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1975 (5) TMI 93
Issues: Scope of the word "forthwith" in Order XXI, Rule 84 of the Code of Civil Procedure; Setting aside a re-sale under Order XXI, Rule 90 based on irregularity or fraud in conducting the sale.
In this case, the revision petition pertains to an application under Order XXI, Rule 90 for setting aside a re-sale and involves interpreting the term "forthwith" in Order XXI, Rule 84 of the Code of Civil Procedure. The facts reveal that after an initial failed sale of immovable property due to the purchaser's failure to deposit the required amount, a re-sale was conducted on the same day. The decree-holder was the only bidder and acquired the property for an amount equal to the decretal amount. Subsequently, the judgment-debtor filed an application under Order XXI, Rule 90, alleging irregularity or fraud in the sale process. The executing Court and the Appellate Judge both found no irregularity in conducting the re-sale on the same day. The petitioner argued that the re-sale held on the same day was illegal and should have been delayed to allow other bidders to participate.
The main contention revolves around the interpretation of the term "forthwith" in Order XXI, Rule 84 (1). The petitioner relied on precedents where the term was understood to mean "within a reasonable time." However, the Court emphasized that the term "forthwith" should be construed in context and may vary depending on the circumstances of each case. Referring to previous judgments, the Court highlighted that a re-sale immediately following an abortive sale on the same day could be justified if circumstances permit, without necessitating a fresh sale proclamation. The Court stressed the need to avoid unnecessary delays while ensuring fairness in the sale process.
Regarding the alleged irregularity in the sale, the petitioner failed to provide substantial evidence to support the claim. The petitioner's argument that the highest bid at the initial sale was not genuine, as it was made by a party with no real interest in purchasing the property, was dismissed by the Court. The Court upheld the lower courts' findings that there was no material irregularity in conducting the sale, thereby rejecting the petitioner's plea to set aside the sale.
Ultimately, the Court dismissed the petition, emphasizing that the re-sale conducted on the same day was not illegal and upholding the lower courts' decisions. The Court declined to award costs in this matter, concluding the judgment.
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1975 (5) TMI 92
Issues Involved:
1. Maintainability of the writ petition under Article 226.
2. Legality of the demand for payment and forfeiture of the security deposit.
3. Right of the respondents to adjust or recover the claimed amount from pending or future bills.
4. Entitlement to refund of withheld amounts.
5. Release of the bank guarantee.
Detailed Analysis:
1. Maintainability of the Writ Petition under Article 226:
The respondents contended that the writ petition was not maintainable under Article 226 of the Constitution as it involved disputed questions of fact arising out of a contract. They argued that the petitioner should have sought recourse to arbitration as provided in the contract. The court noted that the petitioner sought to challenge the actions of the respondents as being illegal, mala fide, and against principles of natural justice, which could be considered under Article 226.
2. Legality of the Demand for Payment and Forfeiture of the Security Deposit:
The respondents demanded Rs. 2,57,337.00 for breach of contract and forfeited the security deposit of Rs. 54,900.00. The court observed that the demand was a mere claim for money based on an alleged breach of contract, which should be resolved through ordinary civil proceedings or arbitration. The court cited the Supreme Court's decision in M/s. Burmah Construction Company v. The State of Orissa, emphasizing that such claims should be adjudicated in civil suits or arbitration, not under Article 226.
3. Right of the Respondents to Adjust or Recover the Claimed Amount from Pending or Future Bills:
The court examined Clause 18 of the General Conditions of Contract, which allows the purchaser to recover sums due by appropriating the security deposit or any sums due under the contract or other contracts. The Supreme Court's decision in Union of India v. Raman Iron Foundry clarified that Clause 18 applies only to sums presently due and payable, not to disputed claims for damages. The court concluded that the respondents had no right to adjust or recover the claimed amount from pending or future bills without adjudication.
4. Entitlement to Refund of Withheld Amounts:
The petitioner sought a refund of amounts withheld by the respondents. The court referred to the Supreme Court's decision in M/s. Burmah Construction Company v. The State of Orissa, which held that claims for money due under a contract should be pursued through civil suits, not writ petitions. The court also noted that the respondents could refuse to pay amounts due under other contracts if they had a valid defense, and the contractor's remedy would be to seek recovery in an appropriate forum.
5. Release of the Bank Guarantee:
The petitioner requested the release of the bank guarantee amounting to Rs. 54,900.00. The court held that the respondents could not adjust or recover their claim from the security amount without adjudication. However, the court also noted that the security was furnished for the claim arising under the contract, and the question of release would arise only after adjudication of the claim.
Conclusion:
The writ petition was partly allowed. The court quashed the portion of the respondents' letter dated August 20, 1973, in which they purported to adjust or deduct the security amount and recover the balance from pending bills. The respondents were directed not to adjust or recover their claim from the security amount or pending/future bills until adjudication. No order as to costs was made.
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1975 (5) TMI 91
Issues Involved:
1. Maintainability of an application under Section 31 of the State Financial Corporations Act, 1951 against a surety.
2. Rights of the Financial Corporation under Sections 29, 31, and 32 of the Act.
3. Interpretation of the term "borrower" and its applicability to a surety.
Detailed Analysis:
1. Maintainability of an application under Section 31 of the State Financial Corporations Act, 1951 against a surety:
The primary issue was whether the Financial Corporation could proceed against the property of a surety under Section 31 of the Act. The court noted that Section 31 provides a speedy and summary mode of recovery by making an application to the District Judge for reliefs such as the sale of mortgaged property. However, the court concluded that this section is confined to actions against the borrower industrial concern and its property. The court stated:
> "The District Judge can pass an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realise in his estimate an amount equivalent in value to the outstanding liability of the industrial concern to the Financial Corporation."
