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• 2010 (2) TMI 1331
  

  1. ISSUES PRESENTED and CONSIDERED

  The core legal questions considered in the judgment are:

  • Whether the allotment of warrants and their subsequent conversion into equity shares by Balaji Distilleries Limited was valid under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
  • Whether the change in shareholding structure constituted a change in management requiring prior approval under SICA.
  • Whether the BIFR had the jurisdiction to declare the allotment of warrants and their conversion as null and void.
  • Whether the principles of natural justice were violated by not providing an opportunity for the investor companies to be heard before the adverse order was passed.
  • Whether the statutory compliances, including SEBI guidelines and FEMA regulations, were adhered to in the process of issuing and converting the warrants.
  • Whether the BIFR's order was justified in directing the submission of an alternate draft rehabilitation scheme (DRS) without involving a change of management.

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue 1: Validity of Allotment and Conversion of Warrants

  • Legal Framework and Precedents: The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) governs the proceedings related to sick companies, including the requirement for approval of changes in management.
  • Court's Interpretation and Reasoning: The court noted that the BIFR's decision to declare the allotment and conversion as null and void was based on the assumption of a change in management without proper consideration of the evidence.
  • Key Evidence and Findings: The appellant company argued that the warrants were issued in compliance with SEBI guidelines and that the investor companies were passive investors with no intention of participating in management.
  • Application of Law to Facts: The court found that the issuance and conversion of warrants were part of the company's revival strategy and were conducted transparently.
  • Treatment of Competing Arguments: The court acknowledged the appellants' contention that the BIFR failed to consider the evidence and statutory compliances presented.
  • Conclusions: The court concluded that the BIFR's decision was not based on a proper appreciation of the evidence and set aside the declaration of the allotment as null and void.

  Issue 2: Change in Management

  • Legal Framework and Precedents: Under SICA, a change in management of a sick company requires approval from the BIFR.
  • Court's Interpretation and Reasoning: The court distinguished between ownership and management, stating that a change in shareholding does not necessarily imply a change in management.
  • Key Evidence and Findings: The investor companies provided irrevocable proxies to the existing promoter, indicating no intent to participate in management.
  • Application of Law to Facts: The court found no evidence of a change in management during the interim period between warrant conversion and the proposed merger.
  • Treatment of Competing Arguments: The court considered the appellants' argument that the BIFR's assumption of a change in management was unfounded.
  • Conclusions: The court concluded that there was no change in management and that the BIFR's order was based on an incorrect interpretation of the facts.

  Issue 3: Jurisdiction of BIFR

  • Legal Framework and Precedents: The BIFR's powers under SICA do not extend to declaring corporate actions as null and void without proper jurisdiction.
  • Court's Interpretation and Reasoning: The court held that the BIFR exceeded its jurisdiction by declaring the allotment and conversion null and void without considering the statutory compliances.
  • Key Evidence and Findings: The appellants argued that the BIFR had no power to set aside the allotment of warrants.
  • Application of Law to Facts: The court found that the BIFR's order was beyond its jurisdiction and not supported by evidence.
  • Treatment of Competing Arguments: The court agreed with the appellants that the BIFR's action was arbitrary and not within its legal authority.
  • Conclusions: The court set aside the BIFR's order, stating that it lacked jurisdiction to declare the transaction null and void.

  Issue 4: Violation of Natural Justice

  • Legal Framework and Precedents: The principles of natural justice require that parties be given an opportunity to be heard before an adverse decision is made.
  • Court's Interpretation and Reasoning: The court found that the BIFR violated the principles of natural justice by not providing the investor companies an opportunity to be heard.
  • Key Evidence and Findings: The appellants argued that they were not given notice or a chance to present their case before the BIFR's decision.
  • Application of Law to Facts: The court agreed that the lack of a hearing rendered the BIFR's order procedurally unfair.
  • Treatment of Competing Arguments: The court sided with the appellants, emphasizing the importance of due process.
  • Conclusions: The court held that the BIFR's order was invalid due to the violation of natural justice principles.

  Issue 5: Statutory Compliances

  • Legal Framework and Precedents: Compliance with SEBI guidelines, FEMA regulations, and other statutory requirements is crucial in corporate transactions.
  • Court's Interpretation and Reasoning: The court found that the appellant company had complied with all necessary statutory requirements.
  • Key Evidence and Findings: The appellant company provided evidence of compliance with SEBI guidelines, including pricing and disclosure requirements.
  • Application of Law to Facts: The court noted that the BIFR failed to consider the compliance evidence presented by the appellants.
  • Treatment of Competing Arguments: The court agreed with the appellants that the BIFR's decision was based on an incomplete assessment of statutory compliance.
  • Conclusions: The court concluded that the appellant company had adhered to statutory requirements and that the BIFR's order was unjustified.

  Issue 6: Direction for Alternate DRS

  • Legal Framework and Precedents: The BIFR's role under SICA includes approving rehabilitation schemes for sick companies.
  • Court's Interpretation and Reasoning: The court found that the BIFR's direction to submit an alternate DRS without involving a change of management was unnecessary.
  • Key Evidence and Findings: The existing DRS included provisions to ensure no change in management during the interim period.
  • Application of Law to Facts: The court held that the existing DRS was sufficient and that the BIFR's direction was unwarranted.
  • Treatment of Competing Arguments: The court agreed with the appellants that the existing DRS addressed the BIFR's concerns.
  • Conclusions: The court set aside the BIFR's direction for an alternate DRS and directed the BIFR to proceed with the existing DRS.

  3. SIGNIFICANT HOLDINGS

  • Preserve Verbatim Quotes of Crucial Legal Reasoning: "The BIFR has not considered this aspect of the matter that the basic object of SICA is to revive a sick industrial company."
  • Core Principles Established: The distinction between ownership and management in corporate structures; the necessity of adhering to principles of natural justice; the requirement for statutory compliance in corporate transactions.
  • Final Determinations on Each Issue: The court set aside the BIFR's order declaring the allotment and conversion of warrants as null and void, directed the BIFR to reformulate the DRS with provisions to ensure no change of management during the interim period, and emphasized the importance of considering all evidence and statutory compliances in such cases.

