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1966 (5) TMI 71
Issues Involved:
1. Whether the defendants entered into Gur transactions mentioned in the Schedule I, filed by the plaintiff, as pakka arhtias.
2. Did the plaintiff-firm actually enter into transactions in dispute on behalf of the defendants with other parties and pay them the losses in question?
3. Whether the transactions in suit are of wagering character, and if so, to what effect?
4. Whether the Gur transactions in suit were declared illegal on 14th February, 1950, by the Government and what is its effect?
5. Whether the dealings between the parties were as between principal and principal?
6. To what amount by way of losses, Arhat, interest and other incidental expenses are the plaintiffs entitled to?
7. Did the plaintiff-firm have authority to settle the transactions on 14th February, 1950, or 15th February, 1950, before the due date, and if not, what is its effect?
8. Relief.
9. Whether the Vishnu Exchange Ltd. had authority to pass Resolution referred to in para 5A of the plaint, and are the defendants bound by the same?
10. Whether the said Resolution was ante-dated and a fraud on the Government Notification, dated the 15th February, 1950? If so, to what effect?
Issue-wise Detailed Analysis:
Issue 1: Whether the defendants entered into Gur transactions mentioned in the Schedule I, filed by the plaintiff, as pakka arhtias?
The court concluded that the transactions between the parties had been entered into as principal and commission agent and not as principal and principal. The transactions mentioned in "I" were not fabricated.
Issue 2: Did the plaintiff-firm actually enter into transactions in dispute on behalf of the defendants with other parties and pay them the losses in question?
The court found that the plaintiff-firm did not actually pay losses to third parties. The evidence provided, including the account-books, was insufficient to establish that the payments were made on behalf of the defendants.
Issue 3: Whether the transactions in suit are of wagering character, and if so, to what effect?
The transactions were held not to be wagering in nature. The court decided this issue in favor of the plaintiff.
Issue 4: Whether the Gur transactions in suit were declared illegal on 14th February, 1950, by the Government and what is its effect?
The Gur transactions for forward delivery were declared void on 15th February, 1950, by a Government notification. The court held that the defendants were not bound by the resolution of the Exchange.
Issue 5: Whether the dealings between the parties were as between principal and principal?
The court concluded that the dealings were between principal and commission agent, not principal and principal.
Issue 6: To what amount by way of losses, Arhat, interest and other incidental expenses are the plaintiffs entitled to?
In view of the decision on other issues, this issue did not arise for decision.
Issue 7: Did the plaintiff-firm have authority to settle the transactions on 14th February, 1950, or 15th February, 1950, before the due date, and if not, what is its effect?
The court concluded that the plaintiff-firm had no authority to settle the transactions in dispute on 14th February, 1950, before the due date. The Vishnu Exchange did not pass the resolution on that date; it was passed subsequently and ante-dated to avoid the effect of the notification.
Issue 8: Relief
The plaintiff's suit was dismissed.
Issue 9: Whether the Vishnu Exchange Ltd. had authority to pass Resolution referred to in para 5A of the plaint, and are the defendants bound by the same?
The court concluded that the Vishnu Exchange had authority to pass the disputed resolution, but it did not pass it on the date claimed. The resolution was passed subsequently and ante-dated.
Issue 10: Whether the said Resolution was ante-dated and a fraud on the Government Notification, dated the 15th February, 1950? If so, to what effect?
The court found that the resolution was indeed ante-dated and a fraud on the Government notification. Therefore, the defendants were not bound by the resolution.
Conclusion:
The appeal was dismissed, and the plaintiff's claim was not upheld. The court found that the plaintiff-firm did not have the authority to settle the transactions before the due date and that the transactions were not wagering in nature. The Gur transactions were declared void by the Government notification, and the resolution by the Vishnu Exchange was found to be fraudulent and ante-dated.
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1966 (5) TMI 70
Issues Involved:
1. Constitutionality of Section 132 of the Income-tax Act, 1961, under Article 14.
2. Jurisdiction of Income-tax authorities in light of the gold-bond scheme.
3. Territorial jurisdiction of the Commissioner of Income-tax (Central), Bombay.
4. Validity of searches and seizures under Section 132 and the Code of Criminal Procedure.
5. Authorization for transferring primary gold to Central Excise authorities.
6. Approval of searches by the Commissioner of Income-tax (Central), Bombay.
7. Seizure of debts and their valuation in estimating seized assets.
8. Disclosure of grounds or materials by the Income-tax Officer before making the impugned order.
9. Jurisdiction of Excise authorities under the Defence of India Rules.
10. Validity of seizure by Excise authorities.
11. Petitioner's right to tender gold under the Gold Bonds Scheme.
Detailed Analysis:
1. Constitutionality of Section 132 of the Income-tax Act, 1961, under Article 14:
The court held that Section 132 of the Income-tax Act, 1961, is not violative of Article 14 of the Constitution. The section provides specific guidance to Income-tax authorities for exercising their powers, particularly when a senior officer like the Director of Inspection or the Commissioner has reason to believe that the process under Section 131 would not yield the desired results. The court referenced similar judgments from the Calcutta and Punjab High Courts to support this view.
2. Jurisdiction of Income-tax authorities in light of the gold-bond scheme:
The petitioner claimed immunity from proceedings under the Income-tax Act due to an application made under the gold-bond scheme. However, the court found no credible evidence supporting the claim that the application was made on 18-11-1965, prior to the searches and seizures. The court noted inconsistencies and suspicious circumstances surrounding the application and concluded that the petitioner failed to establish a valid tender of gold.
3. Territorial jurisdiction of the Commissioner of Income-tax (Central), Bombay:
The court held that the Commissioner of Income-tax (Central), Bombay, had jurisdiction to issue authorization for searches at Ramgarh. The case of the petitioner was assigned to the Commissioner by the Central Board of Revenue, and this assignment included all proceedings under the Act. The court rejected the argument that the Commissioner's jurisdiction was limited to a specific territory.