The court emphasized that the reliefs under Section 31 are directed against the borrower and its property, not against the property of a surety.
2. Rights of the Financial Corporation under Sections 29, 31, and 32 of the Act:
The court examined the rights conferred upon the Financial Corporation under these sections. Section 29 allows the Corporation to take over the management of the industrial concern and realize the mortgaged property. Section 31 provides a special procedure for enforcement of claims, and Section 32 outlines the procedure the District Judge must follow. The court observed:
> "Section 29 defines the general right of the Corporation in cases of default and Section 31 provides for a speedy and summary remedy."
The court clarified that while Section 29 allows the Corporation to proceed against the property of a surety, this right must be enforced through the ordinary legal mechanisms provided in the Transfer of Property Act and the Code of Civil Procedure, not through the summary procedure under Section 31.
3. Interpretation of the term "borrower" and its applicability to a surety:
The court discussed whether the term "borrower" could include a surety. The Advocate-General argued that any party to the loan agreement, including a surety, should be considered a borrower. However, the court disagreed, stating:
> "A borrower is obviously a person who borrows and it cannot include the surety who guarantees or secures the loan."
The court highlighted that the agreement itself distinguished between the borrower and the surety, and this distinction was maintained throughout the document. The court further noted:
> "The preamble of the agreement describes the industrial concern as borrower and describes Munna Lal as the 'mortgagor' who has mortgaged his property in security of the loan."
The court concluded that the statutory provisions of Sections 31 and 32 do not permit the inclusion of a surety within the term "borrower" for the purposes of the summary procedure.
Conclusion:
The court answered the referred question in the negative, stating:
> "The appellant Munna Lal, who mortgaged his property as surety to the Financial Corporation, could not be proceeded against under Section 31 of the Act."
The case was remitted to the Division Bench for disposal in light of this interpretation.
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1975 (5) TMI 90
Issues Involved:
1. Validity of the application for allotment of 50,000 shares.
2. Whether the application was accompanied by the requisite application money.
3. Validity and communication of the allotment of 50,000 shares.
4. Effect of the resolution dated 28th February 1963 canceling the allotment of 50,000 shares.
5. Estoppel against the petitioner due to acquiescence or delay.
6. Liability of respondent No. 4.
7. Relief sought by the petitioner.
Detailed Analysis:
Issue 1: Validity of the Application for Allotment of 50,000 Shares
The court examined whether there was a valid application for the allotment of 50,000 shares. The petitioner claimed he applied only for 500 shares and denied applying for 50,000 shares. The court found that the only application on record was filled in without the petitioner's concurrence or knowledge, indicating no valid application for 50,000 shares existed.
Issue 2: Application Accompanied by Requisite Money
The petitioner contended that he did not provide any cheque for Rs. 5 lakhs for 50,000 shares, but only Rs. 5,000 for 500 shares. The court noted that the application for 50,000 shares was not accompanied by the requisite application money, as the cheque for Rs. 5 lakhs was never sent to the bank for collection, unlike the cheque for Rs. 5,000 which was cashed. Therefore, the court concluded that the application was not accompanied by the requisite money.
Issue 3: Validity and Communication of Allotment
The court examined whether there was a valid allotment of 50,000 shares and if it was communicated to the petitioner. It was established that there was no communication of such an allotment to the petitioner. The court cited that without communication, there was no acceptance, and thus, no concluded contract. Therefore, the court found that there was no valid allotment of 50,000 shares to the petitioner.
Issue 4: Effect of the Resolution Dated 28th February 1963
The court considered the resolution dated 28th February 1963, which canceled the allotment of 50,000 shares. The court referred to precedents that a company could rectify its register without a court order if the right to rectification was recognized by the company. The court found that since the resolution was passed before the winding-up petition, it was valid and effective in canceling the allotment.
Issue 5: Estoppel Due to Acquiescence or Delay
The court examined whether the petitioner was estopped from seeking rectification due to acquiescence or delay. The court concluded that since there was no valid allotment of 50,000 shares, the petitioner could not be estopped from seeking rectification. The court emphasized that there was no contract to begin with, and thus, no estoppel could be pleaded against the petitioner.
Issue 6: Liability of Respondent No. 4
This issue was not argued before the court, and the court found no basis for it in the present petition. Therefore, the court did not see how this question arose in the context of the petition.
Relief
The court directed that the register of members should be rectified to reflect that the petitioner did not subscribe for 50,000 paid-up equity shares but only 500 paid-up shares. The Official Liquidator was instructed not to place the petitioner on the list of contributories.
Conclusion:
The court found that there was no valid application or allotment of 50,000 shares to the petitioner and that no contract existed for such shares. The resolution canceling the allotment was valid, and the petitioner was not estopped from seeking rectification. The court ordered the rectification of the register of members to show only 500 shares allotted to the petitioner and directed the Official Liquidator not to list the petitioner as a contributory. The petition was accepted without costs.
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1975 (5) TMI 89
Issues:
Jurisdiction of the court to try the suit involving claims not excepted by Schedule II under Section 16 of the Provincial Small Cause Courts Act, 1887.
Analysis:
Issue 1: Jurisdiction of the court
The plaintiff filed a suit in 1963 claiming various amounts, including wages and compensation. During the trial, the defendant raised an objection regarding the jurisdiction of the court to try claims not excepted by Schedule II under Section 16 of the Act. The defendant contended that such claims should be tried by a Small Causes Court, not the court of the learned Munsif. The defendant relied on legal precedents to support this argument.
