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Case Laws
Showing 101 to 120 of 1721 Records
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2024 (9) TMI 1623
Income deemed to accrue or arise in India - software licensing amounts to Fee for Included Services under Article 12(4)(b) of India-US DTAA or not? - scope of 'Make available’ clause - whether the professional service such as installation of software into customer system amount to Fee for Included Services under Article 12(4)(b) of India-US DTAA? - HELD THAT:- DR could not dispute that the issue with regard to software licensing is squarely covered by the order of the coordinate bench in which one of us i.e., Judicial Member was also on the Bench [2024 (9) TMI 1505 - ITAT DELHI] assessee has only got the commercial information and not the technical know- how/technical expertise or the technologies on the basis of which it was prepared. For bringing any payment within the definition of "fee for included services' the non- resident must make available the technical skill, expertise or technical know-how to the assessee, on the basis of which non-resident has prepared or developed the commercial information. Undisputedly in the instant case the technical skill, expertise or technical know-how used in preparing the commercial information was not made available to the assessee and hence the remittance made by the assessee for obtaining such commercial information cannot be called to be the 'fees for the included services to make it chargeable to tax in India. 'Make available’ clause is not satisfied, as erroneously held by the DRP ”
We are of the considered view that clearly, these services are merely support services dealing with installation and integration and when the primary services themselves are not taxable as FTS, these ancillary services qua the primary services cannot be taxed as FTS. Reliance is rightly placed by Ld. AR on decision of TSYS Card Tech [2023 (4) TMI 1088 - ITAT DELHI] and Net B.V [2017 (7) TMI 420 - ITAT DELHI] wherein it is held that installation and integration services are support services and not taxable as FTS.
Appeal of the assessee is allowed.
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2024 (9) TMI 1622
Jurisdiction to issue notice u/s. 143(2) - AR has submitted that the notice was issued by ACIT, Circle-5(1), Delhi who had no jurisdiction over the assessee - DR has submitted that the assessee has not challenged the jurisdiction of the AO within the time allowed u/s. 124(3) - HELD THAT:- From the perusal of the order of the Ld CIT(A) it is evident that the first notice was issued on 06-08-2013 by ACIT circle 5(1) which was within time. The case of the assessee was transferred to the jurisdictional assessing officer, who issued the second notice on 28-11-2014. The notice issued by the ACIT was not time barred. Grounds are decided accordingly.
Assessee has submitted that the CIT(A) has erred and acted beyond jurisdiction - In the instant case the addition was sustained by changing the provision of the Act, without giving the show cause notice to the assessee which is the mandatory requirement under sub-section of section 251 of the Act. The Ld. CIT(A) has made the addition.
Addition u/s 68/69C - In the instant case the CIT(A) has deleted the addition u/s. 68 of the Act and made the addition u/s 69 of the Act without giving the notice to the assessee. The books of account were never rejected by the AO. AO had not made any effort to verify the sundry creditors which details were provided by the assessee. The disallowance of corresponding purchase u/s 68 of the Act cannot be made when the assessee has disclosed the sales and purchases as well as gross profit, and which were accepted by the AO.
CIT(A) has made the addition u/s 69 of the Act as the purchases were not made through banking channels. The books of account and audit report were accepted by the AO and entire alleged bogus transaction cannot be disallowed when the sales have been accepted. The assessee’s gross profit rate was also increased 4.39% for the current year. Hence, the addition made by CIT(A) u/s 69C of the Act is liable to be deleted.
From the above discussion, we are of the view that CIT(A) has wrongly made the addition u/s 69 of the Act. The addition made by the Ld. CIT(A) u/s.69C of the Act is deleted. Hence, the appeal of the assessee is liable to be allowed.
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2024 (9) TMI 1621
Revision u/s 263 - primary error found by the Ld. PCIT in the order passed by the AO was with regards to allowance of claim of exemption/ deduction u/s 54F which was claimed by the assessee on account of having invested long term capital gains earned in a new residential house - PCIT found the claim to be not allowable since he found the assessee to have contravened the provisions of the said section by owning more than one residential house property on the date of sale of original asset
HELD THAT:- Incomes from residential houses held as stock in trade were not liable to tax under the head Income from house property in the impugned year i.e. A.Y 2015-16, and therefore did not qualify as “residential house” as per Section 54F.
Assessee also pointed out that the provisions of Section 54F of the Act are incorporated in the chapter dealing with the computation of income under the head ‘income from capital gains’ and it deals primarily with gains on sale of transfer of capital assets. That it provides exemption also on investment in capital assets. He further pointed out that the PCIT has given no basis whatsoever, nor any reasoning to arrive at the finding that even assets not qualifying as capital assets and being in the nature of stock in trade are to be considered for purposes of said section.
We are in complete agreement with the ld. Counsel for the assessee on this account. PCIT has given no reasoning or basis for holding the Flat No. A/1.B1 located at Vastu Luxuria at Surat, admittedly held as stock in trade by the assessee, as being residential house for the purposes of section 54F - assessee has on the contrary demonstrated that, as per law applicable in the impugned year, assets held as stock in trade do not qualify as residential houses in terms of section 54F of the Act.
There is, therefore, we hold, absence of a valid basis with the ld. PCIT for finding the property at ‘Vastu Luxuria’ qualifying as residential house for the purpose of Section 54F of the Act.
