TaxTMI Updates e-Newsletter
Dec 14,2020

Interim protection from arrest - limited notice on specified prayers - consent-based search and de-sealing of premises - direction to cooperate and appear for recording of statements - reliance on Apex Court orders restraining coercive action

Limited notice on specified prayers - Notice in the writ petition confined to prayers (i) and (ii); other prayers dismissed. - HELD THAT: - After hearing, the Court restricted the scope of notice to prayers (i) and (ii) of the petition and expressly dismissed the remaining prayers. The parties were directed to file an amended memo of parties where respondent no.2 was wrongly described and the respondents were permitted to file a reply affidavit within a week with liberty to the petitioner to file a rejoinder before the next date.

Notice limited to prayers (i) and (ii); the other prayers are dismissed.

Interim protection from arrest - reliance on Apex Court orders restraining coercive action - Petitioner shall not be arrested until the next date of hearing. - HELD THAT: - Having regard to the facts on record, including audio-visual material placed before the Court, and by reference to earlier orders of the Apex Court restraining coercive steps in related matters, the High Court directed that no arrest of the petitioner shall be effected till the next hearing. The order is an interlocutory protective measure limited in duration to the next listed date.

Interim protection granted: petitioner shall not be arrested until the next date of hearing.

Consent-based search and de-sealing of premises - direction to cooperate and appear for recording of statements - Search of petitioner's residence and godown to be conducted by agreement on a specified date; premises to be de-sealed thereafter; petitioner directed to appear for recording of statements and to cooperate with investigation. - HELD THAT: - The parties agreed that the petitioner's residence and godown would be searched on a fixed date and time in the presence of an authorised representative of the petitioner or the petitioner himself. The Court recorded that after preparation of the panchnama the premises would be de-sealed and possession returned to the petitioner. The petitioner was directed to appear before the Deputy Director, DGGI (Delhi Zonal Unit) on a specified date for recording of statements and to continue to cooperate in the investigation as required by the investigating officer.

Agreed search will be conducted and premises de-sealed thereafter; petitioner directed to appear for recording of statements and to cooperate with the investigation.

Final Conclusion: The High Court limited notice to prayers (i) and (ii) while dismissing other prayers, recorded an agreed search and de-sealing procedure with directions for the petitioner to cooperate and appear for recording of statements, and granted interim protection against arrest of the petitioner until the next date of hearing.

Summary order. Notice issued on the writ petition challenging cancellation of GST registration; matter listed after four weeks for returnable motion, petitioner directed to serve additional copies on respondent counsel.

Writ jurisdiction in relation to an interlocutory show cause notice - filing of detailed reply and fresh adjudicatory consideration - stay on finalization of penalty pending adjudication - release of detained goods subject to bank guarantee or other security

Filing of detailed reply and fresh adjudicatory consideration - Petitioner permitted to file a detailed reply to the show cause notice and respondents directed to consider the same and pass appropriate order. - HELD THAT: - The writ petition challenged only the show cause notice and the petitioner has filed a preliminary reply but seeks leave to file a detailed reply. The High Court, without expressing any opinion on the merits, granted liberty to the petitioner to file the detailed reply and directed the respondents to consider that reply and determine the tax under the GST Act. The direction requires the adjudicatory authority to examine the respondent's submissions afresh and pass an appropriate order on the show cause notice after perusal of the detailed reply. [Paras 8]

Liberty granted to the petitioner to file a detailed reply; respondents directed to consider the reply and decide the show cause notice afresh.

Stay on finalization of penalty pending adjudication - Respondents directed not to finalize the imposition of any penalty until the show cause notice is considered after receipt of the detailed reply. - HELD THAT: - The Court restrained the respondents from finalizing the imposition of penalty while the matter remains under adjudication and the detailed reply is pending consideration. This relief is interlocutory and limited to preserving the position of the petitioner until the adjudicating authority completes consideration of the reply and issues a reasoned order. [Paras 8]

Respondents restrained from finalizing penalty pending adjudication on consideration of the detailed reply.

Release of detained goods subject to bank guarantee or other security - Machinery and equipment to be released forthwith subject to deposit of a bank guarantee or other acceptable security to the satisfaction of the respondents. - HELD THAT: - The petitioner asserted that non-release of imported machinery would cause logistical misuse and prejudice. Balancing those concerns with the respondents' regulatory interest, the Court directed immediate release of the detained machinery, equipment and related items on condition that the petitioner furnish a bank guarantee or other acceptable security (including demand draft or net banking) to the respondents' satisfaction. The direction is conditional and intended to secure revenue while permitting the petitioner to continue works on the project pending adjudication. [Paras 9]

Detained machinery and equipment ordered released subject to deposit of bank guarantee or other acceptable security to respondents' satisfaction.

Final Conclusion: Writ petition disposed of by granting liberty to the petitioner to file a detailed reply to the show cause notice; respondents directed to consider the reply and decide the notice afresh, restrained from finalizing any penalty in the interim, and directed to release the detained machinery on furnishing security acceptable to the respondents.

Rectification of Form TRAN-1 - uploading of declaration in Form TRAN-2 - transitional credit under section 140 of the Central Goods and Service Tax Act, 2017 - principles of natural justice and opportunity of hearing - alternative remedies in accordance with law

Rectification of Form TRAN-1 - principles of natural justice and opportunity of hearing - alternative remedies in accordance with law - Petition disposed directing the authorities to consider a representation for rectification of Form TRAN-1 filed by the petitioner and to decide the same expeditiously. - HELD THAT: - The High Court granted the petitioner liberty to file a representation within four weeks seeking rectification of the already filed Form TRAN-1. The authorities (Respondent Nos. 3 to 5) were directed to consider and decide that representation as per law and expeditiously, preferably within four weeks of its receipt. While issuing this procedural direction the Court emphasised that principles of natural justice must be followed and due opportunity of hearing afforded to the parties. The Court expressly refrained from expressing any opinion on the merits and left all substantive issues open, permitting the petitioner to pursue alternative remedies available in law.

Liberty granted to file representation for rectification of TRAN-1 within four weeks; authorities to consider and decide expeditiously with observance of natural justice; merits left open.

Final Conclusion: The petition is disposed of by granting procedural relief only: the petitioner may file a representation within four weeks for rectification of Form TRAN-1, which the concerned authorities shall consider and decide expeditiously and in accordance with law, observing principles of natural justice; no decision was given on the merits and all substantive issues remain open.

Penalty under section 271(1)(c) - enhancement of assessment - conclusive agreement and taxation of lump sum consideration - admission of substantial question of law by High Court - penalty cannot survive where additions are debatable

Penalty under section 271(1)(c) - admission of substantial question of law by High Court - penalty cannot survive where additions are debatable - Validity of the penalty imposed under section 271(1)(c) of the Income Tax Act in respect of enhancement of assessment for AY 2012-2013. - HELD THAT: - The Tribunal examined whether penalty levied by the CIT(A) on the enhancement of assessment (additional taxation of consideration received under an agreement) could be sustained after the jurisdictional High Court admitted an appeal under section 260A on a substantial question of law concerning the quantum assessment. The Tribunal relied on the principle, as articulated by the High Court in the cited decision, that where the High Court has admitted a substantial question of law on the quantum, the correctness of the additions becomes debatable; in such circumstances penalty under section 271(1)(c) - which is aimed at concealment of material particulars or furnishing inaccurate particulars - cannot be sustained. Applying that reasoning to the present facts, and noting the admission of the High Court in the assessee's appeal, the Tribunal concluded that the additions were debatable and the imposition of penalty was not justified. Accordingly the penalty imposed by the CIT(A) was deleted. [Paras 9, 10]

Penalty under section 271(1)(c) imposed by the CIT(A) is deleted.

Final Conclusion: The appeal is allowed: penalty levied under section 271(1)(c) in respect of the enhancement for AY 2012-2013 is deleted because the High Court's admission of a substantial question of law rendered the additions debatable and the penalty unsustainable.

Actual cost - Explanation 10 to section 43(1) - indirect meeting of cost - subsidy, grant or reimbursement (by whatever name called) - proportionate reduction of cost where subsidy not directly relatable - capital infusion as equity / risk capital - nexus between receipt of funds and acquisition of assets - commercial accounting principle that cost is the price paid for the asset

Actual cost - Explanation 10 to section 43(1) - indirect meeting of cost - subsidy, grant or reimbursement (by whatever name called) - capital infusion as equity / risk capital - nexus between receipt of funds and acquisition of assets - proportionate reduction of cost where subsidy not directly relatable - commercial accounting principle that cost is the price paid for the asset - Whether Explanation 10 to section 43(1) required reduction of the actual cost of computer hardware on account of a capital contribution received by the assessee-bank during the year. - HELD THAT: - The Tribunal held that Explanation 10 and section 43(1) operate to exclude from the 'actual cost' of an asset so much of the cost as is met directly or indirectly by another person in the form of a subsidy, grant or reimbursement. That provision is directed to sums which effectively meet the cost of the asset to the recipient and, where a subsidy or grant is not directly relatable to a particular asset, the proviso permits a proportionate exclusion. The determinative question is factual - whether the funds were given so as to meet the cost of the asset, directly or indirectly. Applying these principles, the Tribunal found on the material before it that the Rs. 20 crore receipt was a recapitalisation exercise carried out across RRBs, credited as share capital deposit in the shareholding ratio and intended to enhance risk-bearing capital (CRAR). Such capital infusion was equity/risk capital raised from promoters and not a subsidy/grant/reimbursement of the type contemplated by Explanation 10. The Tribunal observed that raising capital to finance acquisition of assets is a transaction distinct from acquisition of the asset itself and, absent evidence that the receipt functioned to meet the asset cost, Explanation 10 is not attracted. While timing or lack of one-to-one correspondence between receipt and purchase does not preclude indirect meeting of cost, the facts here (character of the receipt as equity, contribution by all shareholders, accounting as capital, and absence of material showing the funds were meant to meet the computer cost) led to the conclusion that no part of the computer hardware cost was met by a grant/subsidy within Explanation 10. The Tribunal also noted the parties had not placed conclusive cash-flow or other evidence on record to establish a contrary factual nexus and that the first appellate authority should have made definite findings or called for remand if necessary; nevertheless on the record the Tribunal decided the issue on merits in favour of the assessee. [Paras 5, 6]

Explanation 10 to section 43(1) does not apply to reduce the actual cost of the computer hardware in the facts of the case; no portion of the asset cost was met by the capital contribution.

Final Conclusion: Revenue's appeal dismissed; the addition disallowing depreciation on computer hardware under section 43(1)/Explanation 10 is set aside as the Rs. 20 crore infusion constituted equity/risk capital and did not meet the cost of the assets within the meaning of Explanation 10.

Exemption under section 11(1)(a) - 15% accumulation/set apart - Carry forward of deficit (excess of expenditure over income) for set off in subsequent years - Application of income for charitable purposes - meaning of 'applied'

Exemption under section 11(1)(a) - 15% accumulation/set apart - Application of income for charitable purposes - meaning of 'applied' - Assessee entitled to claim 15% of gross receipts under section 11(1)(a) for accumulation even where actual application/expenditure in the year exceeds gross income. - HELD THAT: - The Tribunal accepted the view that the 15% accumulation under section 11(1)(a) is an independent entitlement and is not conditioned upon there being surplus income after application to charitable objects. The Tribunal followed coordinate bench decisions (including the assessee's earlier year decision and the Lalji Velji and Ahmedabad benches) which held that the statutory language allows accumulation at the prescribed rate of the gross receipts (net of corpus) and that the word 'applied' in section 11(1)(a) does not restrict the 15% deduction to years with positive balance. On this basis the rejection by the AO of the 15% claim was found unsustainable and the CIT(A)'s allowance of the 15% accumulation was upheld; only verification of figures was left open to the AO where necessary. [Paras 3, 10, 11]

Claim for 15% accumulation under section 11(1)(a) upheld and allowed to be deducted in computation of income.

Carry forward of deficit (excess of expenditure over income) for set off in subsequent years - Application of income for charitable purposes - meaning of 'applied' - Deficit (excess of expenditure over income) determined in the assessment year may be carried forward for set off against income of subsequent years. - HELD THAT: - The Tribunal endorsed the proposition, as laid down by jurisdictional and other High Court precedents relied upon by the assessee, that section 11 does not require application of income to be confined to the year in which it arose and that expenses of an earlier year, when adjusted against income of a later year, amount to application of that later year's income for charitable purposes. The Tribunal found the CIT(A) rightly followed these authorities in allowing carry forward of the deficit and directed that the AO permit set off in future years. [Paras 3, 9, 10]

Carry forward of the declared deficit allowed; AO directed to permit set off against future incomes.

Final Conclusion: The appeal is allowed. The Tribunal upholds the CIT(A)'s allowance of the 15% accumulation under section 11(1)(a) and the carry forward of the deficit for set off in subsequent years; the Revenue's appeal is dismissed.

