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• 2004 (6) TMI 645
  
  1. ISSUES PRESENTED and CONSIDERED

  The core legal question considered was whether the suit filed by the respondents was validly instituted under the amended provisions of the Civil Procedure Code (CPC), specifically concerning the requirement for a plaint to be supported by an affidavit. The Court also examined whether the amendments to the CPC applied to the Original Side Rules of the Calcutta High Court and the implications of non-compliance with these amendments on the interlocutory order granted by the First Court.

  2. ISSUE-WISE DETAILED ANALYSIS

  Relevant Legal Framework and Precedents:

  The amendments to the CPC, effective from July 1, 2002, introduced a requirement that every plaint must be supported by an affidavit as per Section 26(2) and Order 6 Rule 15(4). Order 4 Rule 3 further stipulated that a plaint is not deemed duly instituted unless it complies with these requirements. The amendments aimed to create uniformity and expedite civil proceedings. The Court also considered Section 32 of the CPC Amendment Act, 1999, which repeals any inconsistent provisions made by State Legislatures or High Courts.

  Court's Interpretation and Reasoning:

  The Court found that the legislative intent behind the amendments was to ensure uniformity in the procedure for instituting suits across different High Courts. The amendments were deemed mandatory, and any inconsistency with local rules, such as the Original Side Rules of the Calcutta High Court, would be overridden by the amendments. The Court emphasized that the Original Side Rules must be interpreted in harmony with the amended CPC.

  Key Evidence and Findings:

  The Court noted that the plaint in question was verified but not supported by an affidavit at the time of its filing, contrary to the requirements of the amended CPC. The respondents admitted this non-compliance and subsequently filed an affidavit during the proceedings before the High Court.

  Application of Law to Facts:

  The Court applied the amended provisions of the CPC to the facts, concluding that the suit was not duly instituted at the time of its filing due to the absence of an affidavit. The subsequent filing of an affidavit rectified the defect, but the suit could only be deemed duly instituted from the date of filing the affidavit, not retroactively.

  Treatment of Competing Arguments:

  The appellants argued that the suit was not validly instituted due to non-compliance with the affidavit requirement. The respondents contended that the Original Side Rules did not require such an affidavit and that the defect was procedural, not affecting the suit's validity. The Court rejected the respondents' argument, holding that the CPC amendments took precedence over the Original Side Rules.

  Conclusions:

  The Court concluded that the suit was not duly instituted until the affidavit was filed on April 28, 2004. Consequently, the interlocutory order granted by the First Court on April 2, 2004, was set aside as it was made at a time when the suit was not validly instituted.

  3. SIGNIFICANT HOLDINGS

  Preserve Verbatim Quotes of Crucial Legal Reasoning:

  "The legislative intent is unmistakable and the effect of such amendment cannot be diluted and/or ignored by this Court."

  "Unless the plaint complies with the requirement of the amended provision there will be no due institution of the plaint."

  Core Principles Established:

  The amendments to the CPC regarding the requirement of an affidavit with the plaint are mandatory and override any inconsistent local rules. A suit is not duly instituted unless it complies with these requirements, and any rectification of defects does not relate back to the original date of filing.

  Final Determinations on Each Issue:

  The interlocutory order of April 2, 2004, was set aside due to the lack of a duly instituted suit at that time. The Court allowed the respondents to file an affidavit, thereby rectifying the defect, but the suit was deemed duly instituted only from the date of filing the affidavit.

  ---

• 2004 (6) TMI 644
  

  1. ISSUES PRESENTED and CONSIDERED

  The core legal questions considered in this judgment are:

  • Whether the issuance of a cheque after the closure of the account from which it was drawn constitutes an offence under Section 138 of the Negotiable Instruments Act.
  • Interpretation of the phrase "any cheque drawn by a person on an account maintained by him" in the context of Section 138 of the Act.
  • The applicability of the precedent set by the Supreme Court in NEPC Micon Ltd. regarding the closure of accounts and its impact on Section 138 offences.
  • Whether the judgment in Urban Cooperative Credit Society, Borsad v. State of Gujarat is a binding precedent or per incuriam in light of the Supreme Court's ruling.

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue 1: Cheque Issuance Post-Account Closure

  • Relevant Legal Framework and Precedents: Section 138 of the Negotiable Instruments Act criminalizes the dishonour of a cheque due to insufficient funds or if the account is closed. The Supreme Court's decision in NEPC Micon Ltd. is pivotal, establishing that a closed account equates to insufficient funds.
  • Court's Interpretation and Reasoning: The court emphasized the intent behind Section 138, which is to maintain the credibility of cheques in commercial transactions. The closure of an account does not absolve the drawer from liability under Section 138.
  • Key Evidence and Findings: The accused issued cheques from a closed account, and the complainant's bank returned them unpaid. The court found that this act demonstrated a dishonest intention.
  • Application of Law to Facts: The court applied the principle that a cheque drawn on a closed account is akin to drawing on an account with insufficient funds, thus constituting an offence under Section 138.
  • Treatment of Competing Arguments: The petitioner argued that no offence is made out if the account is closed before cheque issuance. The court rejected this, citing the Supreme Court's interpretation that closure implies insufficiency of funds.
  • Conclusions: The court concluded that issuing a cheque on a closed account falls within the ambit of Section 138, thereby upholding the complaint against the accused.

