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1999 (11) TMI 828
Issues Involved:
1. Classification of 'printed wrappers' and 'printed sleeves'.
Detailed Analysis:
Issue 1: Classification of 'printed wrappers' and 'printed sleeves'
The appeal arises from an order dated 10-10-1990 by the Collector (Appeals), Bombay, concerning the classification of 'printed wrappers' and 'printed sleeves'. The Assistant Collector classified these items under sub-heading 4818.90 of the Central Excise Tariff, attracting a basic excise duty of 12% ad valorem. The rationale was that the 'wrapper' is used for packing goods, and any printing (such as name, brand name, and information) is merely incidental. The Assistant Collector relied on the Explanatory Note C(11) of the Harmonized Commodity Description and Coding System, which includes confectionary wrappers, food wrappers, and other wrappers cut to size under Chapter 48 of the HSN.
The appellants contended that these items are products of the printing industry and should be classified under sub-heading 4901.90 of the CET Act, 1985. They argued that the primary purpose of the printing is to indicate the identification of goods and serve as an advertisement, thus making them products of the printing industry. They cited the Supreme Court ruling in Metagraphs Pvt. Ltd. v. Collector of Central Excise, Bombay (1996 (88) E.L.T. 630 (S.C.)), which held that printed aluminum labels are products of the printing industry because the printing communicates essential information to the customer.
The respondent's representative countered that the articles are already wrappers and sleeves, meant for packing, and thus fall under the packaging industry, as supported by the Supreme Court judgment in Rollatainers Ltd. v. Union of India (1994 (72) E.L.T. 793 (S.C.)), which stated that printed cartons are products of the packaging industry, not the printing industry.
Upon considering both sides, the Tribunal found the judgment in Rollatainers Ltd. more appropriate, concluding that printing on packaging material does not make it a product of the printing industry. The Tribunal noted that the product had emerged as packing material and as an article of paper/paperboard, and the printing was incidental. Therefore, the appeal was dismissed, affirming the classification under sub-heading 4818.90.
Separate Judgment by Vice President:
The Vice President observed that the Supreme Court in Metagraph Pvt. Ltd. noted that not all printed products are products of the printing industry; it depends on the nature of the products and other circumstances. He emphasized the need to examine whether the products came into existence prior to printing or if printing was essential. He proposed remanding the matter to the Assistant Collector to examine the samples and determine the facts, considering the Supreme Court's observations in Metagraph Pvt. Ltd.
Resolution of Difference of Opinion:
The matter was referred to a third member due to a difference of opinion. The third member agreed with the initial judgment that the products in question are used for packing and can serve their purpose even without printing. The third member cited the Tribunal's decision in New Jack Printing Works P. Ltd. (1997 (93) E.L.T. 78), which classified printed wrapping paper under sub-heading 4818.90, not 4901.90, as it serves the purpose of wrapping even without printing.
Majority Order:
The majority concluded that the products are indeed products of the packaging industry, and the appeal was dismissed, confirming the classification under sub-heading 4818.90.
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1999 (11) TMI 827
Issues:
1. Hire-purchase agreement default leading to winding up petition.
2. Dispute over ownership rights and hypothecation of machinery.
3. Involvement of Haryana Financial Corporation in the case.
Issue 1: Hire-purchase agreement default leading to winding up petition
The petitioner-company filed a winding-up petition under sections 433(e), 434, and 439 of the Companies Act, 1956 against the respondent-company for defaulting on a hire-purchase agreement. The agreement involved the supply of a vapour absorption system, with the respondent-company failing to make payments as per the agreed terms. Despite assurances and attempts to reschedule payments, the respondent-company continued defaulting. The petitioner sought winding up due to outstanding amounts totaling Rs. 25,10,505 under the agreement.
Issue 2: Dispute over ownership rights and hypothecation of machinery
The respondent-company admitted to the hire-purchase agreement with the petitioner and the disbursement of Rs. 27 lakhs. However, a dispute arose regarding the ownership of the machinery and its potential sale. The Haryana Financial Corporation intervened, claiming a security interest in the machinery due to a loan advanced to the respondent-company. The Corporation argued that all present and future machinery was hypothecated to them, emphasizing their secured creditor status. The terms of the loan agreement specified the hypothecation of the respondent-company's assets, excluding those of the petitioner-company.
Issue 3: Involvement of Haryana Financial Corporation in the case
The Haryana Financial Corporation sought to be impleaded as a party in the case, asserting its status as a secured creditor with a claim of Rs. 18,40,643 against the respondent-company. The Corporation opposed a joint application for settlement, labeling it as a collusive compromise. However, the court dismissed the Corporation's application, ruling that their presence was unnecessary to decide on the winding-up petition. The court clarified that the Corporation's security interest did not extend to the machinery subject to the hire-purchase agreement between the petitioner and the respondent.
In conclusion, the court disposed of the winding-up petition with conditions regarding the sale of the machinery, emphasizing the need for permission from the Delhi High Court due to an existing legal dispute. The court directed the respondent-company to adhere to the payment schedule agreed upon in the joint application. Failure to comply could result in the revival of the winding-up petition.
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1999 (11) TMI 825
Issues:
1. Jurisdiction of the Collector of Central Excise (Judicial) to initiate proceedings under Section 28 of the Customs Act.