Explanation 5 to section 271(1)(c) - requisition under section 132A - search under section 132 - deeming provision - strict construction of penalty provisions - immunity under Explanation 5 by statement under section 132(4) - penalty under section 271(1)(c) tested by declaration in return of income

Explanation 5 to section 271(1)(c) - requisition under section 132A - search under section 132 - deeming provision - strict construction of penalty provisions - immunity under Explanation 5 by statement under section 132(4) - Explanation 5 to section 271(1)(c) is not attracted to assets requisitioned under section 132A and cannot be invoked in requisition proceedings under section 132A. - HELD THAT: - Explanation 5 expressly applies to assets found "in the course of a search under section 132" and creates a deeming fiction in that specific context. Section 132A and its sub-section (3) make certain sub provisions of section 132 applicable "so far as may be" to requisitioned assets, but that statutory deeming does not extend to import another distinct deeming provision (Explanation 5) absent clear legislative mandate. Requisition under section 132A is procedurally and conceptually distinct from a search under section 132; subsection (4) of section 132 (which permits a statement under section 132(4)) does not apply to 132A, so the safeguard in Explanation 5(2) (immunity by making a statement under section 132(4) specifying the manner of derivation) is not available in requisition cases. Penalty and other deeming provisions must be construed strictly, and doubtful or expansive readings that would enlarge the scope of a penal/deeming provision against the assessee are to be rejected. The Tribunal followed consistent Coordinate Bench decisions to the same effect and found that, on the plain language and spirit of the statute and in absence of any contrary higher authority, Explanation 5 cannot be extended to requisition proceedings under section 132A. [Paras 18, 19, 22]

Explanation 5 to section 271(1)(c) does not apply to assets requisitioned under section 132A and cannot be invoked in this case.

Penalty under section 271(1)(c) tested by declaration in return of income - concealment determined with reference to the return filed under section 139(1) - Penalty under section 271(1)(c) cannot be sustained where the alleged undisclosed income was declared in the original return filed under section 139(1) and accepted by the Assessing Officer. - HELD THAT: - Section 271(1)(c) penalises concealment of particulars of income or furnishing inaccurate particulars in the return; therefore the existence of concealment must be judged with reference to the return filed for the impugned assessment year. The assessee filed the original return for AY 1993-94 under section 139(1) declaring the seized cash and the return was accepted by the Assessing Officer. Established authorities hold that where the income representing seized assets is declared in the regular return and accepted, penalty cannot be levied merely on conjecture that the return was filed because of seizure or requisition. Applying that settled proposition to the facts, there was no basis for levy of penalty under section 271(1)(c). [Paras 23]

Penalty under section 271(1)(c) deleted as the amount was declared in the original return filed under section 139(1) and accepted by the Assessing Officer.

Final Conclusion: The Tribunal allowed the appeal: Explanation 5 to section 271(1)(c) does not apply to requisition proceedings under section 132A, and, on the facts, since the seized cash was declared in the original return for AY 1993-94 which was accepted by the Assessing Officer, the penalty under section 271(1)(c) was directed to be deleted.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - requirement of specific grounds in the show-cause notice under section 274 - natural justice - adequacy and particularity of notice - invalidity of printed pro forma notice where irrelevant limbs are not struck out - principle that penalty proceedings must be initiated on and confined to the same limb as the penalty imposed

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - requirement of specific grounds in the show-cause notice under section 274 - invalidity of printed pro forma notice where irrelevant limbs are not struck out - natural justice - adequacy and particularity of notice - Show-cause notice was defective for not specifying whether penalty was for concealment of income or for furnishing inaccurate particulars, rendering the consequent penalty unsustainable. - HELD THAT: - The Tribunal held that a notice issued under section 274 which uses a printed form without striking out the irrelevant limb does not satisfy the requirement of law because the assessee must be made aware of the specific grounds he has to meet; vagueness offends principles of natural justice. Relying on the reasoning in Manjunatha Cotton & Ginning Factory and Tribunal and High Court precedents including the Calcutta High Court, the Bench reiterated that initiation of penalty proceedings and the ground on which penalty is imposed must correspond; drawing up proceedings on one limb and imposing penalty on another is invalid. The Tribunal applied these principles to the facts, observing that the notice did not specify which limb under section 271(1)(c) was invoked and that the defect was substantial since it deprived the assessee of a clear opportunity to meet the specific charge. Following the coordinate decisions, the Tribunal concluded that the penalty order could not be sustained and must be cancelled.

Penalty imposed under section 271(1)(c) quashed for want of a specific show-cause notice; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding the show-cause notice defective for failing to specify whether penalty was for concealment or for furnishing inaccurate particulars, and cancelled the penalty imposed under section 271(1)(c).

Addition under section 69 of the Income tax Act based on uncorroborated third party disclosure - retracted statement of a third party witness and absence of corroborative evidence - failure to provide opportunity for cross examination and breach of principles of natural justice - requirement of valuation reference to the DVO where alleged unaccounted payments determine asset value - assessment under section 153A and reliance on incriminating material discovered in search

Addition under section 69 of the Income tax Act based on uncorroborated third party disclosure - retracted statement of a third party witness and absence of corroborative evidence - failure to provide opportunity for cross examination and breach of principles of natural justice - requirement of valuation reference to the DVO where alleged unaccounted payments determine asset value - Whether the addition of Rs. 5,54,92,000 made under section 69 for AY 2011-12, founded on a pendrive and statement of a builder's employee (later retracted) and without other corroborative material or valuation, is sustainable - HELD THAT: - The Tribunal found that the impugned addition for alleged on money payments rested solely on information recovered on a pendrive and the statement of a builder's employee, whose statement was subsequently retracted. Apart from the assessee's admission of cash payments aggregating Rs. 2.08 crores (which was offered and accepted for assessment in the company in which he was a director), no incriminating material or corroborative evidence was seized from the assessee. The Assessing Officer did not confront the assessee with the higher figure alleged to be on money, and did not refer the matter to the DVO for valuation despite the addition being based on an asserted market value that the Tribunal found to be unrealistic (resulting in an implausible per square foot rate). The learned CIT(A) correctly held that where an addition is predicated on the statement of a third party that has been retracted and there is no corroborative material, the addition cannot be sustained; reliance on such a statement without providing an opportunity for cross examination also engages principles of natural justice. Given these factors, and the absence of DVO valuation or other supporting material, the Tribunal concluded there was no infirmity in the CIT(A)'s deletion of the addition and upheld that deletion. [Paras 13, 14, 15]

The deletion of the addition of Rs. 5,54,92,000 under section 69 for AY 2011 12 is upheld; the Assessing Officer's action is unsustainable in the absence of corroborative incriminating material, valuation reference and having relied on a retracted third party statement.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the addition for AY 2011 12; the objection under Rule 27 concerning jurisdiction under section 153A was not adjudicated as it became academic in view of the decision on merits.

Disallowance under section 13(1)(c) read with section 13(3) - taxation under section 164(2) - reasonableness of remuneration paid to specified persons - principle of consistency in income tax assessments - use of investigation/TEP reports in assessment proceedings - reopening of assessment under section 147

Disallowance under section 13(1)(c) read with section 13(3) - taxation under section 164(2) - reasonableness of remuneration paid to specified persons - principle of consistency in income tax assessments - Deletion of addition of salary/honorarium of Rs. 54 lakhs paid to specified persons for assessment year 2010-11 (and similar relief for 2014-15 and 2015-16). - HELD THAT: - The Tribunal examined the Assessing Officer's finding that payments to three members were not genuine or reasonable and were captured by section 13(1)(c) read with section 13(3) and section164(2). The AO's material included an investigation report stating the members did not attend daily and attended occasional meetings; however the AO's own record also acknowledged that the members rendered services and in para 4.2 admitted they did other work along with services to the society, producing a contradictory stance. The assessee had disclosed payments in audit report and earlier assessments for preceding years had accepted similar payments under section143(3). The Tribunal found that no material was produced to show the payments were excessive, no comparable evidence was cited by the AO to justify invoking section13(1)(c), and the assessee's explanation about the nature of services was unrebutted. Reliance on authorities recognising that trustees' payments, where reasonable and supported by services, do not attract section13(1)(c) was noted. Applying the principle of consistency and the requirement of acceptable evidentiary foundation for treating payments as not genuine or excessive, the Tribunal held the disallowance was not justified and deleted the addition. The Tribunal directed that the same reasoning apply mutatis mutandis to AYs 2014-15 and 2015-16. [Paras 15, 17, 18]

Addition of Rs. 54 lakhs deleted for AY 2010-11; equivalent relief granted for AYs 2014-15 and 2015-16; appeals allowed on this ground.

Reopening of assessment under section 147 - use of investigation/TEP reports in assessment proceedings - Validity of reopening of completed assessment under section 147 was not adjudicated. - HELD THAT: - The Tribunal expressly refrained from deciding grounds challenging the validity of reopening (grounds 1 to 3). Having allowed the appeals on merits by deleting the addition, the Tribunal recorded that it will not give findings on the legality of the reopening under section147 and therefore did not decide that issue. [Paras 16]

Grounds contesting reopening left undecided; no adjudication on the validity of notice under section147.

Final Conclusion: The Tribunal deleted the disallowance of remuneration/ salary claimed to be hit by section13(1)(c) read with section13(3) and taxed under section164(2) for AY 2010-11 and granted the same relief for AYs 2014-15 and 2015-16; appeals are allowed. The challenge to the reopening under section147 was not decided.

Depreciation on capitalized pre-operative expenses - addition to cost of fixed asset of professional/technical fees - genuineness of expenditure and documentary proof - depreciation under Section 32 of the Act - disallowance under Section 43B of the Act

Depreciation on capitalized pre-operative expenses - addition to cost of fixed asset of professional/technical fees - genuineness of expenditure and documentary proof - disallowance under Section 43B of the Act - Whether depreciation can be allowed on amounts capitalized in AY 2014-15 representing payments to directors previously treated as revenue (pre-operative) and partly disallowed in AY 2013-14. - HELD THAT: - The Tribunal recognised the settled principle that professional/technical fees incurred in connection with acquisition or installation of a fixed asset may be added to the cost of that asset and depreciation claimed accordingly. However, the assessee had earlier treated the same amounts as revenue (debited to pre-operative expenses) and a part had been disallowed in AY 2013-14 under the return computation. The assessee failed to produce sufficient evidence to establish beyond doubt that the payments to directors were genuine payments for acquisition/installation services (including qualifications/experience of the directors, basis of the payments, and documentary linkage to the cost of the asset). Mere deduction of TDS did not prove genuineness. In view of the absence of clarity and documentary support, the Tribunal did not adjudicate the allowance on merits but directed that the matter be re-examined by the Assessing Officer who shall verify whether the expenditure is properly part of the cost of the capital asset and, if so, allow depreciation in accordance with law. [Paras 9]

Remitted to the Assessing Officer for fresh examination and verification of the genuineness and capital nature of the payments and, if found to be part of the asset cost, to allow depreciation as per law.

Depreciation under Section 32 of the Act - date asset put to use - claim of 50% depreciation for assets used less than 180 days - Whether depreciation is allowable in AY 2014-15 on plant and machinery acquired in an earlier year but asserted to have been put to use on 01.01.2014 (AY 2014-15), and the related claim for half-year (50%) depreciation where use was for less than 180 days. - HELD THAT: - The Tribunal acknowledged that there is no bar to claiming depreciation on an asset acquired in an earlier year; entitlement depends on the date the asset was actually installed and put to use in the assessee's business. The assessee asserted the asset was put to use on 01.01.2014 but did not furnish documentary evidence before the authorities to substantiate installation date, treatment in books, or reasons for delay. Given this lacuna, the Tribunal did not decide the substantive entitlement but directed the Assessing Officer to verify the date of installation and, if the asset was put to use in AY 2014-15, to allow depreciation from that date. If the asset was used for less than 180 days, the AO is to allow depreciation at 50% of the actual rate in accordance with Section 32. [Paras 10]

Remitted to the Assessing Officer to verify the date the asset was put to use and to allow depreciation (including 50% rate where use was for less than 180 days) in accordance with Section 32.

Final Conclusion: The Tribunal set aside the appeal to the file of the Assessing Officer and remitted the issues relating to (i) allowance of depreciation on amounts capitalized as payments to directors and (ii) depreciation on the asset allegedly put to use in AY 2014-15, directing fresh verification and consequential relief to be granted by the AO if the claims are established; appeal disposed of for statistical purposes.

Interest on temporary deployment of borrowed funds - Set-off of interest income against interest paid on borrowed capital - Interest on grants as accretion to grant where assessee is nodal agency - Interest from mobilisation advances treated as reduction of capital work-in-progress - Section 43B - requirement of payment being "actually paid" and remand for verification - Application of precedents of coordinate benches and High Court decisions on treatment of interest on grants and advances

Interest on temporary deployment of borrowed funds - Set-off of interest income against interest paid on borrowed capital - Application of coordinate bench precedent - Treatment of interest earned on short-term deposits made out of HUDCO loan funds and entitlement to set-off/alternative relief. - HELD THAT: - The Tribunal examined that the assessee had temporarily parked HUDCO loan proceeds in fixed deposits and earned interest, while interest on HUDCO borrowings had been capitalised. On identical facts in preceding assessment years a coordinate bench had accepted the alternate plea that interest paid on HUDCO loans should be allowed as revenue expenditure. No contrary factual material was placed before the Tribunal. Respectfully following the coordinate-bench decision, the Tribunal allowed the alternate claim and directed that the entire interest paid on loans from HUDCO be treated as revenue expenditure, resulting in the grounds being partly allowed.

Assessee's appeals for AYs 2008-09 to 2012-13 partly allowed by permitting entire interest on HUDCO loans as revenue expenditure (alternate relief).

