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2013 (11) TMI 1824
1. ISSUES PRESENTED and CONSIDERED The legal judgment revolves around the following core issues: - Whether the company, Etisalat DB Telecom Pvt. Ltd., has lost its substratum due to the quashing of its 2G licenses by the Supreme Court, rendering it unable to continue its principal business.
- Whether there exists a deadlock and irretrievable breakdown in the relationship between the principal shareholders, Etisalat Mauritius Ltd. and Majestic Infracon Pvt. Ltd., justifying the winding up of the company.
- Whether the petitioner, Etisalat Mauritius Ltd., has acted with improper motives or in collusion with creditors, affecting the legitimacy of the winding-up petition.
- Whether the alleged mismanagement and unilateral decisions by the petitioner have led to the company's financial difficulties and inability to meet its obligations.
- Whether the petitioner can rely on post-petition events to support the winding-up petition.
- Whether the petition is maintainable under Section 433(e) of the Companies Act, given the absence of a statutory notice under Section 434(1)(a).
2. ISSUE-WISE DETAILED ANALYSIS Loss of Substratum - Legal Framework and Precedents: The concept of loss of substratum is grounded in Section 433(f) of the Companies Act, where a company may be wound up if it is just and equitable to do so. The court referenced several precedents, including Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwalla and M/s. Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries Pvt. Ltd.
- Court's Interpretation and Reasoning: The court found that the quashing of the 2G licenses, which were the company's primary assets, resulted in a loss of substratum. The company was unable to carry on its principal business, and the alternative licenses (ILD, NLD, ISP) were not viable without substantial new investment.
- Key Evidence and Findings: The Supreme Court's judgment quashing the 2G licenses, the company's insolvency, and the inability to bid for new licenses due to lack of resources were pivotal.
- Application of Law to Facts: The court applied the principles of loss of substratum, concluding that the company's inability to operate its core business justified winding up.
- Treatment of Competing Arguments: The court rejected Majestic's argument that the company could continue with its remaining licenses, citing lack of infrastructure and financial viability.
- Conclusions: The court concluded that the company had indeed lost its substratum, warranting winding up.
Deadlock and Breakdown of Relations - Legal Framework and Precedents: The court considered the principles of deadlock and breakdown in shareholder relations as grounds for winding up under Section 433(f).
- Court's Interpretation and Reasoning: The court found a complete breakdown in relations between the principal shareholders, exacerbated by legal proceedings and mutual distrust.
- Key Evidence and Findings: The resignation of directors, lack of board meetings, and ongoing legal disputes between shareholders were significant.
- Application of Law to Facts: The court applied the principles of deadlock, finding that the irretrievable breakdown justified winding up.
- Treatment of Competing Arguments: The court dismissed Majestic's argument that no deadlock existed, citing the lack of functioning governance.
- Conclusions: The court concluded that the deadlock and breakdown warranted winding up.
Improper Motives and Collusion - Legal Framework and Precedents: The court examined allegations of improper motives and collusion, referencing M/s. Madhusudan Gordhandas & Co. for the principle that petitions with improper motives should not be entertained.
- Court's Interpretation and Reasoning: The court found no evidence of collusion or improper motives by the petitioner.
- Key Evidence and Findings: The court considered the transparent dealings with creditors and the lack of evidence supporting collusion claims.
- Application of Law to Facts: The court found the allegations of collusion unsubstantiated.
- Treatment of Competing Arguments: The court rejected Majestic's claims of collusion, emphasizing the lack of supporting evidence.
- Conclusions: The court concluded that the petition was not filed with improper motives.
Mismanagement and Unilateral Decisions - Legal Framework and Precedents: The court considered claims of mismanagement under the just and equitable clause.
- Court's Interpretation and Reasoning: The court found that the petitioner did not act unilaterally or mismanage the company.
- Key Evidence and Findings: The court noted the shared management responsibilities and lack of evidence for unilateral decisions.
- Application of Law to Facts: The court found no basis for claims of mismanagement.
- Treatment of Competing Arguments: The court dismissed Majestic's allegations of mismanagement.
- Conclusions: The court concluded that the petitioner did not mismanage the company.
Reliance on Post-Petition Events - Legal Framework and Precedents: The court considered whether post-petition events could be used to support the petition.
- Court's Interpretation and Reasoning: The court held that post-petition events could be considered to demonstrate the ongoing deterioration of the company's situation.
- Key Evidence and Findings: The court referenced reports and actions taken by the Authorized Person.
- Application of Law to Facts: The court found that post-petition events supported the petition.
- Treatment of Competing Arguments: The court rejected Majestic's argument that post-petition events should not be considered.
- Conclusions: The court concluded that post-petition events were relevant.
Maintainability under Section 433(e) - Legal Framework and Precedents: The court examined the requirements for a petition under Section 433(e) concerning insolvency.
- Court's Interpretation and Reasoning: The court found that the company's insolvency was evident from its financial statements and the revival scheme.
- Key Evidence and Findings: The court noted the company's inability to pay its debts and the admissions in the balance sheet.
- Application of Law to Facts: The court found the petition maintainable under Section 433(e).
- Treatment of Competing Arguments: The court dismissed Majestic's argument regarding the absence of a statutory notice.
- Conclusions: The court concluded that the petition was maintainable under Section 433(e).
3. SIGNIFICANT HOLDINGS - Verbatim Quotes: "The Company has lost its substratum; there exists a deadlock between the main shareholders of the Company; there is complete lack of faith and probity resulting in irretrievable breakdown between the major shareholders of the Company."
- Core Principles Established: The loss of substratum and deadlock between shareholders are valid grounds for winding up under Section 433(f).
- Final Determinations on Each Issue: The court admitted the winding-up petition, finding that the company had lost its substratum, there was a deadlock between shareholders, and the petition was filed without improper motives.
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2013 (11) TMI 1823
1. ISSUES PRESENTED and CONSIDERED The core legal issues considered in this judgment are: - Whether the Civil Revision Application should be dismissed for want of original or certified copy of the arbitration agreement.
- Whether an arbitration agreement exists between all the parties to the suit.
- Whether the subject matter of the suit is the subject matter of the arbitration agreement.
