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1999 (12) TMI 889
Issues Involved:
1. Passing off action and deceptive similarity.
2. Infringement of copyright.
3. Use of the word "Action" and numeral "500" in trademarks.
4. Prima facie case for temporary injunction.
5. Alleged misrepresentation and misappropriation of goodwill.
Detailed Analysis:
1. Passing off action and deceptive similarity:
The plaintiffs alleged that the defendants were passing off their goods as those of the plaintiffs by using cartons and strips that were a colorable imitation of the plaintiffs' distinctive packaging. The court examined the principles of passing off, emphasizing that it involves a misrepresentation leading to confusion among consumers. The court noted that the essential features of the two marks must be considered, and it is not necessary to place them side by side to identify differences. The focus should be on the overall similarity that might mislead an average consumer. The court found that the plaintiffs failed to establish a prima facie case of passing off, as the defendants demonstrated that their packaging existed prior to the plaintiffs' relaunch in October 1998.
2. Infringement of copyright:
The plaintiffs claimed copyright infringement of their artistic work on the distinctive ACTION 500 cartons. The court analyzed whether the defendants' packaging was a substantial reproduction of the plaintiffs' copyrighted work. However, the court concluded that the plaintiffs did not prove prima facie that the defendants infringed on their copyright, as the defendants' packaging was shown to have been in use before the plaintiffs' alleged distinctive cartons were introduced.
3. Use of the word "Action" and numeral "500" in trademarks:
The plaintiffs argued that the use of "Action" and "500" by the defendants was misleading and constituted passing off. The defendants countered that these terms were common in the pharmaceutical industry and that the plaintiffs had no exclusive rights to them, as indicated by a disclaimer in their trademark registration. The court agreed with the defendants, noting that the plaintiffs' claim was not based on trademark infringement but on passing off, and the use of the word "Action" alone did not constitute an essential feature of the plaintiffs' distinctiveness.
4. Prima facie case for temporary injunction:
The court evaluated whether the plaintiffs established a prima facie case for a temporary injunction against the defendants. Given that the defendants provided evidence of their packaging's prior existence, the court found that the plaintiffs failed to demonstrate a likelihood of success on the merits. Consequently, the court dismissed the plaintiffs' motion for a temporary injunction and vacated the ad interim order.
5. Alleged misrepresentation and misappropriation of goodwill:
The plaintiffs alleged that the defendants' actions caused damage to their reputation and goodwill. However, the court emphasized that misrepresentation must be specifically pleaded and proven. The plaintiffs' case was based on the similarity of packaging introduced in October 1998, while the defendants showed that their packaging existed since May 1997. As a result, the court found no basis for the plaintiffs' claims of misrepresentation and dismissed the notice of motion.
In conclusion, the court dismissed the plaintiffs' motion for a temporary injunction, vacated the ad interim order, and allowed the plaintiffs six weeks to appeal, maintaining the status quo during that period.
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1999 (12) TMI 888
The Supreme Court quashed the High Court's order granting bail to accused Sanjai Singh in a grave offence case. The High Court failed to consider all relevant materials and granted bail erroneously. The State of Uttar Pradesh was criticized for remaining silent and not fulfilling its duty as a prosecutor. Sanjai Singh was ordered to be taken into custody immediately. The trial was directed to be expedited. The order was to be sent to relevant authorities in Uttar Pradesh.
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1999 (12) TMI 887
Issues Involved:
1. Jurisdiction of the State Government to make a reference under Section 10(1)(d) read with Section 12(5) of the Industrial Disputes Act, 1947.
2. Validity of the tripartite settlement and its binding nature.
3. Status of the Workers' Union as a representative union.
4. Non-application of mind by the State Government in making the reference.
5. Whether the demands of the Workers' Union were covered by the tripartite settlement.
6. Procedural lapses by the State Government in issuing the notification.
Issue-wise Detailed Analysis:
1. Jurisdiction of the State Government to Make a Reference:
The appellant argued that there was no dispute pending at the time of the reference as the Workers' Union members had already benefited from the tripartite settlement. Therefore, the State Government lacked jurisdiction to make the reference. The Supreme Court emphasized that the existence of an industrial dispute is a prerequisite for the State Government to invoke its power under Section 10(1) of the Act. The Court held that the State Government failed to consider relevant factors before making the reference, thus lacking the jurisdiction to do so.
2. Validity of the Tripartite Settlement:
The appellant contended that the tripartite settlement dated October 4, 1986, was binding on all employees, including the Workers' Union members, under Section 18(3) of the Act. The Workers' Union challenged the validity of the settlement, claiming it was made on a Sunday and did not cover all their demands. The Supreme Court held that the settlement was valid and binding, as it was arrived at during conciliation proceedings, and there was no bar to conducting such proceedings on a holiday.
3. Status of the Workers' Union as a Representative Union:
The appellant argued that the Workers' Union was not a representative union under Section 9-E of the Rajasthan Act 34 of 1958, as amended by the Rajasthan Act 14 of 1970. The Court noted that the Labour Union, which had the majority of workers, was the recognized representative union. The Workers' Union's notice under Section 19(2) of the Act was invalid as it did not represent the majority of persons bound by the settlement.