Interest on grants as accretion to grant where assessee is nodal agency - Interest on temporary deposits not taxable where grants restrict utilisation - Application of High Court precedents - Whether interest earned on government grants (parked in fixed deposits by the assessee as nodal agency) is taxable as income or forms part of the grant (accretion) and therefore not assessable as income. - HELD THAT: - The Tribunal found as admitted facts that the assessee received specific grants from the State Government as nodal agency and parked unutilised grant funds in fixed deposits, earning interest. In view of binding decisions of the Hon'ble Karnataka High Court (and having regard to the factual parity with those decisions), the interest was held to be inextricably linked to the grant and to constitute accretion to the grant rather than the assessee's income. Revenue produced no material to distinguish the facts. The Tribunal therefore upheld the CIT(A)'s deletion of the addition.

Revenue appeals for the specified assessment years dismissed; interest on grants treated as accretion to the grant and not taxable in the hands of the assessee.

Interest from mobilisation advances treated as reduction of capital work-in-progress - Receipts intrinsically connected with construction activity - Application of Bokaro Steel Ltd. principle - Taxability of interest earned by the assessee on mobilisation advances given to contractors - whether such interest is income or reduces capital cost of construction. - HELD THAT: - The Tribunal noted that mobilisation advances were given to contractors to facilitate construction, with interest treated in the contract and ultimately adjusted against contractor bills. Reliance was placed on the Supreme Court's reasoning that receipts which are intrinsically connected with and incidental to construction (including interest on advances to contractors) operate to reduce the cost of construction and are capital in nature. On the identical factual matrix, the Tribunal upheld the CIT(A)'s conclusion that such interest is not taxable as income but reduces capital work-in-progress.

Grounds of revenue on this issue dismissed; interest from mobilisation advances treated as reducing capital work-in-progress (not taxable income).

Section 43B - requirement of payment being "actually paid" and remand for verification - Statutory dues, royalty and labour welfare cess - timing and proof of payment - Whether royalty and labour welfare cess, not shown in profit and loss account and not deposited to Government, are allowable under section 43B in the relevant assessment years. - HELD THAT: - The Tribunal recognised that section 43B requires that the payment be real and 'actually paid' in the sense of being a genuine discharge of liability, not a mere fiction. The assessee asserted that certain royalties (collected from contractors) and labour welfare cess related to capital works and were not charged to profit and loss account, and that payments had subsequently been made. Given disputed factual matrix on whether and when statutory dues were actually paid, the Tribunal did not decide on merits but remanded the issue to the Assessing Officer to call for evidence and verify the assessee's documentary proof of payment. The AO was directed to consider allowance to the extent of actual payment in the relevant assessment year.

Issue remanded to the Assessing Officer for verification of actual payment; grounds allowed for statistical purposes and to be decided on verification of payment.

Final Conclusion: Common issues in appeals for assessment years 2008-09 to 2013-14 were disposed issue-wise: (i) interest on HUDCO loan deposits - alternate relief allowed by treating interest on HUDCO loans as revenue expenditure (partly allowed); (ii) interest on government grants - held to be accretion to the grant and not taxable (revenue appeals dismissed); (iii) interest from mobilisation advances - held to reduce capital work-in-progress and not taxable (revenue grounds dismissed); (iv) royalty and labour welfare cess under section 43B - remanded to the Assessing Officer for verification of actual payment, to be allowed to the extent proved.

Expenditure incurred in relation to income not includible in total income - Assessing Officer's satisfaction requirement under Section 14A(2) - methodology for computation under Rule 8D - nexus with business operations as test for allowability of loss - business loss incidental to business allowable under Section 28 - distinction between business loss and business expenditure

Expenditure incurred in relation to income not includible in total income - Assessing Officer's satisfaction requirement under Section 14A(2) - methodology for computation under Rule 8D - Whether the disallowance computed under the Rules (Rule 8D) can be sustained where the Assessing Officer did not record the requisite satisfaction under Section 14A(2). - HELD THAT: - The Tribunal found that although the Assessing Officer set out extensive commentary on Section 14A and Rule 8D and made suo-moto disallowances, the AO did not record the requisite satisfaction, based on the assessee's accounts, that the assessee's claim was incorrect as required by Section 14A(2). The jurisdiction to apply the statutorily prescribed method in the Rules arises only after the AO forms an opinion rejecting the assessee's voluntary claim; such opinion must be based on objective appraisal of materials and cannot be implied or deemed. The AO's assessment pages did not explain how the voluntary disallowance was unreasonable or otherwise unsatisfactory; the CIT(A)'s recomputation likewise did not address the procedural requirement. Consequently the disallowance made in contravention of the procedural and substantive requirement of Section 14A(2) read with the Rules is liable to be deleted. [Paras 9, 12]

Disallowance computed under Rule 8D deleted for want of recorded satisfaction under Section 14A(2).

Nexus with business operations as test for allowability of loss - business loss incidental to business allowable under Section 28 - distinction between business loss and business expenditure - Whether the loss on investment/receivable arising from transactions related to NSEL is allowable as a business loss (under Section 28) in the year in which it arose. - HELD THAT: - The Tribunal analysed the character of the loss and the relationship between the transaction and the assessee's business. Sections 30 to 36 deal with business expenditure, while Section 28 governs profits and gains of business; Section 37 is a general deduction provision. The decisive criterion is the direct and proximate nexus of the loss with the business operations. On the facts the assessee paid amounts in the course of its dealings with a broker and, on the crash of NSEL, sustained a loss in the same year which was written off in the profit and loss account. Given that the loss arose from transactions incidental to the assessee's business and that it manifested in the current year, the loss qualifies as a business loss allowable under Section 28. The Tribunal held that the loss is not to be disallowed as expenditure under Sections 30-36 and that any subsequent recovery would be brought to account when realised. [Paras 18]

Loss arising from the NSEL-related transaction is allowable as a business loss incidental to the business and is to be allowed while computing income under Section 28.

Final Conclusion: The assessee's appeal is allowed: the disallowance computed under Section 14A/Rule 8D is deleted for want of the Assessing Officer's recorded satisfaction, and the loss sustained on the NSEL-related transaction is allowed as a business loss incidental to the assessee's business under Section 28.

Power of appellate authority to admit fresh grounds where relevant facts are on record - distinction between power of assessing officer and powers of appellate/tribunal authorities regarding revised return - purpose test for characterisation of subsidy as capital or revenue receipt - exclusion of non-income capital receipts from computation of book profit for the purpose of minimum alternate tax - remand for verification of factual aspects relating to quantum and documentation of subsidy

Power of appellate authority to admit fresh grounds where relevant facts are on record - purpose test for characterisation of subsidy as capital or revenue receipt - exclusion of non-income capital receipts from computation of book profit for the purpose of minimum alternate tax - remand for verification of factual aspects relating to quantum and documentation of subsidy - Interest subsidies received under the Technology Upgradation Fund Scheme are capital receipts and are to be excluded from book profit computed under section 115JB; the additional ground raising this claim is admitted and the matter is remitted to the Assessing Officer for verification of factual aspects and quantification. - HELD THAT: - The Tribunal, after reviewing the judicial precedents relied upon by the parties (including decisions of the Gujarat High Court in Mitesh Impex, Supreme Court dicta in NTPC and Goetze (as distinguished), Ahmedabad ITAT and Calcutta High Court authorities), held that appellate authorities and the Tribunal have jurisdiction to entertain additional grounds or legal contentions where the necessary facts are already on record. Applying the settled 'purpose test' for classifying subsidies, the Tribunal found that interest subsidy under TUFS is intended to promote capital investment/technology upgradation and therefore bears the character of a capital receipt. As a consequence, such capital receipt is not income and cannot form part of book profit for computing tax under section 115JB. However, recognising that the claim was raised for the first time at the appellate stage and that the assessing officer had not examined the documentary and factual matrix, the Tribunal admitted the additional ground, allowed it in principle, and remanded the issue to the Assessing Officer to verify the quantum and supporting documentation and to give relief in accordance with law if factual correctness is established. [Paras 18, 19]

Additional ground admitted; interest subsidy under TUFS to be treated as capital receipt and excluded from book profit; matter remanded to AO for verification and quantification.

Distinction between power of assessing officer and powers of appellate/tribunal authorities regarding revised return - remand for verification of factual aspects relating to quantum and documentation of subsidy - Claim for deduction of education cess and higher education cess as allowable expenditure was restored to the Assessing Officer for fresh decision after considering the CBDT circular and relevant judicial pronouncements. - HELD THAT: - The Tribunal noted that the assessing officer and CIT(A) had not adjudicated the issue of allowing education cess and higher education cess as deductible expenditure. Having considered the CBDT Circular No. 91/58/66-ITJ(19) dated 18-05-1967 and recent judicial decisions cited by the assessee (including the Bombay High Court decision in Sesa Goa and tribunal orders), the Tribunal found it appropriate to remit the claim to the Assessing Officer for fresh examination in light of the circular and the case law. The matter was restored for adjudication afresh rather than decided on merits by the Tribunal. [Paras 21, 24]

Ground restored to AO for fresh adjudication in accordance with the CBDT circular and applicable judicial decisions.

Final Conclusion: The appeal is partly allowed: the Tribunal admitted the additional ground regarding treatment of TUFS interest subsidy as a capital receipt and directed exclusion from book profit under section 115JB subject to AO's verification and quantification; the claim for deduction of education cess and higher education cess is remitted to the Assessing Officer for fresh decision. Other grounds need not be decided in view of allowance of the additional ground.

Allowability of business expenditure - nexus between expenditure and business - genuineness of payment - training and coaching fees deductible - licence suspension and decline in turnover not determinative

Allowability of business expenditure - nexus between expenditure and business - training and coaching fees deductible - genuineness of payment - Whether the expenditure on two training programmes undertaken by the assessee is allowable as business expenditure for Assessment Year 2014 - 2015. - HELD THAT: - The Tribunal found that the assessee is an ongoing business entity engaged in quarrying and manufacturing and had admitted income for the year. The payments for the two training programmes were not disputed by the Assessing Officer as payments, and therefore were genuine. Although the training was not directly part of the physical process of quarrying or manufacturing, it related to acquisition of management skills and implementation of systems and processes which facilitate better conduct of the assessee's business. A decline in turnover and the fact that the licence renewal was pending were held to be irrelevant to the legal question of whether the expenditure bore a nexus to the business. Applying these considerations, the Tribunal concluded that the trainings were undertaken for business purposes and that the expenditure is connected to the assessee's business and therefore allowable. [Paras 7, 8]

The expenditure on the two training programmes is allowable as business expenditure and the appeal is allowed.

Final Conclusion: The Tribunal set aside the orders below and allowed the appeal, holding that the training and coaching fees paid by the assessee are genuine and sufficiently connected to the business to be allowed as business expenditure for Assessment Year 2014 - 2015.

Disallowance of labour expenses - estimation of gross profit ratio for making additions - obligation to produce site wise/voucher evidence for labour claims - adjustment by estimating gross profit to test book results - disallowance under section 40(a)(ia) for non deduction of TDS - requirement to prove master servant relationship to treat payment as salary

Disallowance of labour expenses - estimation of gross profit ratio for making additions - obligation to produce site wise/voucher evidence for labour claims - adjustment by estimating gross profit to test book results - Validity and quantum of addition made by assessing officer by disallowing a portion of labour expenses and the correctness of the Gross Profit rate adopted by the CIT(A) for estimating addition. - HELD THAT: - The assessing officer disallowed an amount by restricting the disproportionate labour expense recorded in March 2010 to an average of preceding months, making an addition of Rs. 66,01,113. The CIT(A) estimated gross profit at 12% by averaging the book gross profit (8.2%) and the inflated rate (15.2%) resulting from the AO's adjustment, thereby reducing the addition to Rs. 35,65,140. The Tribunal observed that the CIT(A)'s 12% figure was not extraneous to the books because it derived from averaging the book GP and the GP after AO's adjustment. The Tribunal also found that the assessee failed to furnish the site wise breakup and vouchers called for during assessment, which were necessary to verify the reasonableness of the labour claims. Balancing that some merit existed for the assessee given the labour intensive nature of its business and the absence of a finding that the expenses were not incurred, the Tribunal exercised its discretion to adopt a lower estimated GP of 10% (instead of 12%) to allow partial relief, treating that rate as sufficient to account for suspected bogus or unsupported labour expenditure and other discrepancies. [Paras 10, 11]

Addition sustained in part; AO directed to apply gross profit rate of 10% on gross receipts for computation, resulting in an addition of Rs. 16,89,018.

Disallowance under section 40(a)(ia) for non deduction of TDS - requirement to prove master servant relationship to treat payment as salary - Whether the expenditure of Rs. 1,00,000 shown as 'account charges' could be allowed as salary (thereby avoiding disallowance under section 40(a)(ia)) in absence of TDS deduction. - HELD THAT: - The assessing officer disallowed the amount under section 40(a)(ia) because no TDS was deducted on the lump sum payment of Rs. 1,00,000 and the assessee failed to demonstrate that the payment was in the nature of salary. The assessee did not produce evidence to establish the existence of an employer-employee (master and servant) relationship or documentation to show that the payment related to periodic salary. The Tribunal accepted the Revenue's contention that, without proof of the requisite relationship and documentary support, the payment could not be treated as salary for the purposes of section 40(a)(ia). [Paras 17]

Addition of Rs. 1,00,000 under section 40(a)(ia) confirmed; ground dismissed.