  Issue 2: Interpretation of "Account Maintained"

  • Relevant Legal Framework and Precedents: The phrase "on an account maintained by him" was scrutinized. The court referenced the Supreme Court's interpretation that includes accounts closed prior to cheque issuance.
  • Court's Interpretation and Reasoning: The court interpreted "account maintained" to encompass accounts that were closed, aligning with the legislative intent to prevent misuse of cheques.
  • Key Evidence and Findings: The court noted the legislative history and the purpose of Section 138, which aims to ensure the reliability of cheques.
  • Application of Law to Facts: The court determined that the accused's actions fell within the scope of Section 138, as the closure of the account did not negate the offence.
  • Treatment of Competing Arguments: The court dismissed the petitioner's reliance on the Urban Cooperative Credit Society judgment, declaring it per incuriam due to its failure to consider the Supreme Court's ruling.
  • Conclusions: The court upheld the interpretation that "account maintained" includes closed accounts, reinforcing the applicability of Section 138.

  3. SIGNIFICANT HOLDINGS

  • Preserve Verbatim Quotes of Crucial Legal Reasoning: "The expression 'the amount of money standing to the credit of that account is insufficient to honour the cheque' is a genus of which the expression 'that account being closed' is specie."
  • Core Principles Established: The judgment reinforces that the closure of an account does not exempt the drawer from liability under Section 138. The interpretation of "account maintained" includes accounts closed prior to cheque issuance.
  • Final Determinations on Each Issue: The court rejected the petition to quash the complaint, affirming that issuing a cheque on a closed account constitutes an offence under Section 138. The judgment in Urban Cooperative Credit Society was deemed per incuriam and not a binding precedent.

  The court's decision underscores the importance of maintaining the integrity and reliability of cheques in commercial transactions, aligning with the legislative intent behind Section 138 of the Negotiable Instruments Act.

  ---

• 2004 (6) TMI 643
  
  Issues:
  1. Reversal of conviction under Sections 138 of the Negotiable Instruments Act and Section 420 of the IPC.
  2. Interpretation of the intention behind issuing a cheque as security or liability.
  3. Application of Section 138 of the Negotiable Instruments Act in the case.
  4. Compoundability of the offence under the recent amendment in Section 147 of the Act.
  
  Analysis:
  
  Issue 1: Reversal of Conviction
  The judgment involves the reversal of conviction ordered by the Judicial Magistrate of the First Class-II, Kochi, where the learned II Additional Sessions Judge, Ernakulam acquitted the 1st respondent. The appellant challenged this acquittal based on the alleged offences under Sections 138 of the Negotiable Instruments Act and Section 420 of the IPC. The appellant contended that the reversal of conviction was unjustified.
  
  Issue 2: Interpretation of Cheque Issuance
  The judgment delves into the interpretation of whether a cheque was issued as security or to represent a liability. The learned Sessions Judge's finding that the cheque was issued as security and hence did not attract Section 138 was challenged. The court referred to a previous Supreme Court decision to emphasize that even a cheque issued as security for a loan repayment can fall under Section 138 if it represents a legally enforceable liability.
  
  Issue 3: Application of Section 138
  The judgment scrutinizes the application of Section 138 of the Negotiable Instruments Act in the case. It was argued that the cheque in question was issued as security for a payment assured in an agreement between the parties. The court analyzed the timeline of events and the terms of the agreement to establish that the cheque represented a liability incurred by the accused, thereby justifying the application of Section 138.
  
  Issue 4: Compoundability of the Offence
  The judgment also addresses the compoundability of the offence under the recent amendment in Section 147 of the Act. It was noted that the amount in question had been paid, and the parties had seemingly compounded the offence. Consequently, despite the conviction, no sentence was imposed based on the conduct of the parties.
  
  In conclusion, the judgment upheld the reversal of conviction under Section 138 of the Negotiable Instruments Act but maintained the reversal of conviction under Section 420 of the IPC. The compoundability of the offence led to the closure of the appeal without imposing a sentence due to the payment made and the conduct of the parties.

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• 2004 (6) TMI 642
  
  Issues involved:
  1. Constitutional validity of sub-section (4A) of Section 47 of the Gujarat Sales-tax Act, 1969.
  2. Liability of Company Directors for sales-tax dues.
  
  Constitutional Validity of Sub-section (4A) of Section 47:
  The judgment addressed challenges to the constitutional validity of sub-section (4A) of Section 47 of the Gujarat Sales-tax Act, 1969. The court referred to a previous decision in Ashapura Mineral Company vs. State of Gujarat & Ors. (1993) 89 STC 289 where a similar challenge was raised. The court upheld the provision, stating that interest payment under this section is a method of revenue collection, and the rate of interest is fixed by the legislature, not the discretion of tax authorities. It was clarified that the provision is not penal in nature and serves the purpose of compensating the government for delayed payments. The court also rejected claims of discriminatory treatment regarding interest rates for different entities, emphasizing the state's right to decide on revenue collection methods.
  
  Liability of Company Directors for Sales-tax Dues:
  The judgment also analyzed the issue of the liability of Company Directors for sales-tax dues. Petitioners argued that since the Company and its Directors are separate legal entities, the liability of the Company should not extend to the Directors personally or their personal properties. They cited cases to support their argument. On the other hand, respondents contended that if sales-tax arrears could not be recovered from the Companies, authorities were justified in pursuing the Directors' properties. They referred to Section 78 of the Gujarat Sales-tax Act, suggesting that the corporate veil could be lifted to hold Directors accountable. However, the court noted that there was no statutory provision empowering authorities to impose the Company's tax liability on its Directors. It highlighted that Section 78 deals with criminal liability, not personal liability for tax dues. The court emphasized that the corporate veil should only be lifted with a strong factual basis, which was lacking in the present case. Consequently, the court allowed the petitions to the extent that authorities were restrained from pursuing Directors or their personal properties for Company sales-tax dues.
  
