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2002 (2) TMI 1262
The Appellate Tribunal CEGAT, New Delhi allowed the appeal filed by the Appellants against the Order-in-Appeal passed by the Commissioner (Appeals) which was dismissed as time barred. The Tribunal found that the appeal was filed within the period of limitation after the appellants received a corrigendum to the Order-in-Original, setting aside the impugned Order and remanding the matter to the Commissioner (Appeals) for decision on merit.
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2002 (2) TMI 1261
Issues:
Misuse of Import-Export Pass Book Scheme, violation of ITC restrictions, violation of Customs Act Sections 111(d) and 111(o), jurisdiction of the Commissioner of Customs (Preventive) to issue show cause notice.
Analysis:
The judgment involved two cases concerning carpet manufacturers/exporters in Varanasi accused of misusing the Import-Export Pass Book Scheme by selling goods duty-free or the passbook itself at a premium, violating ITC restrictions and Customs Act Sections 111(d) and 111(o). Investigations by the Marine and Preventive Wing of the Customs Commissionerate led to a show cause notice in 1991. The Additional Commissioner of Customs (Preventive) adjudicated the notice resulting in an appeal to the Commissioner (Appeals) and further show cause notice in 1994. The Commissioner of Customs (Preventive) in Bombay confirmed a duty demand of Rs. 5,07,274, ordered confiscation of dyes, and imposed fines and penalties on the appellants.
The appellant argued that the impugned order and show cause notice lacked jurisdiction as only a proper officer of Customs, not any officer, could issue such notices. Citing a Tribunal judgment in Manohar Bros. v. CC, it was contended that specific functions must be assigned to an officer to be considered a "proper officer" under Section 28 of the Customs Act. The Tribunal's decision emphasized the necessity of specific function assignment for officers to issue demand notices, and the Notification No. 58/92-Cus. (N.T.) appointed the Collector of Central Excise, Bombay-III as the Collector of Customs within his jurisdiction. The Tribunal concluded that the Commissioner of Customs (Preventive) lacked jurisdiction to issue the show cause notice, rendering the notice and subsequent adjudication void.
The Tribunal, based on the cited paragraphs, determined that the Commissioner of Customs (Preventive) did not have the jurisdiction to issue the show cause notice or adjudicate the matter concerning imports at Bombay Customs House. Consequently, the impugned order was set aside, and the appeals were allowed, with any consequential relief to be granted according to the law.
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2002 (2) TMI 1258
Issues: Classification and eligibility for exemption under Notifications 8/96 and 4/97 for the product "Sunpac"
In this case, the issue at hand is the classification and eligibility for exemption under Notifications 8/96 and 4/97 for the product "Sunpac" manufactured by the applicant. The applicant claimed the classification of the goods as an article of plastic under Heading 3926.90 of the tariff, seeking eligibility for entry 57 of the Table to Notification 4/97. The department, however, proposed a different classification under Heading 3926.90 as sheets of plastic, which would result in denial of the exemption claimed. The Assistant Commissioner initially ruled in favor of the applicant, classifying the product as a profile shape under Heading 3926.90 and granting the exemption. However, on appeal, the Commissioner (Appeals) held the goods to be classifiable under Heading 3926.39, thereby denying the exemption.
The Commissioner (Appeals) based their decision on a previous Tribunal ruling in the appellant's case, which classified the product as a profile shape instead of a sheet. The Commissioner also referred to the Explanatory Notes to the Harmonised System of Nomenclature under Heading 39.20, stating that the presence of fluting between the layers did not disqualify the product from being considered a sheet. The applicant's counsel argued that despite the change in the tariff, the classification should remain unchanged, emphasizing that the Explanatory Notes did not consider the fluting between the layers. The departmental representative supported the Commissioner (Appeals) order.
The Tribunal, in a previous order, had noted the manufacturing process of the product, describing it as a profile shape consisting of two layers of sheets with corrugation inside, all fused into one. The Tribunal's decision was based on Notification 68/71 related to rigid plastic sheets, where the presence of fluting inside two layers disqualified the product from being classified as sheets. The Tribunal found that the manufacturing process and the presence of fluting inside the layers were crucial factors in determining the classification of the product.
Considering the arguments presented and the previous Tribunal rulings, the Tribunal in this case found no reason to deviate from the earlier classification and exemption granted to the product. The Tribunal noted that the change in the tariff nomenclature did not affect the product's classification, especially in light of the manufacturing process and the presence of fluting between the layers. As a result, the Tribunal waived the deposit of duty, stayed its recovery, and scheduled the appeal for further hearing.
