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2014 (4) TMI 1333
Seeking release on bail/suspension of sentence in the matters where the conviction is recorded for the offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 - Contraband item - HELD THAT:- The issue was considered by Hon'ble the Supreme Court in the case of Rattan Mallik [2009 (1) TMI 844 - SUPREME COURT], wherein too the Apex Court emphasised that the conditions given under Section 37 of the Act of 1985 are cumulative and mandatory, thus, required to be taken into consideration while dealing with an application for grant of release on bail and the court, if finds it proper to grant such application, is under a statutory obligation to record its satisfaction.
In the case of Mansingh [2004 (9) TMI 718 - SC ORDER], Hon'ble the Supreme Court granted an application seeking suspension of sentence during pendency of an appeal before the High Court by taking into consideration the substantial period of imprisonment already undergone and further the circumstance of no likelihood of expeditious hearing of the appeal.
As a matter of fact, the court in this case did not examine the requirements of Section 37 as the order was passed for doing complete justice as the accused was behind the bars for a period of more than seven years and there was no chance of expeditious hearing of the appeal. Such an order was passed by Hon'ble the Supreme Court in exercise of its extraordinary powers available under Article 142(1) of the Constitution of India. The Apex Court as per the provision aforesaid is having an authority to make such order,if necessary for doing complete justice in any cause or matter pending before it.
The authority of Hon'ble the Supreme Court under Article 142 of the Constitution of India is an extraordinary authority and that is not abide by the statutory provisions. The power available can very well be exercised beyond statutory limits if that is required for dispensing complete justice in any case. It shall be pertinent to notice here that as per Article 141 of the Constitution of India the law declared by the Supreme Court shall be binding on all courts within the territory of India, as such, the binding effect in the form of precedent is available to the judgments declaring law by the Apex Court. Article 142 of the Constitution of India nowhere refers judgments but decree or order.
Hon'ble Supreme Court may grant release on bail or suspension of sentence without getting itself satisfied with the requirements of Section 37 of the Act of 1985, if that is necessary for doing complete justice, such an authority, however, is not available to the High Court or the trial court, as the case may be. As already stated, the order passed in the case of Mansingh is a reflection of the authority exercised under Article 142 of the Constitution of India, thus, is not having a binding effect or in other words, an authority of precedent for the High Court or the other courts subordinate.
Conclusion - i) The extraordinary powers under Article 142, do not constitute a precedent for lower courts regarding bail applications under the NDPS Act. ii) Lower courts must adhere to the statutory requirements of Section 37 when considering bail applications, ensuring that the twin conditions are satisfied.
The reference is answered accordingly.
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2014 (4) TMI 1332
Quantum of compensation awarded by the Tribunal - excessive or not - appropriate method for determining the deceased's monthly income for compensation calculation - HELD THAT:- It is pertinent to note that the only available documentary evidence on record of the monthly income of the deceased is the income tax return filed by him with the Income Tax Department. The High Court was correct therefore, to determine the monthly income on the basis of the income tax return. However, the High Court erred in ascertaining the net income of the deceased as the amount to be taken into consideration for calculating compensation, in the light of the principle laid down by this Court in the case of National Insurance Co. Ltd. v. Indira Srivastava and Ors. [2007 (12) TMI 538 - SUPREME COURT].
The High Court erred in making deductions under various heads to arrive at the net income instead of ascertaining the gross income of the deceased out of the annual income earned from his occupation mentioned in the income tax return submitted for the relevant financial year 1994-1995.
As per the Income Tax return of the financial year 1994-1995 produced on record, the deceased was earning Rs. 88,660/- per annum or Rs. 7330/- per month. Further, the deceased being 46 years of age at the time of death, he is entitled to 30% increase in the future prospects of income - Also, since the deceased was 46 years of age at the time of the accident, a multiplier of 13 seems appropriate for determining the quantum of compensation.
Conclusion - An interest @ 9% per annum on the compensation to be awarded to the Appellants-claimants granted. The compensation awarded shall be apportioned between the Appellants equally with proportionate interest. We direct the Insurance Company to deposit 50% of the awarded amount with proportionate interest in any of the Nationalized Bank of the choice of the Appellants for a period of 3 years.
Appeal disposed off.
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2014 (4) TMI 1331
Validity of SCN issued to the appellant regarding the service tax liability on the sale and purchase of foreign exchange - Liability to pay service tax under Rule 6(7B) of the Service Tax Rules, 1994, at the rate of 0.25% of the gross amount of currency exchanged - HELD THAT:- Nowhere in the Statue there is any provision for demanding service tax on the ground that the consideration charged for providing service is not up to the expectations of the Revenue authorities. Here is a case where learned Commissioner has proceeded to determine the appropriateness or the correctness of the quantum of consideration charged by the appellants to their customers without even having any evidence to show that there was excess collection and the amount shown as service charges was in reality not the correct service charge. The order is totally contrary to the provisions of law, equity and justice. It is very sad to note that even penalty under Section 78 has been imposed equivalent to the service tax levied on the ground of suppression and mis-declaration whereas the whole proceedings have arisen because of lack of understanding of the legal provisions by the lower authorities.