  In conclusion, the judgment upheld the constitutional validity of sub-section (4A) of Section 47 of the Gujarat Sales-tax Act, 1969. It clarified that the liability to pay interest under this provision is not penal but a method of revenue collection. Regarding the liability of Company Directors for sales-tax dues, the court ruled in favor of the petitioners, stating that there was no statutory basis to hold Directors personally liable for Company tax obligations. The court emphasized the importance of a clear legal basis before lifting the corporate veil to impose personal liability on Directors.

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• 2004 (6) TMI 641
  
  Issues:
  1. Estimation of income from trading business.
  2. Addition of cash deposits in the bank.
  3. Treatment of unexplained income.
  
  Estimation of income from trading business:
  The assessee declared an income of Rs. 42,140 for the assessment year, including income from trading in plastic granules and salary from a partnership firm. The Assessing Officer estimated the trading income at Rs. 35,000 due to lack of maintained books of account. The CIT(A) upheld this estimation. However, the ITAT found the estimation excessive and restricted the trading income to Rs. 25,000 based on the totality of facts and circumstances.
  
  Addition of cash deposits in the bank:
  The Assessing Officer noted cash deposits in the bank and questioned the source of these funds. The assessee explained the sources of the deposits, attributing them to withdrawals and current year's income. The Assessing Officer deemed Rs. 33,500 as undisclosed income. The ITAT, after considering submissions and precedents, found the assessee's explanations satisfactory. It concluded that the revenue authority lacked material to doubt the correctness of the claims, leading to the deletion of the addition.
  
  Treatment of unexplained income:
  Regarding an initial investment of Rs. 35,000, the Assessing Officer considered it unexplained. The assessee detailed the sources of a larger deposit with a firm, including loans and cash. The Assessing Officer accepted most of the explanation but disallowed Rs. 35,000. The CIT(A) confirmed this addition after the assessee failed to substantiate certain receipts. The ITAT agreed with the authorities' analysis of the receipts and upheld the addition related to unproven amounts. Consequently, the ITAT partially allowed the assessee's appeal.

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• 2004 (6) TMI 640
  
  Issues Involved:
  1. Authority of the Director of Consumer Goods to cancel an agency license.
  2. Unauthorized interference by the Minister in the statutory duties of the Director.
  3. Validity of the order based on the timing of communication.
  4. Allegations of falsification and misconduct by the Director.
  
  Issue-wise Detailed Analysis:
  
  1. Authority of the Director of Consumer Goods to Cancel an Agency License:
  The petitioners challenged the suspension-cum-show cause notice and subsequent cancellation of their agency license by the Director of Consumer Goods, West Bengal, arguing that the Director lacked the authority to cancel an agency license in the District of Purulia. They contended that only the District Magistrate had such authority. The court, however, clarified that a conjoint reading of Paragraphs 4 and 9 of the West Bengal Kerosene Control Order, 1968, confirms that the Director of Consumer Goods is indeed empowered to cancel the license of an agent for misconduct.
  
  2. Unauthorized Interference by the Minister in the Statutory Duties of the Director:
  The court examined whether the Minister for Food and Supplies could direct the Director to send a file for approval before making a final decision. It was found that the Minister had indeed interfered with the duties of the Director, which was beyond his statutory authority. The Control Order, a delegated piece of legislation, vested the responsibility to investigate and decide on the cancellation of licenses solely with the Director. The Minister's interference was deemed unauthorized and a violation of the statutory process. The Director was also criticized for seeking the Minister's approval, which delayed the communication of the order to the petitioners.
  
  3. Validity of the Order Based on the Timing of Communication:
  The petitioners argued that the order of cancellation, communicated to them by fax on January 30, 2004, was invalid as it was beyond 30 days from the suspension order dated December 10, 2003. The court agreed, emphasizing that the date of communication is crucial for the validity of the order. According to Paragraph 9 of the Control Order, the final order must be made and communicated within 30 days from the suspension. The court held that the order of cancellation should be deemed to have been passed on January 30, 2004, when it was faxed to the petitioners, thus rendering it invalid as it was beyond the stipulated 30 days.
  
  4. Allegations of Falsification and Misconduct by the Director:
  The court found substantial evidence of misconduct by the Director, who falsely claimed that the order was tendered to a representative of the petitioners on January 9, 2004, and subsequently refused. This claim was not reflected in the records initially but appeared later, suggesting interpolation. The Director also avoided filing an affidavit by falsely stating he was on election duty in Manipur, while he was actually in Kolkata. The court condemned these actions and emphasized that the statutory requirements of the Control Order were not followed, leading to the setting aside of the impugned order.
  
  Conclusion:
  The court set aside the order dated January 9, 2004, canceling the license of the petitioner No. 1, and revoked the suspension order dated December 10, 2003. The respondents were directed to immediately restore the supply of kerosene to the petitioner No. 1. The court also imposed costs of Rs. 20,000 to be borne equally by the Minister and the Director personally, and allowed the petitioners to file a separate suit for damages. The court refused the State respondents' request for a stay of the order.