2. Validity of duty demand, confiscation orders, and penalties imposed on the appellant factory and director.
3. Compliance with bond and undertaking executed in favor of the Commissioner of Customs.
4. Allegations of misdeclaration and short levy regarding imported goods.
Detailed Analysis:
1. The main issue in this case revolved around the jurisdiction of the Collector of Central Excise (Judicial) to initiate proceedings under Section 28 of the Customs Act. The appellants argued that the Collector did not have territorial jurisdiction as the Proper officer for initiating proceedings should have been the Commissioner of Customs. The appellants contended that the Bill of Entry was cleared only after examination by the Proper officer under the Customs Act. The Tribunal found merit in this argument and held that the Collector of Central Excise did not have the jurisdiction to seize the goods, issue show cause notices, order confiscation, impose fines, or penalties. The Tribunal concluded that the Collector of Central Excise (Judicial) exceeded their jurisdiction, as the proper officer for the investigation should have been the Commissioner of Customs.
2. The validity of duty demand, confiscation orders, and penalties imposed on the appellant factory and director was also a crucial issue in this case. The Collector of Central Excise had confirmed a duty demand of Rs. 9,76,622 and ordered confiscation of goods valued at Rs. 7,62,551. Additionally, penalties of Rs. 1 lakh on the appellant factory and Rs. 25,000 on the director were imposed under Section 112(a) of the Customs Act. However, the Tribunal, after finding the jurisdictional issue in favor of the appellants, set aside the impugned order, thereby rendering the duty demand, confiscation orders, and penalties invalid.
3. Another significant aspect of the case was the compliance with the bond and undertaking executed in favor of the Commissioner of Customs. The appellants had imported goods under specific notifications and executed bonds and undertakings regarding the utilization of the goods. Despite the appellants' contentions that the goods satisfied the declaration and notification requirements, the Collector of Central Excise did not agree and imposed duty demands and penalties. The Tribunal's decision to set aside the impugned order also implied that the compliance with the bond and undertaking was not in question.
4. The case also involved allegations of misdeclaration and short levy regarding the imported goods. The appellants had imported Bushling steel scrap under certain notifications and claimed that the goods were utilized as per the requirements. However, the Collector of Central Excise seized the goods, alleging misdeclaration and short levy. The appellants provided evidence to support their claims, but the Collector did not accept their explanations. Ultimately, the Tribunal's decision in favor of the appellants on the jurisdictional issue resolved the misdeclaration and short levy allegations in their favor, leading to the setting aside of the impugned order.
In conclusion, the Appellate Tribunal CEGAT, Chennai, in this judgment, primarily focused on the jurisdictional issue regarding the Collector of Central Excise's authority to initiate proceedings under the Customs Act. The Tribunal found that the Collector exceeded their jurisdiction, leading to the setting aside of duty demands, confiscation orders, and penalties imposed on the appellants. The decision highlighted the importance of proper jurisdiction and adherence to procedural requirements in customs cases.
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1999 (11) TMI 823
Issues Involved:
1. Disallowance of Modvat credit.
2. Imposition of penalty under Rule 173Q(1) of Central Excise Rules, 1944.
Detailed Analysis:
1. Disallowance of Modvat Credit:
The adjudicating authority disallowed Modvat credit amounting to Rs. 1,69,87,349.14 based on six grounds:
- Ground (i): The credit was availed on car components which appeared to be finished products themselves.
- Ground (ii): The credit was availed on photocopies of input documents.
- Ground (iii): The credit was availed based on cess which did not appear to be specified duty under Notification No. 5/94 (N.T.) dated 1-3-1994.
- Ground (iv): The credit was availed on the basis of documents where the inputs were not consigned to the factory premises.
- Ground (v): The credit was availed on tool kits which did not qualify as inputs under Rule 57A.
- Ground (vi): The credit was availed on goods sent for training and technical staff which were to be returned to the U.K.
Conceded Grounds:
The appellants conceded grounds (iii), (v), and (vi) and paid the amounts due to the government.
Ground (iv):
The dispute arose because the Bills of Entry and other documents showed the name of the company's office instead of the factory premises. The appellant argued that all import transactions were carried out by the office, but the manufacturing occurred at the factory, which was owned and controlled by the company. The tribunal found no substance in this ground, referencing the decision in *Larsen & Toubro Ltd. v. C.C.E.*, which supported the appellant's stance.
Ground (i):
The appellant cited a previous CEGAT Final Order, which stated that for customs classification, the goods should be deemed as 'cars' due to legal fiction but remained components for practical purposes. The Commissioner's refusal to follow this precedent was criticized as a violation of judicial discipline. The tribunal emphasized that subordinate authorities must follow higher authority decisions unless distinguished on facts or stayed/reversed by a higher authority.
Ground (ii):
The appellant initially availed Modvat credit on photocopies of triplicate Bills of Entry but later submitted the originals to the concerned official in November 1995. The tribunal found that the Commissioner's inability to verify these documents was not acceptable. The tribunal verified the originals and photocopies of the Bills of Entry, confirming their authenticity and defacement by the excise authorities. The tribunal concluded that the appellant's claim was valid and the Modvat credit was correctly availed.
2. Imposition of Penalty:
The adjudicating authority imposed a penalty of Rs. 1 Crore under Rule 173Q(1) of Central Excise Rules, 1944. Given the tribunal's findings that the Modvat credit disallowance was unsustainable, the penalty imposition was also set aside.
Conclusion:
The tribunal allowed the appeal, reversing the adjudicating authority's decision on disallowing Modvat credit and setting aside the imposition of the penalty. The appeal was allowed with consequential relief according to law.