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2002 (2) TMI 1253
Issues:
1. Confirmation of duty and penalties by the Commissioner.
2. Allegations of violation of natural justice and defective panchnama.
3. Merits of the case - duty evasion and use of parallel set of invoices.
4. Reduction and setting aside of penalties on different appellants.
Confirmation of duty and penalties by the Commissioner:
The appeals were filed against the Order-in-Original confirming duty of Rs. 1,39,49,680 with penalties under Section 11AC and Rule 209A. The appellants were engaged in manufacturing wires and cables and were found to have used two sets of invoices for duty evasion. Despite denial, the Commissioner confirmed the duty demand and imposed penalties.
Allegations of violation of natural justice and defective panchnama:
The appellants argued that documents were not supplied to them, violating natural justice, and the panchnama was defective and vague. However, the Tribunal found that all necessary documents were provided earlier, and there was no breach of natural justice. The panchnama was deemed sufficient as it contained details of seized records.
Merits of the case - duty evasion and use of parallel set of invoices:
The duty demand was upheld based on documentary evidence, including admissions by one of the appellants regarding the use of two sets of invoices. Records from authorities confirmed evasion, and the authenticity of inspection records was unquestioned. The evasion was evident from the comparison of documents and admissions by the appellants.
Reduction and setting aside of penalties on different appellants:
The Tribunal modified the order by setting aside penalties under Section 11AC due to the prior period of duty evasion. Penalties on individual appellants were reduced or set aside based on their roles in the evasion. Penalties were reduced for some appellants and completely waived for others who had minimal involvement.
In conclusion, the Tribunal upheld the duty demand but made adjustments to the penalties imposed, considering the roles of individual appellants in the evasion. The order was modified accordingly, and the appeals were disposed of based on the revised penalties for each appellant.
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2002 (2) TMI 1248
Issues Involved:
1. Non-application of mind by the Debt Recovery Tribunal in passing orders dated 10-12-2001.
2. Lack of consideration of objections raised by petitioners by the Debt Recovery Tribunal.
3. Direction given to petitioners to approach Debt Recovery Appellate Tribunal against the order dated 10-12-2001.
4. Violation of principles of natural justice by the Debt Recovery Tribunal.
5. Failure to provide an opportunity of being heard before passing orders by the Debt Recovery Tribunal.
6. Exercise of discretionary powers by the Tribunal in an unreasonable manner.
Analysis:
Issue 1: Non-application of mind by the Debt Recovery Tribunal in passing orders dated 10-12-2001
The High Court observed that the order dated 10-12-2001 was passed without proper consideration of the objections raised by the petitioners. The Tribunal granted interim relief to the respondent-Banks without addressing the objections filed by the petitioners, indicating a lack of application of mind. The High Court deemed this order as a result of a total non-application of mind by the Tribunal, leading to an error apparent on the face of the record.
Issue 2: Lack of consideration of objections raised by petitioners by the Debt Recovery Tribunal
Despite the petitioners filing objections opposing the appointment of a receiver, the Debt Recovery Tribunal did not consider any of these objections before passing the impugned order dated 10-12-2001. This failure to address the objections filed by the petitioners was highlighted by the High Court as a violation of the principles of natural justice, indicating a lack of due process in the Tribunal's decision-making process.
Issue 3: Direction given to petitioners to approach Debt Recovery Appellate Tribunal against the order dated 10-12-2001
The High Court found the direction given to the petitioners to approach the Debt Recovery Appellate Tribunal against the order dated 10-12-2001 unwarranted. The petitioners were not obligated to file such an appeal, especially considering the deficiencies in the original order passed by the Debt Recovery Tribunal. The High Court set aside this direction, emphasizing that there was no necessity for the petitioners to file an appeal given the circumstances.
Issue 4: Violation of principles of natural justice by the Debt Recovery Tribunal
The High Court noted that the orders passed by the Debt Recovery Tribunal on 10-12-2001 and 7-2-2002 were contrary to the principles of natural justice. The Tribunal failed to provide an opportunity for the petitioners to be heard before passing the impugned orders, which was deemed a violation of the fundamental principles of natural justice. This lack of procedural fairness in the Tribunal's actions was a significant factor in setting aside the orders.
Issue 5: Failure to provide an opportunity of being heard before passing orders by the Debt Recovery Tribunal
The High Court criticized the Debt Recovery Tribunal for not granting an opportunity to the petitioners to present their case before passing the impugned orders. The Tribunal's failure to afford the petitioners a chance to be heard before making decisions was considered a breach of natural justice, highlighting a fundamental flaw in the Tribunal's procedural approach.
Issue 6: Exercise of discretionary powers by the Tribunal in an unreasonable manner
The High Court concluded that the Debt Recovery Tribunal had exercised its discretionary powers unreasonably in passing the impugned orders. By not considering the objections raised by the petitioners and failing to provide a fair hearing, the Tribunal was deemed to have acted unreasonably. The High Court allowed the writ petition, setting aside the orders dated 10-12-2001 and 7-2-2002, and directed the Tribunal to reconsider the matter in accordance with the law, emphasizing the need for a fair and just process in decision-making.