Issue 2: Objection to jurisdiction
The defendant argued that the claims mentioned in issue No. 6 were not exempted from the jurisdiction of the Small Causes Court under Section 15 of the Act. The defendant contended that the court had no jurisdiction to try claims exceeding the limit set by Section 16 of the Act and that such claims should be tried by a Small Causes Court. The defendant cited relevant case law to support this argument.
Issue 3: Plaintiff's objection to belated jurisdictional objection
The plaintiff opposed the defendant's objection, stating that the objection to jurisdiction was raised belatedly and should not be allowed at this stage of the proceedings. The plaintiff argued that the objection should have been raised earlier and that the court should not entertain jurisdictional objections raised at a late stage. The plaintiff cited legal precedents to support this argument.
Issue 4: Court's authority to examine jurisdiction
The court noted that the objection raised by the defendant related to the court's jurisdiction to try the suit and that such objections could be examined at any stage of the proceedings. The court held that even if the objection was not raised earlier, the court had the authority to consider jurisdictional issues and pass appropriate orders.
Issue 5: Court's decision on jurisdiction
The court analyzed the provisions of the Act and relevant case law to determine that the claims mentioned in issue No. 6 were not exempted by Schedule II. The court concluded that claims not exceeding the specified limit should be tried by a Small Causes Court. The court held that allowing such claims to be tried in ordinary courts would circumvent the law. Therefore, the court set aside the impugned order and made the rule absolute.
Conclusion:
The court ruled in favor of the defendant, holding that claims not excepted by Schedule II should be tried by a Small Causes Court. The court set aside the order challenged by the defendant and emphasized the need for expedited proceedings in the trial court. The plaintiff was given the option to relinquish the claims in issue No. 6 to allow the remaining claim to be tried by the learned Munsif.
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1975 (5) TMI 88
Issues Involved:
1. Validity of amendments to the Mysore Silkworm Seed and Cocoon (Regulation of Production, Supply, and Distribution) Act, 1960.
2. Alleged infringement of fundamental rights under Article 19(1)(g) of the Constitution.
3. Requirement of Presidential sanction under Article 304(b) of the Constitution.
4. Whether amendments imposed additional restrictions on trade and commerce.
Detailed Analysis:
1. Validity of Amendments to the Mysore Silkworm Seed and Cocoon (Regulation of Production, Supply, and Distribution) Act, 1960:
The petitioners challenged the amendments to the Principal Act by the Amending Act of 1969, asserting that these amendments imposed additional restrictions on their business without Presidential sanction. The State of Mysore argued that the amendments did not introduce new restrictions but merely formalized existing statutory rules into statutory provisions. The Court examined the rules and found that the amendments did not impose any significant additional restrictions beyond what was already present in the Principal Act and the rules framed thereunder.
2. Alleged Infringement of Fundamental Rights under Article 19(1)(g) of the Constitution:
The petitioners claimed their fundamental right to carry on business was adversely affected by the amendments. The Court noted that the reasonableness of the restrictions was not challenged by the petitioners. It was held that restrictions without legal authority are inherently invalid. The Court emphasized that the impact on individual rights must be direct, and in this case, the amendments did not impose new restrictions but maintained the regulatory framework of the Principal Act.
3. Requirement of Presidential Sanction under Article 304(b) of the Constitution:
The petitioners argued that the amendments required Presidential sanction as per Article 304(b). The Court clarified that Article 304(b) mandates that restrictions on trade and commerce must be reasonable and in the public interest, and such restrictions require Presidential sanction. However, Article 255 allows for retrospective curing of the defect of want of Presidential sanction. The Court found that the amendments did not introduce new restrictions that would necessitate fresh Presidential sanction, as the Principal Act already had such sanction.
4. Whether Amendments Imposed Additional Restrictions on Trade and Commerce:
The Court examined whether the amendments introduced additional restrictions on trade and commerce. It was argued by the State that the amendments were within the scope of the Principal Act, which had already obtained Presidential sanction. The amendments were seen as formalizing existing rules rather than introducing new restrictions. The Court concluded that the changes did not significantly increase the restrictiveness of the regulations and were within the purposes of the Principal Act.
Conclusion:
The Court dismissed the petitions, holding that the amendments did not impose additional restrictions requiring Presidential sanction and did not infringe upon the petitioners' fundamental rights under Article 19(1)(g). The penalties introduced by the amendments were viewed as procedural enforcement measures rather than new restrictions. The Court emphasized that the amendments aimed to maintain the quality and trade of Mysore silk, contributing to the public interest and the overall trade and commerce framework. Consequently, the petitions were dismissed with costs.
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1975 (5) TMI 87
Issues Involved:
1. Determination of compensation for compulsory land acquisition.
2. Assessment of market value of the acquired land.
3. Evaluation of evidence and comparable sales.
4. Application of legal principles in compensation determination.
Summary:
1. Determination of Compensation for Compulsory Land Acquisition:
The appellant, a landowner, sought increased compensation for his property acquired by the State for constructing a Housing Colony for Madras Port Trust employees. The Land Acquisition Officer awarded Rs. 800 per ground, the City Civil Court increased it to Rs. 1,000 per ground, and the High Court further revised it to Rs. 1,800 per ground. The appellant demanded at least Rs. 2,200 per ground.
2. Assessment of Market Value of the Acquired Land:
The Supreme Court emphasized that compensation for compulsory acquisition, governed by s. 23 of the Land Acquisition Act, 1894, prioritizes the market value of the land at the date of the notification u/s 4(1). The main criterion is what a willing purchaser would pay a willing vendor. The appellant had purchased the land ten months before the notification at Rs. 410 per ground, and the High Court awarded Rs. 1,800 per ground, which was considered fair.