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• 2004 (6) TMI 639
  
  Issues:
  1. Permission to go abroad declined by Additional Sessions Judge
  2. Grounds for declining permission to go abroad
  3. Consideration of facts and circumstances in the case
  
  Analysis:
  1. The petitioner sought to quash the order passed by the Additional Sessions Judge, Ludhiana, declining permission to go to the USA for a month. The petitioner argued that he was falsely implicated in a corruption case and had substantial assets and family ties in India and should be allowed to visit his daughter and newly born grandchild in the USA.
  
  2. The Additional Sessions Judge denied permission based on concerns that the petitioner might not return to India, despite being on bail. The State had filed an application for bail cancellation, but no adverse order had been issued. The court highlighted the presumption of innocence until proven guilty and the right of an individual to travel abroad to see family members, emphasizing that mere pendency of a case is not sufficient grounds to deny such permission.
  
  3. The High Court found that the reasons cited by the Special Judge for denying permission were not valid. The court emphasized that steps should be taken to ensure the petitioner's return, rather than outright denial of permission. The court set aside the impugned order and permitted the petitioner to go abroad for a month, subject to providing an undertaking to return for trial and furnishing adequate security to ensure compliance with court proceedings.
  
  In conclusion, the High Court allowed the petitioner to travel abroad, highlighting the importance of balancing individual rights with the need to ensure compliance with legal proceedings. The judgment emphasized the presumption of innocence and the right to travel for personal reasons, subject to appropriate safeguards to guarantee the petitioner's presence for trial proceedings.

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• 2004 (6) TMI 638
  
  Issues Involved:
  1. Jurisdiction of the Commissioner to entertain a second revision under the Bihar Tenants' Holding (Maintenance of Record) Act, 1973.
  2. Validity of the initial order passed by the Circle Officer.
  3. Procedural compliance under the Bihar Tenants' Holding (Maintenance of Record) Act, 1973.
  
  Detailed Analysis:
  
  1. Jurisdiction of the Commissioner to entertain a second revision under the Bihar Tenants' Holding (Maintenance of Record) Act, 1973:
  
  The petitioner contended that the Commissioner, North Chhotanagpur Division, Hazaribagh, had no jurisdiction to entertain a second revision under the Bihar Tenants' Holding (Maintenance of Record) Act, 1973, as Section 17, which allowed such revisions, was deleted by the legislature. The petitioner argued that the Commissioner bypassed this curtailment by invoking his general power of superintendence under Section 28 of the Act. The court noted that the proceedings were initiated after the deletion of Section 17, making the second revision non-maintainable. However, the court also observed that the initiation of the proceedings was not in accordance with the prescribed procedure, thereby justifying the Commissioner's intervention.
  
  2. Validity of the initial order passed by the Circle Officer:
  
  The court scrutinized the initial order passed by the Circle Officer on 2.3.1996, which directed the issuance of rent receipts to the petitioner. The court found that the Circle Officer did not follow the mandatory procedures outlined in Sections 12 and 14 of the Act. Specifically, the Circle Officer did not issue a general notice or provide an opportunity for objections, nor did he conduct a proper inquiry. The court concluded that the Circle Officer's order was illegal and without jurisdiction, as it was not based on a valid application or in the prescribed form.
  
  3. Procedural compliance under the Bihar Tenants' Holding (Maintenance of Record) Act, 1973:
  
  The court emphasized the importance of procedural compliance under the Act. It noted that the application filed by the petitioner on 19.1.1996, which initiated the proceedings, was not in the prescribed form and did not follow the statutory requirements. The court highlighted that the statutory functionaries must act within the confines of the statute, and any deviation from the prescribed procedure renders the action ultra vires. The court held that the original order of the Circle Officer, as well as the subsequent appellate and revisional orders upholding it, were illegal due to non-compliance with statutory provisions.
  
  Conclusion:
  
  The court upheld the order of the Commissioner, which set aside the orders of the Circle Officer and the Additional Collector. The court remanded the matter to the Circle Officer to proceed afresh in accordance with the law, provided the petitioner files an appropriate application in the prescribed manner. The court directed that the Circle Officer and other revenue authorities await the verdict of the pending LPA before proceeding further. The writ petition was dismissed, with each party bearing its own costs.

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• 2004 (6) TMI 637
  
  Issues: Challenge to Order-in-Appeal confirming duty demand, confiscation of goods, and penalties.
  
  In this case, M/s. Kanodia Technoplast Pvt. Ltd. challenged Order-in-Appeal No. 481/CE/03 dated 4.12.03, which confirmed duty demand on short inputs, confiscation of excess finished goods, and imposed penalties. The Appellants, engaged in manufacturing laminated rolls and polythene products, argued that the excess finished goods were daily production, not liable for confiscation as per their practice. They contended that the shortage of PET films was due to space constraints in the store, with no evidence of removal. Despite paying the duty before the show cause notice, they relied on a precedent to argue against penalty imposition.
  
  The Departmental Representative countered that the Appellants failed to prove the excess goods were daily production or the presence of the alleged shortage on the factory floor during the visit. They argued that duty confirmation, goods confiscation, and penalty imposition were justified.
  