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2002 (2) TMI 1247
Issues:
- Application of RBI Circular for one-time settlement under recovery guidelines to a pending court case.
- Interpretation of RBI guidelines for recovery of non-performing assets by public sector banks.
Analysis:
- The petitioner, engaged in manufacturing non-ferrous castings, borrowed from the respondent-bank and defaulted on repayments, leading to a decree against them. The petitioner sought to set aside the ex parte decree and proposed a one-time settlement under an RBI Circular. The Circular provided guidelines for recovery of dues related to non-performing assets of public sector banks, including provisions for settlements. The petitioner's proposal under the Circular was to settle the amount due in installments, but the bank did not respond.
- The respondent argued that the one-time settlement scheme under the RBI Circular does not apply to cases where decrees have been obtained by public sector banks. The guidelines specify that cases pending before courts are covered, but cases with decrees are not. The respondent's counsel highlighted that the scheme does not extend to cases where decrees have been obtained, emphasizing that the guidelines are not applicable once a decree is in place.
- The court analyzed the RBI guidelines and noted that the scheme for one-time settlement does not apply to cases where decrees have been obtained by banks. While the petitioner had filed an application to set aside the decree, the court held that the suit cannot be considered pending until the decree is set aside. Therefore, the court concluded that the RBI guidelines for one-time settlement do not apply to the petitioner's case, leading to the dismissal of the writ petition seeking direction for consideration of the settlement proposal under the Circular.
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2002 (2) TMI 1245
Issues:
1. Jurisdiction of the company court to direct prosecution.
Analysis:
The case involved an appeal against an order related to the appointment of an administrator in a company petition concerning Anubhav Plantations Ltd. The administrator raised concerns about suspicious transactions involving the sale of lands by certain individuals, leading to an investigation by the C.B.C.I.D. The court, based on the investigation report, directed the prosecution of the accused under various sections of the Indian Penal Code. The appellant challenged the jurisdiction of the company court to direct prosecution.
The appellant argued that the Companies Act does not provide for the company court to launch prosecutions, except for specific provisions related to summoning individuals suspected of holding company property. On the other hand, the administrator relied on Rule 9 of the Companies (Court) Rules, which allows the court to give necessary directions for the ends of justice or to prevent abuse of the court's process. Additionally, reference was made to a Supreme Court judgment stating that anyone can set criminal law in motion by taking note of an offense.
The court carefully considered the contentions of both parties and observed that the investigation report indicated grave offenses under the Indian Penal Code. It was noted that when a prima facie case is established, the court cannot ignore it and must set the criminal law in motion by directing prosecution. The court clarified that directing prosecution does not equate to imposing punishment but is essential for further legal proceedings. The court concluded that the company court is empowered to issue such directions under Rule 9 of the Companies (Court) Rules. Consequently, the appeal challenging the jurisdiction of the company court to direct prosecution was dismissed.
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2002 (2) TMI 1244
Issues Involved:
1. Validity of the workers' claim over the properties sold in execution proceedings.
2. Jurisdiction of the Company Court to entertain the applications.
3. Applicability of the doctrine of lifting the corporate veil.
4. Relevance of admissions made by directors in affidavits.
5. Impact of the Payment of Wages Act orders on the creditors of the partnership firms.
6. Status of the interim stay and its effect on the execution proceedings.
Detailed Analysis:
1. Validity of the Workers' Claim Over the Properties Sold in Execution Proceedings:
The workers of Aarthi Petrochemical Industries (P.) Ltd. claimed that the properties sold in execution proceedings, which belonged to various partnership firms, were actually the properties of the company in liquidation. They argued that the directors of the company were also partners in these firms, and thus, the sale proceeds should be distributed among the workers and secured creditors of the company. However, the court found no material evidence indicating that the properties of the partnership firms were purchased with funds from the company in liquidation. The affidavits provided by the directors only suggested common management but did not prove financial interconnection. Consequently, the workers' claims were dismissed.
2. Jurisdiction of the Company Court to Entertain the Applications:
The court addressed the preliminary objection raised by Kalupur Bank regarding the maintainability of the applications. It was argued that the applications did not specify the provisions of law under which they were filed, violating rule 17 of the Companies (Court) Rules, 1959. Additionally, it was contended that the Company Court lacked jurisdiction as the execution proceedings involved properties of the partnership firms, not the company in liquidation. The court, however, decided not to delve into the jurisdictional issue as the applications were dismissed on merits.