Conclusion - Rule 6(7B) is an optional provision and cannot be enforced if the service provider does not choose to avail of it. Additionally, penalties under Section 78 require clear evidence of suppression or mis-declaration. There are no justification to uphold the impugned order and allow the appeal at this stage itself finally and the appellant shall get back the refund of 50% which they have deposited within a reasonable time without further creating additional difficulties and passing orders which are contrary to the provisions of law.
Appeal allowed.
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2014 (4) TMI 1330
Winding up of company - inability to pay debts - legality of statutory notice served under Section 434 of the Companies Act - Enforceability of Loan Agreement - HELD THAT:- The document, copy whereof is annexure A to the affidavit-in-reply is an undated document. Although it describes itself as an agreement, it bears no date nor is it signed on behalf of the petitioner. However, it is signed on behalf of the Company.
In the case of New Red Bank Tea Co. (P.) Ltd. v. Jahar Roy [2002 (8) TMI 781 - HIGH COURT OF CALCUTTA], a Division Bench of this Court laid down that defence not taken in the reply to the statutory notice but taken for the first time in the affidavit-in-opposition filed in the Court, cannot be accepted for holding that the Company's refusal to pay is based on bona fide defence or the non-payment of the debt did not amount to its neglect to pay. In the instant case, the Company did not even bother to reply to the statutory notice.
The Company has not disputed the receipt of Rs. 30 lakhs. Its contention that as per the 'Loan Agreement', the entire sum had not become due and payable as on the date of filing of the winding up petition cannot be accepted since as already noted above, the concerned document cannot be taken to be an agreement. It does not appear that the Company has any bona fide defence to the petitioner's claim.
Conclusion - The Company is unable to pay its debts; the statutory notice is valid. The 'Loan Agreement' is not enforceable. The winding up petition is not premature.
This Company petition is admitted for a sum of Rs. 35,47,890/-. However, the Company is given opportunity of repaying this amount in five equal monthly installments, the first of which is to be paid on or before 15th May, 2014, and the following installments on the 15th day of each surrounding month.
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2014 (4) TMI 1329
Refund of the amount of composition of entertainment tax - Entitlement to benefits of the amended composition scheme for entertainment tax, which came into effect on February 23, 1995, despite opting for the scheme on February 1, 1995 - validity of the orders passed by the respondent authorities under the old unamended scheme - HELD THAT:- Well it is true that Rule 32 of the Act of 1957 has not laid down the prescribed procedure for dealing the application for rectification of mistake and sub-rule (3) simply envisage giving notice to the proprietor in the event of enhancing an assessment order, reducing a refund or otherwise increasing the liability of the proprietor. However, on properly construing the amended scheme which was in vogue after 23rd of February 1995, specially qua the petitioner for composition of entertainment tax in terms of unamended Scheme of 08.07.1982 make it amply clear that it has jettisoned the right of the petitioner i.e. eventual aversion to its valuable right for being governed by the amended Scheme for composition of entertainment tax. Therefore, requisite order on application for rectification of mistake ought to have satisfied the requirement of audi alterm partem. In absence of adherence of principles of natural justice, the order which has visited petitioner with evil and civil consequences is per-se vulnerable and cannot be approved.
From the facts pleaded by the rival parties and the materials placed on record, it is not at all clear as to whether the petitioner has collected the tax in terms of unamended scheme for composition of entertainment tax or as per the amended provision which came into force from 23rd of February 1995. The reply of the revenue in this behalf is also conspicuously silent and unspecific. During the course of arguments, this contention has been canvassed with full emphasis but there is no cogent evidence available on record from either side to decide this factual aspect of the matter. If the petitioner has realized tax in terms of old unamended scheme, then obviously the doctrine of unjust enrichment would come into play and if the situation is otherwise, there may be some justification for the claim of refund of the petitioner.
Conclusion - The impugned orders cannot be sustained and are hereby annulled and the matter is remitted back to Deputy Commissioner, Commercial Taxes, Bikaner for deciding application of the petitioner for rectification of mistake submitted under Rule 32 of the Rules of 1957 afresh.
Petition allowed by way of remand.
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2014 (4) TMI 1328
Addition made on account of premium paid to the LIC for Gratuity Fund - HELD THAT:- This issue is covered in favour of the assessee vide judgment of CIT Vs. Textool Co Ltd. [2009 (9) TMI 66 - SUPREME COURT] a bare reading of Section 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees.
In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus, the conditions stipulated in Section 36(l)(v) of the Act were satisfied.