  The Tribunal analyzed the submissions and found the Appellants' claims unsubstantiated. They upheld the confiscation of excess finished goods, citing non-compliance with daily stock entry requirements. The redemption fine was reduced to Rs. 20,000. Regarding the shortage of inputs, the Tribunal noted the lack of evidence supporting the Appellants' claims, confirming the duty demand and imposing a penalty of Rs. 15,000 based on the Supreme Court's ruling emphasizing penalty liability irrespective of duty payment timing. Thus, the Appeal was disposed of with the imposition of the mentioned penalty, maintaining duty confirmation and goods confiscation.

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• 2004 (6) TMI 636
  
  The Central Bank of India filed W.A.No.7746/2001 against the order dated 5.12.2001 in W.P.No.33650/2001. The dispute was about backwages for employees of Siruguppa Sugar and Chemicals Limited laid off due to heavy losses. The matter was pending before the Board for Industrial and Financial Reconstruction, so the appeals were disposed of accordingly.

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• 2004 (6) TMI 635
  
  Issues Involved:
  1. Maintainability of the petition under Section 34 of the Arbitration and Conciliation Act, 1996.
  2. Jurisdiction of the Bombay High Court to entertain the petition.
  3. Applicability of Indian law to the arbitration agreement and the award.
  4. Distinction between challenging a foreign award and resisting its enforcement.
  
  Issue-Wise Detailed Analysis:
  
  1. Maintainability of the Petition under Section 34 of the Arbitration and Conciliation Act, 1996:
  The petition was filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award made in Geneva. The petitioner argued that the award, though made in Geneva, was governed by Indian law and thus could be challenged in India. The Court, however, concluded that the award, being a foreign award, could not be challenged under Section 34 of the 1996 Act. The Court emphasized that the legislative intent was clear in providing a mechanism to resist the enforcement of a foreign award but not to challenge it directly in Indian courts.
  
  2. Jurisdiction of the Bombay High Court to Entertain the Petition:
  The petitioner contended that the Bombay High Court had jurisdiction since the agreements were entered into in Bombay and the principal officer of the respondent was situated in Bombay. However, the Court held that jurisdictional issues must be decided based on the law and not the conduct of the parties. The Court found that it did not have jurisdiction to entertain the petition challenging a foreign award, as the appropriate forum for such a challenge was in Switzerland where the award was made.
  
  3. Applicability of Indian Law to the Arbitration Agreement and the Award:
  The petitioner argued that since the agreements were governed by Indian law, the award should be considered a domestic award and thus challengeable under Section 34. The Court, however, clarified that the substantive law governing the contract does not determine the maintainability of a petition under Section 34. The Court highlighted that the curial law governing the arbitration proceedings was Swiss law, and therefore, the award was a foreign award under Section 44 of the 1996 Act.
  
  4. Distinction between Challenging a Foreign Award and Resisting its Enforcement:
  The Court distinguished between challenging a foreign award and resisting its enforcement. It noted that while a foreign award could not be challenged in Indian courts, its enforcement could be resisted under Section 48 of the 1996 Act on grounds similar to those available for challenging a domestic award under Section 34. The Court emphasized that this distinction was crucial and upheld by previous judgments, including those of the Supreme Court and other High Courts.
  
  Conclusion:
  The Court dismissed the petition as not maintainable, holding that a foreign award could not be challenged under Section 34 of the 1996 Act. It reiterated that the appropriate remedy for the petitioner was to resist the enforcement of the award under Section 48. The Court also vacated all interim orders and provided a brief continuation of interim relief to allow the petitioner to seek further legal remedies.

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• 2004 (6) TMI 634
  
  Issues Involved:
  1. Rectification of register of members under section 111A of the Companies Act, 1956.
  2. Alleged illegal transfer of shares in violation of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
  3. Maintainability of the petition under section 111A(3) of the Companies Act, 1956.
  4. Locus standi of the petitioners to file the petition.
  
  Detailed Analysis:
  
  Issue 1: Rectification of Register of Members under Section 111A of the Companies Act, 1956
  The petitioners sought rectification of the register of members by removing the name of VLS Finance Ltd. in respect of 2,64,558 equity shares. The petitioners argued that the shares were transferred without their knowledge and in violation of SEBI regulations. They claimed that the transfer was void and illegal as it exceeded the 10% acquisition limit without compliance with the Takeover Regulations. The petitioners filed an application for rectification within the prescribed two-month limit from the date of intimation of transfer.
  
  Issue 2: Alleged Illegal Transfer of Shares in Violation of SEBI Regulations
  The petitioners contended that the transfer of shares was in gross violation of the SEBI Takeover Regulations, as the acquisition was more than 16%, with the petitioners' shares accounting for nearly 13%. They argued that any acquisition of shares done except in accordance with the regulations is void and illegal. The SEBI had rejected VLS Finance Ltd.'s application for exemption from making a public offer and imposed a penalty for non-disclosure of acquisition of shares and takeover.
  
  Issue 3: Maintainability of the Petition under Section 111A(3) of the Companies Act, 1956
  The respondents argued that the petition was not maintainable as it was filed beyond the two-month limitation period prescribed in section 111A(3). They contended that the shares were transferred in 1998, whereas the petition was filed in January 2000. The respondents also claimed that the petitioners had suppressed facts regarding the loan agreement and deed of pledge, which authorized the transfer of shares in case of default.
  
  Issue 4: Locus Standi of the Petitioners to File the Petition
  The respondents argued that the petitioners, being shareholders, did not fall under any of the five categories of persons (depository, company, participant, investor, SEBI) who could file an application for rectification under section 111A(3). They relied on the judgment of the Bombay High Court in Shirish Finance & Investment (P.) Ltd. v. M. Sreenivasulu Reddy, which held that a member of a company has no statutory right under section 111A to seek rectification of the register of members.
  