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Dismissal for Want of Original or Certified Copy of Arbitration Agreement - Legal Framework and Precedents: Section 8 of the Arbitration and Conciliation Act, 1996 requires filing of the original or certified copy of the arbitration agreement.
- Court's Interpretation: The court noted that both parties had already filed copies of the agreements containing the arbitration clause, thus fulfilling the requirement.
- Conclusion: The application could not be dismissed merely due to non-filing of the original or certified copy, as the existence of the agreements was undisputed.
Issue 2: Existence of Arbitration Agreement Between All Parties - Legal Framework and Precedents: Section 8 of the Act mandates that all parties to the suit must be parties to the arbitration agreement.
- Court's Interpretation: The court found that all parties to the suit were indeed parties to the arbitration agreements within the three partnership firms.
- Conclusion: The arbitration agreements were applicable to all parties, and thus, the matter could be referred to arbitration.
Issue 3: Subject Matter of the Suit vs. Arbitration Agreement - Legal Framework and Precedents: The subject matter of the suit should be the same as the subject matter of the arbitration agreement.
- Court's Interpretation: The court determined that the dispute over the properties acquired by Defendant No. 1 using partnership funds was within the scope of the arbitration agreements.
- Conclusion: The subject matter of the suit was indeed covered by the arbitration agreements, allowing the dispute to be referred to arbitration.
3. SIGNIFICANT HOLDINGS - The court held that "there is no need of any bifurcation of any cause of action as the action brought by the plaintiff is the subject of all the arbitration agreements."
- The principle established is that when all parties to a suit are parties to arbitration agreements, and the subject matter is covered by these agreements, the dispute should be referred to arbitration.
- Final determination: The order of the trial court was set aside, and the parties were referred to arbitration, with the arbitral tribunal consisting of Justice Shri. N.P. Chapalgaonkar (Retd.), Justice A.B. Naik (Retd.), and Justice M.G. Gaikwad (Retd.).
The judgment underscores the importance of adhering to arbitration agreements and highlights the court's role in facilitating arbitration where applicable, thereby reducing judicial intervention in favor of arbitral resolution of disputes.
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2013 (11) TMI 1822
1. ISSUES PRESENTED and CONSIDERED The legal judgment presented revolves around the following core legal questions: - Whether the appeal filed by the applicant/appellant against the Adjudication Order dated 28.06.2007 is time-barred under the provisions of the Foreign Exchange Management Act, 1999 (FEMA).
- Whether there was a sufficient cause to condone the delay of more than five years in filing the appeal.
- Whether the applicant/appellant received the Show Cause Notice (SCN) and the Adjudication Order, and whether the service of these documents was duly acknowledged.
- Whether the penalty imposed for contraventions of FEMA provisions was justified based on the failure to submit documentary evidence of import into India.
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Timeliness of the Appeal - Legal Framework and Precedents: Under Section 19(2) of FEMA, an appeal must be filed within 45 days from the receipt of the order by the aggrieved party. The Appellate Tribunal may entertain an appeal after this period if it is satisfied with the explanation for the delay.
- Court's Interpretation and Reasoning: The Tribunal emphasized that the applicant/appellant failed to file the appeal within the prescribed period and that the delay was over five years and three months.
- Key Evidence and Findings: The applicant/appellant argued that the Adjudication Order was received on 01.10.2012, and the appeal was filed within 45 days thereafter. However, the Tribunal noted the acknowledgment of receipt of the SCN and the applicant's appearance before the Adjudicating Authority in 2006.
- Application of Law to Facts: The Tribunal applied the statutory period for filing an appeal and found that the applicant/appellant did not provide sufficient cause for the delay.
- Treatment of Competing Arguments: The respondent opposed the condonation of delay, arguing that the applicant/appellant was aware of the proceedings and had acknowledged receipt of the SCN.
- Conclusions: The Tribunal concluded that the appeal was time-barred and that the applicant/appellant did not provide a credible explanation for the delay.
Issue 2: Receipt of Show Cause Notice and Adjudication Order - Legal Framework and Precedents: The burden of proof lies on the applicant/appellant to demonstrate non-receipt of the SCN and Adjudication Order.
- Court's Interpretation and Reasoning: The Tribunal found that the applicant/appellant had received the SCN and had appeared before the Adjudicating Authority, acknowledging the proceedings.
- Key Evidence and Findings: The respondent provided evidence of dispatch and acknowledgment of the SCN, which the Tribunal found credible.
- Application of Law to Facts: The Tribunal determined that the service of the SCN and Adjudication Order was duly executed.
- Treatment of Competing Arguments: The applicant/appellant's claim of non-receipt was deemed unconvincing in light of the evidence presented by the respondent.
- Conclusions: The Tribunal held that the applicant/appellant had received the necessary documents and was aware of the proceedings.
Issue 3: Justification of Penalty - Legal Framework and Precedents: The penalty was imposed under Sections 10(5) and 10(6) of FEMA, 1999, read with Regulation 6(1) of the Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2000.
- Court's Interpretation and Reasoning: The Tribunal noted the applicant/appellant's failure to provide documentary evidence of import, which justified the penalty.
- Key Evidence and Findings: The applicant/appellant did not submit the required import documentation, leading to the contravention of FEMA provisions.
- Application of Law to Facts: The Tribunal applied the relevant FEMA provisions and upheld the penalty based on the applicant/appellant's non-compliance.
- Treatment of Competing Arguments: The applicant/appellant's arguments were not sufficient to overturn the penalty decision.
- Conclusions: The Tribunal upheld the penalty as justified under the circumstances.
3. SIGNIFICANT HOLDINGS - The Tribunal held that "the applicant/appellant is thoroughly negligent in filing the present appeal & it would be legitimate for me not to condone the delay in view of the proviso to sub-section (2) of section 19 of FEMA, 1999."
- The core principle established is that the burden of proving sufficient cause for delay lies with the applicant/appellant, and failure to do so results in dismissal of the appeal.
- The final determination was that the appeal was dismissed due to the inordinate delay and lack of sufficient cause for condonation. The applicant/appellant was directed to deposit the penalty amount within 30 days.
