| | Confirmations of creditors is mandatory for assessment proceedings |
| Posted on 02 November 2012 by Apurba Ghosh | |
CourtINCOME TAX APPELLATE TRIBUNAL BriefOn the facts and circumstances of the case and in law, the CIT(A) erred in granting relief in respect of addition u/s 41(1) of Rs. 30,49,113/- on account of sundry creditors for which no confirmations were filed during the course of assessment proceedings and moreover in the remand report it was merely stated by the A.O. that the payments were made by A/c payee cheques and genuineness thereof were not verified. CitationDCIT 22(3), 3rd floor, Tower No.6, Vashi Rly. Station Complex, Vashi, Navi Mumbai (Appellant) Vs. M/s. Rishabh Oil Industries Shop No. 18, Shanti Centre, Sec. 17, Vashi, Navi Mumbai PAN NO: AAEFR 1398 G (Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'D', MUMBAI BEFORE SHRI G. E. VEERABHADRAPPA, PRESIDENT, & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO. 4168/Mum/2011 Assessment Year : 2006-07 DCIT 22(3), 3rd floor, Tower No.6, Vashi Rly. Station Complex, Vashi, Navi Mumbai (Appellant) Vs. M/s. Rishabh Oil Industries Shop No. 18, Shanti Centre, Sec. 17, Vashi, Navi Mumbai PAN NO: AAEFR 1398 G (Respondent) Appellant by : Shri N. K. Mehta Respondent by : Shri B. V. Jhaveri Date of Hearing: 06.08.2012 Date of Pronouncement: 05.09.2012 O R D E R Per Vivek Varma, J.M.: The instant appeal arises from the order of CIT(A) – 33, Mumbai, dated 15.03.2011, wherein, the department has raised the following grounds of appeal:- 1. On the facts and circumstances of the case and in law, the CIT(A) erred in granting relief in respect of addition u/s 41(1) of Rs. 30,49,113/- on account of sundry creditors for which no confirmations were filed during the course of assessment proceedings and moreover in the remand report it was merely stated by the A.O. that the payments were made by A/c payee cheques and genuineness thereof were not verified. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in giving the above relief merely on the ground that cheque payments were made without considering the fact that even during the remand proceedings, the assessee could not establish the genuineness of the credit balance of its creditors. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in granting relief on account of additions made of Rs. 20,25,535/- being difference in credit balances of sundry creditors, on the basis of remand report which merely stated that the differences have been reconciled by the assessee without actually verifying the genuineness of credits and their differences from such creditors. 4. On the facts and circumstances of the case and in law, the CIT(A) erred in holding that the assessee had already declared Rs.45 lakhs during A.Y. 06- 07 as a result of survey and thereby deleting Rs. 60,60,000/- on account of fall in G.P. without actually verifying as to whether the said disclosure was made out of business income when the A.O. had failed to comment on this aspect in the remand report. 5. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored. 2. The facts of the case are, that, the appellant is a partnership firm carrying on the business of crushing of oil seeds and extraction of oil. The appellant filed its return of income declaring total income of Rs. 80,95,090. The assessment has been completed on the total income of Rs. 1,93,15,840. The dispute centers on the following additions. i) Cessation of liability u/s 41(1) Rs. 50,64,748/- (30,49,113 + 20,25,535) ii) Fall in G P Rs. 60,60,000. 3. Ground nos. 1, 2 & 3. At the time of assessment proceedings, the assessee was required to file confirmations, letters to some of the creditors were sent by the A.O., which were returned unserved. As some of these letters came back unserved, the assessee was asked to produce those creditors to file confirmations, the assessee could not produce them, at this point, the AO came to the conclusion that credit balances shown were actually relating to on non existent persons, therefore, invoking section 41(1), the AO added back the credit balance of Rs. 30,49,113. 4. The AO also noticed that confirmations received from Apar Industries and Sarvodya Blending Pvt. Ltd. were at variance with the credit balances shown by the assessee in its books. According to the assessee books, the credit balance against Apar Industries were at Rs. 42,51,432 but as per confirmation received from them, the credit balance were at Rs. 28,57,537, i.e. a difference of Rs. 13,93,895. Similarly, in the case of Sarvodaya, the balance shown by the assessee was at Rs. 13,53,113 and balance confirmation received from that party showed Rs. 6,80,866, i.e. difference of Rs. 6,72,265, both differences aggregating to Rs. 20,25,535 (Rs. 13,93,895 + Rs. 6,72,265). The impugned, aggregating to Rs. 50,64,748/-, details are as follows: A Cessation liability u/s. 41(1) Rs. 5064748 I Chetan Engg. Co. Rs. 8491 Deepak Solanki Rs. 17268 Rakhee Packaging Malegaon Rs. 657121 Selection Hardware & Machine Tools Rs. 19911 Spark Metal Rs. 39225 Gandhear Oil Refinery (I) Ltd. Rs. 661293 Nilish Transport Rs. 23000 Sanjay Roadlines Rs. 136460 Srie Aruna Enterprises Rs. 1483986 Vinayagan Oil Industries Rs. 23587 Total Rs. 