  Conclusion:
  The Board concluded that the petition was not maintainable under section 111A(3) as the petitioners did not fall under any of the five categories authorized to file such an application. Consequently, the petition was dismissed. Additionally, the Board noted that an affidavit filed by the petitioners after the hearing concluded appeared to be an afterthought to defeat the rights of respondent No. 2, and it was not taken into account. There were no orders as to costs.

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• 2004 (6) TMI 633
  
  Issues Involved:
  1. Resignation of petitioner No. 1 from directorship.
  2. Increase in paid-up share capital and issuance of 26,500 equity shares to Mr. Anuj Chandra.
  3. Holding of AGM on 30.9.2003 without proper notice to the petitioners.
  
  Issue-wise Detailed Analysis:
  
  1. Resignation of Petitioner No. 1 from Directorship:
  The petitioners claimed that petitioner No. 1 never resigned from the Board of Directors, and the resignation was falsely reported. The respondents produced both the original and photocopy of the resignation letter dated 1.1.2002, signed by petitioner No. 1. The petitioner did not provide evidence to dispute the authenticity of the signature. The court noted that the resignation was reported to the Registrar of Companies (ROC) on 11.6.2003. As the signatures were not contested and no contrary evidence was presented, the court accepted that petitioner No. 1 had indeed resigned on 1.1.2002.
  
  2. Increase in Paid-up Share Capital and Issuance of 26,500 Equity Shares:
  The petitioners argued that the increase in paid-up share capital from Rs. 7,06,000 to Rs. 9,71,000 and the issuance of 26,500 shares to Mr. Anuj Chandra were done without proper approval from the Board of Directors or an Extraordinary General Meeting (EGM). The respondents justified the increase, stating it was necessary due to creditors stopping credit supplies and the need for cash payments. They provided minutes of the Board Meeting held on 20.1.2003, where this decision was taken. The petitioners failed to demonstrate any illegality in the issuance of these shares. Consequently, the court upheld the allotment of 26,500 shares to Mr. Anuj Chandra.
  
  3. Holding of AGM on 30.9.2003 Without Proper Notice:
  The petitioners contended that the AGM held on 30.9.2003 was conducted without proper notice, violating guidelines set by the Hon'ble High Court of Delhi. The respondents claimed to have sent notices via UPC, but the court found this method inadequate. According to the guidelines in "Trilokchand Khanna v. Rajkumar Kapur," notices should have been sent through Registered A.D. The court declared the AGM held on 30.9.2003 illegal and directed the respondents to hold the AGM again with proper notice through Registered A.D.
  
  Additional Considerations:
  The petitioners' request to transfer 30,000 shares purchased from Bahubali Rubber P. Ltd. and Mr. Ravinder Kumar Agarwal was addressed. The respondents asserted that the petitioners had not filed the necessary documents for the transfer. The court directed the petitioners to submit the requisite documents, and if found in order, the company should register the shares in the petitioners' names.
  
  Conclusion:
  The court provided an option for the petitioners to exit the company by selling their shares at a fair price, to be valued by an appointed valuer based on the balance sheet as of 31.3.2002. The petition was disposed of with no orders as to costs.

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• 2004 (6) TMI 632
  
  Issues Involved:
  1. Allegations of oppression and mismanagement.
  2. Application for referring parties to arbitration under Section 8 of the Arbitration & Conciliation Act, 1996.
  3. Applicability of arbitration clause in the Share Purchase and Cooperation Agreement.
  4. Jurisdiction of the Company Law Board (CLB) versus arbitration tribunal.
  5. Examination of allegations under Sections 397/398 of the Companies Act.
  
  Detailed Analysis:
  
  1. Allegations of Oppression and Mismanagement:
  The petitioner, holding 49% shares in Goel MG Gasses Private Limited, alleged acts of oppression and mismanagement by the respondents. Specific allegations included refusal to purchase shares at a fair price, non-appointment of nominees as directors, improper utilization of funds, deadlock in board and shareholders' meetings, non-provision of minutes/financial information, implementation of rejected projects, refusal to get accounts examined, and non-provision of meeting agendas in a timely manner.
  
  2. Application for Referring Parties to Arbitration:
  The respondents filed an application under Section 8 of the Arbitration & Conciliation Act, 1996, seeking to refer the parties to arbitration based on an arbitration clause in the Share Purchase and Cooperation Agreement. The argument was that the allegations in the petition were covered under the arbitration agreement, which provided for arbitration under the rules of the International Chamber of Commerce (ICC).
  
  3. Applicability of Arbitration Clause:
  The respondents argued that the arbitration clause in the Share Purchase and Cooperation Agreement continued to prevail despite the incorporation of most terms into the Articles of Association. They cited various precedents, including Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums and P. Anand Gajapathi Raju v. P.V.G Raju, to support the mandatory nature of arbitration when an agreement exists. They also mentioned that the parties had already invoked ICC arbitration.
  
  4. Jurisdiction of the Company Law Board (CLB) versus Arbitration Tribunal:
  The petitioner contended that not all allegations were covered by the arbitration agreement. They argued that certain allegations, such as abuse of majority powers and siphoning of funds, were outside the scope of the arbitration agreement and related to violations of the Articles and statutory provisions. They cited Sukanya Holding Pvt. Ltd. v. Jayesh H. Pandeya to argue that if all allegations are not covered by the arbitration agreement, the parties cannot be referred to arbitration. The petitioner also emphasized that the relationship between the parties was governed by the Articles, which did not include an arbitration clause.
  