4. Non-application of Mind by the State Government:
The appellant claimed that the State Government did not consider whether the Workers' Union represented the majority of workers and whether their demands were already covered by the tripartite settlement. The Supreme Court found that the State Government failed to apply its mind and consider relevant factors before making the reference, leading to a lack of jurisdiction.
5. Whether the Demands of the Workers' Union Were Covered by the Tripartite Settlement:
The Workers' Union argued that not all their demands were covered by the tripartite settlement. The Supreme Court held that settlements arrived at during conciliation proceedings encompass all existing disputes except those specifically left out. The Workers' Union's demands were either the same, similar, or identical to those raised by the Labour Union, which were covered by the settlement.
6. Procedural Lapses by the State Government:
The appellant highlighted that the State Government issued the notification for reference without considering the High Court's direction to hear the appellant. The Supreme Court found that the State Government failed to bring the notification to the High Court's notice and did not recall the reference after the High Court's judgment. This procedural lapse rendered the reference invalid.
Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment and quashing the State Government's notification dated March 17, 1989. The Court emphasized that the tripartite settlement was binding on all employees, including the Workers' Union members, and the State Government lacked jurisdiction to make the reference. The Court also highlighted the importance of collective bargaining and the principle of industrial democracy in maintaining industrial peace.
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1999 (12) TMI 886
The Supreme Court allowed an appeal by a company in a case under Section 138 of the Negotiable Instruments Act. The court overturned lower court decisions that dismissed the complaint due to lack of a certified resolution authorizing the company's representative. The Supreme Court directed the trial court to proceed with the trial, emphasizing that the complainant should have the opportunity to prove authorization during the trial.
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1999 (12) TMI 885
Issues Involved:
1. Investigation into allegations and criminal proceedings.
2. Validity of the power project agreement and bidding process.
3. Prima facie sufficiency of evidence for further investigation.
4. Financial and technical capability of project sponsors.
5. Approval process and governmental scrutiny.
6. Allegations of bribery and corruption.
7. Judicial review of techno-economic clearances.
Detailed Analysis:
1. Investigation into allegations and criminal proceedings:
The High Court directed the respondent State to register an FIR with the CBI under the Delhi Special Police Establishment Act for various cognizable offences without naming any accused. The investigation was to be conducted under the supervision of a Deputy Director General of the CBI, commenced without delay, completed within a year, and monthly progress reports submitted to the court. The court also mandated cooperation from all parties and allowed the petitioners to be associated with the investigation.
2. Validity of the power project agreement and bidding process:
The petition sought to set aside the power project agreement between Karnataka Electricity Board (KEB) and Mangalore Power Corporation (MPC) and to reallocate the project through an open bidding process. The High Court granted some reliefs, leading to appeals by both petitioners and respondents.
3. Prima facie sufficiency of evidence for further investigation:
The High Court observed that the facts and documents presented warranted further investigation. It noted that the allegations and circumstances were not frivolous or baseless and required a probe to ascertain the truth, especially regarding the expenditure of 191 million Hong Kong dollars and potential kickbacks related to the power project.
4. Financial and technical capability of project sponsors:
The petitioners questioned the financial and technical capability of the project sponsors. The Government of India had considered these aspects at various stages, granting approvals and amendments. The court found that the approvals and financial structures were scrutinized and could not be challenged collaterally in these proceedings.
5. Approval process and governmental scrutiny:
The project underwent multiple reviews and approvals by different governments and agencies, including the Central Electricity Authority and the Ministry of Power. The court noted that the project had been scrutinized under three different governments and various statutory and other agencies, which validated the process.
6. Allegations of bribery and corruption:
The allegations of bribery, particularly against Mr. Deve Gowda, were based on dubious material. The court found no foundation for these claims, noting that the balance sheet and reports did not substantiate the allegations. The court emphasized that criminal investigations require reasonable suspicion based on credible evidence, not mere conjecture or suspicion.
7. Judicial review of techno-economic clearances:
The court highlighted that techno-economic clearances and project approvals by the Central Electricity Authority and other agencies could not be re-examined by the courts. The detailed project report and objections were thoroughly reviewed, and the clearances granted were based on established guidelines.
Conclusion:
The Supreme Court set aside the High Court's order, stating that the investigation ordered was based on insufficient material and mere suspicion. The court emphasized that criminal investigations must be grounded in reasonable suspicion and credible evidence. The order does not preclude future actions based on appropriate material presented to authorized agencies. The appeal by the other side was dismissed, and parties were directed to bear their own costs.
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1999 (12) TMI 884
The Supreme Court allowed the appeal and remitted the matter back to the High Court for fresh decision regarding the validity of the driver's license in a motor accidents claims case. The Court found that the Claims Tribunal and the High Court had erred in accepting a photocopy of the license without proper verification.