As for the agricultural land purchased by the assessee, the assessee’s contention was that the houses constructed thereon were of very small sizes and for the purpose of carrying out agricultural activities alone and not for residential purposes.
The basis with the ld. PCIT for finding the houses on the agricultural land to qualify as residential houses is that the local authorities have assessed the same to tax and they are equipped with electricity supply. How the fulfilment of these two conditions qualifies a house on agricultural land to be in the nature of residential house has not been elaborated by the ld. PCIT, nor clarified with reference to any law in this regard. It appears to have been found so by the ld. PCIT only on the basis of surmises, conjectures, whims and fancies, and without any basis at all.
Therefore, we hold, that the PCIT’s findings of the assessee being the owner of more than one residential house as on the date of sale of original asset is without any basis at all. His direction, therefore, to the AO to deny the assessee the claim of deduction u/s 54F is clearly not sustainable in law and the order passed by the ld. PCIT on this count is, therefore, directed to be set aside.
As a corollary his direction to the AO to assess income from these properties under the Income from house Property is also not sustainable.
PCIT has also directed the AO to deny the assessee any claim of deduction under Chapter VI A of the Act. In this regard, assessee drew our attention to the computation of income for the impugned year and pointed out therefrom that the assessee in first place had not claimed any deduction under Chapter VI A of the Act. He stated, therefore, that there was no occasion for denying any deduction to the assessee under Chapter VI A of the Act.
DR was unable to controvert the above contention of the ld. Counsel for the assessee. In view of the same this direction of the ld. PCIT to the Assessing Officer to deny the assessee the benefit of deduction under Chapter VI A is also found to be without any substance and merit, and is set aside.
The order of the PCIT passed u/s 263 of the Act is held to be not sustainable in the absence of a concrete finding of error in the order passed by the AO on all issues raised by the Ld. PCIT. The grounds raised by the assessee are allowed.
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2024 (9) TMI 1620
Reasonable time limit for issue of notice u/s 201(1)/201(1A) - HELD THAT:- It is pertinent to refer to the judgments of GE India Technology Centre GE India Technology Centre [2010 (9) TMI 7 - SUPREME COURT] and the judgment of Mahindra & Mahindra Ltd. [2014 (7) TMI 265 - BOMBAY HIGH COURT] wherein it has been held that the reasonable time limit for issue of notice u/s 201(1)/201(1A) is 4 years. In cases, where the notice is issued beyond 4 years, the Co–ordinate Bench of ITAT held that the same is barred by limitation u/s 201(1) of the Act passed in September 2021. Since, in the present case, the orders are beyond 4 years from end of financial year, hence not sustainable and is quashed.
It is pathetic to note that the entire proceeding arose out of a survey under section 133A(2A) conducted on 09/12/2019, at the office premises, which is our firm opinion is belated and unsustainable and is hereby quashed. However, we are in full agreement with the contentions of assessee and the case laws relied upon by him are squarely applicable to the facts of the present case. Hence, insofar as non–residents are concerned, the order to that extent is clearly time barred. There is a small credit of income to a resident, but the transaction did not crystalize. Assessee appeal allowed.
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2024 (9) TMI 1619
Rectification u/s 254 - Levy of interest u/s 234E - intimation of outstanding demand appealable order mentioned u/s 246A or not? - HELD THAT:- Where assessee denies his liability to be assessed under an intimation under sub-section (1) of section 143, he can file an appeal before the CIT(A). Further, the Tribunal while deleting the interest levied u/s 234E of the Act has relied on various decisions of Hon’ble High Courts.
We find the Hon'ble Supreme Court in the case of CIT vs. Reliance Telecom Limited. [2021 (12) TMI 211 - SUPREME COURT] while deciding the powers of the Tribunal u/s 254(2).
In view of the above decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Telecom Limited cited [2021 (12) TMI 211 - SUPREME COURT] the only course available to the Revenue is to approach the higher forum against the order of the Tribunal. Three Miscellaneous Applications filed by the Revenue are dismissed.
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2024 (9) TMI 1618
Second Rectification application u/s 254 - First Misc. Application has been considered & rejected - Validation of payments made towards ESI and EPF within due dates - HELD THAT:- During the course of hearing the assessee vehemently contended that the assessee had submitted the challans for the payment of ESI and EPF at the time of hearing but we found that except 3CB & 3CD Report & Salary Paid Ledger nothing is available on record & therefore the plea of the AR of the Assessee that the issue may be remanded for the limited purpose of verifying the challans submitted at the time of hearing of the appeal on 17.04.2024 so as to render substantial justice cannot be accepted.
We also found that this Misc. Application although filed within 6 months from the end of the month in which the order was passed but the assessee has raised the same ground as that of the first Misc Application. Since we have already adjudicated the same while passing Order in first MA the grounds once again raised in the present M.A is not maintainable.
As relying on Smt. Vasantben H. Sheth [2014 (8) TMI 487 - GUJARAT HIGH COURT] we cannot entertain the second Misc. Application again on the same Grounds when once the First Misc. Application has been considered & rejected by us. We reiterate that the AO shall pass the consequential Order in compliance with Order of the Tribunal in the case of Manikandan Vazhukkapara Kumaran [2023 (11) TMI 1294 - ITAT BANGALORE].