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1999 (11) TMI 822
Issues: Delay in filing appeal, Receipt of impugned order, Duty of department to supply copy
The judgment deals with a case where the appellant filed a COD application to condone the delay in filing the appeal from the date of issuance of the order. The appellant argued that there was no actual delay as the appeal was filed within three months from the actual receipt of the impugned order, despite it being passed on 27-10-1998 and despatched on 10-12-1998. The appellant claimed they only received the order on 10-9-1999 from a co-noticee after multiple unsuccessful attempts to obtain a copy from the Commissioner. The Department argued that the order was despatched on 14-12-1998, and as per the records, there is a presumption that the appellant received it. The appellant contended that without a postal receipt showing actual despatch, the order might not have been received due to possible address errors. The Tribunal noted that the appellant had promptly taken up the matter with the adjudicating authority upon learning about the order and had made repeated requests for a copy. The Tribunal found that the appellant received the order on 10-9-1999 and filed the appeal within ten days, within the three-month period from the actual receipt of the order, thus condoning any delay in filing the appeal. The Tribunal emphasized the duty of the department to reply to the appellant's letters and supply a copy of the order, which was not fulfilled, leading the appellant to seek the order from a co-noticee for the appeal to the Higher Appellate Forum.
In this judgment, the primary issue was the delay in filing the appeal, which the appellant sought to condone by arguing that the appeal was filed within the three-month period from the actual receipt of the impugned order. The appellant's representative contended that despite the order being passed on 27-10-1998 and despatched on 10-12-1998, they only received the order on 10-9-1999 from a co-noticee after multiple unsuccessful attempts to obtain a copy from the Commissioner. The Department, however, argued that the order was despatched on 14-12-1998, and there was a presumption under the law that the appellant received it. The Tribunal considered the evidence presented by both parties and found that the appellant had promptly taken steps upon learning about the order, including making requests for a copy, which were not fulfilled by the department. The Tribunal concluded that the delay in filing the appeal was justified given the circumstances and the appellant's efforts to obtain the order for filing the appeal within the prescribed period.
The judgment also addressed the duty of the department to supply a copy of the order to the appellant upon request. The appellant had written multiple letters to the Commissioner requesting a copy of the order to exercise their right to appeal to the Tribunal. Despite the appellant's efforts and stamped receipts showing the receipt of the letters by the department, no response was received, leading the appellant to obtain a copy from a co-noticee. The Tribunal emphasized that the department should have replied to the appellant's letters and supplied a copy of the order after following the due procedure for obtaining attested copies. The failure of the department to fulfill this duty resulted in the appellant having to procure the order from a co-noticee to challenge it before the Higher Appellate Forum. The Tribunal considered these circumstances in condoning any delay in filing the appeal and disposing of the miscellaneous application accordingly.
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1999 (11) TMI 813
Issues:
Challenge to orders demanding transfer fees under the Goa, Daman and Diu Excise Duty Act, 1964 due to amalgamation of companies.
Analysis:
1. Transfer of Ownership: The petitioners argue that amalgamation of companies does not constitute transfer of ownership. However, the respondents assert that post-amalgamation, the transferor-company ceases to exist, and assets are merged with the transferee-company, justifying the demand for transfer fees. Legal precedents cited by both parties support their arguments, emphasizing the distinct legal entity of a company from its shareholders.
2. Legality of Transfer Fees: Petitioners challenge the legality of transfer fees under the Act, contending that it does not empower the government to issue such notifications. However, provisions in Section 15 of the Act, along with relevant rules, authorize the imposition of transfer fees for license transfers. Citing the Apex Court's decision in a similar case, the court upholds the government's regulatory powers in levying such fees.
3. Retrospective Application of Notification: The petitioners claim that their application for license transfer was filed before the notification enforcing transfer fees. However, the court rules that the notification, part of a comprehensive excise duty structure, applies to transfers occurring within the financial year, irrespective of the application date. Thus, the petitioners are liable to pay the transfer fees for the relevant financial year.
In conclusion, the court dismisses the petition, finding all grounds of challenge unsubstantiated. The ruling affirms the legality of demanding transfer fees post-company amalgamation, upholding the regulatory authority's power to impose such fees under the Act. The retrospective application of the notification for transfer fees is deemed valid, requiring the petitioners to comply with the prescribed fees for the relevant financial year.
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1999 (11) TMI 808
When a company, which committed the offence under section 138 of the Negotiable Instruments Act, 1881 eludes from being prose-cuted thereof, can the Directors of that company be prosecuted for that offence?
Held that:- Appeal dismissed. We are not impressed by the contention that section 139 would afford support to the plea that prosecution of the company is sine qua non for persecuting its directors under section 141. Even if the prosecution proceedings against the company were not taken or could not be continued, it is no bar for proceeding against the other persons falling within the purview of sub-sections (1) and (2) of section 141. In the light of the aforesaid view we do not consider it necessary to deal with the remaining question whether winding up order of a company would render the company non-existent.
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1999 (11) TMI 807
Issues:
1. Contractual dispute regarding the supply and performance of a Black Liquor Evaporator plant.
2. Allegations of underperformance and failure to rectify defects.
3. Dispute over the necessity to convert the plant from tubular to plate type.
4. Request for interim relief to prevent engagement of another agency for plant rectification.
Analysis:
1. The petitioner entered into a contract with the respondent for the supply of a Black Liquor Evaporator plant used in paper manufacturing. The petitioner claims the plant was delivered, installed, and commissioned, but the respondent alleges underperformance without giving sufficient opportunity for improvement. The petitioner expressed readiness to rectify any defects and improve plant performance, invoking the arbitration clause of the contract.
2. The petitioner argues that the respondent's engagement of another agency for plant rectification may prevent them from carrying out necessary repairs in the future. The petitioner seeks interim measures to either restrain the respondent from engaging another agency or appoint independent experts to assess and suggest corrective actions. Additionally, a dispute arises regarding the necessity of converting the plant from tubular to plate type for performance enhancement.
3. The respondent contends that they have already paid a significant amount of the contract cost and have repeatedly requested the petitioner to rectify defects, including switching to plate type. The respondent has engaged a new agency for plant improvement and ordered necessary spares. Reference is made to contractual clauses obligating the petitioner for repairs and replacements in case of underperformance.