Addition made being fund set apart for the security of the salary of the managers of the primary agricultural societies - HELD THAT:- This issue is squarely covered in favour of the assessee in the case of The Barmer Central Cooperative Bank Ltd. [2013 (8) TMI 763 - ITAT JODHPUR] held that the amount is to be contributed to a fund and the fund is not being managed by the assessee. The assessee may be trustee of that fund but it cannot apply the fund as per his own will. The interest, if any, earned on this fund is also to be credited to that fund, it is therefore, clear that funds stand diverted at the source and therefore, this cannot be considered as an appropriation of income but it is an expenditure. Thus the CIT(A) was justified in deleting the addition.
Appeal of the assessee is allowed.
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2014 (4) TMI 1327
Diversion of funds to subsidiaries - appellant defaulted on repaying bonds amounting to over US$ 100 million - admission of a petition for winding up - appellant and its wholly owned subsidiary Zenith Infotech FZE, Dubai, entered into an Asset Purchase Agreement (APA) for the sale of the remote monitoring and management business (MSD division) to Zenith RMM LLC for a sum of about US$ 55 million - Integrated Market Surveillance System of The Securities & Exchange Board of India (SEBI) generated an alert on the sudden change in the price of the scrip of the appellant.
HELD THAT:- The appellant sought to justify its failure to comply with the representations made by it to the bondholders, shareholders, the Bombay Stock Exchange, the National Stock Exchange and the Bombay City Civil Court. It sought to do so on the basis of the alleged offer. It was necessary, therefore, to consider the case. Had the learned Judge failed to do so, the appellant would have been justified in raising a grievance that it's case had not been considered.
It was also necessary to consider the conduct of the respondent as the appellant sought to resist the order of winding up. One of the important factors for a court to consider such an argument is the bona fides of the persons in the management. This is especially so when the company is admittedly insolvent on the date on which the petition is heard. This aspect becomes even more important when the company refuses to discharge its obligations and fails to come up with any viable scheme for its revival.
Appellant made a strong plea for the mode in which the only existing business ought to be sold. It was necessary, therefore, for the court to consider whether any suggestion by such an appellant ought to be considered. We, in fact, do not see how the learned Judge could have avoided considering the conduct of the appellant in these circumstances.
Had the appellant come forward honestly admitting its liability, expressing its regret for having failed to not merely honour its obligations but also its representations and indicated a genuine intention to repay / redeem the bonds, a lenient view could have been pressed for.
The appellant has, however, supported its stand, shown no remorse and expressed no regret for its failure to pay over US$ 100 million and not offered to bring back the US$ 44 million diverted by it to Zenith Dubai and others. It is, therefore, not open to the appellant to contend that the observations insofar as they are adverse to the appellant were not necessary for deciding the petition. The attitude of the appellant before the learned company Judge and before us left the learned Judge and leaves us with no option but to consider the conduct of the appellant. The submission that the conduct of the appellant is not relevant is unsustainable.
On a parity of reasoning, the fact that the appellant is alleged to have committed a fraud upon the respondent or to have siphoned the money or to have cheated the respondent in a civil case viz. the winding up petition, does not convert it into a criminal case. The ordinary rules applicable to civil cases would apply. On the test of balance of probability, Mr. Seervai has succeeded in establishing the allegations.
Winding up petition - The Official Liquidator would also have to bring the assets of the appellant to sale in a fair, open and transparent manner. The appellant is always at liberty to apply to the company Judge for any directions to ensure that the sale of the assets are conducted properly. We are not inclined to accept the offer for more than one reason.
(a) The assets of the company are wholly inadequate to meet even the appellant's liability towards the respondent of over US$ 100 million. There is not even a suggestion as to how the shortfall can be made up. The reports thus far obtained indicate that the Cloud Computing business is worth no more than about Rs. 210 crores to Rs. 220 crores. The remaining assets are worth only about Rs. 200 crores. Interest is mounting on a daily basis. There is no indication of how the shortfall is likely to be made up.
(b) More importantly, there are two crucial conditions imposed by the appellant neither of which can be accepted. Firstly, the appellant wants the order of winding up not to be stayed, but to be set aside. The justification for this is that the Cloud Computing business would not fetch a proper price if the order is merely stayed. There was no indication why the price would be higher if the order is set aside than if the order is only stayed. The appellant does the respondent no favour by repaying / redeeming the bonds. It is bound to do so. The appellant does not do any one a favour by making the offer. In any event, the assets of the company must be sold in a fair and proper manner and in accordance with law. Any party, including the appellant would be entitled to have the same ensured by making a proper application before the company court.
The appeal is dismissed. However, the winding up order is stayed upto and including 31st August, 2014, in order to facilitate the possible sale of the Cloud Computing business of the appellant as a going concern as directed by the impugned order.
(ii) The application for expunging the remarks is rejected. The findings of the learned Judge and the adverse remarks except to the extent indicated above, are confirmed.