The Tribunal's decision underscores the importance of adhering to statutory timelines and the necessity of providing credible explanations for any delays in legal proceedings.
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2013 (11) TMI 1821
Issues:
1. Reduction of share capital under Sections 100 to 105 of the Companies Act, 1956.
2. Compliance with the Companies (Court) Rules, 1959 for confirmation of reduction of share capital.
3. Approval of reduction in share capital by the Board of Directors and shareholders.
4. Publication and approval of special resolution for reduction of share capital.
5. Examination of fairness and equity among different classes of shareholders in the reduction of share capital.
Analysis:
1. The judgment concerns a company petition filed under Sections 100 to 105 of the Companies Act, 1956 seeking confirmation of the reduction of share capital of the petitioner-Company. The petitioner-Company had excess capital due to the withdrawal of a scheme of de-merger, leading to the proposal for reduction in share capital.
2. The petitioner-Company's authorized share capital, details of issued capital, and the process of increase and subsequent reduction in share capital were outlined in the petition. The Board of Directors approved the reduction in share capital in a meeting held on 06.11.2012, and a special resolution was passed on 03.12.2012 for the proposed reduction.
3. The resolution for reduction of share capital was passed unanimously by both equity and preference shareholders of the petitioner-Company. The court noted that there were no objections raised by stakeholders regarding the reduction of share capital, and all necessary steps were taken in compliance with the Companies Act and the Articles of Association.
4. Following the filing of the petition, notices were issued, and after due publication, no objections were received. The court granted permission to dispense with certain procedures and approved the special resolution and proposed minutes for registration under Section 103(1) of the Companies Act.
5. The court emphasized the commercial and business nature of the decision for reduction of share capital, approved by the majority of shareholders. It highlighted the importance of ensuring the interests of all members of the Company, especially regarding fairness and equity among different classes of shareholders. Ultimately, the court found no valid reason to reject the proposed scheme for the reduction of share capital.
In conclusion, the court allowed the company petition, approving the special resolution and directing the petitioner to proceed with the publication and registration of the approved minutes in compliance with the law.
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2013 (11) TMI 1820
Issues:
Validity of company petition filed for winding up based on General Power of Attorney (GPA) authorization.
Analysis:
The appellant, a foreign bank operating in India, extended credit facilities to the respondent, who allegedly defaulted on repayment. The appellant filed a company petition under Sections 433, 434, and 439 of the Companies Act, 1956, seeking winding up of the respondent company. An issue arose regarding the validity of the company petition as it was filed through a General Power of Attorney (GPA) without proper authorization. The appellant attempted to rectify the deficiency by submitting a document dated 24-01-2000. The learned single Judge initially refused to accept the document, leading to the appeal.
The appellant argued that only the principal could question the validity of the GPA, and since the appellant did not doubt it, there was no basis for the rejection. The appellant contended that the original power of attorney did authorize the institution of proceedings, and any deficiency was rectified by the subsequent document. The appellant relied on the Supreme Court judgment in M.M.T.C. LIMITED v. MEDCHL CHEMICALS AND PHARMA (P) LIMITED (2002) 1 SCC 234 to support the curability of the defect.
On the other hand, the respondent's counsel argued that due to the serious consequences of a winding-up petition, strict adherence to procedural requirements was necessary. The respondent contended that the original power of attorney was defective and the subsequent document did not align with the appellant's articles of association. The respondent cited the Supreme Court judgment in STATE BANK OF TRAVANCORE v. KINGSTON COMPUTERS INDIA PRIVATE LIMITED (2011) 11 SCC 524 to support their argument.
The High Court held that while the defect in the GPA used to institute proceedings was curable, the proceedings were not invalidated by the defect. The Court distinguished the present case from the judgment cited by the respondent, emphasizing that the appellant had taken steps to rectify the defect pointed out by the respondent. Therefore, the appeal was allowed, setting aside the single Judge's order and treating the company petition as properly instituted. The Court left open the possibility of framing an issue if the respondent persisted with objections. No costs were awarded in the matter.
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2013 (11) TMI 1819
Issues:
1. Interpretation of terms and conditions of sale regarding outstanding dues payable to KIADB.
2. Validity of KIADB's claim for additional payment based on allotment conditions.
3. Dispute over the amount payable by the auction purchaser for the land.
4. Determination of rights conveyed to the auction purchaser under the lease-cum-sale deed.
5. Resolution of the controversy regarding the payment of outstanding dues to KIADB.
Analysis:
1. The judgment pertains to a dispute arising from the sale of assets of a company in liquidation. The Official Liquidator sought permission to sell the company's properties, and after a bidding process, the applicant emerged as the highest bidder with an offer of Rs. 2.20 crore. However, a subsequent demand by KIADB for Rs. 69.22 lakh, purportedly due for land valuation, created a controversy regarding the terms of the sale and the obligations of the purchaser.
2. KIADB contended that the auction purchaser must pay the difference between the prevailing land price and the amount already paid by the original lessee, as per the allotment conditions. The Board insisted that without settling the dues, the sale deed execution and property conveyance could not proceed, justifying their claim based on internal audit calculations and allotment terms.
3. The applicant argued against KIADB's claim, highlighting that the lease-cum-sale deed remained in force, and there was no indication of termination. The applicant disputed the additional demand, emphasizing that the auction participation was based on existing terms and conditions, not on current land prices. The applicant questioned the validity of KIADB's demand for a substantial sum beyond the initial dues claimed.
4. The Official Liquidator acknowledged the rights conveyed to the auction purchaser under the lease-cum-sale deed, confirming that possession was taken under the existing terms without lease termination. The Liquidator supported the applicant's position, indicating that the auction sale was conducted based on the rights held by the company in liquidation.
5. Ultimately, the court resolved the issue by determining that the auction purchaser was liable to pay the remaining balance amount, including interest, as claimed by KIADB from the original lessee. The court directed the applicant to settle the dues, after which the KIADB and the Official Liquidator were instructed to execute and register the sale deed promptly, ensuring the conveyance of the property to the auction purchaser within a specified timeframe. The judgment clarified the obligations of the parties involved and provided a resolution to the dispute over outstanding dues and property conveyance.