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2024 (9) TMI 1617
Seeking quashing of seizure order - Dried Areca Nuts contained in 352 bags - inter state transportation - Section 110 of the Customs Act - reasons to believe - HELD THAT:- ‘Reason to believe’ is the most significant safeguard available to the authorising officer to conduct search. The phrase is made up of two words ‘reason’ means cause and ‘believe’ means to accept as true or have faith in it.
The ‘reason to believe’ word has been interpreted by the Hon’ble Supreme Court in the case of N. Nagendar Rao and Company [1994 (9) TMI 316 - SUPREME COURT] that even though formation of opinion may be subjective but It must be based on material on the record. It cannot be arbitrary, capricious or whimsical.
‘Reason to believe’ cannot be a rubber stamping of the opinion already formed by a competent officer. The Officer who is supposed to write down his minimum reasons to believe has to be independently apply his mind. It should not be a mechanical reproduction of the words in the statute. When an officer exercising quasi judicial function, such a decision peruses such reasons to believe. It must be apparent to the reviewing authority that the officer penning the reasons has applied his mind to the material information available on record and has, on that material, arrived at his reasons to believe. Application of mind to the officer must be discernible.
In the case of Sabh Infrastructure vs. Assistant Commissioner of Income Tax [2017 (9) TMI 1589 - DELHI HIGH COURT], the Delhi High Court specifically held that it is also now well settled that the reasons to believe have to be self explanatory. The reasons cannot be, thereafter, supported by any extraneous material.
Suspected opinion of the local traders that seized dried Areca Nuts is a foreign origin is not reliable and acceptable, in other words, with a naked eye one cannot draw inference that whether it is Indian origin or foreign origin. In the present case, admittedly, the goods were seized at Forbishganj and not seized from any port or any customs area to form a believe that the goods were being imported into India. The Ministry of Agriculture and Farmer Welfare as well as ICAR were of the view that there is no mechanism available to trace the country of origin of ‘Areca Nuts’ and there is no laboratory test available for the same and further on the basis of examination by naked eye, it cannot be conclusive determined with regard to origin of the ‘Areca Nuts’ - The opinion of the local traders that seized Areca Nuts suspected to be foreign origin failed the test Wednesbury Principles as no reasonable person can reach the conclusion of country of origin of Areca Nuts by mere perusal from naked eye as well as the opinion of the local traders. Some ways to assess the quality of Areca Nuts like glossy appearance, Kernel colour, fiber characteristics, texture, grading, moisture contents, weight etc., are needed.
Recording of reasons in support of the conclusions arrived at in a judgment or order by the Courts in our judicial system has been recognized since the very inception of the system. Right to know the reasons for the decisions made by the Judges is an indispensable right of a litigant. Even a brief recording of reasoned opinion justifying the decision made would suffice to withstand the test of a reasoned order or judgment. A non-speaking, unreasoned or cryptic order passed or judgment delivered without taking into account the relevant facts, evidence available and the law attracted thereto has always been looked at negatively and judicially de-recognized by the courts.
The petitioner has made out a case so as to interfere with the impugned seizure memo dated 02.04.2024 and the same is set aside. Consequently, bank guarantee is discharged and the bond furnished by the petitioner to secure provisional release of the seized goods within a period of three months from the date of receipt of copy of this order.
Petition allowed.
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2024 (9) TMI 1616
100% EOU - clandestine clearance of the short found goods - no corroborative evidences or not - recovery of customs duty and penalties - HELD THAT:- It is found that no corroborative evidence has been relied upon by the Revenue regarding the clandestine clearance of the short found goods from the factory premises of the appellant and also no investigation has been made by the department from the transporter and the buyer to whom such goods were alleged to be sold by the appellant. The burden of proof is on the revenue to establish their case beyond doubts and it is required to be discharged effectively and also the allegation of clandestine removal solely made on the basis of statement of the director without any corroborative evidence is not sustainable as held in the case of M/S. VIKRAM CEMENT (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR [2012 (11) TMI 777 - CESTAT NEW DELHI]. The said decision was confirmed by the Hon’ble Allahabad High Court in the case of COMMISSIONER VERSUS SUNIL KUMAR GUPTA [2013 (11) TMI 1557 - ALLAHABAD HIGH COURT].
Admittedly, nothing has been brought on record with corroborative evidence to allege clandestine removal against the appellant. Therefore we are of the view that demand against appellant is not maintainable by simply relying upon the statement of Shri Vijyendra Kanhaiyalal Arya, director of the Appellant who has also not been cross examined as mandated under section 9D of the Central Excise Act, 1944.
It is found that neither investigation has been made by the department from the agent Shri Nathabhai Agrawal and Abhishek Market, Ring Road, Surat through whom goods were alleged to be cleared by the appellant and nor their statements were recorded by the department to establish their case. Further the onus has to be discharged by the Revenue with the production of sufficient evidence which may lead to the probability of having removed the goods as held in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. ABS METALS (P) LTD. [2016 (9) TMI 940 - CESTAT NEW DELHI].
There are no merit in the impugned order - the impugned order is set aside - appeal allowed.