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2014 (4) TMI 1326
Power of SEBI to call for Call Data Records (CDRs) and details of tower location from Telecom Service Providers (TSP) - disclose the names of its officials who had called for such information from TSP and to take necessary action against such officials - Whether action of calling for CDRs from TSP by SEBI violates and infringes the fundamental right of privacy available to citizens of India? - HELD THAT:- There can be no dispute that the SEBI is authorized under the SEBI Act to call for CDRs from the TSP. However, this power is capable of misuse and can violate a citizen's right to privacy guaranteed by Article 21 of the Constitution. Therefore, it is made clear that such a power cannot be exercised by SEBI for conducting a fishing enquiry. It cannot be a blanket power to hunt out information without any pending inquiry or investigation. This power can only be exercised by SEBI in respect of any person against whom any investigation or enquiry is being conducted. Further,such information can be called for only by an officer duly authorized by SEBI to call for information with regard to CDRs from the TSP
The provisions of Section 11(1), 11(2)(i) & (ia) (as amended by Ordinances promulgated by President of India on 16 July 2013, 16 September 2013 and 28 March 2014), Sections 11(3), 11C(3) and 11C(8) of the SEBI Act confer powers on SEBI to call for information and record of CDR of Tower Location from Telecom Service Providers, whether in public sector or in private sector. However, such power is to be exercised after complying with the following safeguards:
(i) such CDRs or information regarding tower location can be called for only in respect of the person against whom any investigation or enquiry is being conducted by SEBI,
(ii) the information may be called for only by an officer who is duly authorized by SEBI as per the delegation order,
(iii) before calling for such information, the opinion of such authorized officer should be recorded in the file indicating application of mind to the effect that CDRs and/or information regarding tower location would be relevant for any investigation or enquiry by SEBI in respect of any transaction in securities, and
(iv) the CDRs of any such subscriber and information regarding tower location is a matter of confidentiality and privacy and therefore such privacy cannot be invaded except in accordance with law.
In our opinion, therefore, the safeguards indicated above are very important and mandatory and SEBI shall henceforth scrupulously observe the same before calling for any CDRs and/or information regarding tower location.
We also make it clear that we are rendering this decision in light of the provisions of the SEBI Act as amended by Ordinances issued by President of India on 16 July 2013, 16 September 2013 and 28 March 2014.
If any CDRs or information regarding tower location have been called for any period not covered by above Ordinances, we do not express any opinion as in this public interest litigation, the petitioner Council cannot espouse the cause of persons whose CDRs have been called for by SEBI for the purposes of investigation or enquiry in respect of any transaction in securities.
PIL is accordingly disposed of in the above terms.
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2014 (4) TMI 1325
Sanction the scheme of arrangement proposed by Analog Financial Services Private Limited under Sections 391 to 394 of the Act between Viswapriya (India) Limited and its secured debenture holders - HELD THAT:- On going through the report of the Chairman of the meeting, it is clear that 93.16% of the debenture holders have agreed to the scheme of arrangement. An affidavit has been filed by the Founder- Director of Viswapriya (India) Limited accepting the scheme of arrangement and undertaking to abide by the scheme of arrangement. That apart, in accordance with the terms of the scheme of arrangement, there are substantial assets to discharge the claims of the debenture holders. Considering all these factors, the Court is of the view that the company petition, as prayed for, can be ordered.
This company petition is ordered as prayed for and the scheme of arrangement between Viswapriya (India) Limited and its secured debenture holders, as proposed by the petitioner; accepted by 93.16% of debenture holders, and undertaken to be honoured by the Managing Director of Viswapriya (India) Limited, is sanctioned.
Application allowed.
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2014 (4) TMI 1324
Refund of the amount paid with interest due to the alleged non-completion of the project - secured claim or not - failure of respondent company to complete the construction and hand over the apartment to the petitioner as per the agreement - HELD THAT:- The petitioner is not confident about the respondent’s commitment made under the memorandum. It is also pointed out that the actual loss suffered by the petitioner is far greater if amounts paid under other accounts are taken into consideration. And further, that the bank which claims to be in symbolic possession of the apartment in question, pursuant to an order passed under the provisions of the SARFAESI Act and hence, the question of the matter being settled on payments now assured by the respondent is impractical. It is also claimed that the Bank cannot claim to have any right over the property in question and it cannot be brought to sale by the bank, it has neither a contractual or statutory right to do so.
It is the claim of the respondent that it cannot be said that it is unable to pay its debts and would assert that the monies due to the respondent have even been repaid to an extent of Rs. 10.00 lakh and the balance sum of money in a sum of Rs. 47.22 lakh is sought to be repaid - In the alternative it is suggested that if the petitioner insists on an immediate and total repayment of the money with interest at least at the rate of 10% per annum, it would be possible if the apartment is permitted to be sold to a third party. The proceeds from such sale could not only satisfy the dues of the Bank, it would also satisfy the dues payable to the petitioner. This would however, require the petitioner to agree to give a quietus to all matters arising out of the transaction pending elsewhere, secondly, it would require the Bank to restrict its claim to interest on the principal amount at a reasonable rate and not as per the terms of the loan agreement. It would also be required of the petitioner and the Bank, to cooperate with the petitioner to bring the property in question to sale and permit the transfer in favour of a third party.