Final Conclusion: The appeal is partly allowed: the addition relating to labour expenses is reduced by the Tribunal (AO to compute addition applying a 10% gross profit rate, yielding an addition of Rs. 16,89,018), while the disallowance under section 40(a)(ia) in respect of the Rs. 1,00,000 payment is confirmed.

Disallowance under section 14A - computation under Rule 8D(2)(ii) - interest disallowance - computation under Rule 8D(2)(iii) - allocation of common administrative expenses - presumption of investment out of interest free own funds where own funds exceed investment

Disallowance under section 14A - computation under Rule 8D(2)(ii) - interest disallowance - presumption of investment out of interest free own funds where own funds exceed investment - Whether the disallowance on account of interest under section 14A read with Rule 8D(2)(ii) was correctly made by the Assessing Officer - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the Assessing Officer had erred in applying Rule 8D(2)(ii) to disallow interest where the assessee's own interest free funds (share capital and free reserves) during the year under consideration substantially exceeded the investment capable of yielding exempt income. The Tribunal relied on the principle, as applied by the Bombay High Court decisions referred to by the parties, that where interest free own funds available in the relevant year are more than the investment, it is permissible to presume that such investments were made out of interest free funds and not out of borrowed funds so as to attract interest disallowance under section 14A read with Rule 8D(2)(ii). The Revenue did not dispute the factual finding before the Tribunal that own funds exceeded the relevant investments; prior coordinate Bench decisions in the assessee's earlier years applying the same reasoning were followed. On that basis the Tribunal held that the deletion of the interest disallowance by the CIT(A) was correct. [Paras 10, 11, 12, 13]

Deletion of the disallowance on account of interest under section 14A read with Rule 8D(2)(ii) was upheld.

Disallowance under section 14A - computation under Rule 8D(2)(iii) - allocation of common administrative expenses - Whether the common administrative expenses disallowance under section 14A read with Rule 8D(2)(iii) should be restricted to the dividend actually earned - HELD THAT: - The Tribunal sustained the CIT(A)'s restriction of the Assessing Officer's disallowance under Rule 8D(2)(iii) to the amount of exempt dividend actually earned by the assessee in the year. The Tribunal noted and followed higher court and coordinate Bench precedents relied upon by the assessee and the CIT(A) which hold that disallowance under section 14A cannot exceed the exempt income actually earned and that Rule 8D(2)(iii) should be applied having regard to investment yielding exempt income. The Revenue did not press any substantive contrary contention before the Tribunal, which therefore found no infirmity in limiting the disallowance to the dividend received. [Paras 5, 14]

Disallowance under section 14A read with Rule 8D(2)(iii) restricted to the exempt dividend actually earned and so upheld.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the CIT(A)'s order deleting the interest disallowance under section 14A read with Rule 8D(2)(ii) and restricting the Rule 8D(2)(iii) disallowance to the exempt dividend actually earned.

Reopening of assessment beyond four years - reason to believe that income has escaped assessment - disclosure of material facts in tax audit / Form No. 3CD - mere change of opinion - production of books and Explanation 1 to reopening provisions

Reopening of assessment beyond four years - disclosure of material facts in tax audit / Form No. 3CD - mere change of opinion - production of books and Explanation 1 to reopening provisions - Validity of reassessment proceedings initiated after four years where the assessee had produced bills, vouchers and disclosed non-deduction of TDS in Form No. 3CD in the original assessment. - HELD THAT: - The Tribunal found that in the original assessment under Section 143(3) the assessee furnished bills, vouchers and the tax-audit report (Form No. 3CD) which recorded the non-deduction of TDS. The Assessing Officer had accepted the expenditure but made an ad hoc disallowance because many vouchers were self-certified and not fully detailed. The reasons recorded for reopening relied on non-deduction of TDS and sought to disallow the expenditure under the proviso to the reopening provision. The Tribunal observed that the Assessing Officer's mistake or failure to verify material already on record, including the Form No. 3CD disclosure, cannot constitute a valid basis to reopen beyond the four-year period where the assessee had, in substance, disclosed the material facts. While Explanation 1 recognises that mere production of books or evidence will not necessarily amount to disclosure, on the facts the Tribunal held that full and true disclosure had been made and that the reassessment notice issued after the four-year limitation could not be sustained as it amounted to a mere change of opinion by the Assessing Officer. Consequently the reassessment was quashed and further adjudication on merits deemed academic. [Paras 5]

Reassessment initiated beyond the four-year period quashed; appeal allowed.

Final Conclusion: The reassessment proceedings issued by notice dated 21-01-2014 for Asst. Year 2008-09 were quashed on the ground that the assessee had disclosed the relevant material facts in the original assessment and the reopening after the four-year period amounted to a mere change of opinion; the appeal is allowed and merits were not adjudicated further.

Inherent jurisdiction under Section 482 Cr.P.C. - Quashing of criminal proceedings following adjudicatory exoneration on merits - Independence of adjudication and criminal prosecution - Abuse of the process of court where criminal prosecution contradicts merits-based exoneration - Interim stay of summons - Summoning under Customs Act offences

Interim stay of summons - Inherent jurisdiction under Section 482 Cr.P.C. - Summoning order / discharge rejection order dated 25.2.2020 under Customs Act offences stayed until further order. - HELD THAT: - The applicants invoked the inherent jurisdiction of the Court under Section 482 Cr.P.C. seeking quashment of the summoning order and related proceedings. The Court noted that the CESTAT had earlier quashed the adjudicatory order on merits and that no interim order adverse to the applicants in support of the CESTAT order is operating; only an appeal is pending before the Apex Court. Having considered the authorities cited by the parties, the Court found that the matter required further consideration on whether continuation of criminal proceedings would amount to abuse of process in view of the adjudicatory exoneration on merits. Pending such consideration and further pleadings, the Court granted an interim stay of the summoning order dated 25.2.2020 until the next date of listing.

Summoning order / discharge rejection order dated 25.2.2020 shall remain stayed until the next date of listing.

Quashing of criminal proceedings following adjudicatory exoneration on merits - Abuse of the process of court where criminal prosecution contradicts merits-based exoneration - Independence of adjudication and criminal prosecution - Whether criminal prosecution may be permitted to continue notwithstanding a merits-based exoneration in the adjudicatory proceedings is to be considered afresh. - HELD THAT: - The Court recorded that CESTAT had quashed the adjudicatory order after detailed consideration on merits. It referred to the established principle that adjudication and criminal prosecution are independent, but recognised the settled exception that where exoneration in adjudication is on merits and the allegation is found not sustainable, continuation of criminal prosecution may amount to abuse of process. The Court did not decide the question on merits; instead it directed the opposite parties to file a counter affidavit within six weeks and listed the matter for further hearing. The issue of whether prosecution is an abuse of process in light of the CESTAT's merits-based order is thus left for fresh consideration.

The question whether criminal prosecution can continue despite a merits-based exoneration in adjudication is reserved for fresh consideration; opposite parties directed to file counter affidavit within six weeks and matter listed for further hearing.

Final Conclusion: On an application under Section 482 Cr.P.C., the Court, noting a prior merits-based exoneration by the CESTAT and a pending appeal, stayed the summoning order dated 25.2.2020 pending further consideration; the Union of India was permitted to file a counter affidavit within six weeks and the matter was listed for further hearing.

Jurisdiction of the Appellate Tribunal in confiscation of currency - distinction between currency and baggage for customs jurisdiction - export of foreign currency requires prior permission of Reserve Bank of India - confiscation under Section 113(d) and 113(e) of the Customs Act - option to impose fine in lieu of confiscation under Section 125 of the Customs Act - penalty under Section 114(i) of the Customs Act and judicial reduction of penalty

Jurisdiction of the Appellate Tribunal in confiscation of currency - distinction between currency and baggage for customs jurisdiction - Appeal is maintainable before this Tribunal in proceedings involving confiscation of foreign currency seized at airport. - HELD THAT: - The Tribunal relied on its earlier decisions holding that currency is distinct from baggage and that export of currency falls within the ambit of goods for customs purposes; accordingly, appeals arising from confiscation of currency seized at airports are entertainable by this Tribunal. The Tribunal found no impediment to its jurisdiction to hear these appeals in view of the established precedents distinguishing currency from baggage and treating export of currency as a matter within customs adjudication. [Paras 9]

The appeals are maintainable before this Tribunal.

Export of foreign currency requires prior permission of Reserve Bank of India - confiscation under Section 113(d) and 113(e) of the Customs Act - Foreign currency seized from the appellants is liable for confiscation because export was attempted without RBI permission and authorized source of procurement was not proved. - HELD THAT: - Rule 5 of the Foreign Exchange Management (Export & Import of Currency) Regulations, 2000 mandates that export of foreign currency requires general or special permission of the Reserve Bank of India. The appellants failed to establish that the seized currency was procured from an authorized source and could not prove prior RBI permission. Consequently, the attempted export without requisite permission rendered the seized currency liable to confiscation under Sections 113(d) and 113(e) of the Customs Act. [Paras 9]

The foreign currency seized is liable for confiscation.

Option to impose fine in lieu of confiscation under Section 125 of the Customs Act - penalty under Section 114(i) of the Customs Act and judicial reduction of penalty - Despite liability to confiscation, the seized currency was ordered released on payment of fines and the penalties imposed were reduced. - HELD THAT: - Section 125 confers discretion on the adjudicating officer to permit payment of a fine in lieu of confiscation. Applying that statutory discretion to the facts - appellants being business persons who stated the currency was for business purposes and cash funds shown in their books - the Tribunal concluded there was no proved mala fide intention to export for gain. The Tribunal exercised the discretionary power to direct release of seized currency on payment of specified fines rather than uphold absolute confiscation. Further, the Tribunal found the penalties imposed under Section 114(i) to be excessive on the facts and reduced them substantially. [Paras 9]

Seized currency to be released on payment of fines and original penalties reduced.

Final Conclusion: Appeals partly allowed: Tribunal upheld jurisdiction and the liability to confiscation for attempted export without RBI permission, but in exercise of statutory discretion under Section 125 directed release of the seized currencies on payment of fines (specified for each appellant) and reduced the penalties originally imposed under Section 114(i).

Proof of foreign origin for upholding smuggling - retracted statement without independent corroboration - onus on prosecution where goods initially seized by police (absence of presumption) - invoice and documentary evidence as corroboration of lawful transaction - inconsistency in findings affecting imposition of penalty

Proof of foreign origin for upholding smuggling - invoice and documentary evidence as corroboration of lawful transaction - The seized gold was not proved to be of foreign origin or smuggled. - HELD THAT: - The Tribunal found that the Revenue's case rested largely on an initial statement of the person from whose possession the gold was seized, a statement which was retracted subsequently. There were no foreign markings on the gold bars and no evidence of defacement or procedures showing removal of such markings. The seized items were covered by an invoice (No. 517) issued by the proprietor, the GST applicable on the invoice was paid and those facts were not controverted by the Department. The production of the invoice recovered from the mobile of the person in possession supported the appellants' case that the gold formed part of the dealer's stock and was being transported under sale documents. In absence of concrete and positive evidence proving foreign origin and smuggled nature, the Tribunal held that the Revenue failed to discharge the burden of proof required to classify the goods as smuggled. [Paras 7, 9, 11, 14]

Impugned finding of smuggling/foreign origin set aside and appeals of the appellants allowed on this ground.

Retracted statement without independent corroboration - A retracted initial statement of the deponent, unsupported by independent corroboration, cannot serve as conclusive legal proof of smuggling. - HELD THAT: - The Tribunal relied on the settled principle that a retracted statement, standing alone and uncorroborated by independent evidence, is insufficient to establish the smuggled character of goods. The Adjudicating Authority had based its conclusion on the initial statement despite its retraction before the Magistrate; the Tribunal found no contemporaneous corroborative material on record to justify reliance on that retracted statement. [Paras 7, 8]

Reliance on the retracted statement to sustain confiscation and penalties was held to be untenable.

Onus on prosecution where goods initially seized by police (absence of presumption) - Where goods are initially seized by the police, the presumption under the Customs Act is not attracted and the burden to prove smuggling lies on the prosecution. - HELD THAT: - The Tribunal noted that the gold was first seized by GRP police, which precludes invocation of the statutory presumption under section 123 of the Customs Act. Relying on precedent, the Tribunal observed that in such circumstances the prosecution must produce direct and positive evidence to establish smuggling; mere suspicion or assumptions are insufficient. As there was no direct evidence produced by the Revenue to prove smuggling, the case failed. [Paras 10]

Absence of presumption due to police seizure strengthens the requirement on Revenue to prove smuggling; Revenue failed to do so.

Inconsistency in findings affecting imposition of penalty - The Adjudicating Authority's inconsistent treatment-exonerating the alleged mastermind for lack of evidence while imposing penalty on appellants based on the same statement-undermines the findings against the appellants. - HELD THAT: - The Tribunal observed that the Adjudicating Authority found the statement of the deponent insufficient to impose penalty on the alleged mastermind yet relied upon the same statement to impose penalties on the present appellants. This self-contradiction, coupled with absence of additional evidence against the appellants, rendered the imposition of penalties unsustainable. Non-imposition of penalty on the third person had attained finality and, by consistent reasoning, penalties on the appellants could not be sustained. [Paras 8]

Findings and penalties against the appellants set aside in view of inconsistent approach and lack of independent evidence.