3. Evaluation of Evidence and Comparable Sales:
The Court noted that the best evidence of the value of property is the sale of the very property to which the claimant is a party. The appellant's purchase of the land at Rs. 410 per ground was a significant indicator. The Court also considered sales of neighboring lands, which ranged from Rs. 300 to Rs. 400 per ground, with one instance at Rs. 900. The High Court's assessment of Rs. 1,800 per ground was deemed reasonable, considering the evidence.
4. Application of Legal Principles in Compensation Determination:
The Court highlighted that it would not interfere with the High Court's judgment unless there was a wrong application of principle or important points affecting valuation were overlooked. The appellant's arguments regarding distress sales and rising prices were not conclusive. The Court found no serious flaw in the High Court's appraisal and upheld the judgment, dismissing the appeal without costs.
Conclusion:
The Supreme Court dismissed the appeal, affirming the High Court's award of Rs. 1,800 per ground as fair compensation for the compulsory acquisition of the appellant's land. The judgment emphasized the importance of recent transactions and comparable sales in determining market value and upheld the principles applied by the lower courts.
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1975 (5) TMI 86
maxim lex non cogit ad impossibilia means that the law does not compel a man to do that which he cannot possibly perform.
whether, the respondents, after having obtained the orders of injunction from the Court restraining the appellants from taking any proceedings could, thereafter, insist upon the notices within that period as a condition for their liability to file the returns or for the authorities for making the assessments,
whether the Commissioner could have issued the notices before the appeals were preferred
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1975 (5) TMI 85
Issues:
1. Validity of the certificate granted by the High Court under Article 133(1)(a) of the Constitution.
2. Whether an order in a petition under Article 226 or 227 dismissed in limine is a final order for the purpose of Article 133(1)(a) of the Constitution.
Detailed Analysis:
1. The appellant, a widow, claimed joint tenancy in certain plots along with her husband's brother, the 1st respondent. The claim was based on the property being joint Hindu family property. The matter went through various levels of adjudication under the U.P. Consolidation of Holdings Act, 1953, culminating in a petition before the High Court of Allahabad under Article 226. The High Court dismissed the petition in limine but granted a certificate under Article 133(1)(a) of the Constitution. A preliminary objection was raised regarding the validity of the certificate, contending that the High Court's judgment merely affirmed the decision of the Deputy Director, Consolidation. The Supreme Court held that since the High Court did not affirm the decision but simply refused to exercise its powers under Articles 226 or 227, the question of whether the officers under the Act are Courts did not arise. The certificate granted by the High Court was deemed valid based on the non-affirmance of the decision.
2. Various legal precedents were considered to determine the nature of orders in petitions under Article 226 or 227 dismissed in limine. The Court highlighted that for an order to be considered a judgment of affirmance, the appeal must be heard, and a judgment delivered thereafter. Orders dismissed on preliminary grounds like non-prosecution or incompetency of the appeal do not constitute decisions on appeal or affirmance. The Court emphasized that petitions under Article 226 or 227 do not confer a right of appeal, and the High Court's refusal to entertain such petitions does not amount to affirming the decision below. Therefore, an order in a petition under Article 226 or 227 dismissed in limine was held not to be a final order for the purpose of Article 133(1)(a) of the Constitution. The Supreme Court set aside the High Court's order and remanded the case for a fresh consideration with a reasoned order to be passed.
In conclusion, the Supreme Court clarified the distinction between orders of affirmance and orders dismissing petitions in limine under Article 226 or 227. The judgment emphasized the importance of a judicial consideration of appeals for them to be deemed decisions on appeal or affirmance. The case was remanded to the High Court for a fresh consideration and reasoned order, highlighting the need for proper adjudication in legal proceedings.
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1975 (5) TMI 84
Issues Involved:
1. Legality of house-tax levy.
2. Legality of Permission Fee levy.
Summary:
1. Legality of House-Tax Levy:
The Supreme Court addressed the issue of the Kuthbullapur Gram Panchayat's power to levy house-tax on the respondent's buildings, including factory premises. The High Court had previously ruled that the buildings did not fall within the definition of a 'house' u/s 2(15) of the Andhra Pradesh Gram Panchayats Act, 1964, and thus were not subject to house-tax. However, the Andhra Pradesh Gram Panchayats (Amendment) Act, 16 of 1974, retrospectively amended the definition of 'house' to include factory buildings and eliminated the requirement of a separate principal entrance from the common way. The Supreme Court upheld the retrospective amendment, stating that the legislature has the power to make laws retroactive and that the amendment effectively removed the basis of the High Court's decision. Consequently, the levy of house-tax was deemed lawful.
2. Legality of Permission Fee Levy:
The Supreme Court examined the legality of the Permission Fee imposed by the Gram Panchayat for the construction of buildings. The High Court had ruled the fee illegal, noting that no services were rendered by the Panchayat to justify the fee. The Supreme Court concurred, emphasizing that fees must have an element of quid pro quo, correlating the fee with services rendered. The Court found no provision in the Act requiring permission from the Gram Panchayat for constructing non-factory buildings and no evidence of services rendered to the respondent. Additionally, the Court rejected the argument that the Permission Fee could be considered a tax on buildings, noting that the fee was payable regardless of whether a building was eventually constructed. Thus, the levy of the Permission Fee was struck down as illegal.
Conclusion:
The Supreme Court partially allowed the appeal, upholding the levy of house-tax but striking down the Permission Fee as illegal. The success being divided, no order as to costs was made.