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2013 (11) TMI 1818
Issues Involved:
1. Whether demerger constitutes reconstruction under Article 20(d) of the Gujarat Stamp Act.
2. Obligation of the applicant to pay stamp duty for change of ownership under Section 2(g) and Article 20(d).
3. Determination of stamp duty based on share value on the appointed date.
4. Consideration of market value versus face value of shares for stamp duty purposes.
Detailed Analysis:
Issue 1: Demerger as Reconstruction
The court examined whether the demerger of the applicant company from its parent company constitutes "reconstruction" under Article 20(d) of the Gujarat Stamp Act. The applicant argued that the demerger should not be classified as reconstruction, thus not attracting the provisions of Article 20(d). However, the court concluded that demerger falls within the scope of "reconstruction" as per the legislative intent, which was clarified through amendments to include both "amalgamation" and "reconstruction" under the purview of Article 20(d). The court emphasized that the legislative amendments aimed to cover transactions like demerger under the stamp duty provisions.
Issue 2: Obligation to Pay Stamp Duty
The applicant contended that they should not be liable to pay stamp duty for the demerger as it was not an amalgamation. The court, however, held that the applicant is required to pay stamp duty for the change of ownership, as the transaction qualifies as a conveyance under Section 2(g) and Article 20(d) of the Gujarat Stamp Act. The court emphasized that the legislative intent was to impose stamp duty on transactions involving reconstruction or amalgamation, as evidenced by the amendments to the Act.
Issue 3: Determination of Stamp Duty Based on Share Value
The dispute centered on whether the stamp duty should be calculated based on the face value of shares (Rs. 2/-) or the market value (Rs. 50.05/-) on the appointed date. The applicant argued for the face value, while the authorities used the market value. The court upheld the authorities' decision, stating that the market value as determined on the appointed date should be used. This interpretation aligns with Explanation III of Article 20(d), which guides the determination of share value for stamp duty purposes.
Issue 4: Market Value vs. Face Value of Shares
The applicant's contention that the face value of Rs. 2/- per share should be considered for stamp duty was rejected. The court emphasized that the market value of Rs. 50.05/- per share, as per SEBI's statement, is the appropriate basis for determining the stamp duty. The court reasoned that the legislative framework intended for the market value to reflect the true economic value of the transaction, thereby justifying the stamp duty calculation.
Conclusion:
The court affirmed the decisions of the lower authorities, holding that the demerger is indeed a form of reconstruction under Article 20(d), necessitating the payment of stamp duty. The market value of Rs. 50.05/- per share was deemed appropriate for stamp duty calculation, rejecting the applicant's argument for using the face value. The Reference was disposed of with these clarifications, upholding the authorities' determination of the stamp duty liability.
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2013 (11) TMI 1817
Application for grant of licence Under Section 394 of the Act for the eating house - catering services - gas installations - grant of trade licence will be considered subject to fulfillment of conditions - Expression 'eating house' and 'catering establishment' - HELD THAT:- A cursory reading of the definition of the expression 'eating house' may support the conclusion of the High Court because general public is not allowed entry in the premises of the club and, in the first blush, it appears that food is not supplied for consumption on the premises for profit or gain. However, if we apply purposive interpretation, then it becomes clear that the catering department of the club which prepares and serves/supplies food to members of the club is covered by the definition of the expression 'eating house'. It cannot be denied that members of club also fall within the ambit of the term 'public'. No doubt, the primary activity of the club is to provide sporting facilities to the members, but the supply of food is an integral part of such activity and the catering department of the club satisfies an essential component of the facilities provided by the club.
One can take judicial notice of the fact that many members who avail sporting facilities remain on the premises for a very long period. Therefore, the articles of food become integral part of their activities. Not only this, many join the club in the name of availing sporting facilities only for the purpose of spending their time in leisure and for enjoying the facilities provided by the Catering Department of the club. Thus, even though profit may not be the motto of catering facilities provided by Respondent No. 1, it certainly gains by these facilities.
The concept of earning profits is not a necessary appurtenant of the expression "business" and looked at from this point of view, a place used for the business of sale of any article of food or drink does not cease to be so merely because it is not being conducted with a view to earn profits. Anyway, the definition contained in the rules and by-laws of the Borough Municipality is an inclusive definition. After saying that a catering establishment means any place used for the business of sale of any article of food or drink for consumption, it further goes on to say that it includes a hotel or an eating house, etc. and in the same Supreme Court decision, to which a reference has already been made, it has been pointed out that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense. Where the Courts are dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation. Therefore, having regard to the inclusive definition in this case, it is clear that the definition of "catering establishment" does mean and include a cooperative canteen conducted without any motive of earning profits.
Thus, we hold that the Bombay High Court was not right in relieving the Respondents of the obligation to take licence Under Section 394(1)(e) of the Act.
Appeal is allowed
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2013 (11) TMI 1816
Issues Involved:
1. Release of original documents in Company Application No. 2176/2013.
2. Directions for compensation related to land acquisition in Company Application No. 1500/2013.
3. Settlement between SICOM and the ex-management of the company.
4. Payment to legal heirs of late Smt. Bati Devi.
5. Enhancement of compensation by the Official Liquidator.
Issue-wise Analysis:
1. Release of Original Documents:
In Company Application No. 2176/2013, the applicant, Mr. Sachin Duggal, sought the release of original documents annexed with Company Application No. 1331/2013. The court noted that Company Application No. 1331/2013 had been disposed of, and the original documents were no longer required. Consequently, the court directed the return of these documents to Mr. Amit Mittal, the General Power of Attorney holder of the applicant, within two weeks.
2. Directions for Compensation Related to Land Acquisition:
In Company Application No. 1500/2013, the Official Liquidator (OL) sought directions regarding the compensation for land acquired by the Government of Haryana. The land, owned by the company in provisional liquidation, had been acquired, and compensation was pending. The OL requested the Land Acquisition Officer (LAO) to deposit the compensation amount with the court. The court noted that the compensation amount of Rs. 23,50,46,995/- was lying with the LAO. The court directed the LAO to release the compensation to the OL within one week, with specific instructions for subsequent payments to the legal heir of late Smt. Bati Devi and SICOM.