4. The Court, after considering both parties' submissions and contractual provisions, concludes that the arbitrators should determine the merits of the contentions during arbitration proceedings. The Court finds no prima facie case for interim protection as the contract provides for repairs by the petitioner, which have not been carried out. The petitioner's failure to demonstrate irreparable injury or a specific enforceable right under the Specific Relief Act leads to the dismissal of the petition for interim relief under section 9 of the Arbitration & Conciliation Act, 1996.
5. The Court clarifies that its observations do not affect the arbitrators' proceedings or decisions, allowing the petitioner to seek interim directions from the arbitrators if necessary. The judgment emphasizes the need for arbitration to resolve the contractual disputes and determine the responsibilities for plant performance and rectification as per the contract terms.
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1999 (11) TMI 806
Issues:
1. Whether the proceedings in C.S. No. 408/97 are liable to be stayed under section 22 of the Act?
2. Whether the plaintiff is entitled to an interim decree for a sum of Rs. 8,97,960 under Order XII Rule 6 of the Code of Civil Procedure?
3. To what relief is the plaintiff entitled?
Issue 1 - Proceedings Stay under Section 22 of the Act:
The defendant company, declared a Sick Industry under section 3(1)(D) of the Act, filed Application No. 4003 of 1998 seeking to stay the trial of the suit pending BIFR proceedings. The defendant argued that allowing independent action by the plaintiff would render the BIFR proceedings ineffective. The plaintiff, on the other hand, claimed various reliefs including recovery of money and ownership declaration of leased equipments. The court examined precedents like BLU Star Ltd. v. Hindustan Photo Films Mfg. Co. Ltd., emphasizing the prohibition on suits for recovery against sick industrial companies under section 22. The plaintiff cited Shri Ananta Udyog (P.) Ltd. v. Cholamandalam Investment to support their claim that seizure and sale applications fall outside section 22's scope. However, the court found the latter case inapplicable to the current scenario. Considering the relief of money recovery in the suit, the court concluded that proceedings must be stayed until BIFR proceedings are finalized.
Issue 2 - Interim Decree under Order XII Rule 6:
The plaintiff sought an interim decree based on a communication from the defendant admitting a sum of Rs. 8,97,960. However, the court ruled that the plaintiff cannot obtain an interim decree at this stage due to the ongoing BIFR proceedings. Therefore, Application No. 4002 of 1998 was ordered closed, pending the conclusion of BIFR proceedings.
Issue 3 - Relief Entitlement:
The plaintiff's suit included a declaration of ownership of leased equipments and sought injunctions against the defendant. The court noted that the relief of money recovery was part of the suit, aligning with the provisions of section 22, necessitating a stay in proceedings. As a result, Application No. 4003 of 1998 was allowed, staying further proceedings in C.S. 408 of 1998 until the BIFR proceedings are finalized. The court directed that Application No. 4002 of 1998 can be reopened post the conclusion of BIFR proceedings.
This comprehensive analysis of the judgment addresses the issues involved, the arguments presented by both parties, the relevant legal precedents cited, and the court's final decision on each issue.
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1999 (11) TMI 804
Issues Involved:
1. Maintainability of the company petition.
2. Allegations of oppression and mismanagement.
3. Interpretation of Article 57 of the Articles of Association.
4. Relevance of subsequent events and amendments in pleadings.
5. Dividend squeeze as an act of oppression.
Summary:
1. Maintainability of the Company Petition:
The respondents argued that the company petition is not maintainable and should be dismissed u/s 7, Rule 11(a) of the Code of Civil Procedure, 1908, as it discloses no cause of action. They contended that the petitioners failed to make out a case u/s 397 of the Companies Act, 1956. The petitioners countered that the petition should not be dismissed at the threshold and that sufficient facts have been pleaded to make out an arguable case of oppression and mismanagement.
2. Allegations of Oppression and Mismanagement:
The petitioners alleged various incidents of oppression, including the delay in the transmission of shares, withholding of fixed deposit receipts, and the transfer of shares contrary to Article 57. The respondents argued that these incidents were either settled or too old to be relevant. They also contended that oppression must be of the member and not of lineal descendants or creditors.
3. Interpretation of Article 57 of the Articles of Association:
The petitioners argued that Article 57 was intended to maintain proportionality in shareholding and that the transfer of 3,000 shares to respondent No. 2 violated this principle. The respondents contended that Article 57 does not apply to intra-member transfers and that shares are inherently transferable unless expressly restricted in the Articles of Association.
4. Relevance of Subsequent Events and Amendments in Pleadings:
The court held that subsequent events could be brought on record by amendment to do complete justice between the parties. It referred to the case of Khimji M. Shah v. Ratilal D. Modi, which allowed for amendments to include subsequent events. The court rejected the respondents' argument that only the unamended petition should be considered, stating that subsequent events are relevant for deciding the issue of oppression.
5. Dividend Squeeze as an Act of Oppression:
The petitioners argued that the deliberate reduction in dividends constituted an act of oppression. The respondents countered that dividend declaration is a commercial decision and cannot be considered oppressive. The court noted that the issue of whether a dividend squeeze could amount to oppression requires detailed consideration and cannot be dismissed at the threshold.
Conclusion:
The court rejected the preliminary objection raised by the respondents and held that the petition is maintainable. It stated that the issues raised, including the interpretation of Article 57 and the allegations of oppression through dividend squeeze, require detailed consideration and will be decided on merits at the final hearing of the petition.
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1999 (11) TMI 800
Issues Involved:
1. Whether the notice/threatened demand dated 2-8-1999 was in accordance with the terms of the bank guarantee/performance bond.