3. Applicability of the Doctrine of Lifting the Corporate Veil:
The workers' union urged the court to lift the corporate veil to treat the properties of the partnership firms as those of the company in liquidation. The court referred to precedents, including the Supreme Court's decisions in *State of U.P. v. Renusagar Power Co.* and *Life Insurance Corpn. of India Ltd. v. Escorts Ltd.*, which allow lifting the corporate veil in cases of fraud or improper conduct. However, the court found no evidence of fraud or financial interconnection between the company and the partnership firms. Thus, the doctrine was deemed inapplicable.
4. Relevance of Admissions Made by Directors in Affidavits:
The workers' union relied on affidavits by the directors, which stated that the partnership firms and the company were treated as one for management and financial purposes. The court held that these affidavits did not bind the secured creditors who were not parties to the proceedings where the affidavits were filed. Moreover, the affidavits did not prove that the properties were purchased with the company's funds. Therefore, the admissions were not sufficient to convert the properties of the partnership firms into those of the company in liquidation.
5. Impact of the Payment of Wages Act Orders on the Creditors of the Partnership Firms:
The workers argued that orders under the Payment of Wages Act, which treated the companies and partnership firms as one entity, supported their claim. The court clarified that these orders were limited to the specific proceedings under the Act and did not bind the creditors of the partnership firms. The secured creditors, like the co-operative banks, were not parties to those proceedings and thus, were not affected by the orders.
6. Status of the Interim Stay and Its Effect on the Execution Proceedings:
The interim stay granted by the court in 1993 had halted the execution proceedings against the properties of the partnership firms. The court vacated this stay, allowing the execution proceedings to resume. It was clarified that any deposits or appropriations by the creditors from the sale proceeds would be without prejudice to the Official Liquidator's powers to pursue appropriate proceedings if it was found that the company's properties were diverted to the partnership firms.
Order:
The court dismissed Company Application Nos. 66, 67, and 68 of 1993, with a clarification that the Official Liquidator could still exercise his powers under the Companies Act, 1956, to trace any diverted properties. The interim stay was vacated, and Company Application No. 248 of 2000 filed by Bank of India was disposed of as infructuous. The court directed the Official Liquidator to expedite the sale of the company's unsold assets and disburse the proceeds among the secured creditors and workers. The interim stay was extended till 22-3-2002 to allow the workers' union to seek further recourse.
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2002 (2) TMI 1243
Issues:
1. Challenge to the validity of SEBI Rules, 1992 and Regulations 1992.
2. Allegation of excessive delegation of power to SEBI.
3. Allegation of violation of principles of natural justice.
4. Argument against the levy of registration fees on investors.
5. Questioning the quantum of registration fee.
Analysis:
1. The writ petitioner sought a prohibitory order against SEBI, challenging the legality of SEBI Rules, 1992, and Regulations 1992. The petitioner alleged that these regulations were unconstitutional and void ab initio. Additionally, the petitioner challenged the validity of the prohibition order related to the 'Sale and then purchase of shares,' claiming that SEBI had been delegated excessive powers without laying down guidelines, which was against the principles of natural justice.
2. The main argument of the petitioner was based on the excessive delegation of power to SEBI without following the provisions of the Securities and Exchange Board of India Act, 1992. However, the court noted that Section 31 of the Act requires any rules or regulations framed by SEBI to be laid before Parliament for scrutiny, indicating that there are checks and balances in place to prevent excessive delegation of power.
3. The court emphasized that SEBI's functions, as outlined in Sections 11 and 12 of the Act, empower it to regulate the securities market and protect investors' interests. The court found that SEBI's powers were not arbitrary or excessive, as they were in line with the objectives of the Act and subject to parliamentary oversight.
4. The petitioner argued that the levy of registration fees on investors was against the Act. However, the court clarified that the Act and rules primarily dealt with brokers and sub-brokers, not investors. The court highlighted that no registration fee had been levied on investors directly, and the regulations only required stock-brokers to pay registration fees.
5. Regarding the quantum of the registration fee, the court cited a Supreme Court decision that upheld SEBI's authority to fix the fee, provided it was within the statutory framework. The petitioner did not challenge the quantum of the fee but focused on the alleged excessive delegation of powers to SEBI, which the court found unsubstantiated.
In conclusion, the court dismissed the petition, finding no merit in the petitioner's arguments against SEBI's regulations and the levy of registration fees. The court upheld SEBI's authority under the Act and emphasized the importance of parliamentary oversight in regulating the securities market.
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2002 (2) TMI 1242
Whether section 10 is a non-derogable provision?
Held that:- Unable to accept Mr. Venugopal’s argument that, as a matter of public policy, section 10 should be held to be non-derogable. Even though the said Act is now an integrated law on the subject of arbitration, it cannot and does not provide for all contingencies. An arbitration being a creature of agreement between the parties, it would be impossible for the Legislature to cover all aspects. Just by way of an example, section 10 permits the parties to determine the number of arbitrators, provided that such number is not an even number.