4. Validity of searches and seizures under Section 132 and the Code of Criminal Procedure:
The court found that the searches and seizures were conducted in accordance with the law. The Commissioner had issued a proper authorization based on information in his possession, and the Income-tax Officer conducted the searches and seizures as per the authorization. The court dismissed the argument that the searches were invalid due to non-compliance with procedural requirements.
5. Authorization for transferring primary gold to Central Excise authorities:
The court held that the Income-tax Officer was not barred from transferring custody of the seized gold to the Excise authorities if required by law. The transfer did not affect the validity of the initial seizure or the subsequent proceedings under the Income-tax Act.
6. Approval of searches by the Commissioner of Income-tax (Central), Bombay:
The court found that the searches conducted by the Income-tax Officer were valid and did not require additional approval from the Commissioner beyond the initial authorization. The searches were conducted under proper authorization, and the procedures followed were in compliance with the law.
7. Seizure of debts and their valuation in estimating seized assets:
The court held that documents evidencing debts could be seized as they represent valuable articles or things. The Income-tax Officer was within his rights to consider these debts in estimating the undisclosed income. The court noted that the proceedings under Section 132 are preliminary and do not determine tax liability, which will be assessed in subsequent proceedings.
8. Disclosure of grounds or materials by the Income-tax Officer before making the impugned order:
The court found that the petitioner was aware of the grounds and materials on which the Income-tax Officer based the impugned order. The petitioner had been given multiple opportunities to respond to notices, and the order was not rendered invalid due to non-disclosure of specific grounds or materials.
9. Jurisdiction of Excise authorities under the Defence of India Rules:
The court held that the Superintendent of Central Excise, Jaipur, had the authority to seize the gold under the Defence of India Rules. The seizure was conducted in accordance with the rules, and the Excise authorities were within their rights to take possession of the gold.
10. Validity of seizure by Excise authorities:
The court found that the seizure by the Excise authorities was valid and conducted under proper authorization. The court dismissed the argument that the seizure was illegal due to non-compliance with procedural requirements.
11. Petitioner's right to tender gold under the Gold Bonds Scheme:
The court held that the petitioner was not entitled to tender the seized gold under the Gold Bonds Scheme. The gold had already been seized by the Excise authorities, and the seizure was valid. The court noted that the petitioner could not claim immunity under the scheme for gold that was no longer in his possession.
Conclusion:
The court dismissed both writ petitions, holding that the actions of the Income-tax and Excise authorities were valid and in accordance with the law. The petitioner was ordered to pay costs to the respondents.
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1966 (5) TMI 69
Issues:
Challenge to the levy of toll at Haronar Bridge on the Barahiva Lakhisorai Road in Monghyr District as unconstitutional under Article 226 of the Constitution. Interpretation of the Indian Tolls Act, 1851, and its constitutional validity under Article 14, Article 19, Article 301, and Article 303.
Detailed Analysis:
The petitioner challenged the levy of toll at Haronar Bridge, constructed by the Government of Bihar, through an auction in 1966. The main contention was that the levy of tolls under the Indian Tolls Act, 1851, was unconstitutional. The Act empowers the State Government to levy tolls on public roads and bridges. The petitioner argued that Section 2 of the Act conferred arbitrary power on the government to levy tolls at any rate, violating Article 14 and Article 19(1)(d) of the Constitution. The petitioner also challenged the notification fixing toll amounts, alleging an excess of power by the government beyond Section 2's scope.
The Advocate General countered the arguments, stating that Section 2 of the Act provided guiding principles for toll levy, ensuring a reasonable relationship to road and bridge costs. The Act aimed to recoup expenses incurred in construction and maintenance, not for general revenue augmentation. The court agreed with the Advocate General, emphasizing the historical context of tolls in public finance, indicating a compensatory tax nature rather than an arbitrary levy for revenue.
The court analyzed the toll rates set by the government, finding them reasonable and comparable to rates in other states. The government's justification for toll imposition was deemed valid, ensuring cost recovery for bridge construction. The court held that the toll levy was within the government's power under the Act, not exceeding statutory limits or violating constitutional provisions. The court dismissed the petition, emphasizing the reasonableness of the toll restrictions in the public interest, in line with constitutional provisions.
The judgment highlighted the distinction between compensatory taxes and arbitrary levies, aligning with the principles of public interest and reasonable restrictions. The court referenced Supreme Court decisions on compensatory taxes and public interest restrictions, supporting the constitutionality of toll imposition under the Act. The court rejected the petitioner's arguments, considering them as questions of fact beyond the scope of a writ petition, and dismissed the case with costs.
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1966 (5) TMI 68
Issues:
- Verification of winding-up petition not in compliance with rules
- Request for leave to re-verify the petition
Analysis:
1. The petitioner filed an application for winding up of a company, alleging non-payment for goods supplied. The company contended that the verification of the petition was not affirmed according to law as it was a declaration made before a notary public, not an affidavit. The court examined the relevant rules under the Companies (Court) Rules, 1959, and the rules of the Court regarding verification of petitions. It was established that an affidavit verifying a petition must be made on a solemn affirmation as prescribed by the rules. The court emphasized that a mere declaration before a notary public does not comply with the rules for verification of a petition, rendering the verification defective.
2. The petitioner argued that the defect in the verification was a mere irregularity that could be overlooked, and requested leave to re-verify the petition. The court considered precedents cited by the petitioner regarding defects in verification of pleadings in other contexts. However, the court distinguished those cases from the present petition for winding up a company. It highlighted the significance of proper verification in a winding-up petition, as a winding up order relates back to the date of the petition's presentation. Allowing re-verification could lead to confusion regarding dealings by the company with its assets and potential issues related to fraudulent preference.