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1999 (12) TMI 883
Issues Involved:
1. Deletion of addition of Rs. 39,39,315/- as undisclosed income.
2. Deletion of addition of Rs. 7,33,400/- as unaccounted sales of milk products.
3. Deletion of addition of Rs. 25,80,045/- as suppressed sales of milk products.
4. Determination of gross profit rate.
5. Deletion of addition of Rs. 53,380/- as advertisement expenses.
Issue-wise Detailed Analysis:
1. Deletion of Addition of Rs. 39,39,315/- as Undisclosed Income:
The main dispute revolves around the deletion of the addition of Rs. 39,39,315/- made by the Assessing Officer (AO) as undisclosed income for the block assessment years 1987-88 to 1997-98. The AO inferred that the difference between the total dispatch of sale proceeds from Mumbai to Ashta and the amount deposited in the bank account represented unaccounted money. The Commissioner of Income-tax (Appeals) (CIT(A)) observed that the sales recorded in the computerized books were higher than those in the memo-books, indicating that the amount was already included in the assessee's turnover. The CIT(A) directed the AO to delete the said sum from the computation of undisclosed income, a decision upheld by the Tribunal.
2. Deletion of Addition of Rs. 7,33,400/- as Unaccounted Sales of Milk Products:
The AO identified unaccounted sales of milk products from a seized register, estimating suppressed sales for assessment years 1996-97 and 1997-98. The CIT(A) found no evidence linking the seized register to the assessee and concluded that the sales of milk products were already included in the recorded sales. The CIT(A) scaled down the addition to Rs. 78,900/-, a decision partially upheld by the Tribunal, which directed the AO to compute the undisclosed income based on the gross profit rate.
3. Deletion of Addition of Rs. 25,80,045/- as Suppressed Sales of Milk Products:
The AO added Rs. 25,80,045/- as suppressed sales of milk products based on seized documents. The CIT(A) observed that the alleged unaccounted sales were covered by excess cash sales/credits already included in the assessee's books. The Tribunal affirmed that the income from suppressed sales should be included in the block assessment, not in the regular assessment, upholding the CIT(A)'s decision to delete the addition in the regular assessment.
4. Determination of Gross Profit Rate:
The CIT(A) set aside the issue of determining the gross profit rate to the AO for further inquiry, including the adequacy of the gross profit rate shown by the assessee and the shortage of milk in transit. The Tribunal found no infirmity in the CIT(A)'s decision and upheld the direction to the AO.
5. Deletion of Addition of Rs. 53,380/- as Advertisement Expenses:
The AO disallowed Rs. 53,380/- paid towards advertisements, including a sum for a birthday greeting, deeming it non-business related. The CIT(A) restricted the disallowance to Rs. 30,500/-. The Tribunal found no fault with the CIT(A)'s decision and affirmed the deletion of the remaining amount.
Conclusion:
The Tribunal partially allowed the Revenue's appeal regarding the computation of undisclosed income based on the gross profit rate but dismissed the appeal concerning the deletion of additions for suppressed sales and advertisement expenses. The decisions of the CIT(A) were largely upheld, emphasizing the inclusion of income in the block assessment and the proper recording of sales in the assessee's books.
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1999 (12) TMI 882
Issues:
1. Quashing of complaint under Sections 73(2B) and (3) of the Companies Act, 1956 filed by the Registrar of Companies.
2. Liability of alternate Director under Section 73(2A) of the Companies Act.
Issue 1: Quashing of the Complaint
The petition filed under Section 482 of the Cr. P.C. sought to quash the complaint filed by the Registrar of Companies against a company for alleged non-issuance of allotment letters and non-refund of application money within the prescribed period. The complaint also targeted the Managing Director, Company Secretary, and other Directors of the company. The petitioner, an alternate Director, challenged the process issued in the complaint, arguing that as an alternate Director, he was not an officer in default under Section 73(2A) of the Companies Act, and therefore, should not be prosecuted. The petitioner contended that the notice issued by the Registrar of Companies was replied to on behalf of the company, and thus, the prosecution against him was unwarranted.
Issue 2: Liability of Alternate Director
The court analyzed Section 73(2A) of the Companies Act, which imposes liability for non-refund of subscription amount or deposit of the subscription amount on "the Company and every director of the company, who is an officer in default." The definition of officer in default under Section 5 of the Companies Act includes managing directors, whole-time directors, managers, secretaries, and others. The court noted that the petitioner, as an alternate Director, did not fall under the categories specified in Section 5. The court highlighted that the complaint acknowledged the petitioner's status as an alternate Director, and as the company had other managerial personnel, the petitioner could not be held liable under Section 73(2A). The court also criticized the Registrar of Companies for not verifying the facts before filing the complaint, emphasizing the need for responsible action by public officers to prevent unwarranted harassment of citizens.
In conclusion, the court allowed the petition, quashing the complaint against the petitioner as an alternate Director, emphasizing the importance of ensuring legal proceedings are based on accurate interpretation of the law and factual circumstances to prevent wrongful prosecution.
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1999 (12) TMI 881
The Supreme Court of India allowed the appeal in a case involving a no-confidence motion against a municipality President. The Court ruled that nominated members must be counted in determining the two-thirds majority required for the motion to pass. The judgment set aside the previous decision and allowed the appellant's writ petition.
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1999 (12) TMI 880
Issues Involved:
1. Whether the gross labour receipt of Rs. 52,17,920 forms part of the total turnover for computing deduction under section 80HHC.