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• 2010 (2) TMI 1330
  

  1. ISSUES PRESENTED and CONSIDERED

  The core legal issues considered in this judgment are:

  • Whether the classification between 'current and non-current unsecured creditors' is legal and sustainable for differential treatment in the settlement of dues.
  • Whether the differential treatment provided to unsecured creditors in the sanctioned scheme violates principles of equality and non-discrimination.
  • Whether the modification of the sanctioned scheme without hearing the appellant is valid.

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue 1: Classification of Unsecured Creditors

  • Relevant Legal Framework and Precedents: The classification must satisfy two conditions: it must be founded on intelligible differentia and must have a rational relation to the object sought to be achieved by the statute (Article 14 of the Constitution of India).
  • Court's Interpretation and Reasoning: The court found that the classification of unsecured creditors into 'current' and 'non-current' based on the period of supply of goods does not constitute an intelligible differentia. The court referenced the Supreme Court's decision in Prem Chand Somchand Shah v. Union of India, which emphasizes equality among equals.
  • Key Evidence and Findings: The appellant and OCP, Morocco, supplied goods during the same period (up to 2002), yet were classified differently without a clear basis.
  • Application of Law to Facts: The court determined that the classification lacked a rational basis and did not relate to the objectives of SICA.
  • Treatment of Competing Arguments: The respondent's argument that the classification was based on continued supply by OCP was rejected as it did not justify differential treatment.
  • Conclusions: The classification was deemed unsustainable, and the court directed a modification of the sanctioned scheme to provide similar treatment to all unsecured creditors.

  Issue 2: Differential Treatment and Discrimination

  • Relevant Legal Framework and Precedents: Article 14 of the Constitution ensures equality and prohibits discriminatory treatment among similarly situated entities.
  • Court's Interpretation and Reasoning: The court found that the differential treatment between the appellant and OCP, Morocco, was discriminatory and lacked a rational nexus to the objectives of SICA.
  • Key Evidence and Findings: The sanctioned scheme allowed 89% payment to OCP, Morocco, compared to 30% to the appellant, without a justifiable basis.
  • Application of Law to Facts: The court held that the differential treatment was not based on any factual matrix or intelligible differentia.
  • Treatment of Competing Arguments: The court dismissed the argument that the sacrifice made by OCP was higher in quantum as irrelevant to the percentage-based treatment.
  • Conclusions: The court directed that the sanctioned scheme be modified to provide similar dispensation to all unsecured creditors.

  Issue 3: Validity of Scheme Modification

  • Relevant Legal Framework and Precedents: Principles of natural justice require that affected parties be heard before any modification of a scheme.
  • Court's Interpretation and Reasoning: The court noted that the modification of the scheme without hearing the appellant was procedurally improper.
  • Key Evidence and Findings: The modification was recognized by BIFR without a hearing, which the court found inappropriate.
  • Application of Law to Facts: The court did not delve deeply into this issue as the modification order was not directly challenged in the appeal.
  • Treatment of Competing Arguments: The court acknowledged the appellant's grievance but focused on the classification issue.
  • Conclusions: The court remanded the case to BIFR for reconsideration of the scheme with proper hearing.

  3. SIGNIFICANT HOLDINGS

  • Preserve Verbatim Quotes of Crucial Legal Reasoning: "The classification of unsecured creditors as current and non-current is not based on an intelligible differentia to justify differential treatment between two unsecured creditors."
  • Core Principles Established: Classification must have a rational basis and relate to the statutory objective; equality among similarly situated entities must be maintained.
  • Final Determinations on Each Issue: The court directed modification of the sanctioned scheme to provide equal treatment to all unsecured creditors and remanded the case to BIFR for reconsideration.

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• 2010 (2) TMI 1329
  

  1. ISSUES PRESENTED and CONSIDERED

  The core legal questions considered in this judgment are:

  • Whether the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) retain jurisdiction over a company once its net worth turns positive, thus ceasing to be a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
  • Whether the BIFR's decision to not discharge the company from the purview of SICA was correct, given the company's positive net worth and the settlement of dues with secured creditors.

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue 1: Jurisdiction of BIFR/AAIFR after Net Worth Becomes Positive

  • Relevant Legal Framework and Precedents: The legal framework revolves around Section 3(1)(o) of SICA, which defines a sick industrial company, and the jurisdiction of BIFR/AAIFR as per SICA. Precedents include judgments from various High Courts, such as the Calcutta High Court's decision in Zuari Agro Chemicals Ltd. and the Madras High Court's decision in Dunlop India Limited, which establish that BIFR/AAIFR lose jurisdiction once a company's net worth turns positive.
  • Court's Interpretation and Reasoning: The court interpreted that once a company's net worth becomes positive, it no longer fits the definition of a sick industrial company under SICA. Consequently, BIFR/AAIFR lose jurisdiction over such a company. The court criticized the BIFR's failure to consider relevant precedents and misinterpretation of the judgments, particularly the Madras High Court's decision.
  • Key Evidence and Findings: Evidence included the statutory auditor's certification of the company's positive net worth as of 31.3.2008 and the clearance of dues with secured creditors, as confirmed by Canara Bank.
  • Application of Law to Facts: The court applied the legal principle that BIFR/AAIFR's jurisdiction ceases once a company is no longer classified as sick under SICA due to a positive net worth. The company's financial recovery and settlement of debts supported this application.
  • Treatment of Competing Arguments: The appellant argued that BIFR should not retain jurisdiction after the net worth turned positive, citing various precedents. The BIFR's argument that jurisdiction should continue until full revival was rejected as a misinterpretation of legal principles.
  • Conclusions: The court concluded that BIFR/AAIFR have no jurisdiction over a company once its net worth becomes positive, and thus, the company should be discharged from SICA's purview.