3. The court further discussed the implications of third parties acquiring rights in the company's assets during the period between the original petition and re-verification. Emphasizing the strict compliance required for verification of a winding-up petition, the court concluded that the principles from cited decisions did not apply to the current case. The court acknowledged the defective verification and the inability to make an order for winding up based on the petition. Consequently, the court declined the request for leave to re-verify the petition, leading to the dismissal of the application with costs.
4. In summary, the judgment centered on the non-compliance of the verification of the winding-up petition with the prescribed rules, leading to the dismissal of the application for winding up the company. The court emphasized the importance of strict adherence to verification rules in winding-up petitions due to the significant legal implications and potential confusion that could arise from allowing re-verification. The decision highlighted the unique considerations and consequences associated with winding up proceedings, underscoring the need for procedural compliance in such cases.
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1966 (5) TMI 67
Issues:
1. Validity of the order setting aside the election of the appellant.
2. Validity of the order rejecting the prayer to be declared elected by the respondent.
Detailed Analysis:
Issue 1: The first issue in this case pertains to the validity of the order setting aside the election of the appellant, who contested for a seat in the West Bengal Legislative Assembly reserved for Scheduled Castes. The appellant claimed to belong to the Sunri caste, a Scheduled Caste, while the respondent alleged that the appellant was a member of the Saha caste and not a Scheduled Caste member. The Election Tribunal initially dismissed the respondent's objection, but the High Court reversed this decision, declaring the appellant's election invalid based on not belonging to a Scheduled Caste. The High Court interpreted the exclusion of Sahas from Sunris in the Constitution (Scheduled Castes) Order, 1950, as excluding those Sunris bearing the surname Saha. However, the Supreme Court disagreed with this interpretation, emphasizing that Sunri and Saha both referred to caste groups within the Scheduled Caste. The Court held that the evidence did not prove the appellant belonged to the smaller caste group of Sahas, thus upholding the appellant's Scheduled Caste status and dismissing the election petition.
Issue 2: The second issue concerns the validity of the order rejecting the respondent's prayer to be declared elected in place of the appellant. The respondent had appealed to the High Court seeking to be declared elected if the appellant's election was invalidated. However, the High Court rejected this prayer, leading to the respondent's appeal. The Supreme Court, after determining the appellant's Scheduled Caste status, dismissed the respondent's appeal as well, as the respondent failed to establish that the appellant belonged to the smaller caste group of Sahas. Consequently, the Court upheld the appellant's election and dismissed the respondent's appeal, affirming the decision of the Election Tribunal and awarding costs to the appellant.
In conclusion, the Supreme Court allowed Appeal No. 931 of 1965, setting aside the High Court's judgment and restoring the Election Tribunal's decision to dismiss the petition. Additionally, the Court dismissed Appeal No. 1149 of 1965, upholding the appellant's election and awarding costs throughout.
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1966 (5) TMI 66
Issues Involved:
1. Jurisdiction of the District Judge under Section 24 of the Code of Civil Procedure (C.P.C.) to transfer a reference made by a Magistrate under Section 146 of the Code of Criminal Procedure (Cr. P.C.).
2. Whether a reference under Section 146(1) Cr. P.C. is to a "persona designata" or a constituted court.
3. Whether the proceeding before the civil court under Section 146(1) Cr. P.C. is a civil proceeding.
Detailed Analysis:
1. Jurisdiction of the District Judge under Section 24 C.P.C.:
The primary issue in this appeal was whether the District Judge had jurisdiction under Section 24 C.P.C. to transfer a reference made by a Magistrate under Section 146 Cr. P.C. to another civil court. Proceedings under Section 145 Cr. P.C. were initiated due to a dispute likely to cause a breach of peace concerning a plot of land. The Magistrate, unable to determine possession, referred the case under Section 146(1) Cr. P.C. to a civil court. One party requested the District Judge to transfer the case to another court, which was done without objection from the other parties. The appellants later contested the jurisdiction of the transferee court, claiming the District Judge had no authority to transfer the case, rendering subsequent proceedings null.
2. Reference under Section 146(1) Cr. P.C. to a "persona designata" or a constituted court:
The appellants argued that the reference under Section 146(1) Cr. P.C. was to a "persona designata" and not a constituted court, thus making Section 24 C.P.C. inapplicable. However, the court clarified that Section 146(1) empowers a Magistrate to refer the matter to a civil court of competent jurisdiction, not to a specific individual. The reference is to a constituted court, enlarging its ordinary jurisdiction, and not to a "persona designata." This distinction was supported by precedents, including the case of Balakrishna Udayar v. Vasudeva Aiyar, which differentiated between determinations by a "persona designata" and a legal tribunal.
3. Nature of the proceeding before the civil court under Section 146(1) Cr. P.C.:
The appellants contended that the proceeding before the civil court retained its criminal character and was not a civil proceeding. They relied on the judgment in Sri Sheonath Prasad v. City Magistrate, Varanasi, which suggested that the proceeding remains criminal as the Magistrate retains ultimate jurisdiction. However, the court disagreed, citing decisions like Adaikappa Chettiar v. Chandrasekharca Theyar and Maung Ba Thaw v. Ma Pin, which established that when ordinary courts handle disputes over legal rights, they follow ordinary procedural rules. The court held that the proceeding before the civil court is indeed a civil proceeding, as supported by the decision in Narayan Row v. Ishwarlal.
The court further addressed the argument that the civil court, in handling the reference, acts as a criminal court. It refuted this by stating that the Magistrate, while exercising criminal jurisdiction under Section 145 Cr. P.C., does not confer criminal jurisdiction on the civil court through the reference. The civil court operates within its civil jurisdiction, and the proceeding before it is governed by civil procedural rules.
