants. The court, however, finds no convincing evidence of malice, fraud, or collusion. It notes the existence of a buy back arrangement between parties, indicating restrictions on the circulation or sale of the shares in question.
4. The judgment discusses the implications of the buy back arrangement on the transfer of shares and monetary transactions between the parties. It emphasizes the need for monetary adjustments if the delivery of shares is deemed ineffective. The court refrains from granting ad interim relief due to the absence of a prima facie case and directs parties to act in accordance with Stock Exchange regulations.
5. Legal infirmities in the decision of defendant No. 10 are considered, with the court finding no fault in the procedure followed by the company. The judgment clarifies that the Stock Exchange may take necessary actions as per regulations, subject to final court orders.
6. The application for ad interim relief is ultimately refused, keeping all contentions open for further hearings. The court highlights the potential negligence of stock brokers and the monetary claims they may have against involved parties. The judgment concludes by authorizing parties to act based on an authenticated copy of the order and expediting the issuance of a certified copy.
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1995 (12) TMI 277
Issues Involved:
1. Winding up of the company on just and equitable grounds under Section 433(1)(f) of the Companies Act, 1956.
2. Appointment of an official liquidator as the provisional liquidator.
3. Mismanagement and misconduct allegations against the majority shareholders.
4. Applicability of partnership principles to the company.
5. Alternative remedies under Sections 397 and 398 of the Companies Act.
6. Admissibility of the winding-up petition.
Detailed Analysis:
1. Winding up of the Company on Just and Equitable Grounds:
The petitioners, holding 35.7% shares in Saraya Sugar Mills Ltd., sought the company's winding up under Section 433(1)(f) of the Companies Act, 1956, claiming it was just and equitable. They alleged that the majority shareholders, specifically respondent No. 2, committed defalcation, misappropriation, and oppression, leading to a loss of mutual trust and confidence among shareholders. The court noted that the petitioners had previously reached an amicable settlement through a Memorandum of Understanding (MoU) in 1986, which was later disregarded by the majority shareholders.
2. Appointment of an Official Liquidator:
The petitioners also requested the appointment of an official liquidator to take charge of the company's assets. The court issued an ex parte interim order restraining the company from issuing further equity shares or creating additional liabilities. However, respondents argued that the petition was based on distorted facts and unfounded allegations, and the company was making profits under the current management.
3. Mismanagement and Misconduct Allegations:
The petitioners accused respondent No. 2 of selling company land without board approval, diverting molasses to his distillery, employing distillery staff in the company, maintaining inaccurate accounts, and treating the company as his private business. Respondent No. 3 supported these allegations, claiming large-scale illegalities and loss of crores of rupees to the company. The court noted that these allegations, if true, could justify winding up on just and equitable grounds.
4. Applicability of Partnership Principles:
The petitioners argued that the company, though a public limited company, operated like a partnership among Majithia family members. The court examined the articles of association and the 1972 arbitration award, concluding that the company did not retain partnership principles after incorporation. The award had partitioned the family businesses, and the shareholding structure did not indicate a partnership. Thus, the partnership principle was not applicable.
5. Alternative Remedies under Sections 397 and 398:
The court considered whether the petitioners had alternative remedies under Sections 397 and 398 of the Companies Act, which address oppression and mismanagement. It noted that the petitioners' allegations of mismanagement and oppression could be addressed under these sections. The court referred to the Gujarat High Court's decision in Atul Drug House Limited, emphasizing that winding up should be a last resort when other remedies are ineffective.
6. Admissibility of the Winding-up Petition:
The court assessed whether the petition should be admitted based on prima facie evidence. It noted that the petitioners had not attempted to resolve their grievances through the company's domestic forum or annual general meetings. The court emphasized that winding up a profitable company would harm shareholders and other stakeholders. It concluded that the petitioners had alternative remedies and were acting unreasonably in seeking winding up without pursuing those remedies.
Conclusion:
The court dismissed the winding-up petition with costs, emphasizing that the petitioners had not demonstrated that winding up was the only remedy. It clarified that its observations should not influence any future proceedings under Sections 397 and 398 or other appropriate forums.
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