It is evident that the respondent has sufficiently demonstrated that it is not incapable of paying its debts - The dismissal of the petition would not however, be fair without resolution of the dispute which is attempted to be resolved by the respondent even making a part payment even during the course of these proceedings - Petition disposed off.
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2014 (4) TMI 1323
Winding up of company - the respondent is legally indebted to the petitioner or not - petitioner would submit that notwithstanding the present proposed settlement whereby the respondent has issued a cheque for a sum of Rs. 10,00,000/- and proposes to pay the remaining amount with interest at 10% - HELD THAT:- Given the circumstances that there is now a proposal by the respondent to repay the remaining amount with interest thereon at 10%, it would be appropriate if the respondent could also pay a nominal interest on the amount of Rs. 31,00,000/- which has been paid. Hence, the interest for the said amount is directed to be paid at Rs. 75,000/-. Though the learned counsel for the petitioner is yet dissatisfied and would submit that the Court may proceed to pass appropriate orders on merits, therefore, the present order.
This Court is satisfied that the respondent is able to meet its commitments and it would not be just and fair to wind up the respondent. Recording the undertaking of the respondent that the remaining amount shall be repaid as proposed in the memo dated 28.03.2014 along with an additional sum of Rs. 75,000/- as interest towards Rs. 31,00,000/- that has already been paid, the petition is dismissed.
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2014 (4) TMI 1322
Seeking declaration that the affairs of the first respondent company ought to be investigated by Inspector or Inspectors appointed by the Central Government and to further direct the Central Government to appoint as many Inspectors as required to investigate into the affairs of the first respondent company and submit a report thereof - HELD THAT:- A reading of Section 237 of the Companies Act, 1956 makes it clear that it enables the Central government to appoint inspectors to investigate the affairs of a company in case of two eventualities. Firstly, when the company has by a special resolution requested the Central Government to do so, or the Court by order has declared that the affairs of the company ought to be so investigated by an Inspector appointed by the Central Government. Secondly, the section gives a discretion to the Central Government to consider whether such an investigation is called for and it may do so after consideration of circumstances suggesting the conduct of the business in the manner set out in sub clauses (i), (ii) and (iii) to clause (b) of the above section. It is under Section 237(a)(ii) of the Companies the present application has been filed.
There is nothing on record produced by the respondents to show that the suspension of trading in equity shares has been revoked or steps have been taken to comply with the listing agreement. Therefore, the apprehension in the minds of the petitioners regarding listing of shares appears to be bona fide - The petitioners, being shareholders of the first respondent/company, it is stated are kept in dark and are not informed of any major activities of the first respondent/company like amalgamation, listing and de-listing of shares. All that the respondents claim is that due notice has been sent to the petitioners and they are not responsible for the non delivery of such notices.
The only reason stated by the respondents so far for non compliance of the order passed by this Court earlier is “bulkiness of the records required” and that by no stretch of imagination can be accepted to be genuine ground for a period of over five years. The facts, as presented, clearly make out a case for this Court to direct the Central Government to order investigation into the affairs of the first respondent/company, more particularly in view of the fact that the first respondent/company has not furnished the information in respect of its affairs, which it is reasonably expected to furnish - the petitioners have made out a prima facie case to direct the Central Government to appoint Inspector or Inspectors to investigate into the affairs of the first respondent/company.
The Central Government is directed to investigate into the affairs of the first respondent/company by appointing an Inspector or Inspectors, as they deem fit, as per the provisions of the Companies Act, and submit a report to this Court - Petition allowed.
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2014 (4) TMI 1321
Winding up of company - Non-payment of acknowledged debt by the respondent - Validity and interpretation of the Novation and Transfer Agreement (NAAC) - Applicability of Rule 21 of the Companies Court Rules, 1959 - HELD THAT:- Prima facie, from the admission of debt prior to the agreement dated 15.3.13 and going through the terms of the NAAC dated 15.3.13, coupled with the statutory notice dated 20.11.13, which has not been denied by the respondent, it is clear that the respondent is a beneficiary of goods sold and delivered for value and debt, which is acknowledged and the liability having been accepted, despite the agreement dated 15.3.13 to pay the debt, a clear case of inability to pay has been established by the petitioner.
From a plain reading of Sub-section (24) of Section 2 of the Companies Act, 1956, it is clear that the said term is an inclusive definition and, therefore, Manager (Law) of the petitioner company, who has signed the petition is duly authorised by the Board and, therefore, he would come within the definition of 'officer' within the meaning of Rule 21. There are no reason to accept the respondent's plea that Manager, as defined in sub-section 24 of Section 2, would exclude Manager (Law). Therefore, this plea is also rejected.