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1975 (5) TMI 83
Issues:
- Interpretation of article 286 of the Constitution regarding sales tax exemption
- Application of section 27 of the U.P. Sales Tax Act to determine tax liability on sales
- Definition of inter-State sales under the Central Sales Tax Act
- Comparison of definitions in the Central Sales Tax Act and U.P. Sales Tax Act
- Distinguishing factors in assessing sales tax exemption eligibility
Interpretation of Article 286 of the Constitution:
The case involved a reference under section 11(4) of the U.P. Sales Tax Act concerning the exemption from tax on sales of gur consigned outside Uttar Pradesh. The dealer claimed exemption under article 286 of the Constitution, which prohibits the imposition of tax on sales outside the state or in the course of import/export. The Assistant Commissioner accepted the claim, but the Judge (Revisions) reversed the decision based on a previous court ruling. The central question was whether the sales were outside U.P. and exempt under article 286.
Application of Section 27 of the U.P. Sales Tax Act:
Section 27 of the U.P. Sales Tax Act provides exemptions for sales outside the state or in the course of inter-State trade. In this case, the goods were sold within Uttar Pradesh by transferring railway receipts to buyers, indicating that the sales did not fall under the exemptions specified in section 27. The Act prohibits tax imposition on inter-State sales post-March 31, 1951, unless specified by Parliament.
Definition of Inter-State Sales under the Central Sales Tax Act:
The judgment discussed the definition of inter-State sales under the Central Sales Tax Act, which considers sales as inter-State if they involve the movement of goods between states or transfer of title documents during transit. The Act's provisions clarify when a sale is deemed to occur during inter-State trade, emphasizing the movement of goods and transfer of documents.
Comparison of Definitions in Acts:
The court analyzed the similarity between the definition of inter-State sales in the Central Sales Tax Act and the U.P. Sales Tax Act. It concluded that the sales exempt from tax under the U.P. Sales Tax Act align with the definitions in the Central Sales Tax Act. Sales involving the transfer of railway receipts during transit between states were considered inter-State sales exempt from tax.
Distinguishing Factors in Assessing Exemption Eligibility:
The judgment distinguished the present case from a previous ruling where a similar contention was raised but not allowed. It clarified that the sales in question were indeed exempt under article 286 of the Constitution and section 27(1)(b) of the U.P. Sales Tax Act. The court awarded costs to the assessee and answered the reference accordingly, affirming the exemption eligibility for the sales in question.
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1975 (5) TMI 82
Issues Involved:
1. Whether the procurement of rice was made by the State Government as agents of the Food Corporation of India (FCI).
2. Whether the procurement of rice under the Levy Order is a taxable event.
3. Whether the Food Corporation of India is a "dealer" under the relevant tax laws.
4. Whether the transaction between the State Government and the corporation constitutes a "sale" and is thus taxable.
5. The jurisdiction of the authorities to impose tax and the liability of the petitioner to pay the same.
Issue-Wise Detailed Analysis:
1. Agency Relationship:
The court examined whether the State Government and its officers acted as agents of the Food Corporation of India (FCI) in procuring rice. The petitioners argued that the State acted as an agent for FCI, citing admissions made during assessment proceedings and in appeals. However, the court concluded that the State, while procuring rice, did not represent FCI. The procurement was based on the Levy Order issued under the Essential Commodities Act and not on any agency relationship. The court stated, "The State or its officers, while procuring rice, do not represent the Food Corporation of India." Therefore, the contention that there was an agency relationship was repelled.
2. Taxable Event:
The court considered whether the procurement of rice under the Levy Order constituted a taxable event. It was argued that the procurement was not a sale and thus not taxable. The court referred to the Supreme Court's decision in Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P., which held that compulsory acquisition under a statutory order does not constitute a sale. The court found that "the act of procuring rice under the Levy Order does not constitute 'sale'." Therefore, the transaction between the millers or dealers and the State Government was not a taxable event.
3. Definition of "Dealer":
The petitioners contended that FCI, while distributing foodgrains to deficit states, did not act with a profit motive and thus should not be considered a "dealer." The court agreed, stating that "the corporation, while carrying out the policy of the Central Government in distributing foodgrains to the deficit States, is not doing business with the object of making profits." The court emphasized that the activities were welfare-oriented and did not involve any profit motive, thus excluding FCI from the definition of a "dealer."
4. Transaction Constituting "Sale":
The court analyzed whether the transaction between the State Government and FCI constituted a sale. The court found that the transactions under the Levy Order were not sales but compulsory acquisitions. The court stated, "The transaction between the State Government or its officers and the corporation is not a sale and is merely a transfer of rice procured under the Levy Order." Therefore, these transactions were not taxable events.
5. Jurisdiction and Liability:
The court addressed the preliminary objection regarding the jurisdiction of the authorities to impose tax and the liability of the petitioner to pay the same. The court found that the assessment orders and demand notices were issued without jurisdiction. The court stated, "The question of jurisdiction of the authorities to impose tax and the liability of the petitioner to pay the same is involved and the same has been decided on the basis of the admitted or patent facts." Consequently, the court quashed the assessment orders and demand notices.
Conclusion:
The court allowed the writ petitions, quashing the assessment orders and demand notices. The court held that the procurement of rice under the Levy Order did not constitute a sale and was not a taxable event. The court also found that FCI was not a dealer for the purposes of these transactions and that the State Government did not act as an agent for FCI. The court emphasized that the transactions were welfare-oriented and lacked a profit motive, thus excluding them from the purview of sales tax. The petitions were allowed with costs, and the court awarded counsel's fee of Rs. 500 in each case.