2. Whether the construction and commissioning of the power plant is part of the scope of the equipment supply contract.
3. Whether the petitioner has fulfilled its obligations under the contract and if the respondent is entitled to liquidated damages.
4. Whether the invocation of the bank guarantee/performance bond is justified.
Detailed Analysis:
Issue 1: Compliance of Notice with Terms of Bank Guarantee/Performance Bond
The petitioner argued that the notice dated 2-8-1999 was not in accordance with the terms of the bank guarantee/performance bond. They contended that the performance bond was issued for the completion of the scope of supply as defined in the contract and that the petitioner had supplied all materials mentioned in Schedule 3, verified by the respondent's engineer. The petitioner claimed that there was no breach or default in the equipment supply contract, and thus, the invocation of the bank guarantee was fraudulent. The petitioner relied on precedents such as Larsen & Toubro Ltd. v. Maharashtra State Electricity Board and other cases to support their contention that the invocation must be in accordance with the terms of the bank guarantee.
Issue 2: Scope of Equipment Supply Contract
The petitioner argued that the construction and commissioning of the power plant were covered by a separate contract awarded to another contractor, and any delay in the completion of the power plant was not attributable to the petitioner. They claimed that the performance bond could not be legally encashed for delays under a separate contract. The respondent countered that the petitioner was jointly and severally responsible for the timely and successful completion of the power plant, including engineering, construction, erection, procurement, and successful completion as defined in Schedule 3 of their respective contracts.
Issue 3: Fulfillment of Contractual Obligations and Entitlement to Liquidated Damages
The respondent argued that the petitioner failed to adhere to the time for completion of the scope of supply, leading to delays in the project. They provided evidence of notices and letters issued to the petitioner regarding breaches and delays. The respondent maintained that the petitioner's liability extended beyond the mere supply of equipment and included commissioning, erection, and passing a series of tests. The respondent cited a Division Bench decision of the High Court, which held that the performance bond covered compliance with all terms and conditions of the contract, not just the supply of equipment.
Issue 4: Justification of Bank Guarantee Invocation
The legal position regarding the grant of injunctions against the enforcement of bank guarantees is well-settled. The Supreme Court in Svenska Handelsbanken v. Indian Charge Chrome and Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engg. Works (P.) Ltd. established that bank guarantees cannot be interfered with unless there is an established fraud or irretrievable injustice. The court found that the petitioner failed to prima facie show or establish any fraud or irretrievable injustice. Financial hardship or onerous conditions were not sufficient grounds for restraining the encashment of the bank guarantee. The court held that the invocation of the bank guarantee was in accordance with the terms of the contract and dismissed the petition.
Conclusion:
The court concluded that the petitioner did not make out a prima facie case of fraud or irretrievable injustice. The petition was dismissed, and the invocation of the bank guarantee by the respondent was upheld as justified and in accordance with the terms of the contract.
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1999 (11) TMI 799
Issues:
- Petition under section 9 of the Arbitration and Conciliation Act seeking injunction or direction for deferring arbitral proceedings pending adjudication of specific cases before the Supreme Court.
- Claim for reimbursement of cess collected by State Government under the Orissa Cess Act, 1962.
- Constitutional validity of levy of cess and its reimbursement under the Cess and Other Taxes on Minerals (Validation) Act, 1992.
- Maintainability of petition under section 9 of the Act after a similar prayer was declined under section 17 by the arbitrators.
- Scope of interim protection under section 9 of the Act and the discretion of the Court to grant stay of proceedings pending before arbitrators.
Analysis:
1. The petitioner, Steel Authority of India, filed a petition under section 9 of the Arbitration and Conciliation Act seeking to defer arbitral proceedings pending the adjudication of specific cases before the Supreme Court related to the reimbursement of cess collected under the Orissa Cess Act, 1962. The respondent claimed that the cess amounts paid were reimbursable, citing the validation of the levy under the Cess and Other Taxes on Minerals (Validation) Act, 1992.
2. The petitioner argued that previous Supreme Court judgments had held the levy of cess as unconstitutional, leading to the Validation Act. The petitioner sought a stay on arbitral proceedings pending a decision by a larger Bench of the Supreme Court on the legality of the cess levy. The respondent questioned the maintainability of the petition under section 9, arguing that a similar prayer was declined under section 17 by the arbitrators.
3. The Court noted that the main issue before the arbitrators was the claim for reimbursement of cess in terms of the contract. The petitioner opposed the claim based on grounds like limitation and contractual liability. The Court emphasized that the arbitrators needed to decide if the cess was reimbursable before any payment obligation arose for the petitioner.
4. After considering the arguments, the Court found it unnecessary to stay the arbitral proceedings based on the pending reference to a larger Bench of the Supreme Court regarding the Validation Act. As the previous judgment upholding the Act was not stayed, the Court saw no grounds to halt the arbitral proceedings, which had already been adjourned once. The petitioner was advised to present all opposing pleas before the arbitrators during the proceedings.
5. Ultimately, the petition was dismissed, with the Court emphasizing that the arbitrators should continue their proceedings to decide the reimbursement claim based on the contract terms and relevant legal considerations, without the need for a stay at that juncture.
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1999 (11) TMI 798
Issues:
1. Amalgamation of 13 companies under sections 391(2) and 394 of the Companies Act, 1956.
Detailed Analysis:
The judgment deals with a petition seeking the amalgamation of 13 companies under sections 391(2) and 394 of the Companies Act, 1956. The companies involved in the scheme include various entities engaged in businesses such as investing, dealing in shares and securities, providing finance, and trading in different products. The scheme of amalgamation entails the transfer of all assets, liabilities, workmen, and employees of the transferor-companies to the transferee-company. The service conditions for the staff post-transfer are mandated to be at least as favorable as before the transfer. Both the Official Liquidator and the Regional Director have submitted reports stating no objections to the scheme, ensuring it is not prejudicial to public interest, creditors, or shareholders. Additionally, provisions have been made to safeguard the interests of the workmen of the transferor-companies.