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2024 (9) TMI 1615
Revocation of Customs Broker license of the appellant - forefeiture of entire security deposit - Regulation 19(1) of CBLR 2013 - HELD THAT:- The SCN issued is dated 25.11.2013 upon the filing of the Bill of Entry dated 21.11.2012. Order of suspension of License is dated 15.01.2014, the inquiry report is dated 22.05.2014; the SCN under CBLR is dated 25.02.2014. Finally, the order of revocation dated 12.02.2015 came to be passed by the Commissioner. Going by the dates, it is tending to agree with the assertions of the ld. Advocate that the order of suspension of license has been passed after the expiry of the prescribed period of limitation and hence, the suspension order is clearly in violation of Regulation 20(2) ibid. But what is challenged is the order of Revocation dated 12.02.2015 and hence, the legality or the correctness of an order dated 15.01.2014 cannot be decided now.
There are gravity of the alleged offence, if at all committed by the appellant does not call for capital punishment resulting in the very suspension of his Customs Broker License. The same, according, is also highly disproportionate. Initially, the order of suspension of license was passed in 2014, thereafter the impugned order was passed in the year 2015 and since then, the appellant is out of business which is perhaps its only source of income. The appellant must have suffered enough financially which itself is a deterrent factor and hence, to fasten the appellant with a permanent sealing down of its customs broker license may not be called for since the consequences of revocation are very serious since, apart from the members of own family, there may be employees and the members of their family who would be dependent for their sustenance/survival.
It would meet the ends of justice, if it is ordered for re-issuance of its Customs Brokers License subject to fulfilment of the prescribed procedural requirements, but however, it is not proposed to interfere with impugned order insofar as the forfeiture of security deposit is concerned.
The appeal is partly allowed.
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2024 (9) TMI 1614
Demand of Customs duty in respect of goods destroyed while there were warehoused - seeking to demand interest and penalty in terms of the Warehousing (Custody and Handling of Goods) Regulation 2016 - impugned order passed without any jurisdiction and any authority of law - HELD THAT:- The appellants are a custom warehousing station where goods are stored by importers/ exporter before they are exported or cleared from the bonded warehouse. There was a fire in the warehouse resulting in loss of certain goods. The custom duty amount on the goods lost came to Rs. 2,76,52,609/- which was paid by the appellants. The proceedings in the instant case are for recovery of interest on the said amount amounting to Rs. 93,43,881/-.
The first question raised by the appellant is if such loss/ destruction can be treated as removal in terms of Section 71 and 73A of the Customs Act, 1962. It is opined that the removal in terms of Section 71 or section 73A does not include destruction of goods by way of fire or any other reason. There is no provision in the act or regulations to treat such destruction/ loss on account of fire, is deemed removal. In these circumstances, it is opined that no liability to pay duty or interest would arise under Section 71/73A of the Customs Act, 1962 as in the instant case as there was no illicit physical removal of warehoused goods from the warehouse.
The lower authorities have also sought to invoke regulation 4(c) of the Custom Warehousing Regulation, 2016. The said regulation provide for the warehouse keeper to give an undertaking indemnifying the Principal Commissioner of Customs or Commissioner of Customs, as the case may be from any loss arising on account of loss suffered in respect of warehoused goods due to accident, damage, destruction, deterioration or any other unnatural cause during the receipt, delivery, storage despite or handling. It is seen that the said undertaking is to protect the Commissioner of Customs from any liability arising on account of such laws suffered in respect of warehoused goods - In the instant case, the Commissioner has not shown any liability arising on account of such goods. There is no liability of customs duty or interest on the Commissioner of Customs and therefore invocation of clause (c) of Regulation 4 is not warranted in the facts of the case.
Section 73A applies only when the goods are physically removed from the warehouse improperly. Any loss arising on account of fire or any other natural cause cannot be treated as removal in terms of Section 73A and therefore, the provisions of clause (b) of Regulation 4 are also not applicable to the instant case - it is apparent that provisions of Section 73A cannot be invoked to recover duty or interest or impose penalty in case where there is loss on account of fire within a bonded warehouse.
The impugned order therefore cannot be sustained and is set aside - The appeal is consequently allowed.
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2024 (9) TMI 1613
Seeking approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulation - HELD THAT:- All the requirements of Section 30(2) are fulfilled and no provision of law for the time being in force appears to have been contravened.
Section 30(6) of the Code enjoins the Resolution Professional to submit the Resolution Plan as approved by the CoC to the Adjudicating Authority. section 31 of the Code deals with the approval of the Resolution Plan by the Authority if it is satisfied that the Resolution Plan as approved by the CoC under section 30(4) meets the requirements provided under section 30(2) of the Code. Thus, it is the duty of the Adjudicating Authority to satisfy itself that the Resolution Plan as approved by the CoC meets the requirements.
The instant Resolution Plan meets the requirements of Section 30(2) of the Code and the Regulations 37, 38, 38(1A) and 39(4) of the CIRP Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law.
The Application is allowed and the Resolution Plan submitted by “Mr. Harry Dhaul” is hereby approved.
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2024 (9) TMI 1612
Oppression and mismanagement - Illegal sale of land of the Company - illegal allotment of 17,29,000 equity shares - illegal appointment of Respondent No.4 as Director of the Company - illegal eemoval of Petitioner No.1 as Director - correctness of Amendment of Memorandum and Articles of Association - legality of Extra-ordinary General Meetings held and resolutions passed - Recovery of syphoned money with interest.