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1975 (5) TMI 81
Issues:
Interpretation of rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957 regarding the requirement for goods intended for use in an existing business for registration. Application of sections 7, 8(1), and 8(3) of the Central Sales Tax Act, 1956 in relation to the registration of dealers for concessional rate of assessment. Dispute over the inclusion of machinery in the certificate of registration without a pre-existing manufacturing or processing business.
Analysis:
The judgment by the Kerala High Court involved the interpretation of rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957, specifically regarding the necessity of goods being intended for use in an existing business for registration. The Court affirmed that there is no requirement in rule 13 that the goods must be intended for use in an existing business. The Court analyzed the connection between section 7 of the Central Sales Tax Act, 1956, which mandates dealer registration, and sections 8(1) and 8(3) which provide for concessional rates of assessment for certain goods sold in inter-State trade or commerce.
The Court highlighted that sections 8(1) and 8(3) of the Act pertain to a different scenario compared to section 7 and rule 13, focusing on whether the goods were intended for use in the manufacture or processing of goods for sale. In a specific case, the respondent sought to include machinery in the registration certificate for a business manufacturing plastic products. However, the Sales Tax Officer refused to include machinery, asserting that a dealer without an existing manufacturing business is not entitled to concessional tax rates under section 8.
The Court disagreed with this interpretation, emphasizing that the requirement of a pre-existing business for concessional tax rates was unfounded. The judgment overturned the decisions of the Sales Tax Officer and Deputy Commissioner, granting the respondent the right to include machinery in the registration certificate. Another similar case raised the same issue, and the Court ruled in favor of the petitioner, directing the authorities to reconsider the application for registration without the precondition of a pre-existing manufacturing business.
In conclusion, the High Court dismissed the appeal, upholding the decision that goods need not be intended for use in an existing business for registration. The Court allowed the petition in the second case, quashing previous orders and instructing a fresh review of the registration application without the requirement of a pre-existing manufacturing business.
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1975 (5) TMI 80
Issues:
1. Best judgment assessment by Commercial Tax Officer.
2. Legal representation in case of partner's death.
3. Fairness of the assessment process.
4. Compliance with principles of natural justice.
5. Quashing of assessment order and remittance for reassessment.
Best Judgment Assessment by Commercial Tax Officer:
The judgment pertains to a rule against a best judgment assessment order made by the Commercial Tax Officer regarding the business of a partnership firm. The firm, engaged in selling luxury goods and hire-purchase agreements, faced challenges in submitting timely returns due to various reasons, including a fire incident damaging their books of account. The assessment authority estimated the gross turnover at Rs. 34,00,000 for a quarter, leading to distress warrant execution against the firm's movable properties and bank accounts. The petitioners challenged the assessment, arguing that it was based on surmise and lacked a legal basis.
Legal Representation in Case of Partner's Death:
The respondents raised objections regarding the legal representation of the deceased partner's heirs in the rule. The court clarified that under the Bengal Finance Sales Tax Act, the firm itself is not a dealer, and only individual partners are registered as dealers. The death of one partner does not invalidate the assessment proceedings under Article 226 of the Constitution. The court emphasized that even if the registration certificate is issued jointly, any partner can challenge the assessment's legality.
Fairness of the Assessment Process:
Referring to the principles established in previous judgments, the court highlighted the requirement for a fair estimate in best judgment assessments. It noted that the assessing officer must base the estimate on evidence and materials, not mere suspicion. In this case, the Commercial Tax Officer failed to provide any reasoning for the gross turnover estimate of Rs. 34,00,000, which did not meet the minimum standards for best judgment assessment. Consequently, the court quashed the assessment order and directed a reassessment in compliance with the law.
Compliance with Principles of Natural Justice:
The petitioners contended a violation of natural justice principles due to lack of opportunity and improper estimation methods. The court's decision to set aside the assessment order and remit the case for a fresh assessment aimed to rectify these procedural irregularities and ensure a fair and just determination of tax liabilities.
Quashing of Assessment Order and Remittance for Reassessment:
Ultimately, the court made the rule absolute without costs, issuing a writ of certiorari to quash the assessment order and a writ of mandamus to set aside the certificate proceedings against the petitioner. The court clarified that any existing property attachments due to other proceedings would remain unaffected by this order. The judgment's applicability to other related rules was also specified, with a stay on the order's operation for four weeks.
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1975 (5) TMI 79
Issues:
1. Classification of "lime" under the Karnataka Sales Tax Act, 1957.
2. Interpretation of the term "heavy chemicals" under item No. 79 of the Second Schedule to the Act.
Analysis:
The case involved revision petitions by the State under section 23(1) of the Karnataka Sales Tax Act against orders of the Sales Tax Appellate Tribunal regarding the classification of "lime" manufactured from sea-shell by dealers. The assessing authority initially levied tax on the turnover of the dealers at 3%, assuming that lime sold did not fall under any specific item in the Second Schedule. Subsequently, the revisional authorities sought to charge the dealers at a higher rate under item No. 79 for "heavy chemicals." The dealers contended that lime should be classified under item No. 48 as chemical fertilizers or that it did not qualify as a heavy chemical under item No. 79. The Tribunal, after considering definitions and characteristics of "heavy chemicals," ruled in favor of the dealers, stating there was no evidence to prove lime as a heavy chemical. The State challenged this decision in the High Court.