The plea of the learned counsel for the respondent is that the case of the petitioner involves interpretation of the NAAC and, therefore, there is a clear case of dispute. The interpretation as urged by the learned counsel for the respondent is as to whether the liability would stand as against VLMS or the respondent. Here is a clear case of goods sold and delivered and debt acknowledged prior to 15.3.13 by the respondent. The question is whether the respondent herein, viz., ETA, or the transferee VLMS is liable - there are no justification to non-suit the petitioner on the ground that they have filed a petition before the High Court of Karnataka as against VLMS.
All the plea taken by the respondents appears to be a mirage. In view of the clear admission of liability by acknowledgement of debts on various dates as stated above and the NAAC dated 15.3.13, the non-response to the statutory notice, goes to show that the petitioner has made out a prima facie case for admission - this Court is satisfied that a prima facie case has been made out for proceeding against the respondent under Section 433(e) of the Companies Act.
Call the company petition on 16th June, 2014.
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2014 (4) TMI 1320
Reduction of share capital account - Section 101(1) of the Companies Act, 1956 read with Rules 46 & 47 of the Companies (Court) Rules - HELD THAT:- As stated in the petition and as seen from the balance sheet filed, the decision taken as reduction of share capital is purely a commercial decision to have a true reflection of the financial position of the company. Considering the fact that such move has been approved by the overwhelming majority of the shareholders, apart from the fact that such reduction does not involve any cash out flow to prejudice the rights of the creditors, there are no impediment in granting the relief prayed for herein. Consequently, this petition seeking approval to the resolution passed is hereby granted.
Clause (a) of sub Section (2) of Section 102 of the Companies Act, 1956, provides that the Court may, for any special reason, if it thinks proper so to do, direct the company to add the words “and reduced” to its name on the last words thereof during the period commencing from the date of the Court’s order till such time as the court specifies in its order. The purpose of such inclusion is only to put on notice the investing public the state of affairs of the company and that it has gone for reduction of the capital - Taking note of the circumstances warranting the course for reduction of capital, there being no cash outflow or for any creditor to object, the procedure laid down under Section 100 fully complied with, there is no impediment in granting the prayer confirming the reduction of capital as resolved by the company in its special resolution dated 21.10.2013 confirmed so as to be binding on all the shareholders and creditors of the petitioner company. The words “and reduced” pursuant to the reduction approved, is dispensed with. In the light of the above-said facts, the prayer sought for herein is granted.
The petition is ordered to the effect that approving the resolution passed on 21.10.2013 for the reduction of the share capital to Rs. 5,00,000/- divided into 50,000 equity shares of Rs. 10/- each fully paid up and dispensed with the words “and reduced” pursuant to the reduction.
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2014 (4) TMI 1319
Winding up of company - inability to pay the debts due to the petitioner - Sections 433(e) and (f) of the Companies Act - HELD THAT:- In the case on hand the details as to the insolvency of the respondent company are not filed. It is for the petitioner to come out with all relevant and prima facie evidence to prove that the existing and probable assets of the respondent company are insufficient to meet the existing liabilities and that the company is heavily indebted. The pleadings in the present case are not supported by any materials. That apart, this petition is filed under Sections 433(e) and (f) of the Companies Act and it is for the petitioner to convince the Court that there is no alternative remedy open to it. No such plea is also made and proved by the petitioner.
The financial status does not appear to be bad. Issuing notice in a winding up petition, without any material evidence, is a drastic step which should be avoided, more so in this case. The respondent company need not be summoned to answer issues that are nothing but a mirage. Notice need not be issued as a matter of course.
This company petition is dismissed.
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2014 (4) TMI 1318
Seeking sanction to the arrangement embodied in the Scheme of Amalgamation - sections 391 to 394 of the Companies Act, 1956 - HELD THAT:- Having considered the submissions made in this regard and being satisfied that amalgamation under the proposed Scheme would be in the interest of the companies and their members and creditors, the court is of the view that the Scheme deserves to be sanctioned. The arrangement otherwise seems to be appropriate and hence, it is required to be sanctioned with a specific observation that sanctioning of this Scheme would not absolve anyone who is otherwise liable for any responsibility or liability, only on account of this sanctioning.
Petition disposed off.
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2014 (4) TMI 1317
Winding up of respondent company due to inability to pay its debts - Sections 433(e), 434(1)(c) and 439(1)(b) of the Companies Act, 1956 - time barred debt - HELD THAT:- The plea of debt being time barred appears to be not tenable in law. The language of resolution and the minutes of the meeting and debt mentioned, clearly indicate that the debt cannot be said to be time barred as the resolutions and the time of filing of the petition would clearly indicate that debt in question cannot be said to be time barred.
The question of invoice and the purchase order being dependent upon the change circumstances or actions as sought to be made out is also not tenable in eye of law, as none of the documents which were perused were indicative of raising any nexus or a point of nexus between the parties who were participating in the project (so to say), but the averments made in paragraph No.5 and the e-mails exchanged indicate that they have knowledge of the final outcome, but that in itself cannot be given a status of a binding condition so as to bring in new obligations or absolving the parties of its existing obligation for paying the outstanding.