The rationale behind the proposed scheme of amalgamation includes various factors such as the reduction in overheads and expenses, streamlining of management and finances, internal economies, and enhanced productivity. The amalgamation is expected to lead to better control, running, and management of the businesses involved, resulting in a larger company with a stronger financial base for further growth and development. The scheme aims to facilitate better facilities for raising capital, conducting trade, and obtaining favorable terms by combining the businesses of the companies involved. Overall, the scheme is projected to contribute to the growth and development of the combined business, benefiting the companies, shareholders, employees, and all stakeholders.
The court, after hearing the arguments of the petitioners, Regional Director, and Official Liquidator, has carefully examined the scheme of amalgamation. It has concluded that the rights and interests of shareholders, creditors, and employees are not likely to be compromised. The court finds the scheme fair, reasonable, and not contrary to public policy or public interest. Consequently, the court sanctions the scheme of arrangement/amalgamation, making it binding on all equity shareholders and creditors of both companies. The transferor-companies are to be dissolved without winding up, and a formal order is to be drawn up in accordance with the law, thereby disposing of the petition.
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1999 (11) TMI 797
Issues Involved:
1. Validity of the award made beyond the time fixed by the Arbitration Act, 1940.
2. Alleged misconduct by Arbitrators due to differing minutes of arbitration proceedings.
3. Justification of the Arbitrators in awarding the claim based on an inference against the respondent.
4. Maintainability of arbitration petition under section 28 of the Arbitration Act, 1940.
Issue-wise Detailed Analysis:
1. Validity of the award made beyond the time fixed by the Arbitration Act, 1940:
The respondent challenged the award dated 31-7-1995, arguing it was made beyond the time fixed by the Arbitration Act, 1940. The claimant sought an extension of time for making and filing the award under section 28 of the Act. The respondent contended that the provisions of the Bombay Stock Exchange Bye-laws, which allow the Board and its Chairman to extend the time for making the award without the parties' consent, override the Court's power under section 28 due to section 46 of the Act. However, the Court found no inconsistency between the powers conferred on the Court by section 28(1) and the powers conferred on the Board by the Bye-laws. The Court's power to grant an extension is judicial and unlimited, while the Board's power is administrative and limited to one month at a time. Therefore, the Court rejected the preliminary objection and held that it had the power to extend the time for making the award.
2. Alleged misconduct by Arbitrators due to differing minutes of arbitration proceedings:
The respondent alleged misconduct by the Arbitrators, claiming they prepared two different minutes of the arbitration proceedings dated 4-2-1995. The first set of minutes, received on 31-3-1995, did not include the operative part of the award, while the second set, received on 16-10-1995, did. The respondent argued this was an attempt by the Arbitrators to show the award was made on 4-2-1995 to avoid the limitation issue. The claimant's counsel argued that the operative part written in the notes dated 4-2-1995 was a mistake and did not amount to misconduct. The Court found that the date of the award was clearly mentioned as 31-7-1995, and there was no attempt to ante-date the award. The Court concluded that the mistake did not vitiate the award and rejected the misconduct allegation.
3. Justification of the Arbitrators in awarding the claim based on an inference against the respondent:
The respondent argued that the Arbitrators unjustifiably drew an adverse inference against him for not responding to the claimant's communication of March 1992. The claimant's counsel contended that the inference was drawn not only from the lack of response to the March communication but also from the respondent's silence to subsequent reminders. The Court found that the respondent's failure to respond to multiple reminders, including a lawyer's letter dated 23-9-1992 demanding a specific amount, justified the Arbitrators' inference. The Court held that the inference drawn by the Arbitrators could not be termed as an error of law apparent on the face of the award.
4. Maintainability of arbitration petition under section 28 of the Arbitration Act, 1940:
The respondent opposed the maintainability of the arbitration petition under section 28, arguing that the Bye-laws of the Bombay Stock Exchange have an overriding effect due to section 46 of the Act. The Court analyzed the provisions of section 28 and the relevant Bye-laws and concluded that there was no inconsistency between the two. The Court's power to extend time for making the award is judicial and distinct from the administrative power of the Board. The Court found that the claimant could not be penalized for the Arbitrators' failure to seek an extension from the Board and granted the arbitration petition for extension of time.
Conclusion:
The Court dismissed the respondent's arbitration petition No. 236 of 1996 challenging the award and granted the claimant's arbitration petition No. 5 of 1997 for extension of time. The Court passed a decree in terms of the award No. 78 of 1996, as the only objection raised was in the dismissed arbitration petition.
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1999 (11) TMI 796
Issues:
1. Disbursement of maturity value of Kisan Vikas Patra by Post Master.
2. Allegation of deficiency in service by the Post Master.
3. Claim for interest and compensation by the complainant.
Issue 1: Disbursement of maturity value of Kisan Vikas Patra by Post Master
The complainant purchased a Kisan Vikas Patra for Rs. 10,000, which matured on 7-3-1998 with a value of Rs. 14,200. The complainant's daughter filed suits seeking to prevent the Post Master from disbursing the amount to the complainant. Despite no prohibitory order, the Post Master did not disburse the amount, claiming he needed a court order. The State Consumer Disputes Redressal Commission found the Post Master's stance unreasonable, stating that once the Patra matures, the amount should be disbursed to the holder unless legally restrained. The Commission held that the Post Master's failure to disburse the amount was a deficiency in service.