2. Validity of the rectificatory order passed by the assessing officer under section 154.
3. Interpretation and application of Explanation (baa) to section 80HHC and Circular No. 621 dated 19-12-1991.
Issue-wise Detailed Analysis:
1. Whether the gross labour receipt of Rs. 52,17,920 forms part of the total turnover for computing deduction under section 80HHC:
The assessee firm, engaged in importing, cutting, polishing, and exporting diamonds, claimed a deduction under section 80HHC excluding Rs. 52,17,920 received as labour charges from the total turnover. The assessing officer, in a rectificatory order, included this amount in the total turnover, which was upheld by the Commissioner (Appeals). The Tribunal examined whether the gross labour receipt should be part of the total turnover for section 80HHC deduction. The Tribunal noted that the term "total turnover" was not explicitly defined but referred to the aggregate amount of money taken in a business. The Tribunal concluded that the entire amount of Rs. 52,17,920, including reimbursement of labour charges and commission, should form part of the total turnover, as the receipts were for work done and billed to the principals. The Tribunal emphasized that the entire gross receipts on account of labour charges must be included in the total turnover as per the definition and explanation of "total turnover" under section 80HHC.
2. Validity of the rectificatory order passed by the assessing officer under section 154:
The assessee argued that the rectificatory order was invalid as there was no mistake apparent from the record, citing the Supreme Court decision in TS. Balram, Income Tax Officer v. Volkart Bros. The Tribunal, however, found that the assessing officer correctly invoked section 154 to rectify the apparent error in the original assessment. The Tribunal held that the inclusion of the aggregate amount of labour charges in the total turnover was not debatable and was justified by the clear definition of "total turnover" in section 80HHC. The Tribunal concluded that the rectificatory order was valid and correctly amended the deduction under section 80HHC.
3. Interpretation and application of Explanation (baa) to section 80HHC and Circular No. 621 dated 19-12-1991:
The assessee contended that the inclusion of labour charges in the total turnover distorted the export profit and referred to Explanation (baa) to section 80HHC and Circular No. 621. The Tribunal examined the explanation and circular, noting that they clarified what items should not form part of the total turnover, such as freight, insurance, and export incentives. The Tribunal found that the explanation did not define "total turnover" but indicated that the aggregate amount of work done should be included. The Tribunal concluded that the inclusion of labour charges did not distort the export profit and was consistent with the statutory provisions and circular. The Tribunal also reviewed various decisions cited by the assessee, including Salgaocar Mining Industries Ltd., International Research Park Laboratories Ltd., and Smt. Suman Goyal, but found them not directly applicable or supportive of the assessee's position.
Conclusion:
The Tribunal upheld the orders of the revenue authorities, confirming that the gross labour receipt of Rs. 52,17,920 should be included in the total turnover for computing the deduction under section 80HHC. The rectificatory order passed by the assessing officer under section 154 was deemed valid, and the interpretation and application of Explanation (baa) to section 80HHC and Circular No. 621 were found to support the revenue's position. The appeal by the assessee was dismissed.
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1999 (12) TMI 879
Issues:
Reopening of assessment for the assessment year 1979-80 based on seized papers from the assessment year 1987-88.
Analysis:
The appeal challenged the order of the Commissioner (Appeals) regarding the reopening of the assessment for the year 1979-80. The assessee argued that there was no new information available to justify the reopening and that the seized papers from 1987-88 did not have any connection to the 1979-80 assessment. The Assessing Officer reopened the assessment based on a search conducted in 1987, where it was found that the assessee understated the gross profit rate. The Departmental Representative argued that the mode of evasion in 1987-88 indicated a similar pattern in earlier years, justifying the reopening under section 147(a) of the Income-tax Act.
The Tribunal noted that the seized papers from 1987-88 did not establish a valid basis for reopening the assessment of a different year, especially considering the significant gap between the two assessment years. The Assessing Officer's request for additional details post-reopening was not fulfilled by the assessee due to unavailability of books, even though the original assessment had accepted the disclosed gross profit rate. The Tribunal found that the reopening based on material from a distant assessment year amounted to a mere change of opinion, not a valid reason under section 147(a).
The Tribunal distinguished the cited decisions, emphasizing the principle that material from one assessment year cannot justify reopening an assessment of a different year. The assessment for 1979-80 was set aside based on lack of nexus between the seized papers and the income disclosed for that year. The Tribunal concluded that the reopening lacked legal basis and allowed the appeal, without delving into the correctness of the sustained gross profit rate at 14%.
In summary, the Tribunal held that the reopening of the assessment for the year 1979-80, based on seized papers from 1987-88, lacked legal foundation as there was no connection between the two years. The Tribunal emphasized the principle that material from one assessment year cannot serve as a valid reason to reopen the assessment of a different year, especially when there is a substantial gap between the two years. The Tribunal set aside the orders of the revenue authorities, ruling that the reopening constituted a mere change of opinion, not a valid basis under section 147(a) of the Income-tax Act.
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1999 (12) TMI 878
The High Court of Karnataka dismissed the appeal against the Income Tax Appellate Tribunal's order for the assessment year 1995-96. The court found that substantial questions of law did not arise from the order and dismissed the appeal.