  3. SIGNIFICANT HOLDINGS

  • Preserve Verbatim Quotes of Crucial Legal Reasoning: "There is absolutely no doubt in my mind that once a company ceases to be a sick industrial company as defined by the Act all proceedings taken by the Board in relation to it must thereafter absolutely cease."
  • Core Principles Established: The principle that BIFR/AAIFR lose jurisdiction over a company once its net worth turns positive and it no longer qualifies as a sick industrial company under SICA was reaffirmed. The court emphasized that jurisdiction is contingent upon the company remaining sick under the statutory definition.
  • Final Determinations on Each Issue: The appeal was allowed, and the impugned order dated 10.8.2009 was set aside. The company was discharged from the purview of SICA, affirming that BIFR/AAIFR cannot retain jurisdiction once the company no longer meets the criteria of a sick industrial company.

  In conclusion, the judgment underscores the importance of adhering to statutory definitions and established legal principles regarding the jurisdiction of BIFR/AAIFR under SICA, ensuring that companies are not unnecessarily kept under regulatory purview once they have financially recovered.

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• 2010 (2) TMI 1328
  
  The Appellate Tribunal ITAT Delhi ruled in favor of the assessee, stating that the appeal of the revenue against the order of Ld. CIT(A) for the assessment year 2003-04 became redundant as the order passed by the Ld. Commissioner under section 263 was quashed by the Tribunal in ITA No. 2070/D/2008. The appeal of the revenue was dismissed as the assessment order no longer stood valid.

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• 2010 (2) TMI 1327
  
  Issues Involved:
  
  1. Whether the company petition filed in the Company Law Board (CLB) under sections 397 and 398 of the Companies Act, 1956, is maintainable after withdrawal of a comprehensive suit without leave to file a fresh suit on the same cause of action.
  2. Whether the CLB was justified in dismissing the company petition based on the withdrawal of the earlier civil suit without leave.
  3. The applicability of the bar of res judicata and Order 23, Rule 1 of the Code of Civil Procedure, 1908, to proceedings under sections 397 and 398 of the Companies Act.
  4. The distinction between proceedings under sections 397 and 398 and civil suits in terms of reliefs and subject matter.
  
  Issue-wise Detailed Analysis:
  
  1. Maintainability of the Company Petition:
  
  The primary issue in this case is whether a company petition filed under sections 397 and 398 of the Companies Act, 1956, is maintainable after the withdrawal of a comprehensive suit without leave to file a fresh suit on the same cause of action. The High Court held that the company petition is indeed maintainable. The court emphasized that an application under sections 397/398 is not a suit and, therefore, not subject to the same procedural bars as civil suits. The reliefs sought in the company petition were distinct and could not have been granted in the earlier civil suit, which was withdrawn.
  
  2. Justification of the CLB's Dismissal:
  
  The CLB dismissed the company petition on the grounds that the earlier civil suit was withdrawn without leave to file a fresh suit on the same cause of action. The High Court found this dismissal unjustified, noting that the CLB failed to recognize the distinction between the withdrawn civil suit and the company petition. The court pointed out that the subject matter of the company petition was not directly or substantially in issue in the earlier suit, and the reliefs claimed were entirely different.
  
  3. Applicability of Res Judicata and Order 23, Rule 1:
  
  The High Court clarified that the bar of res judicata and Order 23, Rule 1 of the CPC, which prevents filing a subsequent suit on the same cause of action without leave, does not apply to proceedings under sections 397 and 398 of the Companies Act. The court reasoned that these proceedings are not suits but rather applications involving broader issues of public interest, including the interests of creditors and shareholders.
  
  4. Distinction Between Proceedings Under Sections 397/398 and Civil Suits:
  
  The court underscored the distinction between proceedings under sections 397/398 and civil suits. It highlighted that proceedings under these sections are not strictly between private parties and involve broader considerations, including public interest. The court cited various judgments to support the view that the reliefs and subject matter in the company petition did not overlap entirely with those in the earlier civil suit, thus allowing for the maintainability of the company petition.
  
  Conclusion:
  
  The High Court allowed the appeal, setting aside the CLB's order dismissing the company petition. It directed the CLB to decide the company petition and connected applications afresh and on merits. The court refused the respondents' request for a stay of the order, emphasizing the distinct nature and broader scope of proceedings under sections 397 and 398 compared to civil suits.

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• 2010 (2) TMI 1326
  
  Issues Involved:
  
  1. Whether the transaction of granting the right to collect tolls under a Build, Operate & Transfer (BOT) scheme constitutes a "lease" under Section 105 of the Transfer of Property Act, 1882, and Section 2(16) of the Indian Stamp Act, 1899.
  2. The constitutional validity of the amendment made in the proviso to the third clause of Article 33 of Schedule 1-A by the Indian Stamp (M.P.) Act, 2002.
  3. The legality of Sections 48 and 48B as amended by M.P. Act 24 of 1990.
  4. Whether the transaction should be classified as a "license" rather than a "lease."
  5. The competence of the State Legislature to amend the Indian Stamp Act and prescribe stamp duty rates.
  6. The applicability of the decision of the Cabinet regarding the imposition of stamp duty.
  
  Detailed Analysis:
  
  1. Lease vs. License:
  The primary issue was whether the transaction under the BOT scheme constituted a "lease" or a "license." The court examined the definitions under Section 105 of the Transfer of Property Act and Section 2(16) of the Indian Stamp Act. A "lease" involves a transfer of a right to enjoy the property for a certain period with consideration, whereas a "license" does not create an interest in the property. The court found that the agreement allowed the Concessionaire to collect tolls for fifteen years, which constituted a transfer of the right to enjoy the property. The agreement included elements of possession, consideration, and a fixed term, all indicative of a lease. The court concluded that the transaction was a "lease" and not a "license."
  