3. Settlement Between SICOM and the Ex-Management:
A settlement was reached between SICOM, a secured creditor, and the ex-management of the company. SICOM agreed to reduce the outstanding amount from Rs. 72.66 crores to Rs. 37.45 crores, with a reduced interest rate of 10% simple interest instead of 19.50%. The court found the settlement to be fair and reasonable, emphasizing the benefits of reduced liability and potential interest earnings on the compensation amount. The court approved the settlement and directed the parties to adhere to its terms.
4. Payment to Legal Heirs of Late Smt. Bati Devi:
The legal heir of late Smt. Bati Devi, Dharam Singh, agreed to settle for Rs. 5,85,16,500/- in full and final settlement of the amount due from the company. The court directed the OL to pay this amount to Dharam Singh from the compensation received from the LAO. Dharam Singh also undertook to withdraw all pending complaints and legal actions against the company.
5. Enhancement of Compensation by the Official Liquidator:
The court directed the OL to apply for enhancement of the compensation amount determined under award Nos. 24, 25, and 27. The competent court was instructed to decide the application expeditiously, preferably within three months. The court also noted the potential for increased compensation based on similar cases and directed the OL to pursue this enhancement diligently.
Decision:
The court issued several directions, including the release of compensation by the LAO to the OL, simultaneous payments to Dharam Singh and SICOM, and steps to vacate attachment orders. The court also approved the settlement between SICOM and the ex-management, incorporating the term-sheet into its order. The OL was instructed to make an application for compensation enhancement and to manage any remaining funds prudently. The application was disposed of with no order as to costs, and the parties were bound by their respective undertakings and arrangements.
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2013 (11) TMI 1815
Issues Involved:
1. Whether the company contravened provisions of FEMA by purchasing agricultural land using foreign remittances obtained under the Automatic Route.
2. Whether Ms. Yulia Yaskova, as a director, is liable for the contravention by the company under FEMA.
3. Whether the properties involved in the contravention are liable to be confiscated to the Central Government under FEMA.
Detailed Analysis:
Issue I: Contravention by the Company
The primary issue revolves around whether the company purchased agricultural land worth Rs. 1,53,17,000/- using foreign remittances obtained under the Automatic Route, thereby contravening the provisions of section 6(3)(b) of FEMA read with item No.6 of List B of Annexure A to Schedule 1 of the Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2000. The Tribunal found that the properties purchased were indeed agricultural lands, as corroborated by the statements of Mr. Francisco X Souza, an ex-director, and the lack of conversion sanad from agricultural to non-agricultural purposes. The Tribunal concluded that the company's actions were in contravention of the regulations, and the penalty of Rs. 12,00,000/- imposed was deemed appropriate and within legal limits.
Issue II: Liability of Ms. Yulia Yaskova
The second issue concerns the liability of Ms. Yulia Yaskova, a director of the company, under section 42(1) of FEMA. It was established that she was in charge of and responsible for the company's business during the period of contravention. The Tribunal noted that she did not provide evidence to prove that the contravention occurred without her knowledge or that she exercised due diligence to prevent it. Consequently, the Tribunal upheld the penalty of Rs. 1,00,000/- imposed on her, finding her guilty of the contravention alongside the company.
Issue III: Confiscation of Properties
The final issue pertains to the confiscation of the properties involved in the contravention. Under section 13(2) of FEMA, the Adjudicating Authority has the discretion to confiscate properties in respect of which contraventions have occurred. The Tribunal noted that the properties, amounting to Rs. 1,53,17,000/-, were involved in the contravention and were thus confiscated to the Central Government. The Tribunal found no reason to question the application of judicial discretion by the Adjudicating Authority in this matter, as the appellant did not contest this aspect.
Conclusion:
The Tribunal dismissed the appeals Nos. 98-99/2011, finding no illegality in the impugned order. The penalties and confiscation were upheld as appropriate under the circumstances, with no order as to costs.
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2013 (11) TMI 1814
Issues Involved:
1. Application for stay and waiver of pre-deposit of penalty.
2. Establishing a prima facie case by the appellant.
3. Determining undue hardship due to penalty deposit.
4. Safeguarding the realization of penalty.
Detailed Analysis:
1. Application for Stay and Waiver of Pre-deposit of Penalty:
The appellant filed an application seeking a stay and waiver of the pre-deposit of a penalty imposed for alleged contraventions under the Foreign Exchange Management Act, 1999 (FEMA). The penalty was levied for receiving funds in India without the permission of the Reserve Bank of India, which contravened Section 3(c) of FEMA. The appellant argued for a waiver based on the second proviso to sub-section (1) of Section 19 of FEMA, which allows the Appellate Tribunal to dispense with the deposit if it causes undue hardship, subject to conditions to safeguard penalty realization.
2. Establishing a Prima Facie Case:
The appellant contended that the adjudicating officer did not consider the defense presented in response to the show-cause notice. The appellant claimed that statements recorded did not identify him, and the evidence was insufficient to prove the allegations. The appellant asserted that the statements were obtained under duress and lacked corroboration. The appellant also argued that the seized amount was accounted for and belonged to a relative, with no investigation conducted to verify this claim. The appellant's request for cross-examination of the enforcement officer was denied, violating natural justice principles. The tribunal noted that while a prima facie case seemed plausible, a detailed examination would occur during the final hearing.
3. Determining Undue Hardship Due to Penalty Deposit:
The appellant argued that the financial condition was weak, residing in a rented house and relying on community support for sustenance. The appellant submitted an affidavit detailing the lack of income, property, and financial resources, asserting that the penalty deposit would cause undue hardship. The tribunal referred to Supreme Court judgments interpreting "undue hardship" as excessive hardship that deprives a person of basic life necessities. The tribunal found the appellant's financial status credible, as the respondent's report lacked substantial evidence to refute the appellant's claims. Thus, the tribunal concluded that the penalty deposit would indeed cause undue hardship.