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1999 (12) TMI 877
Issues Involved:
1. Law declared and directions in Indira Sawhney regarding "creamy layer".
2. Validity of Kerala Legislature's retrospective validating law on "creamy layer".
3. Constitutionality of Sections 3, 4, and 6 of the Kerala State Backward Classes Act, 1995.
4. Violation of Article 14 and 16 as a violation of the basic structure of the Constitution.
5. Acceptance and objections to the High-Level Committee Report by Justice K.J. Joseph.
6. Further directions to the State of Kerala if Sections 3, 4, and 6 are struck down.
Summary:
Point 1:
The Court reiterated that the Constitution mandates equality, and reservation can only be for socially and educationally backward classes, not based on caste alone. The "creamy layer" among backward classes must be excluded from reservation benefits, as established in Indira Sawhney v. Union of India. The identification of backward classes must be based on relevant data, and forward classes or the creamy layer within backward classes must be excluded to ensure the benefits reach the truly backward.
Points 2 and 3:
The Kerala Legislature's declaration that there is no "creamy layer" in the State and the provisions of Sections 3, 4, and 6 of the Kerala Act 16/95 were scrutinized. The Court held that the legislative declaration in Section 3(a) lacked factual basis and was contrary to the principles laid down in Indira Sawhney and Ashok Kumar Thakur. The non-exclusion of the creamy layer violated Articles 14 and 16 of the Constitution. Sections 3, 4, and 6 of the Act were declared unconstitutional.
Point 4:
The Court emphasized that Article 14, which embodies the principle of equality, is part of the basic structure of the Constitution. Non-exclusion of the creamy layer or inclusion of forward castes in the backward classes list breaches Article 14 and the basic structure of the Constitution. The Kerala Legislature cannot perpetuate such discrimination.
Points 5 and 6:
The High-Level Committee, headed by Justice K.J. Joseph, identified the creamy layer among backward classes in Kerala. The Report was accepted, subject to the inclusion of certain communities and sub-castes. The Court directed the implementation of the Report's recommendations from the date of the judgment, making it obligatory for candidates to file certificates proving they do not belong to the creamy layer. The State of Kerala was given a chance to make provisions for the exclusion of the creamy layer in accordance with the Constitution and the principles laid down by the Court.
Directions:
1. The exclusion of the creamy layer as per the High-Level Committee's Report shall apply from the date of the judgment for all future selections and appointments in public service in Kerala.
2. The State of Kerala is permitted to make provisions for the exclusion of the creamy layer in a manner consistent with the Constitution and the Court's judgments.
3. Any alternative provisions made by the State will be subject to the Court's further decisions.
4. Challenges to any new provisions made by the State shall only be entertained by the Supreme Court.
Conclusion:
The Court condemned the Kerala Government's deliberate violation of the Court's directives and emphasized the need for the benefits of reservation to reach the truly backward classes. The suo motu contempt case was kept pending, and the Court expressed hope that constitutional provisions would not be misused for unjustified patronage.
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1999 (12) TMI 876
Issues Involved:
1. Scope and Applicability of Section 45 of the Arbitration and Conciliation Act, 1996.
2. Application for referring the matter to arbitration (C.A. No. 248 of 1999).
3. Application for staying the arbitration proceedings before the ICC (C.A. No. 254 of 1999).
Summary:
Issue 1: Scope and Applicability of Section 45 of the Arbitration and Conciliation Act, 1996
The judgment explores whether Section 45 of the Arbitration Act applies to proceedings under Section 397/398 of the Companies Act, 1956. The petitioner argued that invoking the jurisdiction of the Company Law Board (CLB) in cases of oppression is a statutory right that cannot be overridden by arbitration agreements. The respondents contended that any disputes arising from agreements containing arbitration clauses should be referred to arbitration as mandated by Section 45. The CLB concluded that proceedings under Section 397/398 are not outside the purview of Section 45, provided the disputes arise out of or in connection with an arbitration agreement and the arbitrator can grant appropriate reliefs.
Issue 2: Application for Referring the Matter to Arbitration (C.A. No. 248 of 1999)
The first respondent filed an application under Section 45 of the Arbitration Act to refer the matter to arbitration, arguing that the disputes arise from agreements with arbitration clauses. The petitioner countered that there was no commonality of parties to the arbitration agreements and the present proceedings, as the company was not a party to the Joint Venture Agreement (JVA). The CLB found that there was no commonality of parties in the agreements relied upon by the respondent and the present proceedings. Consequently, the application for referring the matter to arbitration was dismissed.
Issue 3: Application for Staying the Arbitration Proceedings before the ICC (C.A. No. 254 of 1999)
The petitioner sought to stay the arbitration proceedings before the ICC to avoid conflicting decisions. The respondents argued that the CLB lacked the statutory power to stay the arbitration proceedings and that such an action would be contrary to the principles of the Arbitration Act. The CLB, referencing the Supreme Court's decision in Dresser Rand SA v. Bindal Agro Chemicals Ltd., concluded that it could not stay the proceedings before the ICC. The application to stay the arbitration proceedings was dismissed.
Conclusion:
Both applications, C.A. No. 248 of 1999 and C.A. No. 254 of 1999, were dismissed. The respondents were directed to file their replies to the application C.A. No. 237 of 1999 by January 20, 2000, with the rejoinder to be filed by February 5, 2000. The application will be heard on February 15, 2000. The CLB also noted that the written submissions provided by both sides after the hearing were not considered in the order as they contained additional arguments and citations.