  2. Constitutional Validity of Article 33 Amendment:
  The amendment to Article 33 of Schedule 1-A of the Indian Stamp Act by the M.P. Amendment Act, 2002, was challenged for being ultra vires. The court held that the amendment was within the legislative competence of the State as it pertained to prescribing stamp duty rates, which is a power conferred to the State under the Constitution. The amendment provided a specific rate of stamp duty for transactions under the BOT scheme, which was found to be consistent with the legislative framework.
  
  3. Legality of Sections 48 and 48B:
  Sections 48 and 48B of the Indian Stamp Act, as amended by the M.P. Act, were challenged for lacking a proper adjudication mechanism. The court found that these provisions were not arbitrary or unconstitutional. They provided a mechanism for the recovery of stamp duty and penalties, which was within the legislative competence of the State.
  
  4. Classification as Lease or License:
  The court analyzed whether the transaction should be classified as a "license" rather than a "lease." The Concessionaire was given the right to collect tolls, maintain, and operate the road, which involved a transfer of interest in the property. The court emphasized that the nomenclature of the agreement was not decisive; instead, the substance and the rights conferred were crucial. The court held that the transaction was a "lease" due to the transfer of interest and the right to enjoy the property.
  
  5. Competence of State Legislature:
  The court addressed the argument regarding the State Legislature's competence to amend the Indian Stamp Act and prescribe stamp duty rates. It was held that the State had the authority to legislate on stamp duties for instruments not specified in the Union List, as per the Constitution. The amendment was found to be within the State's legislative powers.
  
  6. Applicability of Cabinet Decision:
  The petitioners argued that the Cabinet had decided not to impose stamp duty on such transactions, and the amendment was brought later. The court held that the agreements were executed after the amendment came into force, and thus, the prevailing stamp duty rates at the time of agreement execution were applicable. The court dismissed the argument based on the Cabinet's prior decision.
  
  Conclusion:
  The court concluded that the transactions in question were leases under Section 105 of the Transfer of Property Act and Section 2(16) of the Indian Stamp Act. The amendment to Article 33 of Schedule 1-A by the M.P. Amendment Act, 2002, was not ultra vires. The writ petitions were dismissed, and the court upheld the classification of the transaction as a lease, subject to the applicable stamp duty.

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• 2010 (2) TMI 1325
  
  Issues involved: Interpretation of the definition of 'purchase price' u/s 2 (gg) of U.P. Trade Tax Act, disallowance of amount paid for plant and machinery as fixed capital investment, treatment of Central Excise Duty charged on sale invoices, impact of incentives under Central Excise Act on purchase price, consideration of subsidies or incentives on capital goods, disallowance of capital investment in car parking u/s 4-A of U.P. Trade Tax Act.
  
  Interpretation of 'purchase price' u/s 2 (gg) of U.P. Trade Tax Act:
  The revision was filed against the tribunal's order disallowing the amount paid for plant and machinery as fixed capital investment. The counsel argued that the investment in plant and machinery should be considered as part of the purchase price as defined in the Act. The court held that the grant of Modvat does not alter the price paid for goods purchased and should be included in fixed capital investment. Therefore, questions (i), (ii), and (iii) were answered in favor of the assessee.
  
  Treatment of Central Excise Duty on sale invoices:
  The department disallowed the fixed capital investment by considering the Central Excise Duty charged on sale invoices as part of the purchase price. The counsel contended that the investment in plant and machinery should be recognized as per the Act's definition of purchase price. The court ruled that incentives like Modvat do not diminish the investment made by the assessee, which should be included in fixed capital investment. Questions (i), (ii), and (iii) were decided in favor of the assessee.
  
  Impact of incentives on capital goods:
  The court emphasized that any subsidy or incentive given to a manufacturer should not reduce the purchase price of essential capital goods. The tribunal's decision to exclude the amount paid for plant and machinery from fixed capital investment due to Modvat was deemed unjustified. The court ruled in favor of including the investment in fixed capital, aligning with the definition provided in the Act.
  
  Disallowance of capital investment in car parking u/s 4-A of U.P. Trade Tax Act:
  Regarding the obligation to provide car parking as per the regulations of the Ghaziabad Development Authority, the tribunal disallowed the capital investment made by the assessee in car parking. However, the court acknowledged the statutory requirement for car parking and ruled in favor of including this investment as part of fixed capital investment. The revision was allowed, modifying the tribunal's order accordingly.

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• 2010 (2) TMI 1324
  
  Issues Involved:
  1. Whether a single complaint is maintainable for dishonor of two cheques issued by two different persons.
  2. Validity of the notice issued u/s 138 of the Negotiable Instruments Act.
  
  Summary:
  
  Issue 1: Single Complaint for Two Cheques by Different Persons

  1. The petitioners-accused filed for quashing the proceedings in C.C. No. 181 of 2009, alleging an offence u/s 138 of the Negotiable Instruments Act.

  2. The second respondent filed a complaint u/s 138 of the Negotiable Instruments Act, stating that the petitioners issued two cheques totaling Rs. 11.44 Lakhs, which were dishonored for insufficient funds.

  3. The petitioners contended that a single complaint against both accused is not maintainable as separate cheques were issued by each accused.

  4. The second respondent argued that there is no illegality in filing a single complaint against both accused.

  5. The court referred to previous decisions, including E. Madhu and B. Venkat Narendra Prasad, which allowed single complaints for multiple cheques issued by the same accused.

  6. The court noted that the present case involves two cheques issued by two different persons, a situation not addressed in the cited decisions.

  7. The court found that both cheques were issued during the same transaction involving a land deal, making it a single transaction.

  8. The court examined Section 223 of the Code of Criminal Procedure, which allows joint trials for persons accused of the same offence committed in the course of the same transaction.