Whether the acts or conduct of respondents are prejudicial and oppressive to the petitioners or /and whether the affairs of the Company are being conducted in a manner prejudicial to the interests of the Company as alleged by the petitioners? - HELD THAT:- In view of the written and oral submission made by both the parties and after perusal of the records as mentioned, the petitioner has not pointed out any irregularity in the process of sale and the main contention of the petitioner is about the valuation of the land.
The Petitioners have failed to point out any irregularity in the sale of land assets but for the price at which they are sold. As far as the issue of selling properties at lower than market value is concerned, there are no illegality in it since the stamp duty has been paid at applicable valuation and rates. However, the moot question before us is whether this act of selling land at a price lower than the market rate is an act of oppression and mismanagement. Thus it is a common practice that many companies/ individuals take conscious decisions to sell property at a price lower than the market value in view of exigencies and other factors. It is clear from the facts produced before us that Company was in urgent need of funds at that point of time - keeping in view that consent of Petitioner no 1 was also there in fixing the cut off sale price, there are no act of oppression and mismanagement for selling the land parcels at a price lower than market price. Therefore, keeping in view the aforesaid facts, there are no act of oppression and mismanagement in the sale of two land parcels as aforesaid by the Company to Respondent No.29.
There are merit in the submissions made by respondents that though lease deed was signed to lease out the company to Messrs Padmavatahi Ispat but it was never put into action and ultimately the said lease deed was cancelled and advance lease rent was returned to lessee, therefore this can not be an act of oppression and mismanagement.
The acts or conduct of respondents are not prejudicial and oppressive to the petitioners and affairs of the Company are also not being conducted in a manner prejudicial to the interests of the Company.
Whether the alleged allotment of 17,29,000 equity shares made on 19th May 2008, 10th September 2008 and 13th October 2008 to the respondents is illegal and void ab initio and thus necessitate the need for rectification of Register of Members? - HELD THAT:- The alleged allotment of 17,29,000 equity shares made on 19th May 2008, 10th September 2008 and 13th October 2008 to the respondents is not illegal and void ab initio and thus does not necessitate any need for rectification of Register of Members.
The present petition being devoid of any merit or substance is liable to be dismissed - petition dismissed.
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2024 (9) TMI 1611
Oppression and mismanagement of the Company - Issuing notice of EGM dated 01.10.2022 for the meeting to be held on 11.10.2022 - Removal of Petitioners as Directors and further of Petitioner No. 1 as Managing Director - HELD THAT:- Section 242 places a heavier burden on the complainant as he is required to prove that the affairs of the company are oppressive and prejudicial to any member or the interests of the company - The alleged acts of oppression are linked to the EGM dated 11.10.2022. The Companies Act, 2013 lays down procedure as how the meeting is to be convened. As far as removal of directors of the Company other than one appointed by Tribunal under section 169(1) of the Companies Act, 2013, simple majority is enough. In respect of notice for removal of director and appointment of new director in place of removed director, special notice is required to be issued under section 169(2) of the Companies Act 2013.
The Petitioners as per their own admission came to know about the said notice on 04.10.2022, which fulfills the requirements of law. Even otherwise, they were having knowledge of the EGM even prior to the said date and perusal of Annexure A-4 filed by the Petitioners reveals that the said notice was issued after complying with all the legal requirements. The stand of Petitioners that no such meeting was held on 11.10.2022 is without any basis as transpired from the record. The meeting was attended by five directors and this record was filed with the RoC. In the circumstances, there is no flaw in sending the notice of the meeting after complying all the requirements of law.
The decision of shareholders in the matter of appointing or removing the directors of the Company from the Board cannot be a subject matter of judicial scrutiny since the right to appoint or remove directors is supreme as a part of corporate democracy. It is emphasized that any inconvenience caused to the opposing party during the legal process will not negate the validity of the legal actions taken. Consequently, although the removal of the Petitioners from their directorial positions may be discomforting for them, the decision of the majority will prevail. From this standpoint, the removal of the Petitioners from the directorial posts does not amount to an act of oppression or prejudice against them.
It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this require that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of the petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless lack of confidence springs from oppression of the minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder.
As far as the act of mismanagement by Respondents, if any, in removing Petitioners from the position of directors of the Company is to be considered in light of Section 241(1)(b) as there is a change in the management of the Company resulting from such removal of Petitioners as Directors.
The phrase “affairs of the company are being conducted” in section 241 indicates a continuous wrong. It means that because of the change in the management of company, there is a likelihood that the affairs of the company will be conducted in a manner prejudicial to the interests of the company or members. Petitioners failed to show any act done by the management or the apprehension that the affairs of the Company in future are likely to be conducted in a prejudicial manner as a result of the removal of Petitioners from the position as directors.
Thus, in the absence of proof of oppression or mismanagement as alleged by Petitioners, this Tribunal finds no merit in the Petition to grant the reliefs as prayed for and hence, the present Petition is liable to be dismissed.
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2024 (9) TMI 1610
Seeking direction to appoint an Inspector to carry out the Investigation into the affairs of the Respondent Companies in terms of the Section 213 (b) of the Companies Act, 2013 - fraud under Section 447 of the Companies Act, 2013 - HELD THAT:- The present Petition has been filed under sub-section (b) of Section 213 of the Companies Act, 2013 and as per the said Section the Petitioner is required to satisfy this Tribunal that there are circumstances suggesting that the business of the Respondent companies is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose.