The court also dismissed the contention that Section 141 C.P.C., which applies to civil proceedings, was not relevant. It emphasized that Section 24 C.P.C. encompasses "any proceeding" pending in a subordinate court, not just civil proceedings. Therefore, the District Judge's transfer of the case under Section 24 C.P.C. was valid.
In conclusion, the court affirmed that the District Judge had the jurisdiction to transfer the case under Section 24 C.P.C., the reference under Section 146(1) Cr. P.C. was to a constituted court, and the proceeding before the civil court was a civil proceeding. The appeal was dismissed.
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1966 (5) TMI 65
Issues Involved:
1. Validity of the Notification under the Jammu & Kashmir Commission of Inquiry Act, 1962.
2. Public Importance of the Matters under Inquiry.
3. Application of Section 10 of the Act.
4. Allegation of Mala Fide Intent.
5. Violation of Article 14 (Equality before the Law).
6. Conduct of the Commission's Proceedings.
Issue-Wise Detailed Analysis:
1. Validity of the Notification under the Jammu & Kashmir Commission of Inquiry Act, 1962:
The first contention was that the Notification was not justified by the Act because under the Jammu & Kashmir Constitution, a Minister was responsible for his acts only to the Legislature and no action could be taken against him except for criminal and tortious acts in ordinary courts of law unless the Legislature by a resolution demanded it. This argument was based on Section 37 of the Jammu & Kashmir Constitution, which states that the Council of Ministers shall be collectively responsible to the Legislative Assembly. The court rejected this contention, stating that Section 37 talks of collective responsibility and does not preclude an inquiry into the actions of a Minister by the Government. Section 3 of the Inquiry Act allows the Government to appoint a Commission of Inquiry, which was upheld by the High Court and affirmed by the Supreme Court.
2. Public Importance of the Matters under Inquiry:
The second issue was whether the matters the Commission was set up to inquire into were of public importance. The High Court had found that they were not, but the Supreme Court disagreed. The court noted that the inquiry was into the assets possessed by Bakshi Ghulam Mohammad and whether he had acquired wealth by abusing his official position. The court held that such matters were indeed of public importance, regardless of whether Bakshi Ghulam Mohammad was in office at the time of the Notification. The court also rejected the argument that there was no public agitation over these matters, stating that public importance is determined by the intrinsic nature of the issues, not by public agitation.
3. Application of Section 10 of the Act:
The next point was whether Section 10 of the Act, which provides for a person to be heard if their conduct is inquired into, applied only incidentally or directly. The court held that Section 10 applies to both direct and incidental inquiries into a person's conduct. The court rejected the argument that the Act did not provide for the right to be heard, cross-examine, and lead evidence in direct inquiries, affirming that Section 10's provisions apply broadly.
4. Allegation of Mala Fide Intent:
The court examined the claim that the Notification was issued mala fide due to political rivalry. The High Court had rejected this contention, and the Supreme Court found no reason to disagree. The court noted that the arrest of Bakshi Ghulam Mohammad and subsequent events were based on allegations of abuse of power and breaches of law and order, and there was no sufficient evidence to prove mala fide intent. The court also dismissed the argument that the Commission was set up to prevent Bakshi Ghulam Mohammad from disturbing public safety and law and order.
5. Violation of Article 14 (Equality before the Law):
It was contended that the Notification violated Article 14 because it singled out Bakshi Ghulam Mohammad while other Cabinet members were equally responsible. The court rejected this argument, stating that the inquiry was specifically about wealth acquired by Bakshi Ghulam Mohammad and his associates through misuse of his official position. Thus, he was in a class by himself, justifying the classification and the inquiry.
6. Conduct of the Commission's Proceedings:
The final issue was whether the Commission's proceedings violated natural justice and statutory provisions. The court noted that Bakshi Ghulam Mohammad had been given inspection of documents and the opportunity to file affidavits. The court also rejected the claim that he had a right to cross-examine all deponents of affidavits, stating that the right to cross-examine is limited to witnesses giving viva voce evidence, as per Section 10 of the Act. The court emphasized that the Commission's procedure should be flexible and aimed at a speedy disposal of the inquiry.
Conclusion:
The Supreme Court set aside the judgment of the High Court, upholding the validity of the Notification and the proceedings of the Commission of Inquiry. The appeal was allowed.
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1966 (5) TMI 64
Issues Involved:
1. Competence of the Sales Tax Officer to issue notices.
2. Whether the respondents were dealers subject to sales tax.
Detailed Analysis:
1. Competence of the Sales Tax Officer to Issue Notices
First Argument: Ineffectiveness of the Notification
The respondents contended that the notification appointing Sri Musharraf Husain as an assessing authority was ineffective because it was issued under the Sales Tax Laws Validation Ordinance, 1956, which had been repealed by the Sales Tax Laws Validation Act, 1956. The Court noted that the notification, issued on 6th February 1957, referred to the extinct Ordinance instead of the Act. However, the Court interpreted this as a common draftsman's slip and concluded that the State Government intended to appoint Sri Musharraf Husain under the Act. The Court applied the maxim *ut res magis valeat quam pereat* to give effect to this intention, thus validating the notification.
Second Argument: Contravention of Sales Tax Rules
The respondents argued that the notification violated rules 3, 3A, and 6 of the Sales Tax Rules under the U.P. Sales Tax Act, which define the jurisdiction of Sales Tax Officers. The Court held that Section 2(a) of the Sales Tax Act impliedly gives the State Government unrestricted power to appoint any person as an assessing authority over any area in the State. The rules did not exhaust this statutory power, and even if there was inconsistency, the Act would prevail over the rules. Therefore, the notification was not invalid.
Flaw in the First Notice
The Court acknowledged that the first notice dated 26th December 1956 was flawed as there was no notification appointing Sri Musharraf Husain as an assessing authority at that time. However, there was no such flaw in the second notice dated 2nd March 1957.