  9. The court concluded that the present case falls within Section 223(c) and (e) of the Code, allowing a joint trial as the cheques were issued in the course of the same transaction.

  10. The court held that there is no illegality in holding a joint trial, even if there is some procedural irregularity, as long as no prejudice is shown to have been caused to the accused.

  11. The petition was dismissed, upholding the maintainability of a single complaint for dishonor of two cheques issued by two different persons.

  Issue 2: Validity of Notice u/s 138

  12. The petitioners argued that the notice was invalid as it demanded a consolidated amount without specifying individual liabilities.

  13. The court referred to the Supreme Court's decision in K.R. Indira v. Dr. G. Adinarayana, which required a specific demand for the cheque amount in the notice.

  14. The court examined the notice dated 25.10.2004, which clearly demanded the amount covered by the two dishonored cheques.

  15. The court found that the notice complied with the requirements set out in Indira's case, making it valid.

  16. The court held that the notice was proper and the complaint was maintainable.

  Conclusion:

  25. The petition was dismissed, upholding the maintainability of a single complaint for dishonor of two cheques issued by two different persons and the validity of the notice issued u/s 138 of the Negotiable Instruments Act.

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• 2010 (2) TMI 1323
  
  Issues Involved:
  1. Jurisdiction of the court u/s 227 of the Constitution of India read with Section 482 CrPC.
  2. Validity of the complaint under the repealed Foreign Exchange Regulation Act, 1973 (FERA) and its transition to the Foreign Exchange Management Act, 1999 (FEMA).
  3. Interpretation of Section 49(3) of FEMA regarding the cognizance of offences under the repealed FERA.
  
  Summary:
  
  1. Jurisdiction of the court u/s 227 of the Constitution of India read with Section 482 CrPC:
  The Criminal Application invoked the court's jurisdiction under Article 227 of the Constitution of India read with Section 482 CrPC to challenge an order dated 27/3/2008 by the Sessions Court for Greater Bombay in Criminal Revision Application No. 921 of 2005. The Additional Sessions Judge upheld the Magistrate's order issuing process and dismissed the Revision Application of the applicant.
  
  2. Validity of the complaint under the repealed Foreign Exchange Regulation Act, 1973 (FERA) and its transition to the Foreign Exchange Management Act, 1999 (FEMA):
  The complaint was filed by the Enforcement Directorate alleging offences under Section 120B of IPC, Section 56(1)(ii) read with Section 19(1)(b) of FERA, 1973, and Sections 64(2), 68(1), and 68(2) of FERA, 1973, all read with Sections 49(3) and 49(4) of FEMA, 1999. The applicants contended that the complaint was barred by law as FERA was repealed by FEMA, which does not provide for criminal prosecution. They argued that the cognizance of offences under the repealed Act was barred after two years from the commencement of FEMA.
  
  3. Interpretation of Section 49(3) of FEMA regarding the cognizance of offences under the repealed FERA:
  The applicants argued that Section 49(3) should be interpreted to mean that no court shall take cognizance of an offence under the repealed Act after two years from the commencement of FEMA. They relied on the Rule of Last Antecedent and various judicial precedents to support their contention. However, the prosecution contended that both criminal proceedings and adjudication under the old Act are saved if initiated within the stipulated period. The court held that Section 49(3) must be read as a whole, and both offences and adjudication proceedings can continue if cognizance is taken within the statutory period. The court rejected the applicants' interpretation and upheld the orders issuing process and rejecting the discharge applications.
  
  Conclusion:
  The court dismissed the Criminal Application, discharged the rule, and vacated any ad-interim orders. The court emphasized that the legislative intent was to save both criminal and adjudication proceedings under the repealed FERA, provided they were initiated within the specified period under FEMA.

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• 2010 (2) TMI 1322
  
  Issues Involved:
  1. Sustainment of penalty under Section 272A(2)(e) of the IT Act, 1961.
  2. Assessment at NIL income and the intention behind delayed returns.
  3. Exemption under Section 10(22) and obligation to submit returns.
  4. Nature of returns filed under Section 148 and their regularization.
  5. Validity of returns deemed 'Non est in law'.
  6. Time limits for filing returns under Section 139(4) and penalty computation.
  7. Jurisdiction of JCIT, Kurnool in levying penalties.
  8. Raising jurisdictional objections during penalty proceedings.
  9. Reasonable cause for delay in filing returns.
  10. Timeliness of penalty imposition.
  11. Limitation period for assessment and penalty for the year 1997-98.
  
  Issue-wise Detailed Analysis:
  
  1. Sustainment of Penalty:
  The CIT(A) Guntur's order sustaining the levy of penalty under Section 272A(2)(e) was challenged. The Tribunal upheld the penalty, noting that the assessee did not file returns from 1997-98 to 2003-04 and filed them voluntarily in October 2004 without any evidence of departmental insistence.
  
  2. Assessment at NIL Income:
  The assessee claimed no deliberate intention to delay filing since the income was assessed at NIL. The Tribunal found this argument unconvincing, emphasizing the legal obligation to file returns irrespective of the assessed income.
  
  3. Exemption under Section 10(22):
  The Tribunal noted that the assessee's income was exempt under Section 10(22) as a charitable trust. However, it held that the obligation to file returns persisted, as supported by case law, including the Punjab & Haryana HC in Late Gopi Mal Kuthiala Charitable Trust Vs. ITO.
  
  4. Nature of Returns Filed:
  The Tribunal clarified that returns filed voluntarily in October 2004 were not in response to any notice under Section 148, thus invalidating the claim that these were regularized returns.
  
  5. Validity of Returns:
  The returns filed were deemed 'Non est in law' as they were beyond the prescribed time limits. The Tribunal upheld the JCIT's treatment of these returns as invalid, leading to continuous default until the penalty was levied.
  