4. Safeguarding the Realization of Penalty:
To balance the waiver of pre-deposit with safeguarding penalty realization, the tribunal imposed a condition requiring the appellant to provide a bank guarantee equivalent to the penalty amount. This condition aimed to secure the penalty's realization while granting relief from immediate financial burden. The tribunal directed the appellant to furnish the bank guarantee within 45 days, warning that failure to comply would result in dismissal of the appeal. The tribunal emphasized that this measure was necessary due to allegations of the appellant's involvement in hawala activities.
In conclusion, the tribunal granted the waiver of pre-deposit due to undue hardship but required a bank guarantee to ensure penalty realization, balancing the appellant's financial constraints with the enforcement of legal obligations.
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2013 (11) TMI 1813
Issues:
1. Condonation of delay in filing appeal under Section 54 of the Land Acquisition Act.
2. Judicial approach in cases involving compensation determination in land acquisition matters.
Analysis:
1. The judgment involves a case where the Appellants sought condonation of a 1110-day delay in filing an appeal under Section 54 of the Land Acquisition Act. The delay was due to the Appellants entrusting their appeals to other claimants who failed to file the appeal on their behalf. The learned Single Judge dismissed the condonation application, leading to the dismissal of the appeal as time-barred. The Supreme Court considered the vague explanation provided by the Appellants but noted that another Single Judge had granted relief in similar matters. The Court emphasized the need for a liberal approach in such cases, especially considering the illiteracy and lack of legal knowledge among villagers. Citing a previous case, the Court directed that those who did not seek intervention due to various constraints should be granted enhanced compensation.
2. The judgment highlighted the importance of adopting a liberal approach in land acquisition matters concerning compensation determination. The Court acknowledged the challenges faced by villagers, who are often illiterate and rely on others for legal proceedings. It stressed the need for courts to consider the circumstances of affected parties, especially in cases where relief has been granted to similarly situated individuals. By referencing a previous case where enhanced compensation was ordered for disadvantaged landowners, the Court underscored the obligation to ensure fair treatment and access to justice for all parties involved in land acquisition disputes.
This detailed analysis of the judgment provides insights into the legal principles applied by the Supreme Court in addressing issues related to delay condonation and the judicial approach in land acquisition cases, emphasizing fairness, equitable treatment, and consideration of the circumstances of affected parties.
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2013 (11) TMI 1812
Issues involved:
Petition under Section 482 of Cr.P.C. for setting aside order in complaint under Section 138 NI Act; Dismissal of application under Section 311 Cr.P.C. for additional evidence.
Details of the Judgment:
Issue 1: Dismissal of application under Section 311 Cr.P.C.
The petitioner, a partnership firm, filed a complaint under Section 138 of NI Act regarding a bounced cheque. The complaint was filed through a Power of Attorney holder, Mr. Rohit Jain. During the trial, it was revealed that the Special Power of Attorney was not notarized. The petitioner sought to introduce new evidence, including a notarized power of attorney and the testimony of another partner. The Trial Court dismissed the application under Section 311 Cr.P.C., stating it cannot be used to fill a lacuna in the prosecution. The petitioner argued that rectifying procedural errors is permissible at any stage and cited relevant case law. The Court noted that the power to summon witnesses or recall them is essential for a just decision and that rectifying inadvertent mistakes should be allowed in the interest of justice.
Issue 2: Legal Interpretation and Precedents
The Court referred to cases such as Grafitek International v. K.K. Kaura and Rajendra Prasad v. Narcotic Cell to emphasize that procedural defects, like a notarization lapse in a power of attorney, should not impede the administration of justice. The importance of notarization was acknowledged, but it was highlighted that rectifying such defects during the case does not invalidate the authority conferred. The Court emphasized that procedural laws should serve the interests of justice and not hinder it, allowing for rectification of errors to ensure a fair trial.
Conclusion:
The Court set aside the impugned order, allowing the petitioner to introduce the new evidence. The dismissal of the application under Section 311 Cr.P.C. was overturned, emphasizing the importance of rectifying procedural defects to uphold the principles of justice. The parties were directed to appear before the Trial Court, with costs imposed on the petitioner for the respondent.
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2013 (11) TMI 1811
Issues Involved:
1. Maintainability of Public Interest Litigation (PIL) in service matters.
2. Validity of the appointment of the Chairman as CEO of CESU.
3. Legality of granting honorarium to the Chairman for additional charge as CEO.
4. Direction for recovery of the amount paid to the Chairman.
Summary of Judgment:
1. Maintainability of Public Interest Litigation (PIL) in service matters:
The Supreme Court emphasized that a PIL is not maintainable in service matters except for a writ of quo warranto. The High Court's decision to entertain the PIL and direct recovery of the amount paid was beyond the scope of a PIL. The Court cited various precedents to clarify that the jurisdiction of the High Court to issue a writ of quo warranto is limited to ensuring that a public office is not held by a usurper without legal authority.
2. Validity of the appointment of the Chairman as CEO of CESU:
The Supreme Court scrutinized the Scheme framed by the State Commission u/s 22 of the Electricity Act, 2003. The Scheme allowed the Commission to give additional charge of CEO to the Chairman. The Court found that the High Court had erroneously concluded that the appointment was illegal. The High Court misinterpreted the internal administration of CESU, failing to recognize that the Commission had the authority to make temporary arrangements. The Supreme Court held that the Commission's decision to allow the Chairman to discharge the functions of CEO was within its permissible authority.
3. Legality of granting honorarium to the Chairman for additional charge as CEO:
The Supreme Court noted that the Chairman was not holding two posts with two sets of salaries but was given an honorarium for additional responsibilities. The High Court's reasoning that granting honorarium was impermissible was flawed. The honorarium was not equivalent to the salary and was justified given the additional duties performed by the Chairman.
4. Direction for recovery of the amount paid to the Chairman:
The Supreme Court annulled the High Court's direction for recovery of the sum paid to the Chairman. It stated that even if a writ of quo warranto is issued, recovery of the salary or honorarium for services rendered is not permissible. The Court emphasized that denying pay for services rendered amounts to forced labor, which is impermissible. The judgment highlighted the need for a cautious approach while dealing with a writ of quo warranto to avoid causing undue humiliation and loss of honor to the individual concerned.