A conjoint reading of sections 10 and 16 shows that an objection to the composition of the Arbitral Tribunal, is a matter which is derogable. It is derogable, because, a party is free not to object within the time prescribed in section 16(2). If a party chooses not to so object, there will be a deemed waiver under section 4. Thus, we are unable to accept the submission that section 10 is a non-derogable provision.
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2002 (2) TMI 1241
Issues involved:
1. Application for transfer of shares of a company at a higher price than market value.
2. Objection to the transfer of shares based on previous court orders.
3. Consideration of change of circumstances warranting deviation from previous court orders.
4. Resolution of board of directors for sale of shares and regulatory approvals.
5. Interim arrangement to balance conflicting interests of parties involved.
Detailed analysis:
1. The application was filed by the applicants to transfer shares of a company they agreed to purchase at a higher rate than the market value. They sought either a refund of the amount deposited or transfer of shares in their favor. The relief was subject to the terms and conditions set by the court.
2. Objections were raised by a party regarding the transfer of shares citing previous court orders that remanded the matter for further consideration. The objecting party argued that transferring the shares would render pending litigation infructuous.
3. The court considered the change of circumstances post the previous court orders and the implications on the relief sought by the applicants. It was noted that the circumstances would be further evaluated during the main appeal hearing.
4. The resolution of the board of directors for the sale of shares and regulatory approvals were highlighted. The court acknowledged the permissions granted by SEBI and the Bombay High Court for the public offer and subsequent purchase of shares by the applicants.
5. An interim arrangement was proposed by the court to balance the conflicting interests of the parties involved. The court directed the transfer of 50% of the shares to the applicants at a higher price, subject to further orders. The court also outlined conditions regarding voting rights, dividends, and the handling of the deposited amount.
Overall, the court aimed to safeguard the interests of all parties involved while maintaining the integrity of the pending litigation and regulatory approvals. The interim arrangement was devised to address the immediate concerns without prejudicing the final decision on the matter.
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2002 (2) TMI 1240
Issues:
1. Company application for winding up based on BIFR opinion under Sick Industrial Companies (Special Provisions) Act, 1985.
2. Notices issued to respondent-company and IFCI for show cause.
3. Declaration of company as Sick Industrial Company, actions by operating agency, and decision for winding up.
4. Acceptance of BIFR opinion by the Court for winding up and appointment of official liquidator.
5. Directions for official liquidator regarding sale of company's assets and further proceedings.
Analysis:
1. The company application for winding up was initiated following the opinion of the Board for Industrial and Financial Reconstruction (BIFR) under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The BIFR's opinion, recorded on 26-9-2001, recommended winding up of the company due to non-revival and absence of response from promoters.
2. Notices were duly issued to the respondent-company and IFCI to show cause as to why the company should not be wound up. Despite sending notices via registered post A/D, the acknowledgment due or undelivered cover was not returned, leading to the notice being deemed sufficient under the Court rules.
3. The company was declared a Sick Industrial Company by BIFR under section 3(1)(o) of the Act, with IFCI appointed as the operating agency. Various actions were taken, including attempts for change of management, reports of promoters disposing of assets, and the company remaining closed. The BIFR formed a prima facie opinion to wind up the company, considering the promoters' disinterest and absence of response to rehabilitation efforts.
4. The Court, based on the BIFR's opinion and the circumstances presented, accepted the recommendation for winding up. Chandra Synthetics Ltd. was directed to be wound up, with the official liquidator appointed to oversee the process in accordance with the Companies Act, 1956 and Companies (Court) Rules, 1959.
5. The official liquidator was tasked with informing IFCI about the winding up order and the status of asset sale as directed by BIFR. Instructions were provided for handling the sale proceeds, depositing sale consideration, and taking charge of unsold assets for further proceedings as per the relevant legal provisions.
This comprehensive analysis outlines the legal proceedings leading to the decision for winding up the company, the roles of the BIFR, operating agency, and official liquidator, along with the necessary directions for asset management and liquidation in compliance with the applicable laws.
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2002 (2) TMI 1238
The High Court of Allahabad accepted the opinion of BIFR and ordered Vijayshree Chemicals Ltd. to be wound up as it was not likely to become viable in the future. The official liquidator was appointed to proceed with the liquidation process according to the Companies Act, 1956.
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2002 (2) TMI 1236
The High Court of Allahabad confirmed the opinion of the Board for Industrial and Financial Reconstruction to wind up a company under the Sick Industrial Companies (Special Provisions) Act, 1985. The company was declared sick in 2000, with no revival scheme submitted despite efforts. Bank of Baroda had no objection to the wind up, and the company's assets will be liquidated by the official liquidator as per the Companies Act and Rules.