  6. Time Limits for Filing Returns:
  The Tribunal agreed with the assessee that penalty should be computed only up to the time limits prescribed under Section 139(4). It directed the AO to recompute the penalty accordingly.
  
  7. Jurisdiction of JCIT, Kurnool:
  The Tribunal upheld the JCIT, Kurnool's jurisdiction, noting that the main trustee resided in Kurnool, and the engineering college was located there. The assessee's failure to raise jurisdictional objections timely further validated the JCIT's jurisdiction.
  
  8. Raising Jurisdictional Objections:
  The Tribunal found the assessee's jurisdictional objections untimely and without merit. It emphasized that such objections should have been raised within the time allowed by notice under Section 148.
  
  9. Reasonable Cause for Delay:
  The Tribunal rejected the assessee's claim of reasonable cause for delay, noting the trust's active operations and lack of specific reasons for the delay. It emphasized that negligence and lack of due care could not constitute a sufficient cause.
  
  10. Timeliness of Penalty Imposition:
  The Tribunal dismissed the argument that penalties should be imposed within a reasonable period, noting no prescribed time limit under Section 272A(2)(e) and the independence of penalty proceedings from assessment proceedings.
  
  11. Limitation Period for 1997-98:
  The Tribunal acknowledged that for the assessment year 1997-98, the time limit for filing returns under Section 148 expired on 31.3.2004. It held that the penalty could not be levied for returns filed beyond this date.
  
  Conclusion:
  The Tribunal partly allowed the appeals, directing the AO to recompute the penalty based on the time limits under Section 139(4) and upheld the JCIT's jurisdiction and the validity of penalties for the other years.

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• 2010 (2) TMI 1321
  
  The Supreme Court of India dismissed the special leave petition after hearing the counsel for the petitioner.

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• 2010 (2) TMI 1320
  
  Issues Involved:
  1. Addition on account of deficit and excess consumption of raw materials.
  2. Exclusion of 90% of interest income while quantifying business profits u/s 80HHC.
  3. Exclusion of 90% of income from the sale of advance license while quantifying business profits u/s 80HHC.
  4. Levy of interest u/s 234A, 234B, and 234C.
  5. Initiation of penalty u/s 271(1)(c).
  
  Summary:
  
  1. Addition on account of deficit and excess consumption of raw materials:
  The first issue pertains to the addition of Rs. 44,22,659/- for deficit and Rs. 1,53,44,220/- for excess consumption of raw materials compared to Standard Input Output Norms prescribed by the Government of India. The Tribunal referred to the assessee's own case in ITA No.554 and 997/Ahd/2006, where it was held that the CIT(A) wrongly relied on the input-output consumption ratio. The Tribunal found that the assessee demonstrated better consumption than the prescribed norms and deleted the addition, allowing the assessee's appeal on this issue.
  
  2. Exclusion of 90% of interest income while quantifying business profits u/s 80HHC:
  The next issue involves the exclusion of 90% of interest income amounting to Rs. 1,89,975/- from business profits while quantifying deduction u/s 80HHC. The Tribunal cited the decision of the Hon'ble Delhi High Court in CIT v Shri Ram Honda Power Equip 289 ITR 475 (Delhi), which mandates that only net interest (gross interest less expenditure incurred to earn such interest) should be excluded. The issue was restored to the AO to decide as per this decision, allowing the assessee's appeal for statistical purposes.
  
  3. Exclusion of 90% of income from the sale of advance license while quantifying business profits u/s 80HHC:
  The issue of excluding 90% of income from the sale of advance license amounting to Rs. 1,92,500/- was addressed by referring to the Mumbai Special Bench decision in Topman Exports v. ITO (2009) 318 ITR (AT) 87 (Mum) (SB). The Tribunal directed the AO to re-verify the issue in light of this decision, allowing the assessee's appeal for statistical purposes.
  
  4. Levy of interest u/s 234A, 234B, and 234C:
  The grounds related to the levy of interest u/s 234A, 234B, and 234C were not pressed by the assessee and were dismissed accordingly.
  
  5. Initiation of penalty u/s 271(1)(c):
  The appeal against the order of CIT(A) confirming the levy of penalty u/s 271(1)(c) was allowed since the quantum appeal on the variation of consumption of raw materials was already decided in favor of the assessee.
  
  Conclusion:
  Both appeals of the assessee were partly allowed, with specific issues being resolved in favor of the assessee and others being remanded for further verification. The order was pronounced in Open Court on 25/02/2010.

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• 2010 (2) TMI 1319
  
  Issues Involved:
  1. Legality of the High Court's decision to set aside the First Appellate Court's judgment of acquittal.
  2. Proof of motive for the offence under Section 307 of the Indian Penal Code (IPC).
  3. Variance in expert and medical evidence.
  4. Allegation of accidental firing and lack of explanation for the broken weapon.
  
  Detailed Analysis:
  
  1. Legality of the High Court's Decision to Set Aside the First Appellate Court's Judgment of Acquittal:
  The appellant-accused challenged the High Court's decision to overturn the First Appellate Court's acquittal, arguing that the High Court acted beyond its limitations. The Supreme Court emphasized that the High Court has full power to review evidence and reach its conclusions, provided it gives due weight to the trial judge's views, the presumption of innocence, and the benefit of doubt to the accused. The High Court must act with substantial and compelling reasons to reverse an acquittal. The Supreme Court found that the High Court did not err in law and had substantial reasons for setting aside the acquittal, as the First Appellate Court's decision was based on assumptions and lacked support from the evidence.
  
  2. Proof of Motive for the Offence Under Section 307 IPC:
  The appellant argued that no specific motive was proven. The Supreme Court noted that while the exact motive might not have been established, there was sufficient reason for the accused to act offensively. The dispute over irrigation from the tubewell provided a context for the accused's actions. The High Court found this reason enough to support the prosecution's case, even if it did not amount to a clear motive.
  