2. Whether the Respondents Were Dealers Subject to Sales Tax
Respondents' Argument
The respondents claimed they were not dealers but commission agents with their principal place of business in Calcutta. They purchased goods on behalf of U.P. businessmen without disclosing their principals' names and only charged a commission. This was supported by affidavits.
Court's Analysis
The Court noted that the respondents were registered as dealers under section 8A of the U.P. Sales Tax Act for the years 1953-54 and 1954-55, and had declared an estimated turnover not less than Rs. 15,000. They had also made payments towards sales tax, albeit under protest. These admissions indicated that they were dealers.
Prohibition Writ
The respondents sought a writ of prohibition to prevent Sri Musharraf Husain from proceeding under the Sales Tax Act. The Court explained that such a writ is issued to restrain a quasi-judicial authority from exceeding its jurisdiction. However, if the jurisdiction depends on certain facts, the Court should generally not interfere until the authority has decided on its jurisdiction. Since there was prima facie evidence indicating jurisdiction, the Court declined to issue the writ at the threshold. The Court suggested that if the respondents were not dealers, they could file a return showing nil turnover and produce their account books to satisfy the assessing authority.
Precedent
The Court referenced a similar case, *Sri Chander Bhan Agarwal v. Sales Tax Officer, Agra*, where a writ of prohibition was declined under similar circumstances. The Court noted that the decision relied upon by the learned Judge, *Panna Lal Babu Lal v. Commissioner of Sales Tax, U.P.*, was not applicable after the commencement of the Sales Tax Laws Validation Act.
Conclusion:
The appeals were allowed, the order of the learned Judge was set aside, and the writ petitions were dismissed. Each respondent was ordered to pay costs of Rs. 300 to the appellant.
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1966 (5) TMI 63
Issues:
1. Whether the prosecution against the respondent was barred by time under section 26(2) of the C.P. and Berar Sales Tax Act.
2. Whether carrying on business without registration constitutes an act done under the Act.
Analysis:
1. The appeal was against the acquittal of the respondent on the grounds of the prosecution being barred by time under section 26(2) of the C.P. and Berar Sales Tax Act. The prosecution alleged that the accused, a forest contractor dealing in timber, charcoal, and firewood, exceeded the turnover limit without registering as a dealer between 1947 and 1950. The Magistrate held the prosecution barred by time as per section 26(2) of the Act.
2. The contention was raised regarding the interpretation of section 26(2) of the Act, specifically whether the provision applies to any person or only servants of the Government. The court referred to a previous decision and concluded that the time limit of three months under section 26(2) applies to every prosecution under section 24(1) of the Act, regardless of the accused's status.
3. The key issue was whether carrying on business without registration constitutes an act done under the Act. The prosecution argued that such an act is not done under the Act as there is no provision for carrying on business in accordance with the Act. However, the court disagreed, emphasizing that section 8 mandates registration before carrying on business, and a violation is punishable under section 24(1)(a), making it an act done under the Act.
4. Referring to a previous case, the court reiterated that acts like submitting returns and producing accounts under the Act were considered acts done under the Act. Applying the same principle, the court held that a dealer's omission to register is something "done" under the Act, making the prosecution in this case rightly barred by time under section 26(2).
5. Consequently, the court dismissed the appeal, affirming the decision that the prosecution was barred by time due to the omission of the dealer to register, which was considered an act done under the Act.
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1966 (5) TMI 62
Issues:
1. Validity of assessment based on repealed rule 28 under the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi.
2. Scope of power of review by the Sales Tax Officer under sub-section (4) of section 20 of the Act in light of a subsequent Supreme Court decision.
3. Applicability of the limitation period under section 11(2a) of the Act for assessments made for specific quarters.
Analysis:
1. The petitioner-firm challenged the assessment order based on rule 28, which was repealed in November 1959, as unconstitutional due to an alleged illegal delegation of legislative power. However, the court noted that the firm voluntarily opted for a 30% exemption under rule 28 as they couldn't provide labor details, making the assessment valid. The court cited a previous case where rule 28 was deemed invalid but clarified that the voluntary exemption acceptance didn't render the assessment illegal.
2. The petitioner-firm contended that the Sales Tax Officer's power of review should have limitations akin to those in the Civil Procedure Code. The court rejected this argument, emphasizing that the term "review" doesn't have a fixed legal meaning and cited legal definitions to support its stance. It highlighted that wider review powers were likely granted to rectify injustices, and in this case, the officer was justified in reviewing the order due to a reversal by the Supreme Court on tax liability for building contractors.
3. Regarding the limitation period under section 11(2a) of the Act, the court clarified that the four-year limitation period is calculated from the end of the relevant year, not the specific quarter. As the assessment order was issued before March 31, 1960, within four years from the end of the year 1955-56, the limitation provision wasn't applicable. Consequently, the court dismissed the petition challenging the assessment order, ruling in favor of the Sales Tax Officer's decision.
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1966 (5) TMI 61
Issues:
1. Validity of notice for review of assessment order dated 21st December, 1956.
2. Interpretation of the limitation period for making assessment orders under section 11(2a) of the Act.
Analysis:
1. The petitioner, a building contractor firm, challenged a notice for review of an assessment order dated 21st December, 1956, issued by the Commissioner of Sales Tax, Delhi. The petitioner argued that the notice was invalid due to the expiration of the limitation period under section 11(2a) of the Act, which restricts assessment orders after four years. The petitioner relied on a Supreme Court decision regarding a similar provision in the Orissa Sales Tax Act, emphasizing the importance of adhering to statutory limitations for assessment orders.
2. The court analyzed the Supreme Court's interpretation of limitation provisions in tax laws and concluded that any order of assessment made by an appellate or revising authority must be considered an order under the relevant assessment section. The court highlighted the anomalies that could arise if assessment orders were not bound by statutory limitations, emphasizing the need for consistency and legal certainty in tax assessments. The court found that the power of review cannot be exercised without any limitation period, even after a significant period, to prevent potential injustice and ensure compliance with statutory provisions.