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2002 (2) TMI 1235
Issues Involved:
Company application under Sick Industrial Companies (Special Provisions) Act, 1985 to wind up the company based on BIFR opinion.
Analysis:
The judgment pertains to a company application filed under the Sick Industrial Companies (Special Provisions) Act, 1985, based on an opinion of the Board for Industrial and Financial Reconstruction (BIFR) to wind up the company. The BIFR opinion was recorded on 17-8-2001, prompting the registration of the company application. Notices were issued to the company and IFCI to show cause as to why the company should not be wound up. Despite sending the notices, no acknowledgment or undelivered cover was returned. The respondent-company appeared through its representative, Sri C.N. Tewary.
The company had previously filed a reference under section 15(1) of the Act, leading to the sanctioning of a rehabilitation scheme in 1996. However, during a review in 1999, it was found that the existing promoters had failed to implement the sanctioned scheme adequately. Efforts for rehabilitation were unsuccessful, leading to the issuance of notices for a change of management. The monitoring agency, I.F.C.I., was directed to conduct a Techno Economic Viability Study (TEVS) and estimate the market value of assets. Despite no progress towards rehabilitation and lack of funds from the promoter, the Board formed a prima facie opinion to wind up the company.
During the hearing, various parties, including IFCI, IDBI, Bank of India, Union Bank of India, and Rajasthan State Mines & Minerals Ltd., expressed no objection to the winding up of the company. The company itself acknowledged its inability to infuse more funds and lack of responses to the advertisement for co-promoters. The BIFR concluded that the company was liable to be wound up, a position supported by the Managing Director's affidavit. Consequently, the Court accepted BIFR's opinion and ordered the winding up of Ganges Fertilizers & Chemicals Ltd., appointing the Official Liquidator to proceed with liquidation in accordance with relevant laws.
In conclusion, the judgment reflects a comprehensive analysis of the company's financial position, failed rehabilitation efforts, and the just and equitable decision to wind up the company in the public interest based on BIFR's opinion and the company's own acknowledgment of its financial constraints.
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2002 (2) TMI 1234
Issues Involved:
1. Failure to disburse principal and additional term loans.
2. Effect of reports showing the viability of the company.
3. Relief sought by the petitioner.
Detailed Analysis:
1. Failure to disburse principal and additional term loans:
The petitioner-company alleged that financial institutions failed to disburse the sanctioned loans, leading to an inability to complete the plant and commence production. The respondents countered that the project delays and cost overrun were due to the company's mismanagement and inability to bring in necessary funds. The court found that the company's claims were barred by laches and that any breach of contract should be addressed through civil courts, not under Article 226. The court emphasized that the agreements were ordinary civil contracts without public law elements, and thus, a writ petition was not the appropriate remedy.
2. Effect of reports showing the viability of the company:
The petitioner-company cited reports by IDBI and Tata Economic Consultancy Services indicating the unit's viability. The respondents argued that the viability was conditional upon the company's compliance with certain obligations, which it failed to meet. The BIFR and AAIFR had given the promoters several opportunities to revive the company, but these attempts failed due to the promoters' inability to bring in funds. The court held that the company could not circumvent the statutory orders of BIFR and AAIFR by filing a writ petition and that any grievances should be addressed in the pending winding-up proceedings before the Company Court.
3. Relief sought by the petitioner:
The petitioner sought a writ of mandamus directing the financial institutions to provide financial assistance for the revival of the company. The court found that the doctrine of promissory estoppel was not applicable as the necessary conditions were not met. The court also held that the financial institutions' actions in recalling loans and stopping disbursements were not arbitrary or irrational. The court concluded that the learned Single Judge exceeded jurisdiction by directing the financial institutions to provide financial assistance without considering the techno-economic viability of the unit.
Conclusion:
The appeals were allowed, and the writ petition was dismissed. The court emphasized that the revival and rehabilitation of sick industries should be addressed under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, and not through writ petitions under Article 226. The court also highlighted the limitations of judicial review in matters involving commercial transactions and the need for parties to seek remedies through appropriate civil courts.
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2002 (2) TMI 1230
Issues:
- Whether a criminal court can take cognizance of a complaint under section 138 of the Negotiable Instruments Act, 1881, when filed by a power of attorney holder of the complainant.
Analysis:
1. The judgment involved a reference of eight cases to the High Court regarding the issue of whether a criminal court can consider a complaint under section 138 of the Negotiable Instruments Act when filed by a power of attorney holder. The court noted the previous judgment in Smt. Payyati Savitri Devi v. Malireddy Damayanthamma, which allowed a complaint to be filed by a general power of attorney holder. This reference was made due to doubts raised about the validity of this view.