  3. Variance in Expert and Medical Evidence:
  The appellant contended that the expert and medical evidence were at variance, which should have resulted in the benefit of doubt. The Supreme Court held that differences in expert opinions, especially when none of the experts were ballistic experts, do not necessarily undermine the prosecution's case. The medical evidence supported the prosecution's narrative, and the injuries were consistent with gunshot wounds. The Court noted that minor discrepancies in expert opinions do not automatically entitle the accused to an acquittal.
  
  4. Allegation of Accidental Firing and Lack of Explanation for the Broken Weapon:
  The appellant claimed the firing was accidental and the prosecution failed to explain how the weapon was broken. The Supreme Court found no merit in this argument, stating that the accused's own report indicated the gun broke after the shots were fired. The prosecution's evidence, including eyewitness testimonies and medical reports, supported the intentional firing by the accused. The Court emphasized that the prosecution proved its case beyond a reasonable doubt, and the explanation for the broken gun was secondary to the primary issue of whether the accused fired intentionally.
  
  Conclusion:
  The Supreme Court upheld the High Court's judgment, affirming the conviction under Section 307 IPC and Section 25(1)(a) of the Arms Act. The appeal was dismissed, and the Court found no reason to interfere with the High Court's decision, which was based on a thorough re-appreciation of the evidence and was legally sound.

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• 2010 (2) TMI 1318
  
  Issues involved:
  The judgment involves a revision under Section 397/401 of the Code of Criminal Procedure against a judgment passed by the 1st Addl. Sessions Judge, Tikamgarh in Criminal Appeal No. 66/09, affirming a sentence under Section 138 of the Negotiable Instruments Act.
  
  Revision under Section 397/401:
  The applicant/accused filed a revision against the judgment convicting him for the offence under Section 138 of the Negotiable Instruments Act. The Appellate Court set aside the sentence in default of depositing the damages amount, leading to the revision.
  
  Facts and Background:
  The case involved a loan transaction between the Respondent/complainant and the applicant, where the applicant issued a cheque that was dishonored due to insufficient funds. The Respondent sent multiple demand notices, leading to the filing of the complaint under Section 138 of the Act.
  
  Legal Arguments and Precedents:
  The applicant's Counsel argued that the limitation for issuing the demand notice should have been counted from the date of initial dishonor of the cheque. Citing a precedent, it was contended that failure to follow technical provisions of the Act could prevent conviction.
  
  Court's Analysis and Decision:
  The Court examined the sequence of notices sent by the Respondent and found that the third notice was duly served on the applicant within the prescribed period. Referring to an Apex Court decision, the Court held that the cause of action to file a complaint arises on the expiry of the payment period after notice issuance.
  
  Conclusion:
  Based on the findings of fact and legal precedents, the Court dismissed the revision, stating that the impugned complaint was not barred by time. The applicant was directed to surrender to serve the remaining jail sentence as per the lower Courts' judgment. The interim order for suspension of the sentence was lifted, and the applicant was given a deadline for surrender.

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• 2010 (2) TMI 1317
  
  Issues involved: Challenge to assessment order u/s 158BD of the Act and rejection of stay application by Additional Commissioner of Income Tax.
  
  The petitioner challenged the assessment order passed u/s 158BD of the Act and the rejection of the stay application by the Additional Commissioner of Income Tax. The petitioner had filed an appeal against the block assessment order and a stay application before the Commissioner of Income Tax (Appeals), Meerut. The Additional Commissioner rejected the stay application, while the stay application before the Commissioner of Income Tax (Appeals) was pending. The High Court declined to examine the validity of the block assessment order, noting that the petitioner had already availed an alternative remedy by filing an appeal.
  
  The learned Standing Counsel requested the High Court to direct the Commissioner of Income Tax (Appeals), Meerut to dispose of the stay application in accordance with the law. The petitioner's counsel referred to a case where the Bombay High Court provided parameters for disposing of stay applications. The High Court directed the Commissioner of Income Tax (Appeals), Meerut to expedite the disposal of the stay application within two weeks, following the parameters set by the Bombay High Court, without being influenced by the rejection of the stay application by the Additional Commissioner of Income Tax. Additionally, considering the substantial demand involved, the Commissioner of Income Tax (Appeals), Meerut was directed to decide the appeal promptly.

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• 2010 (2) TMI 1316
  
  Issues involved: Interpretation of Section 22 of The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) regarding staying further proceedings in a suit for recovery of money under Order 37 of the CPC.
  
  Summary:
  1. The appellant challenged the order staying proceedings in the suit under Section 22 of SICA, arguing that since nothing remained to be "proceeded with" in the suit, Section 22 did not apply. The contention was based on the judgment in Arjun Singh v. Mohindra Kumar AIR 1964 SC 993.
  
  2. The learned Single Judge held that SICA prevails over other laws, and registration of reference under SICA denudes the court's jurisdiction until approval under Section 22 is sought.
  
  3. Unlike Order 9 Rule 7 of CPC, Section 22 of SICA bars the institution or further proceedings of a suit for recovery of money. The question arises whether proceedings include pronouncement of judgment after arguments are heard and reserved.
  
  4. The appellant relied on legal precedents to support the argument that once judgment is reserved, no further proceedings are required in the suit.
  
  5. The respondent's counsel cited cases emphasizing that pronouncement of judgment is a crucial stage in legal proceedings and the court retains jurisdiction until judgment is pronounced.
  
  6. The term "proceeding" encompasses all steps in a legal action from commencement to judgment execution. The process of pronouncing judgment involves specific legal requirements.
  
  7. The legal steps required after judgment is reserved, such as notice of pronouncement, are considered part of the proceedings. The literal interpretation of Section 22 supports the bar on further proceedings.
  
  8. Section 22 aims to protect sick companies from legal actions, including suits, and the bar applies to all suits against such companies. Differentiating between steps for judgment and other proceedings lacks a rational basis.
  