Issue 2: Allegation of deficiency in service by the Post Master
The Commission determined that the Post Master's refusal to disburse the maturity value of the Kisan Vikas Patra to the complainant, despite the absence of any legal prohibition, constituted a deficiency in service. The Post Master's argument that he required a court order before making the payment was deemed unjustified, especially considering the delays it could cause. The Commission emphasized that the Post Master's knowledge of the failed attempts to obtain an injunction should have prompted him to disburse the amount without further delay.
Issue 3: Claim for interest and compensation by the complainant
The complainant sought 18% interest on the maturity value of the Kisan Vikas Patra, along with Rs. 5,000 as compensation for mental agony. The Commission, while acknowledging the deficiency in service by the Post Master, awarded interest at 12% per annum on the maturity value from 7-3-1998. However, the claim for compensation was rejected since interest had already been awarded. The Commission allowed the appeal, directing the Post Master to disburse the maturity value with the specified interest, and advised the complainant to seek further recourse under the Consumer Protection Act if necessary.
In conclusion, the State Consumer Disputes Redressal Commission found the Post Master's actions to be deficient in service, ordering the disbursement of the maturity value of the Kisan Vikas Patra with interest. The claim for compensation was rejected, and the complainant was advised on further legal options if the payment was not made.
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1999 (11) TMI 795
Issues Involved:
1. Whether the respondents-company is in the nature of a joint venture partnership between the petitioner and the third respondent.
2. Whether the issue of additional share capital in March 1988 suffers from any illegality and has been done by respondents for their exclusive benefit and is an act of oppression.
3. Whether the company has undertaken construction of residential flats and, if so, is it within the scope and authority conferred by the memorandum of association.
4. Whether the affairs of the company are being conducted in a manner oppressive to the interests of the petitioner for the reasons mentioned in the petition.
5. What relief to be granted in this petition.
Issue-wise Detailed Analysis:
1. Nature of the Company:
The learned Single Judge initially found that the company was in the nature of a joint venture partnership between the petitioner and the third respondent. However, this finding was not fully endorsed by the appellate court. The appellate court noted that while there were equal shareholdings initially and intimate friendship, there was no evidence of an express or implied agreement that the petitioner should actively participate in the business affairs of the company. Thus, the appellate court did not fully agree with the finding that the company was a partnership in substance.
2. Issue of Additional Share Capital:
The appellate court agreed with the learned Single Judge that the issue of additional share capital in March 1988 was done without proper notice to the petitioner and was intended to benefit the respondents exclusively. The court found that the move to raise additional share capital to finance a new line of business (construction of residential flats) was done without informing the petitioner, thereby constituting an act of oppression. The court emphasized that the petitioner was not given due notice of the proposed allotment of additional shares or the change in business activity.
3. Construction of Residential Flats:
The court found that the decision to undertake the construction of residential flats was not within the scope and authority conferred by the memorandum of association of the company. The decision to raise additional share capital for this purpose was made without the petitioner's knowledge, further supporting the finding of oppression.
4. Conduct of Company Affairs:
The court concurred with the learned Single Judge that the affairs of the company were being conducted in a manner oppressive to the petitioner. The court noted that the arbitrary and unfair acts of the respondents, such as issuing shares to family members without the petitioner's knowledge, amounted to acts of oppression within the meaning of section 397 of the Companies Act. The court emphasized that these acts had continuing repercussions and cast a shadow over the affairs of the company.
5. Relief Granted:
The learned Single Judge directed the respondents to pay Rs. 2 lakhs to the petitioner for his 50 shares. The appellate court, however, modified this relief. The court found that the valuation of the shares should be based on the market value of the land, which was the only asset of the non-functioning company. The court fixed the value of the shares at Rs. 4 lakhs instead of Rs. 2 lakhs, considering the time lag and costs incurred by the petitioner in pursuing the litigation. The court directed the respondents to deposit the amount in a bank with instructions to pay the petitioner upon submission of necessary share transfer documents.
Conclusion:
The appellate court dismissed OSA No. 40 of 1999 filed by the respondents in the company petition and allowed OSA No. 5 of 1996 filed by the petitioner to the extent of modifying the relief granted. The respondents were directed to pay Rs. 4 lakhs to the petitioner for his shares, and both parties were given the option to seek further directions from the court if necessary. No order as to costs was made.
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1999 (11) TMI 792
Issues:
1. Alteration of place of auction in chit agreement.
2. Interpretation of sections 15, 19 of the Chit Funds Act, 1982.
3. Jurisdiction of Registrar over chit agreements.
4. Compliance with chit agreement requirements.
5. Enforcement of provisions by Registrar.
Analysis:
Issue 1: Alteration of place of auction in chit agreement
The petitioner, a chit Corporation, sought to change the place of auction in a chit agreement from Mayiladuthurai to Thanjavur. The alteration was made with consent and was sent for registration as per rule 14 of the Chit Funds Rules. The District Registrar objected, citing section 19(1) and (2) of the Act, stating that the alteration must be registered with the Joint Registrar having jurisdiction over the new place. The petitioner challenged this in a writ petition.
Issue 2: Interpretation of sections 15, 19 of the Chit Funds Act, 1982
The court analyzed section 15, which allows alterations in chit agreements, and section 19, which deals with opening new places of business. It found that changing the place of auction did not constitute opening a new place of business under section 19. The court clarified that the place of draw is not considered a chit place of business, allowing the alteration requested by the petitioner.
Issue 3: Jurisdiction of Registrar over chit agreements
The court addressed the jurisdiction of the Registrar, emphasizing that since the chit agreement was registered with the respondent, he had control over the chit. The court rejected the argument that the draw must be conducted within the Registrar's jurisdiction, stating that as long as the agreement was registered with the respondent, he could enforce provisions, including directing the draw.