Final adjudicatory outcome - The appeals filed by the appellants were allowed and the Revenue's appeal became infructuous. - HELD THAT: - Having concluded that the Revenue failed to prove that the gold was of foreign origin or smuggled, and that reliance on the retracted statement was impermissible, the Tribunal set aside the impugned order as regards confiscation and penalties against the appellants. Consequential relief was granted to the appellants. Since the individual appeals succeeded, the Revenue's appeal attacking the conversion to redemption option was rendered infructuous and rejected. [Paras 15]

Appellants' appeals allowed; Revenue's appeal rejected as infructuous.

Final Conclusion: The Tribunal set aside the adjudicating findings of smuggling and penalties against the appellants for want of positive and corroborative evidence of foreign origin; the appellants' appeals were allowed and the Revenue's appeal was held infructuous and rejected.

Restoration of company name under Section 252(1) of the Companies Act, 2013 - Strike off under Section 248(1) of the Companies Act, 2013 - Justness to restore - Filing of outstanding statutory documents and payment of late fees as condition for restoration - Conditional restoration subject to compliance and payment to Prime Minister's Relief Fund

Restoration of company name under Section 252(1) of the Companies Act, 2013 - Strike off under Section 248(1) of the Companies Act, 2013 - Justness to restore - Paramount Facilities Management Services Private Limited was entitled to restoration of its name on the Register of Companies because it was in operation at the time of striking off and it was just to restore the name. - HELD THAT: - The Tribunal examined the material placed by the company - audited financial statements for financial years including 2016-17 showing assets and revenue, bank statements evidencing transactions, income tax returns for the relevant assessment years, statutory registrations and licences (including a valid private security agency licence) - and found sufficient evidence that the company was carrying on business and was not defunct at the time its name was struck off. The Registrar of Companies had itself stated no objection to restoration, subject to the company filing all pending statutory documents and payment of late filing fees. Applying the discretionary power vested in the Tribunal under Section 252(1), and in the interest of stakeholders, the Tribunal held it was just to restore the company's name. Restoration was ordered on terms requiring the company to file all outstanding documents with requisite fees and to complete formalities, including payment to the Prime Minister's Relief Fund, before the name is reflected as restored.

The appeal is allowed; the ROC order striking off the company's name is set aside and the company's name is ordered to be restored on compliance with filing of outstanding statutory documents, payment of late fees and other formalities including the directed payment to the Prime Minister's Relief Fund.

Final Conclusion: The Tribunal set aside the Registrar's strike-off order and directed conditional restoration of the company's name under Section 252(1) of the Companies Act, 2013, subject to the company's compliance with filing requirements, payment of applicable fees and the prescribed payment to the Prime Minister's Relief Fund.

Scheme of Arrangement by way of Amalgamation - schemes under sections 230-232 of the Companies Act, 2013 - dispensing with convening of meetings - consent affidavits of shareholders and creditors - absence of secured creditors - appointed date - service of statutory notices on regulatory authorities

Dispensing with convening of meetings - consent affidavits of shareholders and creditors - absence of secured creditors - Dispensing with convening/holding of meetings of shareholders, secured creditors and unsecured creditors in respect of the Transferor Companies and the Transferee Company as contemplated in the Scheme. - HELD THAT: - The Tribunal examined the board resolutions approving the Scheme and the affidavits of consent filed by all shareholders of each applicant company. For Transferor Company-1 and Transferor Company-2 all three equity shareholders holding 100% voting share filed consent affidavits and the companies have no secured or unsecured creditors; accordingly convening shareholders' and creditors' meetings was dispensed with. For Transferor Company-3, all three equity shareholders gave consent affidavits and its two unsecured creditors also filed consent affidavits, and there were no secured creditors; convening meetings of shareholders and unsecured creditors was dispensed with. For the Transferee Company, all three shareholders filed consent affidavits and its two unsecured creditors filed consent affidavits, with no secured creditors; convening meetings of shareholders and unsecured creditors was dispensed with. The Tribunal recorded the appointed date in the Scheme as 31st December, 2019 subject to directions of the Tribunal and, on the basis of the documents placed on record, allowed dispensation of the meetings as indicated. [Paras 10, 11, 12, 13, 14]

The Tribunal dispensed with convening/holding of the meetings of shareholders and, where applicable, unsecured creditors for the Transferor Companies and the Transferee Company; no meetings were required in respect of secured creditors where none existed.

Service of statutory notices on regulatory authorities - disclosure to Income Tax authorities - Directions for service of notices of the application on specified regulatory and statutory authorities. - HELD THAT: - The Tribunal directed that notice of the application be served on the Regional Director, Registrar of Companies, Official Liquidator and the Income Tax Department, and on any other sectoral regulators as required. The Tribunal specifically required that notices to the Income Tax Authorities disclose sufficient details such as PAN, ward numbers and assessing officers so that a timely and proper reply may be filed. These directions were issued as part of the terms on which the application was allowed. [Paras 15]

Notice of the application shall be served on the Regional Director, Registrar of Companies, Official Liquidator, Income Tax Department and any other sectoral regulators as directed.

Final Conclusion: The joint application under the Scheme of Arrangement by way of Amalgamation was allowed on the terms recorded: meetings of shareholders and, where applicable, unsecured creditors were dispensed with in the manner indicated, statutory notices shall be served as directed, and the application is disposed of.

Scheme of Arrangement by way of Amalgamation - Dispensing with convening of meetings of shareholders and creditors - Unanimous consent affidavits as substitute for meetings - Absence of secured creditors - no necessity to convene meeting - Service of notice on regulatory and revenue authorities

Dispensing with convening of meetings of shareholders and unsecured creditors - Unanimous consent affidavits - Certificate from Chartered Accountants certifying list of shareholders and creditors - No secured creditors - convening not required - Application for sanction of the Scheme of Arrangement by way of Amalgamation and for dispensing with convening of meetings of shareholders and creditors of the applicant companies. - HELD THAT: - The Tribunal examined the board resolutions authorising the filing, the Memoranda and Articles and last audited accounts, certificates from Chartered Accountants listing shareholders and creditors, and affidavits of consent from the shareholders and all unsecured creditors of each applicant company. Where both shareholders of a company had given consent affidavits covering 100% voting share, the Tribunal dispensed with convening the meetings of members. Where there were no secured creditors, the Tribunal held that convening a meeting of secured creditors was not required. Where all unsecured creditors had filed consent affidavits covering 100% voting share, the Tribunal dispensed with convening the meetings of unsecured creditors. The appointed date in the Scheme was noted. The Tribunal also directed that notice of the application be served on the Regional Director, Registrar of Companies, Official Liquidator and Income Tax authorities to enable them to file responses if any. These directions were applied to each of the seventeen transferor companies and the transferee company as recorded in the order. [Paras 40, 41]

The application for sanction of the Scheme and for dispensing with convening of the meetings of shareholders and unsecured creditors (and noting absence of secured creditors) was allowed; directions given for service of notice on regulatory and income tax authorities.

Final Conclusion: The Tribunal allowed the joint application under sections 230-232 of the Companies Act, 2013 sanctioning the proposed Scheme of Amalgamation and dispensed with convening meetings of shareholders and unsecured creditors of the applicant companies where unanimous consent affidavits and requisite certificates were on record, recorded that no secured creditors exist for the companies, and directed service of notice upon the Regional Director, Registrar of Companies, Official Liquidator and Income Tax authorities.

Scheme of arrangement - dispensing with convening of meetings of shareholders and unsecured creditors - convening meeting of secured creditors - appointment of chairperson and scrutinizer for creditors' meeting - compliance with the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - statutory auditor's/chartered accountant's certification of shareholders and creditors

Dispensing with convening of meetings of shareholders and unsecured creditors - statutory auditor's/chartered accountant's certification of shareholders and creditors - Application to dispense with convening and holding the meetings of the Shareholders and Unsecured Creditors of Applicant Companies No.1 and No.2 was allowed. - HELD THAT: - The Tribunal examined the Company Application, accompanying certificates from the chartered accountants/statutory auditors certifying the existing shareholders and creditors and compliance with accounting treatment, and the Board approvals. Satisfied that material facts relating to the proposed Scheme were disclosed and certification requirements were met, the Tribunal concluded there was sufficient basis to dispense with calling meetings of the shareholders and unsecured creditors of both applicant companies and granted the relief sought. [Paras 5, 6]

Meetings of the shareholders and unsecured creditors of Applicant Companies No.1 and No.2 are dispensed with.

Convening meeting of secured creditors - scheme of arrangement - compliance with the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Direction to convene the meeting of the secured creditors of Applicant Company No.1 for consideration of the proposed Scheme was issued. - HELD THAT: - Noting that Applicant Company No.1 has two secured creditors as certified and that the Scheme impacts their rights, the Tribunal directed that the secured creditors' meeting be convened for consideration of the Scheme. The Tribunal specified procedural requirements including publication of notice in specified newspapers and mandated adherence to statutory provisions under the Companies Act, 2013 and the relevant Rules when convening the meeting. [Paras 5, 6]

The meeting of the secured creditors of Applicant Company No.1 is directed to be convened on the date, time and at the venue specified, with notice to be published and statutory compliance observed.

Appointment of chairperson and scrutinizer for creditors' meeting - remuneration of chairperson and scrutinizer - quorum for secured creditors' meeting - Appointment of the Chairperson and the Scrutinizer for the secured creditors' meeting and fixation of their remuneration, and quorum requirement were ordered. - HELD THAT: - The Tribunal appointed the named advocate as Chairperson and the named PCS as Scrutinizer to conduct the secured creditors' meeting, fixed their remuneration, and directed that since there are two secured creditors both should form the quorum. These appointments and terms were ordered to enable proper conduct and scrutiny of the creditors' meeting under the Scheme process. [Paras 6]

Chairperson and Scrutinizer appointed with specified remuneration; both secured creditors to constitute the quorum.

Filing of reports after creditors' meeting - further company petition for sanction of the scheme - compliance with statutory formalities - Directions were issued for filing of reports by the Chairperson and Scrutinizer and for the applicants to file a company petition seeking sanction of the Scheme after completion of meetings. - HELD THAT: - The Tribunal directed that the Chairperson and Scrutinizer file their respective reports with the Registry within two weeks of conclusion of the meeting. Thereafter the applicant companies were granted two weeks to file the appropriate company petition for sanction of the Scheme, subject to all statutory compliances. The order thus linked the convening of meetings to subsequent mandatory procedural steps for final sanction. [Paras 6]

Chairperson and Scrutinizer to file reports within two weeks of the meeting; applicants to file company petition thereafter for sanction of the Scheme, subject to statutory compliance.

Final Conclusion: The Tribunal allowed the C.A.(CAA) by dispensing with shareholders' and unsecured creditors' meetings, directed convening of the secured creditors' meeting of Applicant Company No.1 with appointed Chairperson and Scrutinizer (and fixed remuneration), ordered statutory compliance including notice publication, and mandated filing of post-meeting reports and a subsequent company petition for sanction of the Scheme.

Restoration of company name in register of companies - Applicability of section 252(1) and section 252(3) of the Companies Act, 2013 - Protection of legitimate interest of revenue - Direction to Registrar of Companies to comply with statutory formalities for restoration - Exemption of time consumed in appeal for initiation of tax/legal proceedings

Applicability of section 252(1) and section 252(3) of the Companies Act, 2013 - The appeal filed under section 252(3) was to be treated as an appeal under section 252(1) because the company had been struck off by the Registrar and not voluntarily, and a mistaken reliance on a wrong provision would not disentitle the party to relief. - HELD THAT: - The Tribunal examined the differing contours of section 252(1) and section 252(3), noting that section 252(1) applies where the Registrar strikes off a company for failure to file returns, whereas section 252(3) contemplates applications where striking off is voluntary or by members/creditors. Although the appellant invoked section 252(3), the Tribunal held that a mis pleading of the statutory provision did not bar relief and therefore the appeal would be treated under section 252(1). The Tribunal relied on the principle that a wrong citation of the provision will not dis entitle a party from relief when the substance of the claim falls within the proper provision. [Paras 8, 9]

Appeal to be treated under section 252(1) and not section 252(3); mis quotation of the provision did not preclude adjudication.

Restoration of company name in register of companies - Protection of legitimate interest of revenue - The Tribunal restored the name of M/s. Navyug Consultancy Pvt. Ltd. to the Register of Companies to protect the public interest and legitimate revenue interest, finding restoration just and equitable and not barred by law. - HELD THAT: - On review of the record, the Tribunal found that restoration was necessary in the public interest and to enable the Income Tax Department to pursue pending proceedings. The Tribunal concluded that the company's name should be restored in the Registrar's register because it was just and equitable to do so and no legal bar prevented restoration. Having treated the appeal under the correct provision, the Tribunal exercised its power to order revival to enable further statutory action by revenue authorities. [Paras 10, 11, 12]

The name of the company was ordered restored in the register of companies; restoration was directed as just and equitable to protect the legitimate interest of revenue.

Direction to Registrar of Companies to comply with statutory formalities for restoration - Exemption of time consumed in appeal for initiation of tax/legal proceedings - The Tribunal directed the Registrar of Companies to restore the company's name subject to compliance with statutory formalities (publication in newspapers and Official Gazette as per draft) and exempted the time consumed in disposal of the application for the purpose of initiation of Income Tax or legal proceedings. - HELD THAT: - The Tribunal specified procedural steps to effect restoration: publication of notice in two leading newspapers circulating in the district of the registered office and in the Official Gazette in the form approved by the ROC, at the cost of the petitioner, and directed the company to comply with Companies Act and other statutory requirements. Additionally, recognizing the practical effect on revenue proceedings, the Tribunal ordered that the time taken in disposal of the application be excluded for purposes of initiating Income Tax or legal proceedings against the company. [Paras 12, 13, 14, 15]

ROC directed to restore the company's name subject to specified publications and statutory compliances; time consumed in disposal is exempted for initiation of tax/legal proceedings.