3. The court determined that the limitation period under section 11(2a) applied to the review of the assessment order dated 21st December, 1956. As the notice for review was issued after the expiration of four years from the relevant period, the court held that the Commissioner of Sales Tax was legally barred from reviewing the assessment order. Consequently, the court allowed the petition, issuing a writ of prohibition to restrain the Commissioner from further proceedings based on the review notice. The court's decision focused on upholding statutory limitations to maintain the integrity of tax assessments and prevent undue delays or uncertainties in the legal process.
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1966 (5) TMI 60
Issues Involved:
1. Commercial Insolvency of the Company
2. Bona Fide Dispute as to Debt
3. Validity of Consent Decree
4. Jurisdiction of the High Court to Try the Suit
Detailed Analysis:
1. Commercial Insolvency of the Company:
Mr. Sen argued that the company is commercially insolvent, even excluding the disputed debt, and should therefore be wound up. He cited the omission to file balance sheets and provide particulars of assets and liabilities as raising a strong presumption of insolvency under section 114 of the Evidence Act. However, the burden of proof for proving insolvency lies on the applicant. The respondent-company denied the allegations of insolvency, and the applicant did not rely on specific facts or the last balance sheet published. The court found the omission by the respondent insufficient to discharge the burden of proof, thus rejecting this contention.
2. Bona Fide Dispute as to Debt:
Mr. Sen further submitted that a winding-up order should be made as the claim is founded on a decretal debt, leaving no room for bona fide disputes. The respondent's counsel argued that the company was not competent to guarantee the liabilities of its sister concern, making the consent decree void and a nullity. The court considered the position when a debt is disputed before the winding-up court, referencing English and Indian case law. It was established that non-payment of a bona fide disputed claim is no proof of insolvency. The court must determine if the grounds for disputing the debt are substantial and bona fide.
3. Validity of Consent Decree:
The respondent argued that the consent decree was void due to the company's incompetency to guarantee the debt and the decree's effect on immovable properties outside the jurisdiction. The court noted that a decree without jurisdiction is a nullity and can be challenged collaterally. It also highlighted that a consent decree stands on the same footing as a contract and can be set aside on similar grounds, such as fraud or collusion. The court emphasized that the winding-up court has broader jurisdiction to go behind a decree than ordinary civil courts, particularly in bankruptcy matters. The court found that the decree raises a strong presumption of the existence of the debt, but this presumption can be rebutted by showing a bona fide dispute.
4. Jurisdiction of the High Court to Try the Suit:
The respondent raised the issue of the High Court's jurisdiction to receive, try, and determine the earlier suit resulting in the consent decree. The court considered whether the suit, which included a claim for a charge on immovable properties outside the jurisdiction, was within the High Court's jurisdiction under Clause 12 of the Letters Patent. The court noted that a suit is treated as one unit and cannot be split into separate suits for jurisdictional purposes. The court found a substantial ground of dispute regarding the jurisdiction and deemed it bona fide.
Conclusion:
The application for winding up was adjourned until the disposal of the pending suit filed by the respondent company. If the suit is not proceeded with or is decided in favor of the petitioning creditor, the creditor may bring the winding-up petition back to the list. The interim order restraining the respondent company from applying for an injunction against the petitioning creditor was modified accordingly. The costs of the application were reserved, and no costs were awarded to the supporting creditors.
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1966 (5) TMI 51
Issues Involved:
1. Whether the letter dated 16th April 1946 amounted to an acknowledgment of liability and extended the limitation for the two suits.
2. Authority of Shri N.L.V. Subramaniyam to acknowledge liability on behalf of the corporation.
Issue-wise Detailed Analysis:
1. Whether the letter dated 16th April 1946 amounted to an acknowledgment of liability and extended the limitation for the two suits:
The common question in all three appeals was whether the letter dated 16th April 1946 (exhibit 1) amounted to an acknowledgment of liability and extended the limitation period for the suits. The court noted that if the letter did not save limitation, both suits were barred by time. The letter was written by Shri N.L.V. Subramaniyam, the secretary of the corporation, in response to a letter dated 25th February 1946 from the Gupta group. The correspondence between the parties was exploratory and aimed at clarifying the state of accounts, rather than binding any party to the statements made. The court concluded that the letter did not amount to an acknowledgment of liability because it was not meant to bind the parties and was merely part of an ongoing discussion to settle accounts.
2. Authority of Shri N.L.V. Subramaniyam to acknowledge liability on behalf of the corporation:
The court emphasized that for an acknowledgment to be valid under Section 19 of the Limitation Act, the person making the acknowledgment must have the authority to do so. The court examined the evidence to determine whether Shri N.L.V. Subramaniyam had such authority. The only evidence on record was the statement of Shri Subramaniyam himself, who admitted that he did not have the authority to acknowledge debts and that his correspondence was meant to clarify the position and would have required confirmation by the directors. The court found that there was no evidence to show that the secretary had the power to bind the corporation financially. The court referred to the principles laid down in Uma Shankar v. Govind Narainl AIR 1924 All. 855, which held that a person merely authorized to write routine letters could not bind the principal by any acknowledgment. The court also discussed the general position of a secretary in a corporation, noting that under both Indian and English company law, a secretary does not have inherent powers to bind the corporation in financial matters unless specifically authorized.
The court dismissed the argument that the secretary's authority to sign pleadings under Order 29, Rule 1, Civil Procedure Code, implied a broader authority to bind the corporation financially. The court concluded that the letter dated 16th April 1946 did not amount to an acknowledgment of liability and was not sufficient to extend the limitation period. Consequently, both suits were dismissed on the ground of limitation.