  5. Examination of Allegations under Sections 397/398 of the Companies Act:
  The CLB noted that while some allegations were covered under the arbitration agreement, others were not. The main thrust of the petition was the misuse of majority strength by the respondents, leading to oppression. The CLB emphasized that under Section 8 of the Arbitration & Conciliation Act, it is mandatory to refer parties to arbitration if the dispute is covered by an arbitration agreement. However, in this case, the allegations included violations of the Articles and statutory provisions, which fell under the jurisdiction of the CLB. The CLB referenced the Limrose case, where it was held that allegations of oppression/mismanagement could be examined without referring to the arbitration agreement.
  
  Conclusion:
  The CLB concluded that since some allegations were not covered by the arbitration agreement and related to violations of the Articles and statutory provisions, the parties could not be referred to arbitration. The application under Section 8 was dismissed, and the respondents were directed to file their replies to the petition. The petition was scheduled for hearing on 17th August at 2.30 p.m. Additionally, a separate application regarding the maintainability of the petition, based on the alleged sale of shares by the petitioner, was to be heard on a notified date.

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• 2004 (6) TMI 631
  
  Issues Involved:
  1. Allegation of financial mismanagement by loaning Rs. 78 crores to M/s Classic Credit Limited.
  2. Allegation of inadequate disclosure and violation of Section 628 of the Companies Act.
  3. Allegation of procedural violations of various provisions of the Companies Act.
  4. Request for appointment of government directors on the Board of the company.
  
  Issue-wise Detailed Analysis:
  
  1. Allegation of financial mismanagement by loaning Rs. 78 crores to M/s Classic Credit Limited:
  The Central Government filed a petition under Sections 397/398 read with Sections 401/408 of the Companies Act, 1956, seeking the appointment of Government Directors on the Board of M/S Kopran Limited. The main ground was that the company had loaned Rs. 78 crores to M/s Classic Credit Limited, a group company of Ketan Parikh, who was involved in the 2001 stock market scam, resulting in a loss of Rs. 28 crores. The company had received back only Rs. 50 crores, and the balance cheque of Rs. 28 crores was dishonored. The respondents argued that the loan was given after assessing the creditworthiness of M/s Classic Credit, which had a good reputation and substantial net assets at the time. The court found that the Board of Directors had assessed the creditworthiness based on the balance sheet of M/s Classic Credit and the reputation of Ketan Parikh. The court concluded that the loan was a commercial misjudgment rather than an act of mismanagement, as the company had received back Rs. 50 crores and initiated proceedings under Section 138 of the Negotiable Instruments Act for the dishonored cheque.
  
  2. Allegation of inadequate disclosure and violation of Section 628 of the Companies Act:
  The Central Government alleged that the company had violated Section 628 of the Act by not adequately disclosing the grounds for its confidence in recovering the loan amount in its balance sheet for the year ended 31st March 2001. The court noted that the company had stated in its balance sheet that it was confident of recovering the amount, but did not disclose the specific grounds for this confidence. However, the court did not find this to be a significant violation warranting the appointment of government directors.
  
  3. Allegation of procedural violations of various provisions of the Companies Act:
  The Central Government pointed out several procedural violations of the Companies Act, including Sections 193, 224(8), 233(8), 257, 205, 270(3), 209(1), 203(3), 209(3)(b), 211(3A) read with (3C), Part 1 of Schedule VI read with Section 211 and 212. The respondents argued that these were procedural irregularities for which they had already filed compounding applications. The court agreed that these were procedural violations and did not amount to acts of mismanagement or oppression.
  
  4. Request for appointment of government directors on the Board of the company:
  The Central Government sought the appointment of government directors to safeguard the interests of the company, its shareholders, and the public interest. The court held that the appointment of government directors under Section 408 must be based on continuous acts of oppression or mismanagement. The court found that the acts complained of were either a single act of commercial misjudgment or procedural violations from the year 2000-2001. There were no continuous acts of oppression or mismanagement up to the date of the petition. The court also noted that the company had five independent directors and was a listed company. Therefore, the court did not find it necessary to appoint government directors.
  
  Conclusion:
  The court disposed of the petition with a direction to the Board of Directors of the company to take all steps available in law to recover the Rs. 28 crores from M/s Classic Credit Ltd. The court did not find sufficient grounds for the appointment of government directors, as the alleged acts were either commercial misjudgments or procedural violations, and there were no continuous acts of oppression or mismanagement.

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• 2004 (6) TMI 630
  
  Issues: Withholding of passport without justification and authority of law.
  
  Analysis:
  The petitioner's grievance in this case pertains to the withholding of the passport without any valid justification or legal authority. The petitioner was issued the passport in 1993 but was directed to surrender it in 2003 due to alleged links with a banned association called SIMI. The petitioner, however, claimed to have resigned from the association in 1995. The Passport Act, 1967 authorizes the passport authority to vary or cancel conditions of passport issuance with prior approval from the Central Government. In this instance, the respondents ordered the surrender of the passport based on a report from the police authorities without any other substantial grounds.
  