Issue 4: Compliance with chit agreement requirements
It was noted that the petitioner had complied with all requirements under the Act, including registering the chit agreement with the District Registrar. The alteration sought was specific to the place of auction and did not impact other clauses in the agreement.
Issue 5: Enforcement of provisions by Registrar
The court concluded that there was no prohibition in the Act or rules preventing the petitioner from changing the place of auction beyond the jurisdiction of the registering officer. As long as the Registrar could fulfill duties related to the chit, the objection to registering the alteration was deemed unsustainable. The court set aside the respondent's order and directed the registration of the alteration regarding the place of auction in the chit agreement.
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1999 (11) TMI 789
Issues:
Amalgamation petition filed for three companies - Kwality Zippers Ltd., Shamil Industries (P.) Ltd., and Avadh Udyog Ltd.
Analysis:
The petition sought the amalgamation of three companies based on the convenience and advantage of combining their businesses. The transferee-company and transferor-company No. 1 were located nearby, sharing the same place of registration, and dealing with similar products like 'Polyester Zip Fasteners', 'Zip Sliders', and 'Polyster Tapes'. It was argued that merging these companies would create a stronger capital base, enabling them to raise resources for growth and diversification. A scheme of amalgamation was framed to facilitate this process.
The Court directed the companies to convene meetings of their shareholders and creditors to approve the proposed scheme. Chairmen were appointed for each company to oversee the meetings and submit reports to the Court. After the meetings were held, the scheme of amalgamation was adopted and accepted by the shareholders and creditors of all companies. Subsequently, a petition was filed for the Court's approval of the scheme, with notices issued to relevant authorities and published in newspapers for objections.
The Regional Director of the Department of Company Affairs confirmed no objection to the proposed scheme. However, the Official Liquidator raised an objection regarding the sufficiency of the transferee-company's authorized capital to accommodate the transferred capital of the transferor-companies based on the share-exchange ratio. In response, the transferee-company increased its authorized capital to Rs. 60 lacs, addressing the concern raised by the Official Liquidator.
Considering the resolutions passed by the shareholders and creditors of all companies, the Court sanctioned and approved the Scheme of Amalgamation. The transferor-companies, Shamil Industries (P.) Ltd. and Avadh Udyog Ltd., were ordered to be resolved in accordance with the provisions of section 394(1)(iv) of the Companies Act, 1956. The petition was disposed of accordingly, marking the final decision on the amalgamation process.
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1999 (11) TMI 762
Issues:
Rectification of mistake in the final order regarding the benefit of Notification No. 175/86-C.E. based on the use of a brand name on different products.
Analysis:
The Appellate Tribunal considered an application for the Rectification of Mistake in Final Order No. 1210/98-C, dated 27-11-98, concerning the benefit of Notification No. 175/86-C.E. The Revenue's appeal was rejected initially based on the use of a brand name on different products. The Revenue argued that the benefit of the notification should not be available if a manufacturer affixes the brand name on a product different from the brand name owner's products, citing relevant case laws from the Madras High Court. The Tribunal noted the Madras High Court's decisions but found a mistake in the final order, as it was held that using a brand name on different products should not disentitle the manufacturer from the benefit of the notification.
Counterarguments were presented by the Respondent's Advocate, emphasizing that the brand name was registered for specific goods by the brand name owner, while the Respondent manufactured different products like washing powder and laundry soap. The Advocate relied on a Supreme Court decision to support the argument that using the same brand name for different goods should not automatically disqualify the manufacturer from availing benefits. It was highlighted that the Respondents were the owners of the brand name for their products, which included washing powder and laundry soap.
After considering both sides' submissions, the Tribunal referred to the Madras High Court's decision in Bell Products case, which clarified that Notification No. 175/86 did not require the brand name to be affixed to similar or identical goods. The Tribunal acknowledged the mistake in the initial order and clarified that the Respondents, who had acquired common partnership in the trade name "T Series" for their products, were considered the owners of the brand name themselves. As a result, affixing their own brand name did not fall under the restriction of the notification's Para 7, and the benefit of the notification was deemed available to the Respondents. Consequently, the application for rectification of mistake was allowed, but the Revenue's appeal remained rejected.
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1999 (11) TMI 761
Issues:
Appeal against Order-in-Original confiscating goods as not qualifying as bushelling scrap, imposing fines and penalties, and determining duty as applicable to steel sheets.
Analysis:
The appellant contested the decision of the Commissioner of Customs, arguing that most of the imported goods qualified as scrap, specifically bushelling scrap. The appellant highlighted the sizes and conditions of the imported items, emphasizing that they should be considered scrap based on international standards and Bureau of Indian Standards. The appellant also pointed out the failure to consult the National Metallurgical Laboratory for a technical opinion, which they claimed led to a denial of justice.
The Departmental Representative (DR) countered the appellant's arguments by stating that the goods did not meet the definition of scrap under the Customs Tariff Act, as they appeared usable as sheets for purposes other than melting scrap. The DR referenced a previous Tribunal decision to support this stance.
In response, the appellant distinguished the present case from the cited Tribunal decision, emphasizing the smaller dimensions of the imported items and the lack of evidence showing their use for purposes other than melting scrap. The appellant criticized the order for being presumptive and lacking a clear finding on the usability of the items as sheets.
The Tribunal reviewed the submissions and records, concluding that the application of the scrap definition needed to be objective and clear. They noted the ambiguity in the order regarding the usability of the items and the failure to consider obtaining a technical opinion from the National Metallurgical Laboratory. As a result, the Tribunal set aside the order and remanded the matter to the original authority for reconsideration, directing them to obtain technical opinions, consider international standards, and review the previous Tribunal decision.
In conclusion, the appeals were allowed for remand, and the original authority was instructed to conduct new proceedings promptly, providing the appellants with a personal hearing.
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