The Court is, therefore, of the view that the petitioner Company has made out a case of outstanding and respondent Company has liability to make good the outstanding i.e. US$ 371,019.00. Let there be some more time available to the respondent Company for discharging its liabilities to the petitioner Company and therefore while admitting the matter the Court is inclined to grant time to the respondent Company to make good its liability to the petitioner Company on or before 16.06.2014, failing which the further order of advertisement will be passed.
The matter may come up on 18.06.2014.
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2014 (4) TMI 1316
Appropriate directions from the Court, to the Court appointed Committee to carry out the affairs and manage the properties, and sell the assets of the Golden Forests (India) Ltd and its group companies - Golden Projects Ltd introduced a number of investment schemes promising handsome returns lured investors and depositors, and in 9-10 years collected several hundred crores of rupees. Huge tracts of lands and property were acquired by it; likewise a large number of properties were acquired in the name of Golden Tourist Resorts and Developers Ltd and others in the name of Himachal Country Resorts Ltd and some other companies.
HELD THAT:- Given the constraints and limitation as well as the uncertainities associated with the task of applying a uniform principle to ensure fairness to investors, the Court had heard submissions on behalf of the Committee, the SEBI and the representatives of investors. Initially, the suggestion of the Committee to make slab-wise disbursements to investors, who had deposited/paid Rs. 5000/- in a graded manner, did not appeal to the Court because the proposal was premised upon the assumption that those who deposited more than Rs. 5000/- (the principal limit proposed to be finally supplied with one-time interest payment) were affluent. In these circumstances, the Court directed the Committee to revise the claim and apply a non-discriminatory principle because it was felt that an assumption that someone who deposited Rs. 20,000/- in 1996 or 1997 is more affluent than one who deposited Rs. 5,000/- would not be accurate. It is quite likely that those who participated deposited amounts higher than Rs. 5000/- have not parted with substantial amounts of their live savings could not ruled out especially because of the nature of claims held out by the GFIL and its group companies.
With this objective, the Court examined the feasibility of applying one principle, i.e. for instance, making-up one-time payment to all depositors to the extent of Rs. 5,000/- with a one-time interest payment. Court was informed that this would take care finally of the claims in respect of 1110098 depositors who had paid Rs. 216.25 crores. In addition, so far as 363.7 depositors who had paid Rs. 5000/- and above were concerned, the Committee outgoings would have been Rs. 181.91/- only towards the principal amount.
This Court is of the opinion that even though the adoption of one principle is fair, yet, the possibilities of disbursements (specifying investors who have paid Rs. 3000/-) regardless of the total amount deposited result in an outgoing of Rs. 309.60 crores. As on date, there is uncertainty with respect to the litigation pending in regard to at least three properties; the Committee is facing a possible reimbursement claim to the tune of Rs. 65 crores. We were also informed that an income tax payment of Rs. 32 crores towards capital gains has been made.
Having regard to all these aspects, this Court is of the opinion that at this stage, it would not be appropriate to direct any claim. Instead the Court is of the opinion that an expert ought to be appointed to assist the Committee in its task of ensuring the management of its funds and evolving a method of disbursing the amounts whenever the position becomes clear. Accordingly, the Court hereby directs the RBI to nominate an expert – not necessarily in its employment and preferably residing in Chandigarh or near that city with sufficient expertise in such matters to advise the Committee in its task of:
(a) Managing the funds available with it to optimise their returns having regard to the previous orders of the Court;
(b) To evolve a feasible practicable method for disbursement of various amounts to depositors and investors.
For the moment, this Court feels that this would be the most appropriate course given the fluid situation. The Court proposes to consider the question of disbursement at a later stage, after obtaining the report of the expert. Governor, RBI is requested to indicate the name of a suitable professional or individual – preferably including one amongst its former officials who can assist in the task indicated above.
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2014 (4) TMI 1315
Collective Investment Scheme ventured without registration - Conviction u/s 24 read with Section 27 of SEBI Act, 1999 - sentenced to undergo rigorous imprisonment for one year each and to pay fine of Rs. 1 lac each or to undergo SI for six (6) months each in default - HELD THAT:- The Company has rightly been convicted for contravening sub-section (1B) of Section 12 of SEBI Act by collecting money from the investors under its CIS schemes without registration with SEBI and it also committed contravention of the provisions of Section 24 of the Act by not complying with the Regulations framed by SEBI and the directions issued by the Chairman. Therefore, no fault can be found with the conviction of the Company.
Vicarious liability of the appellants - whether they, at the time the provisions of Section 12(1B) and/or CIS Regulations were contravened by the Company, they were in-charge of and responsible to the Company for conduct of its business or not? - As far as the appellant Managing Director of the Company, was the person primarily concerned with managing the business of the Company. Being the Managing Director, he would be involved in day-to-day business of the Company and raising funds from the investors under the Collective Investment Scheme floated by the Company. Therefore, he would certainly be a person in-charge of and responsible to the Company for conduct of its business.