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1999 (12) TMI 875
Issues Involved:
1. Allegations of oppression and mismanagement under Section 397/398 of the Companies Act, 1956.
2. Non-holding of Annual General Meetings (AGMs) and non-presentation of annual accounts.
3. Non-supply of annual reports and falsification of books of account.
4. Diversion of funds and violations of various statutory provisions.
5. Non-compliance with sponsorship agreement terms.
6. Allegations of non-issuance of notices for Board meetings.
7. Request for special audit, investigation, and removal of directors.
8. Allegation of forged document submission by the petitioner.
9. Contempt application against the 2nd respondent for non-compliance with inspection orders.
Detailed Analysis:
1. Allegations of Oppression and Mismanagement:
The petitioner-company, holding about 44.70% shares in Regal Industries Ltd., filed a petition under Section 397/398 of the Companies Act, 1956, alleging acts of oppression and mismanagement in the affairs of the company. The petitioner claimed that the company failed to hold AGMs, present annual accounts, supply annual reports, and falsified books of account. Additionally, there were allegations of diversion of funds to sister companies and violations of various statutory provisions.
2. Non-holding of AGMs and Non-presentation of Annual Accounts:
The petitioner alleged that no AGMs were held, and annual accounts were not presented. The respondents denied these allegations, claiming that all statutory meetings, including general body meetings, were conducted regularly, and notices were sent to the petitioner.
3. Non-supply of Annual Reports and Falsification of Books of Account:
The petitioner contended that annual reports were not supplied, and books of account were falsified. The respondents argued that the petitioner was aware of the company's affairs and that the allegations were baseless.
4. Diversion of Funds and Violations of Statutory Provisions:
The petitioner alleged that funds were diverted to Khurana Foam Sales and Esteem Capital and Management Services Ltd., both controlled by the 2nd respondent. The respondents countered that these were trade advances and investments made in compliance with statutory provisions. The petitioner also claimed violations of the Income-tax Act, Central Excise Act, and other statutes, but the respondents pointed out that proceedings were already initiated by relevant authorities.
5. Non-compliance with Sponsorship Agreement Terms:
The petitioner and the 2nd respondent had a dispute regarding the terms of the sponsorship agreement. The petitioner claimed to have invested in 6.75 lakh shares, while the respondents alleged that the agreement was for 12.87 lakh shares. The Board decided not to adjudicate this issue, as both parties had already filed civil suits regarding the same.
6. Allegations of Non-issuance of Notices for Board Meetings:
The petitioner alleged that notices for Board meetings were not issued to its nominee directors. The respondents argued that notices were sent regularly, but the nominees did not attend the meetings. The Board directed the company to issue notices for general body meetings by registered post and to send Board meeting notices and agendas to the petitioner's nominees at least seven days before the meetings.
7. Request for Special Audit, Investigation, and Removal of Directors:
The petitioner sought a special audit, investigation into the company's affairs, and removal of the 2nd respondent as a director. The Board found no substantial evidence to warrant an investigation or removal of directors. It noted that the dues from Khurana Foam Sales had significantly reduced, and the investment in Esteem Capital was disclosed in the draft prospectus. The Board rejected the prayer for investigation, stating that it would result in duplication of ongoing proceedings by other authorities.
8. Allegation of Forged Document Submission by the Petitioner:
The respondents filed an application alleging that the petitioner had submitted a forged sponsorship agreement. The Board decided not to address this issue within the Section 397/398 proceedings, as it was beyond their jurisdiction and both parties had already initiated civil suits.
9. Contempt Application Against the 2nd Respondent:
The petitioner filed a contempt application against the 2nd respondent for not complying with inspection orders. The Board had already directed the 2nd respondent to pay Rs. 2,000 to the Legal Aid of Delhi High Court for non-compliance, which he did. No further orders were deemed necessary.
Conclusion:
The petition was disposed of with directions to the company to ensure proper notice issuance for meetings and no order as to costs. The Board declined to order an investigation or removal of directors, finding no substantial evidence of mismanagement or oppression.
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1999 (12) TMI 874
Issues Involved:
1. Disqualification of the first petitioner as a director under Section 274(b) of the Companies Act, 1956.
2. Legality of the extraordinary general meeting held on April 21, 1998, and the resolutions passed therein, including the appointment of two employee directors and the second respondent as managing director.
Detailed Analysis:
1. Disqualification of the First Petitioner as a Director:
The second respondent informed the first petitioner that he had ceased to be a director/managing director by virtue of Section 274(b) of the Companies Act, 1956, on the grounds of being declared an undischarged insolvent by the High Court of Madras. However, it was revealed that the insolvency petition against the first petitioner had been dismissed by the High Court, a fact known to the respondent. The judgment noted that there was no argument from the respondents on this issue, and a certificate from an advocate confirmed the dismissal of the insolvency petition. Consequently, the first petitioner did not attract the provisions of Section 274(b) and, as per the company's articles, would continue to function as the managing director for life.