The State argued that "lime" should be considered a "heavy chemical" under item No. 79 due to its bulk production at low rates. The key question was whether lime manufactured from sea-shell in the country fell within the definition of "heavy chemicals" as per the Act. The term "heavy chemicals" was not defined in the Act, but references were made to dictionaries and encyclopedias to understand the concept. The Encyclopaedia of Social Sciences described heavy chemical industries as those producing bulky chemicals cheaply per unit of weight, including acids, alkalies, fertilizers, and other chemical products. The Court noted that while lime might be a heavy chemical in certain countries, the production method in India through cottage industries did not align with the characteristics of heavy chemical industries.
The Court emphasized that the legislative intent behind item No. 79 was not to encompass all chemicals with general economic characteristics of heavy chemicals. It highlighted the distinction between large-scale chemical production in heavy chemical industries and smaller-scale production by cottage industries. Without concrete evidence supporting lime as a heavy chemical in the country, the revisional authorities erred in revising the assessment orders. The Court concluded that since there was insufficient material to determine if lime qualified as a heavy chemical under item No. 79, the Tribunal's decision to uphold the assessing authorities' orders was justified. The revision petitions were dismissed, and the Court refrained from definitively deciding on the heavy chemical classification of lime in the absence of substantial evidence.
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1975 (5) TMI 78
Issues:
1. Whether there is material on record to sustain the finding of continuous suppression?
2. Should the addition to the turnover be limited to the amount of actual suppression detected?
Analysis:
The case involved a dealer in timber logs and sizes whose accounts were rejected by the Sales Tax Officer, leading to an estimated total taxable turnover higher than the one reported by the petitioner. The main contention was the reasonableness of the estimate made by the assessing authorities. The Sales Tax Officer, based on the recovery of slips of paper and a secret diary indicating suppression, estimated the total suppression for the whole year and added it to the admitted turnover, which was objected to by the assessee. The petitioner argued that the addition made by the assessing authority was unreasonable and should be limited to the actual suppression detected initially.
The High Court held that the addition made by the assessing authority, confirmed by the appellate authority and the Tribunal, was justified. It was established that there was a pattern of suppression from the materials available, justifying the addition to the turnover. The Court emphasized that if taxing authorities are convinced of suppression based on available evidence, they are justified in making additions for the entire year. The Court rejected the petitioner's argument that the addition should be limited to the amount of actual suppression detected, as there was sufficient material to indicate a pattern of continuous suppression by the assessee.
The judgment referenced a Full Bench decision of the Court to support the conclusion that the existence of material indicating suppression and a pattern of suppression justifies the taxing authorities' actions. The Court found that the Intelligence Officer's detection of suppression, coupled with the assessee's explanation of accounting practices indicating suppression, provided ample evidence of continuous suppression. Therefore, the Tribunal's decision to reject the petitioner's contentions was upheld, and the Court dismissed the Tax Revision Case without ordering any costs.
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1975 (5) TMI 77
Issues:
- Determination of the time requisite for obtaining a certified copy of an order under the Bihar Sales Tax Act, 1959.
Analysis:
The case involved a question of law regarding the computation of the time requisite for obtaining a certified copy of an order under the Bihar Sales Tax Act, 1959. The dispute arose from the discrepancy between the date the dealer made an application for the certified copy by registered post (3rd June, 1968) and the date it was received by the authority concerned (6th June, 1968). The Tribunal held that the time requisite for obtaining the copy should commence from the date it was received, not the date of posting. The key issue for determination was whether the time taken in postal transit should be included in the time requisite for obtaining the copy.
The relevant provisions of the Act and the Bihar Sales Tax Rules were considered in the judgment. It was noted that while the Act provided for the filing of appeals and revisions within specified time frames, there was no explicit provision for deducting the time taken to obtain a certified copy of the order. The judgment highlighted the absence of a specific provision in the Act or Rules for excluding the time taken to obtain a certified copy, unlike in the Income-tax Act, 1961.
The judgment delved into the interpretation of Section 12(2) of the Limitation Act, 1963, which allows for the exclusion of the time requisite for obtaining a copy of an order in computing the period of limitation for appeals or revisions. The court referred to precedents and legal principles to determine that the time taken in obtaining the copy, even if due to postal transit, should be considered beyond the party's control and hence deductible from the period of limitation.
The court specifically analyzed Rule 35(4) of the Bihar Sales Tax Rules, which allowed for making an application for a certified copy by registered post. It was emphasized that if the dealer complied with all formalities and made the application within the limitation period, the time taken by the postal department should be deemed beyond the dealer's control. The judgment concluded that there should be no distinction in computing the period deductible for obtaining a certified copy based on whether the application was made in person or through registered post.
Ultimately, the court held in favor of the assessee, ruling that the time requisite for obtaining the certified copy should commence from the date of application (3rd June, 1968), not the date of receipt by the authority (6th June, 1968). The judgment provided a detailed analysis of the legal provisions and precedents to support this conclusion, emphasizing the importance of considering the time taken in postal transit as part of the time requisite for obtaining a copy.
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1975 (5) TMI 76
Issues:
1. Whether a firm is included within the definition of "dealer" under section 2(c) of the Bengal Finance (Sales Tax) Act, 1941.
2. Whether a dissolved firm can be assessed to sales tax under the Bengal Finance (Sales Tax) Act, 1941.
Analysis:
1. The case involved the dissolution of a partnership firm and the assessment of sales tax under the Bengal Finance (Sales Tax) Act, 1941. The petitioner argued that a dissolved partnership firm cannot be assessed as a dealer under the Act. The Supreme Court's decision in Additional Tahsildar v. Gendalal was cited, emphasizing that a firm ceases to be a legal entity upon dissolution and cannot be assessed unless there is a statutory provision allowing it. The definition of "dealer" in the Act did not explicitly include a firm, unlike in other state acts where firms were considered dealers.