  9. The appellant's reference to Section 33 of CPC to argue for pronouncement of judgment after hearing is rejected, as Section 22 of SICA prevails. Allowing judgment pronouncement post-reservation could lead to inconsistent legal interpretations.
  
  10. The appeal is dismissed with no order as to costs, concluding that the bar under Section 22 applies to prevent further proceedings in the suit.

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• 2010 (2) TMI 1315
  

  Negotiable Instruments Act - offence punishable u/s 138 - cheque not issued on the date mentioned - ascertaining the age of the writings and the age of the ink used for the writing - HELD THAT:- Considering the matter on record and relying on different decisions we are of opinion that there is no expert in terms of Section 45 of the Indian Evidence Act available who could be in a position to offer any opinion regarding the age of the ink by adopting any scientific method. In view of all the above, we are inclined to interfere with the order of the learned Sessions Judge.

  In the result, the revision is allowed and the impugned order of the learned Sessions Judge is set aside and the order of the learned Judicial Magistrate No. II, Pollachi is restored. Consequently, connected Miscellaneous Petition is closed.

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• 2010 (2) TMI 1314
  
  Issues involved: Appeal against deduction u/s.80IA of the Income Tax Act, 1961.
  
  Issue 1: Justification of deduction u/s.80IA
  
  The appeal raised the issue of justification in allowing deduction u/s.80IA of the Income Tax Act, 1961, based on a previous order of the ITAT Mumbai. The department had not accepted the referred order and had appealed to the High Court, Mumbai against the same.
  
  Details: The Assessing Officer denied the deduction u/s.80IA to the assessee, considering them solely as a contractor in a water supply project, not engaged in infrastructure development. The CIT(A), however, reversed this decision, citing the decision of a Larger Bench in a similar case. The Tribunal, following the precedent, set aside the CIT(A)'s order and reinstated the Assessing Officer's decision, denying the deduction u/s.80IA.
  
  Key Takeaways:
  - The issue was decided based on the nature of the assessee's work and their eligibility for the deduction u/s.80IA.
  - Precedents and decisions from higher authorities played a crucial role in determining the outcome of the appeal.
  - The Tribunal's decision aligned with the interpretation of the law and previous judgments, leading to the denial of the deduction in this case.

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• 2010 (2) TMI 1313
  
  Issues involved: Appeal against denial of deduction u/s.80-IA(4) for a civil contractor in relation to a water supply project.
  
  The judgment pertains to an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) granting deduction u/s.80-IA(4) for the assessment year 2004-2005 to a civil contractor involved in a water supply project for Hyderabad Metropolitan Water Supply and Sewerage Board. The Assessing Officer initially denied the deduction, which was later overturned by the CIT(A) in favor of the assessee.
  
  Upon hearing the arguments from both sides and examining the relevant material, the Tribunal found that the case at hand was similar to a precedent set by a Larger Bench in the case of M/s.B.T.Patil & Sons Belgaum Construction Private Limited Vs. ACIT [(2010) 36 SOT 171 (Mum) (LB)], where it was established that deduction u/s.80-IA(4) is applicable only to the developer of an infrastructure facility and not to a contractor. The Tribunal noted that there were no distinguishing features in the facts of the present case compared to the precedent case. Consequently, the Tribunal decided to overturn the order of the CIT(A) and reinstate the decision of the Assessing Officer, ruling that the assessee, being a contractor, was not eligible for deduction u/s.80-IA(4).
  
  In conclusion, the appeal by the Revenue was allowed, and the order was pronounced on February 9, 2010.

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• 2010 (2) TMI 1312
  
  Issues Involved:
  1. Whether the cheque issued by the respondent was for the discharge of an existing debt or liability.
  2. Whether the cheque was issued as security for the loan.
  3. Whether the provisions of Section 138 of the Negotiable Instruments Act are applicable.
  4. Whether the Trial Court was correct in acquitting the respondent based on the evidence presented.
  
  Summary:
  
  1. Existing Debt or Liability:
  The Trial Court acquitted the respondent on the grounds that the cheque was not issued for an existing debt or liability. The respondent had repaid the entire loan by 2005 and provided receipts as evidence. The court found that the amounts paid by the respondent were not reflected in the account extract produced by the complainant, thus failing to prove that Rs. 87,209/- was due on the date of the cheque.
  
  2. Cheque Issued as Security:
  The court held that the cheque in question was one of ten blank cheques obtained by the applicant bank as security while sanctioning the loan. The respondent did not issue the cheque towards any existing debt or liability. The evidence showed that the cheque book containing the cheque in question was issued on 04.10.2000, and the respondent was not using cheques from this book in 2008, supporting the claim that the cheque was given as security.
  
  3. Applicability of Section 138 of the Negotiable Instruments Act:
  The court discussed the object and purpose of Section 138, which is to punish those who issue cheques without sufficient funds to discharge their liabilities. However, the court noted that Section 138 is not intended to cover cheques issued as security for loans. The court cited several cases where cheques given as security were held not to attract the provisions of Section 138, including *Anand Urban Co-operative Credit Society v. Vipin Lalchand Mehta* and *Karekar Finance Pvt. Ltd. v. Shri M.N. Bashyam*.
  
  4. Trial Court's Acquittal:
  The Trial Court's decision was based on three main grounds: the cheque was one of ten blank cheques obtained as security, there was a bar of limitation, and the amounts paid by the respondent were not reflected in the account extract. The court found the evidence of the respondent reliable and noted that the complainant failed to produce account extracts up to the date of the cheque, leading to an adverse inference. The court concluded that it was not proved that Rs. 87,209/- was outstanding on the date of the cheque, thus provisions of Section 138 were not attracted.
  
  Conclusion:
  The High Court dismissed the application for leave to file an appeal against the order of acquittal, agreeing with the Trial Court's findings and reasoning. The court emphasized that Section 138 of the Negotiable Instruments Act is not applicable to cheques issued as security for loans.

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