It can hardly be disputed that being the Managing Director and person in-charge and responsible to the Company for conduct of its business, he is vicariously liable for the contravention of the provisions of SEBI Act and the Regulations framed thereunder. Therefore, no fault can be found with his conviction.
Other appellants are concerned for conviction of the appellants other than Shri P.S. Chaudhary, SEBI was required to prove not only that they were Directors of the Company at the relevant time, but also that they were the persons in charge of and responsible to the Company for conduct of its business. No evidence to this effect, however, has been led by SEBI. This is also not the case of the SEBI that the offence by the Company was committed with the consent and connivance of the appellants other than Mr. P.S. Chaudhary and is attributable to some neglect on their part. In these circumstances the conviction of the appellants, Mr. D.S. Thakur, Mr. S.S. Thakur and Mr. Roop Lal Kaundal cannot be sustained.Appellants Mr. D.S. Thakur, Mr. S.S. Thakur and Mr. Roop Lal Kaundal are acquitted.
Sentence awarded to the appellant Mr. P.S. Chaudhary, considering that neither the Company nor Mr. P.S. Chaudhary produced any documentary evidence of having repaid to the investors and did not examine any investor to prove the alleged payment and also considering that admittedly all the investors do not stand paid, there is no scope for reducing the substantive sentence awarded to him.
As regards the quantum of fine, though there was no maximum fine at the relevant time, Section 24 has since been amended so as to enhance the maximum substantive sentence to ten (10) years, and to prescribe a fine up to Rs. 25.00 crore. The amendment clearly indicates the seriousness, which the Legislature attaches to such contraventions. The purpose obviously is to deter persons such as the appellants from trapping the gullible investors, by promising them returns which are unrealistic and can never be given. Any unwarranted leniency towards such persons will be highly misplaced, besides being detrimental to the larger interest of the society. Therefore, no ground made out for reducing the amount of fine imposed upon the appellant Mr. P.S. Chaudhary. The appeal filed by Mr. P.S. Chaudhary is, therefore, dismissed. He is directed to surrender forthwith before the trial court. If he does not surrender forthwith, the trial court shall take necessary steps to procure his presence and commit him to prison to undergo the sentence awarded to him. The fine imposed upon Mr. P.S. Chaudhary, unless already deposited, shall be deposited within a week. If the fine is not deposited within one (1) week, it shall be open to SEBI to take such steps as are open to it in law to recover the amount of fine.
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2014 (4) TMI 1314
Seeking winding up of TTL on the ground of inability to pay its debts - whether there is any justification for staying the CDR Scheme, which is yet to be given effect to pursuant to the undertaking given to this court on behalf of TTL on 16-9-2013? - section 433(e) of the Companies Act - HELD THAT:- The implementation of the CDR scheme cannot be stayed. That will not be in the interests of the company or the various stake holders; nor would it be in the interest of the bondholders. It is strongly contended that the argument that the success of the CDR scheme would be beneficial to the petitioner and therefore the petitioner should not try to block it is unacceptable because the CDR scheme, even if it is implemented, appears to be only for the benefit of the secured creditors. But what this contention overlooks is that the bondholders are unsecured creditors, whereas the CDR lenders are all secured creditors.
The bondholders will not be justified in claiming that the company should be willy-nilly wound up just because their dues have not been paid, even when steps for revival of the company are afoot. It is in this context necessary to recapitulate that it is the duty of the Company Court to welcome revival rather than affirm the death of the company. The respondent-company is an IT infrastructure company providing core infrastructure and essential services. It employs about 3500 workmen on whom some 20,000 lives are dependent. Staying the CDR scheme at this juncture would practicably amount to winding up of the company which step has to be taken only as a last resort. The legislative thinking on this aspect can also be gleaned from the provisions of the Companies Act, 2013 which is yet to come in force fully, though many of its provisions have been notified. Section 253 of that Act provides that the Company or 50% in value of its secured creditors may file an application before the Company Law Tribunal for a determination that the company be declared sick and for stay of the winding up proceedings to facilitate revival.
Section 256 provides for appointment of an interim administrator to consider whether it is possible to revive and rehabilitate a sick company on the basis of the draft scheme, if any, filed along with the application for revival and rehabilitation filed under section 254(1) by a secured creditor or the company itself. Thus the legislative thinking also appears to be to revive and rehabilitate the company if possible and save it from liquidation. This is legislative recognition of the judicial decisions.
There will be no stay of the CDR scheme and the company is at liberty to implement the same forthwith. The undertaking given to this Court on 16.09.2013 stands discharged - though there can be a pooling of the securities, any sale of a pooled security shall be subject to the orders passed by this Court and prior approval of such sale shall be taken from this Court.
Application disposed off.
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