2. The respondents contended that the dissolved partnership firm was indeed a dealer under the Bengal Finance (Sales Tax) Act, based on the registration certificate issued in the names of the partners. However, the court noted that the Act's definition of "dealer" did not include a firm, and the legislature had specifically excluded "firm" from the definition. Therefore, the dissolution of the partnership did not affect the assessment of the individual partners as dealers, as the firm itself had no legal entity under the Act.
3. The court held that while a firm is considered a "person" under the General Clauses Act, it was specifically omitted from the definition of "dealer" in the Bengal Finance (Sales Tax) Act. The judge concluded that the extended definition of "dealer" would be repugnant to the Act's subject and context. Consequently, the Commercial Tax Officer was deemed to be within jurisdiction in issuing notices for the production of the petitioner's business accounts. The application was dismissed, with no order for costs, but the operation of the order was stayed for six weeks as requested.
In summary, the judgment clarified that a dissolved partnership firm is not considered a dealer under the Bengal Finance (Sales Tax) Act, and individual partners can be assessed separately. The court relied on statutory provisions and previous Supreme Court decisions to support its findings, ultimately upholding the Commercial Tax Officer's authority to issue assessment notices in this case.
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1975 (5) TMI 75
Whether the "sales tax" collected by these assessees under section 21-A of the Madras Prohibition Act, 1937, can be treated as part of their total turnover?
Held that:- Appeal dismissed. It is clear from section 21-A of the Madras Prohibition Act, 1937, that the sales tax which the section requires the seller of foreign liquor to collect from the purchaser is a tax on the purchaser and not on the seller. This is what makes the authorities on which counsel for the appellants relied inapplicable to the cases before us. Under section 21-A the tax payable is on the price of the liquor and that tax is to be paid by the purchaser; the seller is required to collect the tax from the purchaser which he has to pay over to the Government. Section 21-A makes the seller a collector of tax for the Government, and the amount collected by him as tax under this section cannot therefore be a part of his turnover. Under the Madras General Sales Tax Act, 1959, the dealer has no statutory duty to collect the sales tax payable by him from his customer, and when the dealer passes on to the customer the amount of tax which the former is liable to pay, the said amount does not cease to be the price for the goods although "the price is expressed as X plus purchase tax" but the amounts collected by the assessees concerned in these appeals under a statutory obligation cannot be a part of their taxable turnover under the Madras General Sales Tax Act, 1959.
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1975 (5) TMI 67
Issues Involved:
1. Liability of respondent No. 3, Ranadeb Choudhuri, as a director for the sum of Rs. 83,700.
2. Liability of the directors or any of them for the sum of Rs. 83,700.
3. Whether the application is barred by the law of limitation.
4. Relief entitled to the official liquidator.
Issue-wise Detailed Analysis:
Issue 3: Whether this application is barred by the law of limitation.
The application was filed under section 543 of the Companies Act, 1956, which mandates a five-year limitation period from the date of the winding-up order. The winding-up order was made on 1st February 1966, making the limitation period expire on 1st February 1971. The application was noted as made on 2nd February 1971. However, it was argued that 31st January 1971 was a Sunday and 1st February 1971 was a holiday for Saraswati Puja immersion. Evidence, including a witness and documents, confirmed that 1st February 1971 was indeed a holiday. Consequently, the application was deemed timely, and issue No. 3 was answered in the negative.
Issues 1 and 2: Liability of Respondent No. 3, Ranadeb Choudhuri, and other directors for the sum of Rs. 83,700.
The official liquidator's misfeasance application cited three main grounds:
1. Wrongful and illegal payment of Rs. 29,000 as commission for share sales.
2. Unjustified payment of Rs. 52,700 as commission and interest for procuring finance.
3. Unjustified payment of Rs. 3,000 for travelling and conveyance expenses.
An auditor's report, treated as final, indicated several discrepancies and unauthorized payments. The managing director, Mr. M.N. Mitra, was found to have authorized these payments, many of which lacked proper documentation and appeared suspicious. The report suggested that some payments were made to non-existent or dummy persons. The auditor also highlighted that the company's records were poorly maintained, further implicating mismanagement.
Liability of Directors:
Section 543 of the Companies Act empowers the court to assess damages against delinquent directors. A director closely associated with the management is liable for misfeasance if they fail to act with reasonable diligence. The managing director, M.N. Mitra, was found personally liable for the misfeasance and breach of trust, resulting in a loss of Rs. 83,700 to the company. The court held that the non-availability of proper books was strong evidence of deliberate negligence by the managing director.
Exoneration of Respondent No. 3:
The evidence showed that respondent No. 3, Ranadeb Choudhuri, did not participate in the day-to-day affairs of the company and had no knowledge of the misappropriations. It was not his duty to scrutinize the books of accounts, and there was no evidence of his involvement in the fraudulent activities. Consequently, he was exonerated from liability.
Relief Entitled to the Official Liquidator:
The court directed Mr. M.N. Mitra to compensate the company for Rs. 83,700 with interest at 6% per annum from 1st February 1971 until realization. The official liquidator was also instructed to initiate criminal proceedings against M.N. Mitra and hand over the investigation to the Deputy Commissioner, Detective Department, Calcutta. The official liquidator was entitled to costs from M.N. Mitra, with initial payment from the company's assets.
Conclusion:
Mr. M.N. Mitra, the managing director, was held personally liable for misfeasance and breach of trust, while respondent No. 3, Ranadeb Choudhuri, was exonerated. The court ordered compensation and criminal proceedings against M.N. Mitra and awarded costs to the official liquidator.
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