Conclusion:
The appeals were allowed, and the judgment and order of the High Court were set aside. The Supreme Court found that the High Court had overstepped its jurisdiction and misinterpreted the provisions of the Scheme and the legal principles governing the issue of a writ of quo warranto.
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2013 (11) TMI 1810
Issues Involved:
1. Grant of pardon u/s 306 CrPC.
2. Role of the court in granting pardon.
3. Rights of co-accused to oppose pardon.
4. Relevance of evidence and public policy in granting pardon.
5. Revisional powers of the High Court.
Summary:
1. Grant of Pardon u/s 306 CrPC:
The appeal challenges the High Court's decision to set aside the Special Judge's order granting pardon to Respondent No. 2 u/s 306 CrPC and making him an approver. The case originated from a complaint alleging that forged documents were planted during a search by the Enforcement Directorate, implicating Respondent No. 1.
2. Role of the Court in Granting Pardon:
The Supreme Court emphasized that granting pardon is a judicial act and the court must consider the consequences, including the policy of the State and the relative culpability of the accused. The court should not act mechanically and must ensure that the pardon serves the interest of justice. The court's discretion cannot be marginalized by the prosecution's support for the pardon.
3. Rights of Co-Accused to Oppose Pardon:
The court clarified that the co-accused does not have a right to be heard before any forum regarding the grant of pardon. However, the High Court can exercise suo motu revisional powers to ensure justice is done according to recognized principles of criminal jurisprudence.
4. Relevance of Evidence and Public Policy in Granting Pardon:
The court must consider all relevant facts, including the nature of the evidence and the public policy implications. The evidence provided by an accomplice should be scrutinized with caution and requires substantial corroboration. The court also noted that documents sent by foreign authorities in response to a Letter Rogatory are considered evidence collected during the investigation.
5. Revisional Powers of the High Court:
The High Court has the authority to examine the correctness, legality, or propriety of any order or proceeding of the inferior court. The revisional powers can be exercised suo motu to ensure justice, even if the litigant does not have a legal right to raise the grievance.
Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's decision to remit the matter to the Special Judge for reconsideration. The court emphasized that substantial justice should not be defeated on mere technicalities and that the Special Judge must consider all relevant facts and legal principles while deciding the application for pardon afresh.
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2013 (11) TMI 1809
Issues involved:
The judgment involves the interpretation of liability under section 138 and section 141 of the Negotiable Instruments Act in a case of dishonored cheque issued by a company, and whether individuals associated with the company can be held vicariously liable.
Issue 1: Liability under section 138 and section 141 of the Negotiable Instruments Act
The judgment pertains to a case where a dishonored cheque was issued by a company, leading to criminal proceedings under section 138 of the Negotiable Instruments Act. The petitioner argued that only the drawer of the cheque can be punished under section 138, and constructive liability under section 141 does not apply to individuals not in charge of the company's affairs at the time of the offense. The petitioner relied on legal precedents to support this argument.
Issue 2: Interpretation of Constructive Liability
The respondent contended that the principle of constructive liability is applicable in penal law, asserting that individuals associated with the company, whose liability was sought to be discharged by the issuance of the cheque, should be held liable upon dishonor of the instrument. Reference was made to a relevant legal case to support this stance.
Judgment:
The court analyzed the provisions of section 138 and section 141 of the Negotiable Instruments Act. It emphasized that penal liability for dishonored cheques primarily rests with the drawer of the cheque, as per section 138, while section 141 creates a legal fiction for constructive liability in the case of a company. The court highlighted the conditions that must be met for extending liability under section 141 and stressed the need for strict compliance due to the penal nature of the provisions.
The court referred to previous legal judgments to support its decision, emphasizing that vicarious liability under section 141 is limited in scope and should not extend beyond the specified conditions. It concluded that individuals not directly involved in the company's affairs at the time of the offense cannot be held vicariously liable under section 141 for the dishonor of a cheque issued by the company.
Therefore, the court allowed the revisional application, setting aside the impugned order and quashing the proceedings against the petitioners in the case. The trial against other accused persons was directed to continue as per the law.
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2013 (11) TMI 1808
Issues Involved:
1. Applicability of Takeover Regulations, 1997 vs. 2011.
2. Determination of the trigger date for public announcement.
3. Interpretation of 'acquirer' and 'acquisition' under the Takeover Regulations.
4. Validity of the impugned order directing public announcement and interest payment.
Summary:
1. Applicability of Takeover Regulations, 1997 vs. 2011:
The appellants argued that the Takeover Regulations, 1997 should apply since they agreed to acquire shares on June 23, 2010. They contended that they became 'acquirers' upon subscribing to the warrants, not on the conversion date of December 19, 2011. The Tribunal, however, noted that the Takeover Regulations, 2011 were in force at the time of the actual allotment of equity shares, thus applicable.
2. Determination of the trigger date for public announcement:
The appellants claimed that the trigger date should be the date of subscription to the warrants, not the conversion date. They relied on the case of Sharad Doshi vs. The Adjudicating Officer and Ors., which emphasized transparency and shareholder benefit. The Tribunal, referencing previous judgments, held that the trigger date for the Takeover Code is the date of conversion of warrants into equity shares, not the date of subscription.
3. Interpretation of 'acquirer' and 'acquisition' under the Takeover Regulations:
The Tribunal reiterated that an 'acquirer' is defined as a person who acquires or agrees to acquire shares or voting rights. The acquisition of voting rights is crucial for invoking the Takeover Code. The Tribunal cited previous cases, including Shri Ch. Kiron Margadarsi Financiers vs. Adjudicating Officer, SEBI, and Mr. Sohel Malik vs. SEBI & Anr., to support the stance that the acquisition of voting rights occurs on the conversion date.
4. Validity of the impugned order directing public announcement and interest payment:
The Tribunal upheld the impugned order dated July 8, 2013, which directed the appellants to make a combined public announcement to acquire shares and pay interest to shareholders. The Tribunal found no fault in the order, noting that the appellants' collective shareholding increased significantly upon conversion of warrants, thus triggering Regulation 3(2) of the Takeover Regulations, 2011. The Tribunal also dismissed the appellants' request for a monetary penalty instead of a public announcement, distinguishing the present case from Sunil Khaitan vs. SEBI due to the promptness of the proceedings.