  Upon perusal of the affidavits-in-reply and hearing the arguments, it was observed that no further action under section 10 of the Passport Act had been taken by the authorities regarding the petitioner's passport. The court noted that there was no legal provision allowing the detention of a passport solely based on suspicion or past associations with banned organizations. Consequently, the court found no justification for withholding the petitioner's passport at that stage. The authorities were instructed to return the passport to the petitioner within a week, with the liberty to take appropriate legal action if necessary and in accordance with the law.
  
  In conclusion, the court ruled in favor of the petitioner, directing the respondents to return the passport promptly. The judgment emphasized that while the petitioner was entitled to the passport's return, the authorities could pursue lawful actions if valid grounds existed, ensuring compliance with legal procedures. The court made the rule absolute with no order as to costs, allowing the issuance of a true copy of the order upon payment of usual charges.

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• 2004 (6) TMI 629
  
  Issues:
  Appeal against cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1996-97.
  
  Analysis:
  1. Assessment and Penalty Imposition:
  The assessment was completed with an income of Rs. 1,35,58,475 against the returned income of Rs. 1,12,24,312, leading to initiation of penalty proceedings under section 271(1)(c). The Assessing Officer imposed a penalty of Rs. 1,20,800 based on the claim of depreciation on a building not used for business purposes, which was later withdrawn by the assessee. The Assessing Officer found the revised return to be false, leading to the penalty imposition.
  
  2. CIT(A) Decision:
  The CIT(A) held that the withdrawal of depreciation claim voluntarily should be considered in the same light as a revised return. The CIT(A) found no justification for the penalty, stating that the assessee was entitled to depreciation as the building was fit for business use, supported by evidence like electricity bill payments and business correspondence. Thus, the CIT(A) deleted the penalty of Rs. 12,00,000.
  
  3. Tribunal Decision:
  The Revenue appealed before the Tribunal, arguing that the assessee had concealed income by falsely claiming depreciation. The assessee contended that the claim was withdrawn in good faith to avoid litigation, with no mens rea for concealment. The Tribunal noted that the Assessing Officer did not record satisfaction for initiating penalty proceedings under section 271(1)(c). Relying on precedents, the Tribunal canceled the penalty, emphasizing the absence of wilful neglect or fraud by the assessee.
  
  4. Legal Precedents and Final Decision:
  The Tribunal referred to legal precedents highlighting the importance of subsequent conduct in determining penalty imposition. It also emphasized the necessity for the Assessing Officer to record satisfaction before initiating penalty proceedings. Citing relevant case laws, the Tribunal dismissed the Revenue's appeal and directed the cancellation of the penalty imposed under section 271(1)(c) for the assessment year 1996-97.
  
  In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing the lack of mens rea for concealment and the absence of recorded satisfaction by the Assessing Officer for initiating penalty proceedings.

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• 2004 (6) TMI 628
  
  The judgment pertains to the confiscation of second hand photocopier machines imported by the appellants. The appellants claimed the machines were capital goods for service, not requiring import licenses. The Tribunal ruled in favor of the appellants, stating that the machines were not consumer goods and should be eligible for unrestricted import. The impugned order was set aside, and fines and penalties paid were to be returned to the appellants.

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• 2004 (6) TMI 627
  

  Admissibility of Modvat Credit u/r 57Q on various inputs - Denial of Modvat Credit on specific items - Challenge by Revenue on allowed credits - HELD THAT:- Modvat credit on electrical insulating, fitting, electrical transformer and electrical wires and cables, and material handling equipment has been allowed by the Commissioner. This is being challenged by the Revenue. Thus, we hold that modvat credit on these items is admissible.

  Thus, the appeal of the assessee is partly allowed in above terms and the Department's appeal is rejected along with the cross objection filed by the assessee.

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• 2004 (6) TMI 626
  
  Issues:
  1. Applicability of Notification No. 206/63 and subsequent Notification No. 208/83 regarding ship breaking scrap used as raw material for rerolling.
  2. Validity of the direction given to Assistant Commissioner/Deputy Commissioner to file appeals before the Commissioner (Appeals) when the original order was passed by the Additional Commissioner.
  
  Analysis:
  1. The judgment addresses the issue of the applicability of Notification No. 206/63 and subsequent Notification No. 208/83 concerning ship breaking scrap used as raw material for rerolling. The Tribunal referred to the decision in L.G. Industries case, which was approved by the Supreme Court, to support the assessees' position. The Tribunal found that the issue was settled in favor of the assessees based on previous rulings. Consequently, the appeals filed by the Revenue on this issue were dismissed.
  
  2. The judgment also delves into the validity of the direction given by the Commissioner to the Assistant Commissioner/Deputy Commissioner to file appeals before the Commissioner (Appeals) when the original order was passed by the Additional Commissioner. The Tribunal cited the case of Dhampur Sugar Mill Co. Ltd. to establish that such directions were not permissible under Section 35E(2) of the Central Excise Act. It was highlighted that the power granted to the Collector under this section was specific to examining decisions or orders of adjudicating authorities subordinate to him. The Tribunal emphasized that the direction must be given to the same authority whose decision is being examined. As the direction in this case was given to the Assistant Collector instead of the Superintendent, it was deemed impermissible. The judgment concluded that there was no merit in the Revenue's case on this issue and upheld the order of the Commissioner (Appeals), dismissing the appeals.
  
  Overall, the judgment provides a detailed analysis of the issues at hand, citing relevant legal provisions and precedents to support the decisions made. The Tribunal's thorough examination of the legal framework and application of previous rulings ensures a comprehensive and well-reasoned outcome in the case.

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