Final Conclusion: The appeal is allowed: the Tribunal treated the mis pleaded appeal as one under section 252(1), ordered restoration of M/s. Navyug Consultancy Pvt. Ltd.'s name in the Register of Companies as just and equitable, directed statutory publications and compliances for restoration, and exempted the time consumed in disposal for the purpose of initiating Income Tax or other legal proceedings.

Reservation and de-reservation of order in insolvency proceedings - Statutory timeline for disposal of applications under Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 - Reopening of reserved matter contrary to I&B Code timelines - Duty of Adjudicating Authority to admit or reject within prescribed period - Direction to Adjudicating Authority to decide on merits on a date certain

Reservation and de-reservation of order in insolvency proceedings - Reopening of reserved matter contrary to I&B Code timelines - Duty of Adjudicating Authority to admit or reject within prescribed period - Validity of the Adjudicating Authority's order reopening a matter reserved for orders in an application under the I&B Code. - HELD THAT: - The Tribunal found that the Adjudicating Authority had originally reserved its order on the appellant's Section 10 application but later issued an order which effectively de-reserved/reopened the matter and adjourned it for further clarification. Such procedure was held not to conform with the statutory scheme under the I&B Code which requires applications under Sections 7, 9 and 10 to be disposed of by admission or rejection within the prescribed period of 14 days. The impugned order was also noted to be ambiguous in not specifying the nature of the 'clarification' sought. Consequently the Adjudicating Authority's action of practically reopening a reserved matter and listing it beyond the statutory timeframe was found contrary to the Code's mandate.

The reopening/de-reservation and adjournment of the reserved matter by the Adjudicating Authority was held to be contrary to the I&B Code and therefore not in conformity with law.

Direction to Adjudicating Authority to decide on merits on a date certain - Statutory timeline for disposal of applications under Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 - Relief to be afforded in view of the procedural irregularity and the appropriate course for the Adjudicating Authority. - HELD THAT: - Given the procedural impropriety and the statutory requirement to dispose of such applications within the prescribed period, the Tribunal directed that the matter be prepone d and listed immediately. The Adjudicating Authority was instructed to consider the Section 10 application on its merits and pass an order of admission or rejection as warranted by law. The Tribunal fixed a time-bound mandate that this exercise be completed within one week from the date of the Tribunal's order and directed communication of its order to the Adjudicating Authority.

The appeal is disposed by directing the Adjudicating Authority to list the matter forthwith and decide the Section 10 application on merits by passing an order of admission or rejection within one week.

Final Conclusion: The Adjudicating Authority's practical reopening of a reserved Section 10 application and adjournment beyond the statutory timeframe was held to be inconsistent with the I&B Code; the appeal was disposed with directions that the Adjudicating Authority immediately list the matter and decide the application on merits by admitting or rejecting it within one week, with a copy of this order to be communicated to the Adjudicating Authority.

Ineligibility under Section 29-A of the IBC - facilitator versus management control - abuse of process - liquidator's exclusive authority during liquidation - deemed notice of discharge under Section 33(7) of the IBC - validity of MSME certificate obtained during liquidation

Ineligibility under Section 29-A of the IBC - facilitator versus management control - abuse of process - Whether the schemes submitted by the appellant were properly rejected on the ground that the appellant, being ineligible under the IBC, was attempting a back-door re-entry rather than acting merely as a facilitator. - HELD THAT: - On review of the schemes and related documents the Tribunal found that the schemes were centred on and linked to the appellant and that he was not a mere facilitator but would remain in command and exercise dominant control in implementation. The Adjudicating Authority therefore correctly concluded that the appellant, being ineligible under ineligibility under Section 29-A of the IBC, was attempting a back-door entry into the corporate debtor's assets. The Tribunal rejected the submission that the schemes should have been permitted to proceed without examination and that the appellant's role was purely facilitative, holding that permitting such a scheme would amount to an abuse of process and would prejudice other stakeholders. [Paras 11]

Schemes rightly rejected because they were centred on an appellant who was ineligible under Section 29-A and not merely a facilitator; no interference with the Adjudicating Authority's conclusion.

Liquidator's exclusive authority during liquidation - deemed notice of discharge under Section 33(7) of the IBC - validity of MSME certificate obtained during liquidation - Whether the appellant could lawfully obtain an MSME certificate and act independently to seek such certification during liquidation proceedings without involving the liquidator. - HELD THAT: - The Tribunal held that once liquidation order is passed the officers and management stand discharged except where the liquidator continues the business; management and related powers vest in the IRP/RP during CIRP and in the liquidator after liquidation. Accordingly, the appellant could not lawfully bypass the liquidator and apply for or obtain an MSME certificate in contravention of the liquidator's exclusive authority. The Tribunal described such action as impermissible and illegal, noting concern if mere filing without verification could confer rights that circumvent the liquidation process. The factual timeline - liquidation order, schemes submission, and subsequent MSME application - supported the conclusion that the appellant's application was improper. [Paras 12]

Application for MSME certificate made by the appellant during liquidation without involvement of the liquidator was improper and could not be permitted; such action is illegal.

Final Conclusion: The appeal is dismissed. The Appellate Tribunal upheld the Adjudicating Authority's finding that the appellant's schemes were centred on him and constituted an attempt by an ineligible person to gain back-door entry, and that the appellant could not lawfully obtain an MSME certificate or bypass the liquidator during liquidation; no costs.

Time-bar and laches in invocation of the Code - defective demand notice vitiating Section 9 application - pre-existing dispute defeating invocation of CIRP - existence of undisputed operational debt as sine qua non for CIRP - prohibition on using the I&B Code as a recovery forum - running account / last payment as relevant to date of default

Time-bar and laches in invocation of the Code - running account / last payment as relevant to date of default - Whether the petition was barred by delay and laches because the claimed defaults arose between 2009 and 2014 and the Section 9 application was filed only in 2020. - HELD THAT: - The Tribunal found that each invoice carried a 15-day payment term and the cause of action for each bill arose on the 16th day after issuance. The last bill dated 17.09.2014 gave rise to default on 03.10.2014; the demand notice was sent on 02.01.2020 and the petition filed on 22.01.2020, more than five years after the date of default. The Tribunal held that the I&B Code was not intended to revive old, time-barred demands predating the Code and that most defaults arose well before the Code's commencement and long prior to the demand notice and petition, rendering the claim hit by delay and laches. [Paras 6]

Petition dismissed insofar as it is barred by delay and laches; defaults arose prior to filing and are largely time-barred.

Defective demand notice vitiating Section 9 application - Whether the demand notice dated 02.01.2020 was defective and therefore incapable of sustaining a Section 9 petition. - HELD THAT: - On examination, the demand notice and annexed list of unpaid bills showed inconsistent bill numbers, differing amounts and entries pertaining to different stations, which rendered the demand notice defective. The Tribunal held that a defective demand notice cannot give rise to a valid cause of action under the Code and that this defect alone warranted dismissal of the petition. [Paras 6]

Petition liable to be dismissed on the ground that the demand notice is defective.

Pre-existing dispute defeating invocation of CIRP - existence of undisputed operational debt as sine qua non for CIRP - Whether there existed a pre-existing real dispute regarding the claimed debt that barred initiation of CIRP under Section 9. - HELD THAT: - Applying the principles in Mobilox and Transmission Corporation, the Tribunal examined contemporaneous communications and payment records and found that the Respondent had denied or disputed the claims well before the demand notice-emails indicated payments, adjustments (including desktop purchase adjustments) and statements that dues had been paid. A cursory comparison of listed invoices and Respondent's payment vouchers showed that several invoices claimed by the Petitioner had been paid (some after TDS deduction) and therefore the dispute was real and not a mere ruse. Mere pre-existence of a real dispute was sufficient to reject the Section 9 petition. [Paras 9, 10]

Existence of a pre-existing bona fide dispute established; petition cannot be admitted under Section 9.

Prohibition on using the I&B Code as a recovery forum - Whether the I&B Code could be invoked as a substitute for ordinary debt recovery where the corporate debtor is a viable entity and the debt is disputed. - HELD THAT: - The Tribunal reiterated that the Code is not a recovery forum and must not be used to push viable and profit-making companies into insolvency. Having regard to the Respondent's financials and workforce, and the nature of the dispute, the Tribunal found no case of insolvency or inability to pay. Consequently, initiation of CIRP was inappropriate where the Petitioner sought recovery of a disputed debt and the Corporate Debtor remained a viable enterprise. [Paras 7, 11, 12]

Petition rejected because the Code cannot be used as a substitute for recovery proceedings and no insolvency was made out.

Running account / last payment as relevant to date of default - Whether the last payment received in 2017 altered the date of default such as to validate the Section 9 application filed in 2020. - HELD THAT: - The Tribunal noted the Petitioner relied on a last payment received on 24.01.2017 but held that defaults must be assessed with reference to each invoice/bill. The fact of intermittent correspondence or a later payment did not alter the date of default for individual invoices which had earlier become due; therefore the contention that the 2017 payment revived earlier time-barred claims was not accepted for the purposes of sustaining the Section 9 petition. [Paras 6]

Last payment in 2017 did not cure earlier defaults so as to validate the Section 9 petition.

Final Conclusion: The Tribunal dismissed C.P. (IB) No.146/BB/2020, holding that the petition was barred by delay and laches, the demand notice was defective, a pre-existing real dispute existed as to the alleged debts, and the I&B Code could not be used as a recovery forum nor to initiate CIRP against a viable, non insolvent corporate debtor; the petitioner remains free to pursue its remedy through reconciliation, arbitration or other fora.

Cancellation of shares by board of directors - rectification of the register of members - invalidity of Form-32 intimating cessation of directors - deletion of oppressive clauses in the articles of association - appointment of independent chairman/administrator to manage company affairs - interaction of regulatory findings under FEMA / FIPB / RBI with company law reliefs - oppression and mismanagement

Cancellation of shares by board of directors - interaction of regulatory findings under FEMA / FIPB / RBI with company law reliefs - The cancellation of 3,32,640 equity shares (and subsequent cancellation of 200 shares) of the first petitioner by the board meeting of the respondent company is invalid, illegal and non-est in law and the cancelled shares are to be restored. - HELD THAT: - The Tribunal examined the pleadings, regulatory orders and submissions of the parties, including communications and findings by FIPB, RBI and the Adjudicating Authority under FEMA. On the material before it the Tribunal held that the cancellation effected by the respondent-board in the meeting of 20.09.2011 (and the later cancellation of 200 shares) was not legally sustainable. The Tribunal observed that FIPB and RBI had indicated that the shareholding was held on a non-repatriation basis and that the Adjudicating Authority placed the onus of compliance with FEMA on the issuing company rather than individual shareholders and did not order confiscation of the shares. Taking those regulatory findings into account and having regard to the manner in which the board purported to cancel the shares without following the statutory process for share cancellation, the Tribunal concluded that the cancellation was invalid and the first petitioner's shareholding must be restored.

Cancellation of 3,32,640 equity shares and the subsequent cancellation of 200 shares is held invalid; the cancelled shares are to be restored to the first petitioner.

Rectification of the register of members - Consequent to the invalidation of the share cancellations, the Register of Members of the respondent company must be rectified to restore 3,32,640 equity shares in the name of the first petitioner. - HELD THAT: - Having held the cancellations to be invalid and non-est in law, the Tribunal directed corrective action to give practical effect to that finding. The rectification of the Register of Members was ordered as the necessary proprietary and statutory step to restore the first petitioner's rights as a shareholder. The order flows directly from the Tribunal's finding on invalid cancellation and is directed at restoring the corporate record to the position prior to the unlawful actions of the board.

Register of Members to be rectified to restore 3,32,640 equity shares in the name of the first petitioner.

Invalidity of Form-32 intimating cessation of directors - The Form-32 filed with the Registrar of Companies by the respondent (intimating cessation of the petitioners as directors with effect from 02.01.2012) is invalid and non-est in law. - HELD THAT: - The Tribunal found that, in consequence of the unlawful cancellation of shares and the resultant diminution of the petitioners' shareholder rights, the subsequent steps taken to remove the petitioners from directorship (and to inform the RoC by filing Form-32) were consequent upon and inseparable from the invalid actions of the board. For that reason the intimation of cessation recorded in Form-32 could not be sustained and was declared invalid.

Form-32 filed with RoC intimating cessation of the petitioners as directors is held invalid and non-est in law.

Deletion of oppressive clauses in the articles of association - oppression and mismanagement - Clauses 31(a), 32 and 39(b) of the Articles of Association of the respondent company are deleted as being contrary to the interest of the majority shareholders and oppressive in effect. - HELD THAT: - The Tribunal reviewed the genesis and operation of the challenged articles, their impact on shareholders' and directors' rights and the overall functioning of the board. Finding that those provisions had the practical effect of entrenching management in favour of the respondent group and preventing the majority shareholders from effectively participating in corporate governance, the Tribunal ordered deletion of the cited clauses. The order was made to restore the ability of the company to be governed in a manner consistent with shareholders' rights and to remove entrenched provisions which had been used to stymie majority control.