2. Upon hearing arguments and examining the complaint, the court observed that the complaint in question was purportedly made by the payee but was signed by the power of attorney holder. The court emphasized that under section 142(a) of the Negotiable Instruments Act, a complaint must be made in writing by the payee or the holder in due course of the cheque. The court clarified that the provisions of the Criminal Procedure Code do not apply in such cases.
3. The court highlighted that section 5 of the Criminal Procedure Code excludes its application when special laws like the Negotiable Instruments Act provide specific procedures. The court emphasized that for a criminal court to have jurisdiction, the complaint must fulfill two conditions: it should be in writing and made by the payee or holder in due course. In the cases under consideration, the complaint was made in the name of the complainant but not signed by the payee, as required by law.
4. The court rejected the reliance on judgments from other High Courts, emphasizing that the Code of Criminal Procedure does not apply to the cognizance process under section 138 of the Negotiable Instruments Act. The court disagreed with the views expressed in those judgments due to the specific provisions of the Negotiable Instruments Act governing the filing of complaints.
5. The court concluded that a complaint under section 138 can only be filed by the payee or the holder in due course, with the determination of the holder being a factual question that must be pleaded. In the cases at hand, the complaint was filed by the power of attorney holder on behalf of the payee, which was deemed impermissible under section 142 of the Act. The court disagreed with previous judgments that allowed such filings.
6. Ultimately, the court held that a power of attorney holder cannot file a complaint on behalf of the payee under section 138 of the Negotiable Instruments Act. It declared that the law established in the previous judgment was not valid, and the matters were referred back to the Single Judge for further proceedings.
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2002 (2) TMI 1228
Issues:
1. Maintainability of revisions under article 227 of the Constitution of India against the order of the Debts Recovery Tribunal.
2. Interpretation of Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 regarding the remedy of appeal.
3. Jurisdiction of High Court under articles 226 and 227 of the Constitution of India in cases of orders passed by Tribunals.
4. Applicability of alternative remedies provided by the statute in debt recovery cases.
Analysis:
1. The judgment deals with the maintainability of revisions under article 227 of the Constitution of India against the order of the Debts Recovery Tribunal. The petitioner, aggrieved by a common order of the Tribunal, filed revisions seeking relief. The Tribunal had directed the defendants to pay a portion of the decretal amount to contest the case on merits. The High Court considered the maintainability of the revisions, emphasizing the statutory remedy of appeal provided under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Court held that the petitioner must avail the remedy of appeal to the Appellate Tribunal as per the statute, dismissing the revisions under article 227.
2. The interpretation of Section 20 of the Act was crucial in determining the proper remedy for the aggrieved party. The Court highlighted the provisions of Section 20, emphasizing that any person aggrieved by an order of the Debts Recovery Tribunal must prefer an appeal to the Appellate Tribunal. The Court noted the limitation period for filing an appeal, the procedure to be followed, and the expeditious disposal of appeals within six months. The Court also referred to the fee payable for appeals as provided in the rules. It cited a Supreme Court judgment emphasizing the importance of following the statutory appeal process in debt recovery cases.
3. Regarding the jurisdiction of the High Court under articles 226 and 227 of the Constitution in cases of orders passed by Tribunals, the Court referred to precedents to clarify the scope of judicial intervention. It highlighted that the Act provides a special procedure for debt recovery, and while there is no express bar on High Courts' jurisdiction, judicial prudence demands refraining from exercising jurisdiction under articles 226 and 227 when an effective alternative remedy is available under the statute. The Court emphasized the need to adhere to the statutory appeal process for debt recovery matters.
4. The judgment underscored the importance of adhering to the alternative remedies provided by the statute in debt recovery cases. It emphasized that the fast-track appeal procedure under the Act should not be derailed by resorting to proceedings under articles 226 and 227 of the Constitution. The Court dismissed the revisions under article 227, directing the petitioner to avail the appellate remedy as provided under Section 20. It also granted a time extension for the petitioner to pursue the appellate remedy, excluding the time taken in the revision process for limitation purposes.
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2002 (2) TMI 1224
Issues Involved:
1. Justification for the proposed demerger/merger.
2. Exchange ratio and valuation.
3. Non-disclosure of directors' interest.
4. Latest financial position of the companies.
5. Objections raised by a shareholder.
Detailed Analysis:
1. Justification for the Proposed Demerger/Merger:
Alembic Ltd. sought the court's sanction for a scheme of demerger and transfer of the bulk drugs manufacturing unit of Darshak Ltd. to Alembic Ltd. The demerger was justified on the grounds that Darshak Ltd.'s bulk drug division was incurring losses, and Alembic Ltd. required a new manufacturing plant to meet USFDA approval requirements for entering the USA market. The bulk drug division of Darshak Ltd. was deemed suitable for this purpose.