Judgment:
The appeals filed by the corporation (Appeals Nos. 441 and 442 of 1950) were allowed, and the appeal filed by the company (Appeal No. 198 of 1952) was dismissed. The corporation was awarded costs in both suits and in both courts.
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1966 (5) TMI 50
Issues Involved:
1. Whether the letter of authority constituted a charge on the book-debts of the company.
2. Whether the charge was void under section 95 of the Companies Act, 1948.
3. The nature of the company's right under the E.C.G. policy.
4. Whether the letter of authority represented an assignment by way of charge or an absolute assignment.
Issue-Wise Detailed Analysis:
1. Whether the letter of authority constituted a charge on the book-debts of the company:
The plaintiffs sought a declaration that the letter of authority dated January 23, 1961, constituted a charge on the book-debts of the company. The court examined the evidence provided by four chartered accountants. The key point of contention was whether the E.C.G. policy should be entered as a book-debt in the company's books. The court accepted the evidence of the defendants' accountants, who testified that such a policy would not be entered as a book-debt in practice, even after the liability was accepted and the amount ascertained. The court concluded that the E.C.G. policy did not constitute a book-debt at the date of the letter of authority.
2. Whether the charge was void under section 95 of the Companies Act, 1948:
Section 95 requires registration of a charge on book-debts within 21 days of its creation. The court held that to determine if a charge is on book-debts, one must look at the items of property at the date of the charge's creation. Since the E.C.G. policy did not encompass any book-debt at the date of the letter of authority, it did not fall within the scope of section 95. The plaintiffs' argument that a contract requires registration if it may result in a book-debt was rejected. The court emphasized that the contract must comprehend a book-debt at the date of the charge for section 95 to apply.
3. The nature of the company's right under the E.C.G. policy:
The court considered the nature of the company's right under the E.C.G. policy at various stages: before the contingency occurred, after the contingency but before liability was accepted, and after liability was accepted and the amount ascertained. It was found that in practice, the E.C.G. policy would not be entered as a book-debt at any of these stages. The court concluded that the right under the E.C.G. policy did not constitute a book-debt at any relevant time.
4. Whether the letter of authority represented an assignment by way of charge or an absolute assignment:
Although the primary issue was resolved, the court also addressed whether the letter of authority was an assignment by way of charge or an absolute assignment. The defendants argued that it was an absolute assignment, which would exempt it from section 95. The court, however, found that the letter of authority clearly represented an assignment by way of charge. Despite this finding, the court's primary conclusion that the charge did not involve book-debts rendered this issue moot.
Conclusion:
The court dismissed the action, concluding that the letter of authority did not constitute a charge on book-debts under section 95 of the Companies Act, 1948. Consequently, the charge was not void under this section. The first defendant was ordered to pay the plaintiff's costs, with the liquidator's costs being costs in the liquidation.
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1966 (5) TMI 38
Issues Involved:
1. Whether the debt owed by the defendant to the company was effectively released.
2. Whether the defendant committed misfeasance by entering into the agreement with Myer and Joseph.
3. Whether the release of the debt constituted a breach of Section 54 of the Companies Act, 1948.
4. Whether the liquidator should have been a co-plaintiff in the action.
Issue-wise Detailed Analysis:
1. Effective Release of Debt:
The company contended that although no formal release had been executed, the debt owed by the defendant could not be enforced in the ordinary way. The defendant argued that the debt had been effectively released. The court noted that the company could not contend that the debt was still a liability enforceable against the defendant, even though the company was now in liquidation. The court recorded that this concession was rightly made.
2. Misfeasance by the Defendant:
The company argued that the defendant committed misfeasance by bargaining with Myer and Joseph that, in consideration of selling his shares, they would use their powers as directors to cause the company to release his debt without consideration. The court found that the defendant did not commit misfeasance because the company had not received any consideration for the release of the debt from Myer and Joseph or the creditors. The creditors were only interested in being satisfied that the debt had no present value to them. The court concluded that the fresh lease of life gained by the company was not the outcome of any agreement to which the company was a party and could not be treated as consideration for the release of the debt.
3. Breach of Section 54 of the Companies Act, 1948:
The company alleged that the defendant breached Section 54 by providing financial assistance to Myer and Joseph in their purchase of shares. The court noted that the infringement occurred when the company, under the control of Myer and Joseph, released the debt. The court referenced the decision in Victor Battery Co. Ltd. v. Curry's Ltd., which showed that although the section makes the company guilty of a criminal offense, it does not invalidate the disposition. The court also referenced Steen v. Law, which showed that directors causing a company to enter a transaction infringing Section 54 are guilty of misfeasance. The court concluded that the defendant, who was no longer a director when the debt was released, could not be held responsible for the misfeasance committed by Myer and Joseph.
4. Liquidator as Co-Plaintiff:
The defendant argued that the liquidator should have been a co-plaintiff based on the decision in Independent Automatic Sales Ltd. v. Knowles & Foster. The court rejected this argument, stating that the company was not claiming the release was void by reason of Section 54 but was claiming against a director for misfeasance. The court saw no reason why the company could not bring such an action in its own name or why the liquidator could not bring it in the name of the company without suing personally.
Conclusion:
The court held that the action failed because the defendant was not guilty of misfeasance. The court noted that the defendant was entitled to stipulate an effective release of his debt as a term of transferring his shares. The court concluded that the release of the debt did not necessarily involve any misfeasance or infringement of Section 54. The court found that if Myer and Joseph carried out the release in a way that amounted to misfeasance, they were responsible, not the defendant. Consequently, the action was dismissed.
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1966 (5) TMI 37
Whether the power under article 11 to refuse registration of the transfer is a discretionary power?