Clauses 31(a), 32 and 39(b) of the Articles of Association are deleted and the AoA amended accordingly.

Appointment of independent chairman/administrator to manage company affairs - The Tribunal appointed an independent Chairman for a limited tenure and permitted the petitioners to nominate additional directors, to ensure proper conduct of the company's affairs and to give effect to its orders. - HELD THAT: - In order to implement its directions (restoration of shareholding, rectification of records, deletion of oppressive articles and continuity of corporate governance), the Tribunal allowed nomination of additional directors by the petitioners in proportion to their shareholding and appointed an independent Chairman for six months to preside over the Board and shareholders' meetings, update statutory records, and oversee preparation and adoption of accounts and convening of meetings necessary to implement the orders. The appointment was made as an administrative measure to ensure compliance and smooth management pending reconstitution of the board.

Petitioners allowed to nominate two additional directors; independent Chairman appointed for six months to implement the Tribunal's orders and manage company affairs.

Final Conclusion: The Tribunal set aside the board's purported cancellation of the first petitioner's shares (including a later cancellation of 200 shares), ordered rectification of the Register of Members to restore those shares, held the Form-32 intimating the petitioners' cessation as directors to be invalid, directed deletion of Articles 31(a), 32 and 39(b) of the AoA, permitted the petitioners to nominate additional directors and appointed an independent Chairman for six months to implement the orders and manage the company's affairs.

Approval of resolution plan under Section 30(6) / Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - commercial wisdom of the Committee of Creditors and limited scope of judicial review - mandatory contents of a resolution plan under Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - priority payment of insolvency resolution process costs and liquidation-value protection for operational and dissenting financial creditors - approach to concessions, waivers or dispensations sought in a resolution plan vis-a -vis competence of statutory authorities

Approval of resolution plan under Section 30(6) / Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - mandatory contents of a resolution plan under Regulation 38 - commercial wisdom of the Committee of Creditors and limited scope of judicial review - The Resolution Plan submitted by the Resolution Applicant and approved by the Committee of Creditors is approvable by the Adjudicating Authority under Section 30(6) read with Section 31(1) of the Code and Regulation 38. - HELD THAT: - The Adjudicating Authority examined the process from issuance of EoI to CoC approval and found that the CoC approved the plan with requisite voting share (91.28%). The Resolution Plan was held to contain the mandatory elements specified in Regulation 38, including identification of specific sources for payment of insolvency resolution process costs and treatment of creditors. Having regard to the settled principle that the Tribunal does not sit in appeal over the commercial wisdom of the CoC, the Adjudicating Authority declined to re-evaluate the commercial decisions of the CoC and instead confined itself to satisfaction that statutory requirements under Section 30(2) and Regulation 38 were met. On that basis the Adjudicating Authority was satisfied that the plan could be sanctioned. [Paras 6, 10, 11]

Application for approval of the Resolution Plan is allowed; the Resolution Plan approved by the CoC meets the requirements of Section 30(2) and Regulation 38 and is sanctioned under Section 31(1).

Approach to concessions, waivers or dispensations sought in a resolution plan vis-a -vis competence of statutory authorities - effect of non-inclusion of statutory concessions on implementability of the resolution plan - Concessions, reliefs or dispensations sought in Annexure 2 of the Resolution Plan are not permitted to be approved as part of the sanctioning order; the Resolution Applicant has liberty to approach the relevant statutory or competent authorities for such reliefs. - HELD THAT: - The Adjudicating Authority observed that requests for concessions, waivers or dispensations are matters falling within the jurisdiction of the respective statutory or competent authorities and cannot be automatically granted by sanctioning the Resolution Plan. It recorded that denial of Annexure 2 in the sanction will not impede implementation of the plan, and granted liberty to the Resolution Applicant to seek appropriate reliefs from the competent forums. The plan was therefore sanctioned subject to compliance with existing laws and without automatic conferment of the concessions sought. [Paras 7, 8, 9]

Annexure 2 concessions are not allowed as part of the sanctioned Resolution Plan; Resolution Applicant may independently approach competent authorities for any concessions or reliefs.

Final Conclusion: The Adjudicating Authority sanctioned the Resolution Plan submitted by the Resolution Applicant, being satisfied that the plan meets the requirements of Section 30(2) and Regulation 38 and that there is no permissible interference with the commercial wisdom of the CoC; requests for statutory concessions in the plan were not granted but the Resolution Applicant is free to seek such reliefs from the appropriate authorities.

Financial debt - assured return - Collective Investment Scheme - admission of petition under section 7 - moratorium - attachment and auction by regulatory authorities - MPID Act proceedings - jurisdiction

Financial debt - assured return - Collective Investment Scheme - The amounts payable to the financial creditors under the schemes floated by the corporate debtor constitute 'financial debt'. - HELD THAT: - The Tribunal examined the Rule Book, application form, certificates and receipts issued by the corporate debtor under its schemes and concluded that the arrangements carried a commitment of assured return or interest. Such commitment falls within the expression 'financial debt' under the IBC. The Tribunal noted precedent of the NCLAT holding that parties entitled to 'assured return' or 'interest' are covered by the expression 'financial creditor', and applied that reasoning to hold that the claim of the petitioners is a financial debt. [Paras 10]

The claim arising from assured returns under the schemes is treated as financial debt for purposes of the IBC.

Admission of petition under section 7 - moratorium - attachment and auction by regulatory authorities - MPID Act proceedings - Whether the petition under section 7 of the IBC should be admitted at this stage and CIRP initiated against the corporate debtor. - HELD THAT: - The Tribunal noted multiple parallel enforcement and regulatory processes: orders and attachment/auction proceedings by SEBI, auction and sale processes supervised pursuant to MPID Court directions, engagement of an agency for sale of properties, and reports of attachments by other authorities. Given the advanced stage of those proceedings (including auctions and issuance of certificates of sale), the Tribunal concluded that admitting the petition, imposing moratorium and appointing an IRP would serve no meaningful purpose at this stage. In light of these concurrent measures affecting the assets of the corporate debtor, the Tribunal exercised its discretion not to admit the section 7 petition at present. [Paras 11, 12, 13, 14]

The petition under section 7 is not admitted at this stage; CIRP is not initiated and moratorium is not imposed because parallel attachment and auction proceedings render admission presently unproductive.

Jurisdiction - Whether this Bench has jurisdiction to entertain the petition. - HELD THAT: - The corporate debtor is an unlisted public company incorporated on 12.06.2008 with its registered office in Panaji, Goa. On that basis the Tribunal recorded that this Bench has jurisdiction to deal with the petition. [Paras 2]

This Bench has jurisdiction to hear the petition.

Final Conclusion: The Tribunal held that the creditors' claims based on assured returns under the corporate debtor's schemes constitute financial debt, but declined to admit the section 7 petition and initiate CIRP in view of advanced attachment and auction proceedings under regulatory and MPID processes; the Bench for Mumbai had jurisdiction to entertain the petition.

Lapse of SVLDRS application for failure to make payment within prescribed time - interpretation and application of Section 127(5) of the Finance Act 2019 read with Section 7(iv) of the Taxation and Other Laws Ordinance, 2020 - designated committee's power to treat application as lapsed - banking error as ground to set aside statutory lapse

Lapse of SVLDRS application for failure to make payment within prescribed time - designated committee's power to treat application as lapsed - banking error as ground to set aside statutory lapse - Whether the Designated Committee was justified in treating the petitioner's SVLDRS application as lapsed for non-payment within the prescribed time, notwithstanding the petitioner's contention of a payment reversal by its bank, and whether the petitioner was entitled to direction for acceptance of the declaration and issuance of a discharge certificate. - HELD THAT: - The Court examined the circumstances in which the petitioner's purported payment, made on 19 March 2020, was reversed by the petitioner's bank and considered the subsequent voluntary tendering of a demand draft and explanation. The Court found that the reversal constituted an error attributable to the petitioner's agent (the bank) and that no fault was shown on the part of the Designated Committee. In view of the statutory scheme governing SVLDRS and the temporal requirement for payment, the Committee's action in treating the application as lapsed was held to be in accordance with Section 127(5) of the Finance Act, 2019 read with Section 7(iv) of the Taxation and Other Laws Ordinance, 2020. The Court declined to interfere with the statutory consequence of lapse on the facts presented and observed that any grievance arising from the banking error lies against the bank and may be pursued by the petitioner in accordance with law. The Court expressly refrained from opining on disputes between the petitioner and its bank and left the parties' rights and contentions open.

Designated Committee's decision treating the SVLDRS application as lapsed affirmed; no direction to accept the declaration or issue a discharge certificate; petitioner free to pursue remedies against its bank.

Final Conclusion: Writ petition dismissed: the impugned letter treating the SVLDRS application as lapsed is upheld as being in accordance with the relevant statutory provisions; petitioner may proceed against its bank for the payment reversal.

Alternative statutory remedy - Exhaustion of statutory remedies - Exercise of writ jurisdiction under Article 226 - Discretionary refusal to entertain writ petitions where alternative remedy exists - Condonation of delay by Appellate Tribunal

Alternative statutory remedy - Exhaustion of statutory remedies - Discretionary refusal to entertain writ petitions where alternative remedy exists - Condonation of delay by Appellate Tribunal - Writ petition dismissed for failure to avail the alternate remedy of appeal before the Appellate Tribunal under the Act. - HELD THAT: - The respondent's Order in Original expressly informed the petitioner of the right to prefer an appeal under Section 129 A of the Finance Act, 1994 within three months and that the Appellate Tribunal had power to condone delay. The petitioner did not invoke that statutory remedy and instead filed the present writ petition. Applying the settled principle that Article 226 is not intended to short circuit or circumvent available statutory remedies, and relying on the reasoning in Assistant Collector of Central Excise v. Dunlop India Ltd., the High Court held that absent good and sufficient reason to bypass the alternative remedy, the writ jurisdiction should not be exercised in matters where statutory avenues are available. The Court therefore declined to examine the merits of the underlying controversy and dismissed the petition for non exhaustion of the statutory remedy. [Paras 2, 3, 4]

Writ petition dismissed for failure to resort to the statutory appeal remedy; merits not adjudicated.

Final Conclusion: The High Court dismissed the writ petition as not maintainable because the petitioner failed to avail the statutory appeal under Section 129 A despite being informed of that remedy and the Tribunal's power to condone delay; the Court did not express any view on the merits.

Distribution of CENVAT Credit under Rule 7 of Cenvat Credit Rules, 2004 - Entitlement to distribute Cenvat Credit as Input Service Distributor - Direct nexus between Research & Development services and manufacture - Research & Development services as inputs to manufacture in the pharmaceutical industry - Registration as Input Service Distributor and distribution of credit

Distribution of CENVAT Credit under Rule 7 of Cenvat Credit Rules, 2004 - Direct nexus between Research & Development services and manufacture - Entitlement to distribute Cenvat Credit as Input Service Distributor - Appellant entitled to distribute CENVAT Credit (including Education Cess and SHE cess) taken on Research & Development services to its manufacturing units in terms of Rule 7 of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal accepted the assessee's submission that R&D activities in the pharmaceutical industry form an integral and essential part of the manufacturing process because product development, testing, quality control, certification and related activities are necessary preconditions for a marketable pharmaceutical product. The bench observed that where an assessee has a centralized R&D unit (IPDO) serving multiple manufacturing units, the services used in that R&D unit have a direct nexus with manufacture at those units. Consequently, if the assessee is registered as an Input Service Distributor and has taken CENVAT Credit on services used in the R&D unit, such credit can be distributed to its manufacturing units under Rule 7. The Tribunal relied on earlier decisions including the Tribunal Allahabad in Jubiliant Life Sciences Ltd. (upheld by the Apex Court) and prior orders of this Bench and other Benches , to hold the issue no longer res integra and to set aside the demand and impugned order. The Tribunal therefore allowed the appeal and remitted no further matter for fresh consideration. [Paras 3, 4]

Demand set aside and impugned order quashed; appeal allowed with consequential reliefs as per law.

Final Conclusion: The Tribunal held that CENVAT Credit claimed on R&D services used in a centralized R&D unit of a pharmaceutical manufacturer is distributable to its manufacturing units under Rule 7 when the assessee is registered as an Input Service Distributor; the impugned demand was set aside and the appeal allowed.

Refund under Rule 5 of the CENVAT Credit Rules, 2004 - Explanation (1A) to Rule 5 - definition of "export goods" - refund admissible only in respect of goods physically exported and not for deemed exports - condition precedent of debiting CENVAT account for claiming refund - restoration/re-credit of CENVAT credit upon rejection of refund claim

Refund under Rule 5 of the CENVAT Credit Rules, 2004 - Explanation (1A) to Rule 5 - definition of "export goods" - refund admissible only in respect of goods physically exported and not for deemed exports - Whether refund under Rule 5 was admissible in respect of goods cleared to a sister concern (a 100% EOU) where the goods were not physically exported by the applicant. - HELD THAT: - The Tribunal held that after insertion of Explanation (1A) in Rule 5, the term "export goods" for the purpose of refund under Rule 5 is confined to goods physically exported by the claimant. Where goods are cleared by the applicant to its sister concern which is a 100% EOU, such clearances do not amount to physical exports by the applicant and therefore do not qualify as "export goods" under Explanation (1A). Prior decisions of the Tribunal dealing with the same provision were followed and applied to reject the claim for refund made in respect of the quarters in issue. [Paras 4]

Refund claims rejected as the clearances were not physical exports by the appellant and hence did not qualify for refund under Rule 5 in view of Explanation (1A).