The issue raised by Supertech does not warrant any intervention by RBI. Even otherwise, the issue essentially is a matter of reconciliation of accounts between lender-borrower and to be dealt with as per the grievance redressal mechanisms in place. However, Indiabulls is advised to complete the adjustment of Rs. 9.75 crore mentioned above and inform the position to Supertech with in 15 days of receipt of this order.
The averments made in the Petition by the Petitioners are not supported by any material documents in order to substantiate such allegations. The documents filed by the Petitioner along with the Petition would show that the allegations made by the Petitioner are not corroborated with the documents filed therewith. Prima facie, the Petitioner has miserably failed to make out a case under Section 213(b) of the Companies Act, 2013 and also failed to satisfy this Tribunal that the affairs of the Respondent Company have been conducted in a fraudulent manner or unlawful purpose and on the said count itself this Petition is liable to be dismissed.
On the perusal of the documents submitted by the Petitioner and the in view of the discussion made, the Petition as filed by the Petitioner under Section 213 of the Companies Act, 2013 stands dismissed in limine.
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2024 (9) TMI 1609
Maintainability of the company petition under Section 399 of the Companies Act, 1956 - pre-condition envisaged under sub sections (1) and (3) of section 399 of the Companies Act, 1956 satisfied or not - amendments made to the Articles of Association and the declarations filed before Registrar of Companies, by the respondents were prejudicial to the interests of public, the 1st respondent company, and the petitioner or not - oppression and mismanagement.
Whether the Petitioners have satisfied the condition precedent envisaged under subsections 1 & 3 of section 399 of the Companies Act, 1956? If the answer is no, whether the company petition is maintainable? - HELD THAT:- Though there appears to be some controversy as to whether compliance of sub-section (a) of Section 399 which states that "not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less or any members or members holding not less than one-tenth of the issued share capital of the company," is mandatory or directory, in so far as the essential test that determines the eligibility in terms of sub-section (a) of section 399 of the Companies Act, 1956 is concerned, there is no ambiguity.
In the instant case, the petitioners even while contending that they have 1/10th share of the issued share capital of the Company at the time of filing the company petition, also on 20.03.2023 have filed the consent affidavits of 4 shareholders of the 1st respondent, namely, Mrs. Alka Sanghi, Aarthi Sanghi, Gaurav Sanghi and Aashish Sanghi, which were merely taken on record subject to the objection if any of the respondents but not under the liberty/direction dated 14/03/2023 of this Tribunal, as contented by the petitioners in their written submission - the purpose behind the consent affidavits is to “overcome” the pre-condition under Sub- clause (a) of Section 399. The language, in sub-section 3 of section 399, ‘having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them’, engaged by the Legislature, makes it abundantly clear that the written consent is a condition precedent for maintaining a petition under section 397 of the Companies Act 1956.
An affidavit filed after lapse of 15 years, that too at the far end of the proceedings even accepting that filing of the consent letters is not mandatory does not satisfy the test and hence it is overwhelmingly clear that here is a case of non-filing of written consent as contemplated under Sub-section (3) of Section 399 of the Act, Hence, the sub-section (3) of Section 399 of the Act, remains unsatisfied.
Whether amendments made to the Articles of Association and the declarations filed before Registrar of Companies, by the respondents were prejudicial to the interests of public, the 1st respondent company, and the petitioner, amounting to the acts of oppression and mismanagement? - HELD THAT:- Merely by stating that only upon perusal of the annual return for the financial year ending 2007, the petitioners gained knowledge of the alleged illegal transfer of shares, especially when it is not the case of the petitioners that the Annual Reports of the 1st respondent were not uploaded in the MCA web site as required under the statute, the Petitioners cannot get over the bar of limitation, as once the returns are uploaded in the MCA web portal, which is in the public domain, the same constitutes notice to public especially to all the directors and members of the company.
None of the allegations as made in the petition either survive the law of limitation or constitute the acts of oppression and mismanagement. Therefore, petition is thoroughly misconceived.
Petition dismissed.
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2024 (9) TMI 1608
Admission of Section 7 application filed by the Respondent No.1 - initiation of CIRP - Financial debt - whether the Appellant had a financial debt qua Respondent No.1 which had become due and payable and whether there was an incidence of default thereof? - Time limitation - HELD THAT:- In the instant matter, whether on factorising the part payment against the loan on 01.05.2021 or taking into account the email of the Appellant of 11.05.2022 wherein the outstanding debt under the Facility Agreement and Supplementary Facility Agreement has been acknowledged, the present application having being filed within three years from the date of acknowledgement of the debt, it cannot be held to be barred by time.
Whether Corporate Debtor was required to be given time to regularise its loan account in terms of RBI circular before declaring the account of the Corporate Debtor to be NPA under the SARFAESI Act? - HELD THAT:- There are not much substance in the contention of the Appellant that they were denied adequate opportunity to regularise their loan account. Respondent No.1 on 24.02.2020 vide their letter had accepted to regularise the loan account of the Corporate Debtor subject to payment of an amount of Rs 2.38 Cr. towards the over-due debt on or before 15.03.2020. It is also found that in response to this letter, the Corporate Debtor deposited Rs 1 Cr. in two tranches but failed to pay the balance amount as assured by 15.03.2020 to regularise the loan account. Furthermore, declaration of account as NPA under the SARFAESI Act is an independent proceeding and cannot be adopted as a defence to obstruct the Financial Creditor from proceeding under IBC to initiate CIRP against the Corporate Debtor.