2. Legality of the Extraordinary General Meeting and Resolutions Passed:
The extraordinary general meeting held on April 21, 1998, was convened to transact various businesses, including appointing the second respondent as managing director and two employees as directors. The petitioners argued that the meeting was convened in violation of the Companies Act and that the induction of outsiders into a family company without the consent of all family shareholders constituted an act of oppression. The respondents countered that proper notices were issued, and any irregularities could be rectified in subsequent meetings.
The judgment emphasized that in a Section 397/398 petition, the focus is on whether the actions constitute oppression rather than their legality. Given the family nature of the company and the parity in the board with two directors from each group, any disturbance resulting in the marginalization of one group was deemed an act of oppression. The appointment of two additional directors was thus considered oppressive. Additionally, the appointment of the second respondent as managing director was invalidated since the first petitioner was not disqualified and the company did not carry on any business.
Additional Considerations:
The judgment acknowledged the potential for deadlock in the board due to equal representation from both groups. To protect the company's interests, especially concerning its subsidiary, Coromandel Indag Products India Limited, options were provided to the petitioners. They could either opt for the distribution/transfer of the company's 70% shares in the subsidiary to the individual petitioners at 14% each or choose to sell their shares to the respondents/company based on an independent valuation. These options were to be exercised within 30 days, and once exercised, the directions invalidating the resolutions from the extraordinary general meeting would lapse.
Conclusion:
The petition was disposed of with no order as to costs, and liberty to apply was given to both parties. The judgment provided a balanced resolution aimed at protecting the interests of the company and its subsidiary while addressing the acts of oppression identified in the petition.
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1999 (12) TMI 873
Issues Involved:
1. Application under Order 1 Rule 10 for impleading as a party.
2. Alleged Will dated 1.10.1987 and its genuineness.
3. Applicability of Article 137 of the Limitation Act, 1963.
4. Necessary and proper party in probate proceedings.
5. Direct interest in litigation and locus standi.
6. Adverse inference due to non-filing of probate for the alleged Will.
7. Granting probate and potential revocation under Section 263 of the Act.
Detailed Analysis:
1. Application under Order 1 Rule 10 for impleading as a party:
The application was filed by S. Gurcharan Singh to be impleaded in the proceedings for the grant of Letters of Administration with the Will attached, relating to the estate of Mrs. Raseel Kohli. The applicant claims rights based on a Will dated 1.10.1987 executed by the deceased. The court noted that the application was moved after the applicant learned of the proceedings from his uncle.
2. Alleged Will dated 1.10.1987 and its genuineness:
The court observed that the alleged Will dated 1.10.1987 had not been produced earlier. Given the lack of blood relationship between the deceased and the applicant, and the applicant's non-possession of the relevant property, the court found it reasonable to question the genuineness of the Will. The court emphasized that probate proceedings should have been initiated much earlier if the Will were genuine.
3. Applicability of Article 137 of the Limitation Act, 1963:
The court referred to the decision in Ramanand Thakur Vs. Permanand Thakur, which stated that the right to apply for probate accrues every day as long as the Will remains unprofaned. However, the court also considered the decision in Kerala State Electricity Board, Trivandrum Vs. T.P. Kunhaliumma, which held that Article 137 applies to any petition filed under any Act to a civil court. The court concluded that the period of three years under Article 137 would commence from the date the legatee knew the Will was likely to be disputed.
4. Necessary and proper party in probate proceedings:
The court noted that the applicant was not a Class I heir of the deceased and thus not a necessary party to the proceedings. Even if the applicant's case was presumed correct, it would not automatically reject the current petition since the Will on which the petition was founded could still be genuine.
5. Direct interest in litigation and locus standi:
The court referred to Razia Begum Vs. Sahebzadi Anwar Begum & Ors., which established that only parties with a direct interest, not merely a commercial interest, should be impleaded. The court found that the applicant did not have a direct interest in the current proceedings and had not filed a petition for probate of the alleged Will dated 1.10.1987.
6. Adverse inference due to non-filing of probate for the alleged Will:
The court drew an adverse inference regarding the authenticity of the Will dated 1.10.1987 due to the applicant's failure to initiate probate proceedings for over a decade. The court emphasized that permitting the applicant to join the proceedings would cause undue delay and injustice.
7. Granting probate and potential revocation under Section 263 of the Act:
The court cited Mrs. Elizabeth Antony Vs. Michael Charles John Chown Lengera, noting that granting probate does not decide title disputes and that probate can be revoked under Section 263 of the Act if necessary. The court stressed that the findings regarding caveatable interest are limited to the probate grant and do not affect the right to seek revocation.
Conclusion:
The application was dismissed with exemplary costs of Rs. 5000 due to its vexatious nature and potential to cause delay. The court underscored the importance of timely probate proceedings and the necessity of genuine interest in litigation for impleading parties.
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1999 (12) TMI 872
Issues Involved:
The issues involved in the judgment include the rejection of an application for amendment of the written statement by the Trial Court and the High Court, the interpretation of Order 6 Rule 17 CPC regarding the power to allow amendments in pleadings, and the consideration of the benefit of Section 60(b) of the Indian Easements Act, 1882 in a dispute between a licensee and a grantor.