Condition precedent of debiting CENVAT account for claiming refund - restoration/re-credit of CENVAT credit upon rejection of refund claim - Whether the amounts debited from the appellant's CENVAT account in respect of the refund claims must be restored when the cash refund is rejected. - HELD THAT: - The Tribunal observed that law requires a claimant, when filing refund under Rule 5, to debit the amount claimed from the CENVAT account as a precondition. If the cash refund is allowed, the debited amount is adjusted; if the refund is rejected wholly or partly, the corresponding debited amount must be restored to the claimant's CENVAT account. The Tribunal distinguished the revenue's contention that restoration was a new ground, holding that restoration is a direct legal consequence of rejection of the refund and not a new plea barred by failure to raise it earlier. The Tribunal relied on precedents applying the same principle and rejected the submissions that restoration could not be granted as a new ground. [Paras 4]

Amounts debited from the appellant's CENVAT account in respect of the refund claims are to be restored/re-credited to the appellant as a consequence of rejection of the cash refund claims.

Final Conclusion: Appeal dismissed on merits regarding entitlement to cash refund under Rule 5 for the specified quarters-refund not admissible because clearances were not physical exports by the appellant-however, the CENVAT credits debited at the time of filing the refund claims are to be restored to the appellant following rejection of the cash refund claims.

Entitlement to cash refund or re-credit under Section 142(3) of the CGST Act, 2017 - re-credit of Cenvat credit reversed prior to enforcement of the CGST regime - ability to raise a legal entitlement arising after change of law during pending adjudication - precedent of this Tribunal in Rawalwasia Ispat Udyog Pvt Ltd

Entitlement to cash refund or re-credit under Section 142(3) of the CGST Act, 2017 - re-credit of Cenvat credit reversed prior to enforcement of the CGST regime - ability to raise a legal entitlement arising after change of law during pending adjudication - Appellant entitled to re-credit of Cenvat credit reversed before introduction of the CGST Act, 2017, in view of Section 142(3) of the CGST Act, 2017. - HELD THAT: - The appellant had reversed certain Cenvat credit and filed a refund claim which was pending when the CGST Act, 2017 came into force and the adjudicating authority passed its order post-enforcement of the CGST regime. Section 142(3) of the CGST Act, 2017 provides that where a refund arises on account of Cenvat credit, duty, tax, interest or any amount, it shall be paid in cash. The Tribunal accepted the submission that the appellant had no occasion to seek re-credit before the adjudicating authority because the entitlement under the CGST law arose only after its enactment and the adjudication occurred after that change in law. The Tribunal further relied on its earlier decision in Rawalwasia Ispat Udyog Pvt Ltd adopting the same interpretation of Section 142(3). The respondent's objection that the point was not previously raised was rejected as the issue concerned a legal entitlement arising on the change of law and could be raised in the proceedings. Applying this reasoning, the Tribunal held that the amount already reversed prior to introduction of the CGST Act, 2017 is to be re-credited to the appellant's credit account. [Paras 5, 6]

Appeal allowed to the extent that the appellant is entitled to re-credit of the amount reversed before introduction of the CGST Act, 2017.

Final Conclusion: The appeal is disposed of by directing re-credit of the Cenvat credit reversed before the enforcement of the CGST Act, 2017, in accordance with Section 142(3) of the CGST Act, 2017, following the Tribunal's precedent.

Section 143A of the Negotiable Instruments Act - Prospective operation of statutory amendment - Non-retrospectivity of substantive law

Section 143A of the Negotiable Instruments Act - Prospective operation of statutory amendment - Non-retrospectivity of substantive law - Applicability of insertion of Section 143A of the Negotiable Instruments Act - whether it operates retrospectively or prospectively - HELD THAT: - The Court framed the determinative question as whether the insertion of Section 143A is prospective or can be given retrospective effect. Applying the established presumption that substantive provisions affecting rights operate prospectively unless an express contrary intention is shown, the Court examined relevant authority. The judgment distinguishes the earlier decision relied upon by the respondent, which concerned Section 148, and notes that the Apex Court in G.J.Raja v. Tejraj Surana has directly held that Section 143A is prospective in nature and confined to offences committed after its insertion. In view of that binding interpretation, the trial Court and the revisional Court erred in applying Section 143A to transactions that occurred prior to the insertion of that provision; the impugned orders did not consider the prospective operation and therefore are unsustainable. [Paras 6, 7, 8]

Section 143A has prospective operation and does not apply to offences committed prior to its insertion; the impugned orders applying Section 143A to pre-insertion transactions are set aside.

Final Conclusion: Both petitions are allowed; the revisional Court's confirmation of the trial Court orders directing interim compensation under Section 143A in cases where the alleged offences occurred before insertion of that provision is set aside, the matter stands disposed accordingly.

Section 145(2) Negotiable Instruments Act - mandatory duty to summon and examine person giving evidence on affidavit upon application by prosecution or accused - Admissibility of affidavit evidence under Section 145 and right to summon for cross-examination to ensure fair trial - Summary trial procedure under Section 143 NI Act read with Sections 262-265 Cr.P.C. - commencement of trial after recording substance of accusation / notice of accusation - Competence and stage for entertaining application under Section 145(2) - after notice of accusation/recording substance and after complainant led further evidence

Section 145(2) Negotiable Instruments Act - mandatory duty to summon and examine person giving evidence on affidavit upon application by prosecution or accused - Admissibility of affidavit evidence under Section 145 and right to summon for cross-examination to ensure fair trial - Trial Court erred in dismissing the accused's application under Section 145(2) of the Negotiable Instruments Act. - HELD THAT: - The Court held that legislative use of the words 'may' and 'shall' in Section 145(2) distinguishes the Court's discretion from the obligation arising on an application by the prosecution or the accused. Following the principle that an application by the prosecution or accused invokes the mandatory limb, the trial Court had no discretion to refuse summoning and examining a person who has given evidence on affidavit when such person is sought to be examined on the application of the accused. A refusal to summon in those circumstances amounts to illegality because it impinges on the accused's right to a fair trial and the ability to test affidavit evidence by oral examination and cross-examination. [Paras 9, 10, 11]

Impugned order dismissing the Section 145(2) application was illegal and set aside.

Summary trial procedure under Section 143 NI Act read with Sections 262-265 Cr.P.C. - commencement of trial after recording substance of accusation / notice of accusation - Competence and stage for entertaining application under Section 145(2) - after notice of accusation/recording substance and after complainant led further evidence - Application under Section 145 should not have been entertained before commencement of trial by putting notice of accusation/recording substance and before affording complainant the opportunity to lead further evidence; the application must be considered at the appropriate stage. - HELD THAT: - The Court explained that proceedings under Chapter XVII of the NI Act are to be conducted either summarily or as a regular trial in conformity with Sections 262-265 Cr.P.C. Trial for the purposes of summary or summons-case procedure commences when the accused is informed of the substance of the accusation or put to notice of accusation and asked for his plea. Section 145 permits affidavit evidence to be lodged during inquiry, but the occasion to summon and examine persons who have given affidavit evidence under Section 145(2) arises after trial commencement - i.e., after notice of accusation/recording substance and after the complainant has been given opportunity to lead any further evidence. Entertaining and deciding the Section 145(2) application before that stage was a legal error; if permitted prematurely, the application should have been kept pending and considered at the appropriate stage. [Paras 12, 30, 32]

Application entertained and decided at the wrong stage; trial Court directed to consider the application after putting notice of accusation/recording substance and on or after calling for further evidence of the complainant.

Final Conclusion: Impugned order dated 8.4.2019 dismissing the accused's Section 145(2) application is set aside as illegal; the trial Court is directed to consider the application at the proper stage-after putting notice of accusation/recording substance and on or after calling for the complainant's further evidence-thereafter proceeding in accordance with law.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption under Section 118 of the Negotiable Instruments Act - Burden of proof in cheque-dishonour prosecutions - Alteration of sentence - fine in lieu of imprisonment

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption under Section 118 of the Negotiable Instruments Act - Burden of proof in cheque-dishonour prosecutions - Conviction under Section 138 of the Negotiable Instruments Act is sustainable on the facts and law - HELD THAT: - The trial court's finding that Ext.P1 was executed by the accused and was dishonoured for insufficiency of funds engages the statutory presumptions under Sections 118 and 139 of the Act. Once execution of the cheque is proved or admitted, the law presumes issuance for discharge of a debt or liability and the burden shifts to the accused to rebut that presumption by adducing cogent evidence. The accused's contention that Ext.P1 was one of several blank cheques handed over and was misutilised was not proved by credible evidence; DW1 had no direct knowledge and the accused failed to discharge the burden to show absence of debt or liability. Concurrent findings of the trial and appellate courts construing Section 139 were not shown to be perverse and therefore are not interfered with on revision. Reliance on the principles in the cited authority confirms that a voluntarily signed blank cheque attracts the statutory presumption in absence of cogent rebuttal. Applying these principles to the admitted facts, the complainant succeeded in proving a legally enforceable debt and the conviction under Section 138 is sustained. [Paras 5, 6, 8, 10]

Conviction under Section 138 is affirmed.

Alteration of sentence - fine in lieu of imprisonment - Sentence modified from imprisonment with compensation to fine with default imprisonment and time granted for deposit - HELD THAT: - Section 138 prescribes punishment by imprisonment or fine or both. Having upheld the conviction, the court exercised sentencing discretion: finding mandatory imprisonment unnecessary in the circumstances, the sentence of imprisonment was converted into a monetary sentence. The order substitutes a fine equal to the cheque amount, with default simple imprisonment for five months, and directs that on payment the fine shall be released to the complainant as compensation. Considering prevailing pandemic circumstances and the revision petitioner's request, the court granted nine months' time to pay or deposit the fine before the trial court. [Paras 11]

Sentence altered to a fine (recoverable as compensation) with default simple imprisonment for five months; nine months granted for payment/deposit.

Final Conclusion: Revision partly allowed: conviction under Section 138 of the Negotiable Instruments Act is upheld; sentence altered to a fine (to be released as compensation to the complainant) with default simple imprisonment for five months, and nine months' time granted to the accused to pay or deposit the fine before the trial court.

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - requirement of specific averments that a director was in charge of and responsible for conduct of company's business - strict construction of penal provision creating vicarious liability - effect of suppression of material fact / failure to deny notice on complainant's case - legally enforceable debt as prerequisite for prosecution under Section 138 of the Negotiable Instruments Act

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - requirement of specific averments that a director was in charge of and responsible for conduct of company's business - strict construction of penal provision creating vicarious liability - Whether the complaints could sustain prosecution of directors (A2 to A4) under Section 141 read with Section 138/142 of the Negotiable Instruments Act in absence of specific averments that they were in charge of and responsible for conduct of the company's business at the relevant time. - HELD THAT: - The Court applied the settled principle that Section 141 is a penal provision creating vicarious liability and must be strictly construed. A company must be shown to have committed the offence and, to fasten vicarious liability on directors, the complaint must contain specific averments demonstrating how and in what manner each director was in charge of and responsible for the conduct of the company's business at the time of the offence. Bald, cursory statements that directors are responsible for management are insufficient. The complaint before the Court merely pleaded that the accused Nos.2 to 4 were directors and responsible for management without pleading the role played by each director or that the offence was committed with their consent or connivance. Reliance was placed on Supreme Court authorities holding that merely being a director does not attract liability under Section 141 unless the statutory ingredients are pleaded and proved. Applying those principles, the Court found the allegations inadequate to sustain prosecution of the directors. [Paras 10, 13, 14]

Allegations in the complaints do not satisfy the requirements for imposing vicarious liability on the directors under Section 141; complaints as against A2 to A4 are vitiated.

Legally enforceable debt as prerequisite for prosecution under Section 138 of the Negotiable Instruments Act - effect of suppression of material fact / failure to deny notice on complainant's case - Whether the complaints were sustainable having regard to the petitioners' notices (including the 15.10.2018 notice) calling upon the complainant to refrain from presenting or to return the cheques, and the existence of a disputed question as to legally enforceable debt. - HELD THAT: - The petitioners produced and relied on notices (including one dated 15.10.2018) asserting defects in goods and calling upon the complainant to refrain from presenting and to return the cheques, and the petitioners had stopped payment after disputing quality and revising payment terms. The complaint contained the reply notice but did not deny or rebut the averments in the earlier notice and did not place ledger or supporting documents showing an indisputable debt corresponding to the cheques. In that factual matrix the Court observed that the cheques were post-dated, that payment had been stopped after a bona fide commercial dispute, and that the complainant failed to approach the Court with clean hands in respect of those particulars. On the materials before it, and having regard to authorities cited on legally enforceable debt and the need to consider factual disputes at trial, the Court concluded that the complaints could not be sustained against the petitioners. [Paras 11, 12]

The averments and documentary record regarding the notices, dispute over quality, revised payment terms and absence of undisputed ledger proof demonstrate that the cheques were not shown to be issued for a legally enforceable debt; the complaint is unsustainable on these grounds.

Final Conclusion: The criminal complaints in CC.Nos.375, 376, 368, 62, 51 and 37 of 2019 are vitiated for failure to plead the statutory ingredients to fasten vicarious liability on the directors and for absence of material establishing a legally enforceable debt in the face of the petitioners' notices; the petitions are allowed and the impugned proceedings are quashed.