Existence of key ingredient of Section 5(8) of the IBC of disbursement of loan against consideration for time value of money by the Financial Creditor qua the Corporate Debtor or not - HELD THAT:- In the instant case, the Sanction Letter clearly provides that 15% p.a. floating interest linked to Long Term Reference Rate of the Financial Creditor was applicable. The loan facility having been extended by Respondent No.1 being interest-bearing, this disbursement squarely falls within the purview of Section 5(8)(a) of the IBC and has all the trappings of a financial debt. There are no force in the contention of the Appellant that the disbursal of funds by the Respondent No.1 was without consideration for time value of money.
The acknowledgment of debt in the present facts of the case is therefore clear and unambiguous and nothing on record controverts the position that there was a default in repayment. That being the case, there arises no doubt in our minds that there was a debt on the part of the Primary Borrower and the Co-Borrowers qua the Financial Creditor which remained unpaid. The obligation of the Co-Borrower is coextensive and coterminous with that of the Primary Borrower and hence a right or cause of action becomes available to the financial creditor to proceed against the primary borrower, as well as the Co-Borrower in equal measure in case they commit default in repayment of the amount of debt.
Since in the facts of the present case, a debt has arisen which is due and payable by the Corporate Debtor and a default has occurred, the Respondent No. 1 was entitled to file the Section 7 application - Section 7 application filed by the Financial Creditor was not barred by time and the debt and default being proven, the Adjudicating Authority did not commit any error in admitting the Section 7 application.
There are no error in the judgement of the Adjudicating Authority admitting the Section 7 application. There is no merit in the Appeal - appeal dismissed.
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2024 (9) TMI 1607
Maintainability of application filed u/s 7 of Insolvency and Bankruptcy Code, 2016 - existence of financial debt or not - Bar under Section 10A of the IBC - Record of Default - Stamping of Loan Agreement - Authorization to Submit the Application.
Existence of financial debt or not - HELD THAT:- There were a number of adjournments on the ground of some kind of settlement between the parties. Moreover, Ld. Counsel for the Corporate Debtor has even mentioned that the they have already made the part payment and the next installment will be paid by 25.09.2023. Admission of part payments towards loan repayment and further promise to pay next instalment by 25.09.2023 amounts to acknowledgement of existing financial debt - the first defense of the Corporate Debtor that there is no existence of financial debt is rejected.
Bar under Section 10A of the IBC - HELD THAT:- According to the Repayment Schedule, 1st EMI instalment of Rs. 5,70,00,000/- became payable on 05.01.2021. It is submitted that this instalment was paid by the Corporate Debtor on various occasions till 02.04.2021. Thereafter, 2nd EMI instalment of Rs. 34,20,00,000/- became payable on 05.04.2021. Part Payments were made for this end EMI till 21.06.2021. The 3rd EMI became payable on 05.07.2021 which the Corporate Debtor failed to honour. During the hearing of the matter, this aspect has not been denied by the Corporate Debtor. Thus, the default has occurred on 05.07.2021 and is clearly not barred under Section 10 A of IBC.
Record of Default - Claim is neither based on the record of default recorded with the Information Utility nor based on any other record or evidence demonstrating default as per Regulation 2A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- Admittedly, the financial creditor has not annexed record of default recorded with IU nor any evidence as specified under Regulation 2A. However, financial creditor has annexed the loan sanction letter dated 03.06.2020, loan agreement dated 03.06.2020 duly executed by the Corporate Debtor co-borrower, statement of account evidencing the disbursement of Rs. 190 crores on 23.06.2020 through RTGS No. PID0010824 copy of notice dated 20.01.2022 issued under section 13(2) of SARFAESI Act, 2002, revised payment of schedule dated 12.10.2022 - these documents constitute “such other record” as required under section 7(3)(a) of the Code. Corporate Debtor has not denied any of the above record, rather had submitted before this Court that part payment of loan has already been made and that next instalment would be paid on 25.09.2023. Therefore, this contention of the Corporate Debtor is also rejected.
Stamping of Loan Agreement - HELD THAT:- In view of the fact that existence of debt and default has been established, default amount is more than threshold limit of Rs. 1 crore, the contention of mentioning different amount in the notice and in the part IV of the petition is inconsequential. Even then on examining the petition and found that the complete break-up is provided in the Foreclosure Statement at Annex.5 of the Company Petition and the amount mentioned therein does tally with the amounts mentioned in Part IV of the petition. Therefore, this contention of the Corporate Debtor is also rejected.
Authorization to Submit the Application - Whether signatory to the petition is not authorized to initiate specific proceedings under IBC? - HELD THAT:- It is observed that the Board Resolution at Annexure 8 clearly states that Mr. Uttam Kumar is authorised on behalf of Indiabulls Housing Finance Limited to appear for and/or represent the Petitioner before the National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT) or such other authorities/forums/courts for the cases pertaining to the Code. We are satisfied that petition has been lawfully initiated on the strength of the board Resolution 14.08.2020. Therefore, this contention of the Corporate Debtor is also rejected.
Thus, the Petitioner has proved the debt and default and the same was also admitted during the hearing of this petition by the Corporate Debtor.