2. Exchange Ratio and Valuation:
The proposed scheme involved Alembic Ltd. issuing six equity shares of Rs. 10 each for every 100 equity shares of Rs. 10 each held in Darshak Ltd. This ratio was based on a valuation report by M/s. Sharp and Tannan Associates, which used the Discounted Cash Flow (DCF) technique to determine the fair value per share of Alembic Ltd. and Darshak Ltd. The court found that the exchange ratio was properly worked out and backed by a recognized firm of chartered accountants. The objections to the exchange ratio were dismissed as the objector failed to demonstrate any detriment to the shareholders of Alembic Ltd. and did not propose an alternative method or ratio.
3. Non-Disclosure of Directors' Interest:
The objector argued that the explanatory statement did not disclose the shareholding of companies in which the directors had substantial interest. The court referred to Section 393 of the Companies Act, which requires disclosure of material interests of directors if the effect of the scheme on those interests differs from its effect on other shareholders. Since the objector did not show that the scheme affected the directors' interests differently, the court found no merit in this objection.
4. Latest Financial Position of the Companies:
The objector contended that the latest financial position of both companies was not provided, citing the need for financial information as of the time of the final hearing. The court noted that the scheme was based on financial positions as at March 31, 2000, and the petition was filed on October 11, 2001, with the latest available audited accounts as of December 30, 2000. The court found no significant change in the financial position of either company that would affect the scheme and dismissed this objection.
5. Objections Raised by a Shareholder:
The sole objector, a shareholder with 30 shares in Alembic Ltd., raised several technical objections, including the exchange ratio, valuation report, non-disclosure of directors' interests, and the latest financial position. The court found these objections to be without merit, noting the overwhelming approval of the scheme by secured and unsecured creditors and shareholders. The court did not award costs against the objector, as there was no evidence of habitual objections for extraneous considerations.
Order:
The petition was allowed, and the court granted sanction to the scheme of arrangement and restructure. The petitioner-company was directed to pay the fees of the learned additional standing counsel for the Central Government, quantified at Rs. 2,500.
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2002 (2) TMI 1223
Issues:
Challenge to order of Debt Recovery Tribunal and Registrar's order, Powers and jurisdiction of Registrar, Validity of office order issued by Presiding Officer, Interpretation of rules 22 and 23, Delegation of judicial powers to Registrar, Applicability of case laws, Reopening of settled cases after quashing office order.
Analysis:
Challenge to Tribunal and Registrar's Order:
The petitioners, legal heirs of a deceased advocate, challenged the order of the Debt Recovery Tribunal and the Registrar's order. The Tribunal transferred the case to the Debt Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, after the advocate's death. The petitioners filed applications for setting aside abatement, bringing legal representatives on record, and condonation of delay. The Registrar overruled their objections, leading to the challenge in this case.
Powers and Jurisdiction of Registrar:
The petitioner challenged the office order issued by the Presiding Officer, granting powers to the Registrar beyond the Act and rules. The Registrar was given judicial powers to dispose of applications related to legal matters, which the petitioner contended was contrary to the Act. The Registrar's role was administrative, limited to receiving, scrutinizing, and placing applications before the Presiding Officer. The delegation of judicial powers to the Registrar was deemed improper and against the Act's objective.
Validity of Office Order and Interpretation of Rules 22 and 23:
The court analyzed rules 22 and 23, highlighting the Registrar's functions and additional powers. While rule 22 outlined the Registrar's custodial and administrative duties, rule 23 specified additional powers, subject to the Presiding Officer's directions. The court emphasized that the Registrar's role was akin to a shirestedar in a civil court, and the delegation of judicial powers through the office order was inconsistent with the Act and rules.
Delegation of Judicial Powers to Registrar:
The court emphasized that judicial powers were sacrosanct and statutory, not to be delegated without express authority. The Registrar's powers were limited to administrative functions, and the delegation of judicial powers through the office order was deemed inappropriate. The court quashed the office order, leading to the Registrar's order being set aside as well.
Applicability of Case Laws:
The court distinguished case laws cited by the respondent, emphasizing their inapplicability to the present case. The judgments cited did not align with the facts and circumstances of the case at hand, reinforcing the decision to quash the office order.
Reopening of Settled Cases:
Addressing concerns about reopening settled cases post the office order's quashing, the court invoked a Supreme Court judgment to ensure prospective application of its decision. The court directed that the decision should not disturb settled cases, aligning with administrative reality and public interest considerations.
Conclusion:
The petition was allowed, setting aside the impugned orders and remitting the matter back to the Tribunal for reconsideration of interlocutory applications in compliance with the law. The decision was prospective, ensuring settled cases were not reopened due to the quashing of the office order.
This detailed analysis of the judgment highlights the key issues, legal interpretations, and the court's decision, ensuring a comprehensive understanding of the case's intricacies.
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