Held that:- Cannot accept the contention that the petition was liable to be dismissed because the State of Orissa had asked for registration in the name of the Secretary, Finance Department. No such objection was taken by the company, although it had taken numerous other objections. Moreover, by letter dated December I, 1953, Shri S.K. Mandal, the attorney for the State of Orissa, had definitely called upon the company to record the name of the State as the owner of the shares in the share register. In spite of this letter, the company refused to make the necessary registration.
The Maharaja of Mayurbhanj has ceased to be the owner of the shares. The State of Orissa is now their owner, and has the legal right to be a member of the company and is entitled to say that the company should recognise its membership and make an entry on the register of the fact of its becoming a member and its predecessor-in-title having ceased to be a member. The name of the State of Orissa has, without sufficient reason, been omitted from the register and there is default in not entering on the register the fact of the Maharaja having ceased to be a member. The court's jurisdiction under section 38 is, therefore, attracted. The High Court rightly ordered the rectification in the exercise of its summary powers , under section 38. The jurisdiction created by section 38 is very beneficial and should be liberally exercised. We see no reason why the court should deny the applicant relief under section 38. The directors of the appellant company on the most frivolous of objections have prevented the State of Orissa from becoming a member for the last 16 years. It is a matter of regret that justice has been obstructed so long. There is no merit in this appeal.
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1966 (5) TMI 36
Issues Involved:
1. Mala fides in the issuance of the order.
2. Relevance of circumstances under Section 237(b) of the Companies Act.
3. Validity of the order issued by the Chairman of the Company Law Board.
4. Constitutionality of Section 237(b) under Articles 14 and 19(1)(g) of the Constitution.
Detailed Analysis:
1. Mala Fides in the Issuance of the Order
The appellants alleged that the order was made mala fide at the instance of the then Finance Minister, who bore hostility towards them. They argued that the High Court erred in not allowing cross-examination of the concerned officials and in not compelling the production of documents. The court found that the allegations were based on "reasons to believe" rather than concrete evidence. The affidavits from the respondents, including the Chairman, categorically denied these allegations and stated that the order was made independently based on materials before the Board. The court held that in the absence of specific particulars and tangible evidence, the High Court did not err in refusing to allow cross-examination or additional evidence. The court concluded that the appellants failed to establish mala fides.
2. Relevance of Circumstances Under Section 237(b) of the Companies Act
The appellants argued that the circumstances disclosed by the Chairman in his affidavit were extraneous to Section 237(b) and could not form the basis for the impugned order. The court examined the relevant provisions and concluded that while the formation of opinion by the Board is subjective, the existence of circumstances suggesting fraud or misconduct is a condition precedent to the formation of such opinion. The court held that the circumstances disclosed in the affidavit, such as delay, bungling, faulty planning, continuous losses, and the resignation of directors, did not suggest an intent to defraud or fraudulent management. The court found that these circumstances were not relevant to the matters specified in Section 237(b) and thus, the order was ultra vires the section.
3. Validity of the Order Issued by the Chairman of the Company Law Board
The appellants contended that the order was invalid as it was issued by the Chairman alone under rules that were ultra vires Section 10E of the Companies Act. The court examined the relevant rules and the order of distribution of work by the Chairman. It held that Section 10E did not provide for the splitting up of the Board's work among its members and that the power to order an investigation under Section 237(b) could only be exercised by the Board as a whole. The court found that the rule allowing the Chairman to distribute the Board's work was not a matter of procedure but amounted to sub-delegation, which was not authorized by the Act. Therefore, the order made by the Chairman was invalid.
4. Constitutionality of Section 237(b) Under Articles 14 and 19(1)(g) of the Constitution
The appellants challenged the constitutionality of Section 237(b) on the grounds that it violated Articles 14 and 19(1)(g) of the Constitution. The court held that Section 237(b) did not confer discriminatory power on the Government as it provided different powers exercisable in different circumstances and manners. The court also held that an order directing an investigation under Section 237(b) did not amount to a restriction on the right to carry on business under Article 19(1)(g). Even if it were considered a restriction, it was a reasonable one in the interests of protecting shareholders, creditors, and other interested persons from potential misuse of power and malpractices in the management of companies. Therefore, the challenge under Articles 14 and 19(1)(g) failed.
Conclusion:
The court allowed the appeal, holding that the impugned order was invalid due to the extraneous circumstances considered and the improper delegation of power to the Chairman. However, the court did not uphold the allegations of mala fides or the constitutional challenge to Section 237(b). No order as to costs was made.
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1966 (5) TMI 14
Whether the shares in question held by the trustees under the Second Trust are held for the benefit of the three minor children mentioned in the Second Trust deed?
Held that:- The word " benefit " in the context means for the immediate benefit of the individual or his wife or minor child. If a property is transferred to trustees to hold in trust for the life of A and then for B, we cannot hold that the property is held for the benefit of B during the lifetime of A. As will appear later, under the Second Trust, the trustees hold the trust property for the benefit of the charitable trust for a number of years before they start holding it for the benefit of the minor children. It is difficult to say that while the property is being held for the benefit of the charitable trust, it is also being held for the benefit of the minor children.
Thus considering the document as a whole the shares were not held for the benefit of the three minor children as on March 31, 1958, and March 31, 1959. Accordingly the answer to the question referred by the Appellate Tribunal and set out above must be against the revenue
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1966 (5) TMI 13
Whether an advocate of the High Court of Bombay is liable to pay income-tax on his receipts?
Held that:- The receipts were not chargeable to tax either under the head of professional income or under the residuary head. It was not said that the receipts might be brought to tax under any other head. In our opinion, therefore, the receipts were not chargeable to tax at all. Appeal allowed.
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1966 (5) TMI 12
The High Court of Judicature at Allahabad dismissed the petition challenging the legality of the seizure of account books, citing the re-enactment of seizure provisions in Section 110 of the Customs Act, 1962 from Section 178 of the Sea Customs Act. The court found no merit in the petition based on the notification and relevant legal provisions.
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