Amendment of Pleadings:
The appellant-defendant sought to amend the written statement to introduce an alternative plea regarding his status as a licensee and the irrevocability of the license under Section 60(b) of the Indian Easements Act, 1882. The Trial Court and the High Court rejected the application on the basis of mutual destructiveness and withdrawal of an alleged admission by the appellant.
Interpretation of Order 6 Rule 17 CPC:
The judgment emphasizes the purpose of Order 6 Rule 17 CPC, highlighting that the power to allow amendments is broad and can be exercised at any stage in the interest of justice. It stresses that amendments should be permitted to avoid unnecessary litigation and that a liberal approach should be adopted, especially when the other party can be compensated with costs.
Benefit of Section 60(b) of the Indian Easements Act, 1882:
The appellant-defendant sought to incorporate a plea in the written statement regarding the benefit of Section 60(b) of the Indian Easements Act, 1882 if not considered a lessee. The Court allowed this specific amendment, noting that it was not inconsistent with existing pleas and did not cause irretrievable prejudice to the respondent, provided the appellant paid arrears of the license fee and costs.
Conclusion:
The Supreme Court allowed the appeals, permitting the appellant-defendant to amend the written statement to include the plea related to Section 60(b) of the Indian Easements Act, 1882. The appellant was directed to pay arrears of the license fee and costs within a specified period, with the payment not prejudicing the rights of the parties to be adjudicated by the Trial Court. The judgment underscored the importance of promoting justice through amendments while ensuring fairness and avoiding undue prejudice to either party.
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1999 (12) TMI 871
Issues Involved:
1. Maintainability of the petition u/s 397/398 of the Companies Act, 1956.
2. Allegations of oppression and mismanagement.
3. Increase in authorized capital and allotment of additional shares.
4. Appointment of additional directors.
5. Relief to be granted.
Summary:
1. Maintainability of the Petition:
The respondents raised a preliminary objection on the maintainability of the petition, arguing that the petitioners did not satisfy Section 399 of the Act. The petitioners countered by stating that they were the first named shareholders in several joint holdings and satisfied the requirement of one-tenth of the total number of members. The Board concluded that the petitioners met the conditions of Section 399, making the petition maintainable.
2. Allegations of Oppression and Mismanagement:
The petitioners alleged that the respondents engaged in acts of oppression and mismanagement, including allotting 65,000 shares to themselves, appointing additional directors to disturb board equality, and treating the petitioners' group unfairly in terms of employment and remuneration. Attempts to settle the disputes amicably failed, leading to a hearing on the merits.
3. Increase in Authorized Capital and Allotment of Additional Shares:
The petitioners claimed that the increase in authorized capital and subsequent allotment of shares were done without their knowledge and consent, reducing their shareholding from 49.98% to 13.88%. The Board found that no formal offer was made to the petitioners to subscribe to additional shares, deeming the allotment an act of oppression. The Board held that in a family company managed as a quasi-partnership, any change in shareholding parity without mutual agreement is oppressive.
4. Appointment of Additional Directors:
The petitioners contended that the appointment of additional directors from the respondents' group disturbed the equality in board representation. The Board agreed, noting that the appointments were made in a meeting not attended by the first petitioner, who was abroad. The Board found this act to be oppressive, especially given the disproportionate increase in remuneration for the respondents' group.
5. Relief to be Granted:
The Board concluded that the issue of additional shares and the appointment of additional directors were clear acts of oppression. To resolve the disputes, the Board ordered that the respondents or the company purchase the petitioners' shares at a value determined by an independent valuer, with the valuation date being March 31, 1997. The additional shares issued in February 1996 would be excluded from the number of shares in existence on that date. The additional directors would continue, and the first petitioner would be given notice and the right to participate in board meetings. The first petitioner and the fourth petitioner would continue to receive their salary and perquisites until the shares were purchased.
The parties were directed to appear before the Board on January 7, 2000, to suggest a mutually acceptable valuer for determining the fair value of shares.
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1999 (12) TMI 870
Issues:
1. Exoneration by competent authorities in departmental proceedings and its impact on criminal prosecution.
Analysis:
Issue 1: Exoneration by competent authorities in departmental proceedings and its impact on criminal prosecution
In the present case, the petitioners had been exonerated by competent authorities in departmental proceedings related to alleged violations under various Acts. The petitioners contended that since the orders exonerating them had attained finality, their prosecution based on the same set of facts and evidence could not be sustained. The petitioners relied on various legal precedents to support their contention. The court noted that the decisions by competent authorities were based on a thorough examination of facts and evidence. It emphasized that the orders exonerating the petitioners had become final, and there was no indication that the respondent sought to challenge these orders through appropriate legal procedures. The court highlighted that subjecting the petitioners to criminal prosecution after being exonerated in departmental proceedings would be unjust and an abuse of the legal process. It underscored that the standard of proof required in criminal cases was higher than in departmental proceedings, and since the charges were identical in both proceedings, the lack of evidence in departmental proceedings rendered the criminal prosecution baseless. Consequently, the court allowed the petitions, quashed the criminal proceedings against the petitioners, and discharged their bail bonds.
This detailed analysis of the judgment highlights the key issue of exoneration by competent authorities in departmental proceedings and its impact on subsequent criminal prosecution. The court's thorough examination of the legal precedents and principles ensures a comprehensive understanding of the case and its implications.
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