The default is to the tune of Rs. 260 Crores (which is much above the threshold of Rs.1 Crore). We are of the considered view that the Financial Creditor has proved existence of debt and default. Further the debt is in excess of Rs. 1 Crore and thus above the threshold limit mandated in Section 4(1) of the Code. Also the Petition filed is within limitation. Therefore, this company petition is admitted and also looking at the consent given by the Insolvency Professional, Mr. Ravi Prakash Ganti appointed as an IRP, with a direction to the Financial Creditor to pay remuneration to the IRP and his expenses until the constitution of CoC.
Petition allowed.
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2024 (9) TMI 1606
Maintainability of application filed under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 - guarantee was not invoked against the applicant for recovery of the amount - Petitioner has not produced and has suppressed from this Tribunal regarding the cases filed by the Respondent under Negotiable Instrument Act - HELD THAT:- The Demand Notice dated 07.03.2018, which is the basis of the default as claimed by the Appellant has been filed along with Application. The notice is addressed to Rutika Creation Pvt. Ltd, the Corporate Debtor and Kiran Sanjaybhai Kanani, the other guarantor but not to the applicant. Therefore, the guarantee was not invoked by the Kotak Mahindra Bank vide demand notice dated 07.03.2018 against this applicant. Apart from this document, the applicant has not produced or placed any other document to show that guarantee was invoked against the applicant for the recovery of the amount.
This application is dismissed for filing an application being a co borrower cum guarantor in which there are certain details not revealed or attached. This application is appears to be filed to escape from the action initiated by financial creditor. Since he appears to have signed the loan as director cum guarantor, the personal insolvency on the grounds of this default cannot be filed under Sec 94 of IBC. Further the loan agreement clause 11.6 restricts default only to arbitration.
It is not agreed that the report submitted by the RP that the present application is maintainable as the guarantee has not been invoked in respect of the applicant. The report of the RP is found to be not satisfactory in examining the eligibility of the borrower to file under Sec 94 of IBC. In sequel to the above, the present application is not maintainable.
Petition dismissed.
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2024 (9) TMI 1605
Initiation of Insolvency Resolution Process against the Applicant/Debtor who is the Personal Guarantor of M/s. Sarthak Creation Private Limited - grounds for admission of the application recorded in the Report is that the Personal Guarantor admit its liability therefore Insolvency Resolution Process can be initiated - HELD THAT:- This application has not enclosed the relevant documents of demand notice of invocation and the notice under SARFESI Act.
The application is barred by limitation period in preferring the application within the relevant period considering the date of NPA and demand notice of Bank of Baroda stated to have been issued on 19.11.2015.
Petition dismissed.
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2024 (9) TMI 1604
Seeking direction to set aside the sale notice dated 19.07.2023 issued by the liquidator in respect of Haldia property - seeking to set aside the communication dated 14.07.2023 sent by the liquidator & any consequential action taken by the liquidator in respect of Haldia property and to direct the liquidator not to interfere in respect of Haldia property.
Where the amount payable by the secured creditor under sub- Regulation (2) (a), is not certain, whether liquidator is mandated to inform the secured creditor the estimated amount? - If liquidator has not informed the estimated amount, whether provision of sub-Regulation (3) would apply or not? - Whether first proviso is an exception to sub-Regulation (2) which mandates the secured creditor to pay the amount within 90 days?
HELD THAT:- It is a settled law that while interpreting a statute, courts have to see the intention of the legislature. Further, when the words of an Act or Regulations are clear and unambiguous, courts are bound to give effect to those words.
The language of Regulation 21A is plain and simple. It cast a duty on the secured creditor who proceeds to realise its security interest, it has to pay the liquidator either an amount referred to in sub-Regulation (2)(a), or an amount referred to in first proviso. Failing which, the asset shall become part of the liquidation estate as mentioned in Regulation 21A(3).
As per the Regulation 21A(1) a secured creditor is required to inform the liquidator about its decision to relinquish security interest to the liquidation estate or to realize its security interest; the said decision is to be communicated within 30 days from the liquidation commencement date failing which the assets covered under the security interest are presumed to be part of the liquidation estate. Accordingly, 30 days expired on 15.04.2021 and the remaining part of the Haldia Property admeasuring 8.04 acres became part of the liquidation estate. However, the applicant through its revised Form-D dated 28.01.2023 had for the first time claimed its security interest over remaining 8.04 acres of the property.
The plea of the applicant that since the estimate was not given by the liquidator and therefore, Regulation 21A is not applicable on it is quite misplaced. Rather the issue of estimate would arise only when the applicant had realized the security interest and inquired the liquidator about the proportionate amount payable by him, however no such steps were ever taken by the applicant. Therefore, the interpretation made by the applicant is not acceptable at all. The law is very clear that the secured creditor has to realise and pay the CIRP cost with in 90 days and also to pay the excess realized value of the asset, if any, within 180 days. Thus the applicant had to complete the entire process within 180 days itself, failing which the entire subject property would form part of liquidation estate as per Regulation 21A(3) of the IBBI (Liquidation Process) Regulations, 2016. As far as claim of the applicant for 8.04 acres is considered we are of the view that the same should also have been communicated with in 30 days from the date of the liquidation commencement order, failing which Regulation 21A(3) would apply and the said part of the property will form part of the liquidation estate.
The applicant failed to comply with the requirements of the Regulation and therefore, the decision of the liquidator that the entire property forms part of the liquidation estate is not contrary to law.
Application dismissed.
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