Conclusion:
The appeal was dismissed with no order as to costs, affirming the requirement for the appellants to make a public announcement and pay interest as directed by the impugned order.
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2013 (11) TMI 1807
Issues Involved:
1. Territorial Jurisdiction
2. Benami Transaction
3. Partition of Properties
4. Shares and Debentures
Summary:
1. Territorial Jurisdiction:
The Plaintiff filed a suit for partition and permanent injunction concerning properties in Gurgaon and Delhi. The Defendants argued that the Court lacked territorial jurisdiction over the Gurgaon property. The Court agreed, stating that the Gurgaon property is outside its territorial limits. Consequently, the Plaintiff can seek appropriate remedies for the Gurgaon property in a Court of appropriate jurisdiction.
2. Benami Transaction:
The Plaintiff claimed that the Delhi property, although registered in the name of Defendant No. 2 (mother), was purchased by their late father and should be treated as joint family property. The Defendants contended that the property was bought by Defendant No. 1 and his wife, and registered in the mother's name with the understanding that it would be transferred to Defendant No. 1 or his wife. The Court held that the Plaintiff's plea of a Benami transaction is barred u/s 3 of the Benami Transactions (Prohibition) Act, 1988, as the Plaintiff failed to plead that the property was not acquired for the benefit of the mother.
3. Partition of Properties:
The Plaintiff sought a preliminary decree of partition for the suit properties, claiming a 1/5th share for each legal heir. The Court noted that the Delhi property belonged absolutely to Defendant No. 2 and she was free to deal with it as she pleased. Therefore, the Plaintiff cannot be granted the relief of partition for the Delhi property, and such a relief is barred u/r VII Rule 11(d), CPC.
4. Shares and Debentures:
The Plaintiff also sought partition of shares and debentures jointly owned by their late father and Defendant No. 2. The Court ruled that since these assets have now come entirely to the share of Defendant No. 2, the question of partition during her lifetime does not arise.
Conclusion:
The applications for rejection of the plaint are allowed. The Plaintiff is granted liberty to seek relief for the Gurgaon property in other appropriate proceedings. The interim order is vacated, and all pending applications are disposed of.
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2013 (11) TMI 1806
Issues Involved:
1. Territorial Jurisdiction
2. Inquiry u/s 202 Cr.P.C.
3. Cheques given as Security
4. Clubbing of more than three Cheques in a Complaint u/s 138 Negotiable Instruments Act
Territorial Jurisdiction:
The petitioners challenged the territorial jurisdiction of the Delhi Court as the cheques were drawn at Bank of Baroda, Faridabad. However, this ground was not pressed during the hearing due to the Supreme Court's recent judgment in Nishant Aggarwal v. Kailash Kumar Sharma, 2013 (7) SCALE 753.
Inquiry u/s 202 Cr.P.C.:
The petitioners contended that the learned Metropolitan Magistrate did not conduct any inquiry or investigation as required u/s 202 Cr.P.C. The court dismissed this ground, stating that the Magistrate considered the complainant's affidavit and documentary evidence, making further inquiry unnecessary. The case was deemed covered by Abhishek Agrawalla v. Boortmalt NV, (2011) 122 DRJ 42, which clarifies that no further inquiry is needed when the offence is evident from documents.
Cheques given as Security:
The petitioners argued that the cheques were given as security, not in discharge of any legal liability. The court noted that this defense was not presented before the Magistrate at the time of issuing summons. There is a legal presumption u/s 139 of the Negotiable Instruments Act that the cheques were issued in discharge of a debt or liability unless rebutted by the petitioners. The appropriate stage to rebut this presumption is before the learned Metropolitan Magistrate, not u/s 482 Cr.P.C.
Clubbing of more than three Cheques in a Complaint u/s 138 Negotiable Instruments Act:
The petitioners argued that more than three cheques cannot be clubbed in proceedings u/s 138 of the Negotiable Instruments Act. The court found no merit in this contention, stating that the cause of action for filing a complaint u/s 138 is the service of notice, not the dishonour of cheques. Since a single notice was issued for all four dishonoured cheques, Section 219 Cr.P.C. is not applicable. This view is supported by various judgments, including Trichandoor Muruhan Spinning Mills Pvt. Ltd. v. Madanlal Ramkumar Cotton & General Merchants and Rajendra B. Choudhari v. State of Maharashtra.
Conclusion:
The court found no merit in the petition, deeming it a gross abuse and misuse of the process of law. The petitioners delayed the complaint for over two years. The petition was dismissed with a cost of Rs. 30,000 to be paid to the respondent within four weeks. The ex-parte interim order dated 17th August, 2011, was vacated, and the Metropolitan Magistrate was directed to resume proceedings and complete the trial within six months. The parties were instructed to appear before the Metropolitan Magistrate on 18th November, 2013.
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2013 (11) TMI 1805
Issues involved: Misc. Applications filed by the Revenue seeking fresh adjudication of the issue and setting aside the matter to the file of the Ld. CIT to decide the issue de novo.
Summary:
The Misc. Applications were filed by the Revenue challenging the order of the ITAT dated 11.07.2012 passed in ITA Nos. 617(Asr)/2013 & 618(Asr)/2013. The applications sought fresh adjudication of the issue regarding the registration of the assessee trust under section 12AA(b)(ii) of the Income Tax Act, 1961. The ITAT had directed the CIT to grant registration to the assessee, which the Revenue contended was done without completing the necessary procedure and recording satisfaction as per section 12AA of the Act.
The Revenue argued for fresh adjudication and setting aside the matter to the file of the CIT for deciding the issue de novo. However, the counsel for the assessee contended that no mistake was pointed out in the ITAT's order and prayed for the dismissal of the Misc. Applications.
After hearing the contentions of both parties and examining the facts of the case, the ITAT found that no mistake was identified in the applications filed by the Revenue. Consequently, the ITAT rejected the Misc. Applications filed by the Revenue, leading to the dismissal of M.A. Nos. 33 & 34(Asr)/2013.
The judgment was pronounced in the open court on 27th November 2013.
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