3049113 B Apar Industries Rs. 1393895 C Sarvodaya Blending Pvt. Ltd. Rs. 672265 The submissions made before the CIT(A) are as under : A) With a view to verifying the genuineness of the creditors, letters were sent to the above mentioned persons which came back unserved. This fact was intimated to the assessee and was asked to produce these persons and file confirmations. The assessee has failed to comply. Hence additions were made on this score. The assessee submitted a paper showing payments made by the above 10 parties as specified in the assessment order. Payments are made by account payee cheque, in certain cases payments have been made by the bank and the statements are filed in the paper book. The statements filed in respect of the above parties in the paper book has been verified and found to be in order. B) The assessee has shown Apar Industries as sundry creditors at Rs. 42,51,432. During the course of scrutiny assessment Notice u/s.133(6) sent to Apar Industries Ltd. In response to the notice u/s.133(6), Apar Industries submitted copy of account statement the outstanding was Rs. 2,85,77,537 out of Rs. 42,51,432. In this regard the assessee submitted confirmation copies of ledger A/c, Copies of Bill discounted by Apar Industries Ltd., of Rs. 7,16,626 & Rs. 6,82,001. The State Bank of India, Vashi – Turbhe, Branch had accepted the bill of Exchange (LC) dated 27.03.2006 & 16.03.2006 respectively. The State Bank of India, Vashi- Turbhe, Branch has directly debited from the account on the due date of the (Hundi) Bill of Exchange. A copy of the bank account statement is available in the paper book. BI) Same is the case with Sarvodaya Blending Pvt. Ltd. Sarvodaya shows Rs 6,80,866 against which the assessee has shown Rs. 13,53,131. The assessee could not explain the discrepancy in the figures. And the difference of Rs.6,72,265 was added. In this regard the assessee submitted confirmation copies of ledger A/c, Copies of Bill discounted by Sarvodaya Blending Pvt. Ltd. of Rs. 6,72,265. The State Bank of India, Vashi – Turbhe, Branch had accepted the bill of Exchange (LC) Dated 18.04.2006. The State Bank of India, Vashi – Turbhe, Branch have direcly debited from the account on the due date of the (Hundi) Bill of Exchange. A copy of the bank account statement is available in the paper book. The CIT(A), after considering the submissions and taking into account the evidence brought on record, deleted the addition made at Rs. 50,64,748/-. 5. Ground no. 4 This ground pertains to deletion of addition of Rs. 60,60,000 on account of low gross profit. 6. The facts as available in the orders of the revenue authorities as well as the evidence brought on record, we find that the AO noticed that there had been a sudden drop of GP by 5% as compared to the preceding year, where it was at 17.76%. According to the AO, as well as the CIT(A), no plausible explanations were given by the assessee on the reasons for fall in GP rate. The AO, therefore, computed the GP at 15.91% and added back Rs. 60,60,000. The CIT(A), in principal, sustained the addition on account recomputed GP. But, the CIT(A) observed that the assessee had made a declaration of Rs. 45,00,000 in the current year, during survey operation and had also paid taxes. Taking that into consideration, the CIT(A) deleted the addition. 7. Against these observations on both the issues, the department is in appeal before the ITAT. 8. Before us, the DR supported the order of the AO, while on the other hand, the AR submitted that no doubt the confirmations and reconciliations were not available with it at the assessment stage, but since the same were available at that time, the comments could be called for from the AO. The CIT(A) thus called for the remand report, wherein the assessee was able to file all the required details and also filed reconciliations in the cases of Apar and Sarvodya. 9. The AR also pointed out that the CIT(A) took cognizance of the fact that the assessee had made a declaration of Rs. 45,00,000 and on that basis, the addition of Rs. 60,00,000 was deleted, as the GP, with the inclusion of Rs. 45,00,000 came to 16.29%, more than what was estimated by the AO. 10. We have heard the arguments from both the sides and have also perused the material placed on record. It is evident from the order of the CIT(A) that the assessee was unable to produce confirmations and reconciliations at the time of assessment proceedings and since the details was produced before the CIT(A), the CIT(A), called for the remand report. During the remand proceedings, the assessee was able to reconcile the same. The CIT(A), on the basis of the remand report, where the AO accepted on facts with the observation that "the statements filed in respect of the above parties in the paper book has been verified and found to be in order", which were in fact, the confirmations on ten parties, amounting to Rs. 30,49,113 and reconciliations of amounts standing in the names of Apar & Sarvodya aggregating to Rs. 20,25,535, deleted the additions made by the AO at Rs. 50,64,748, u/s 41(1) of the Act. We are in agreement with the observations made by the CIT(A), that since the details and reconciliations had been provided to the AO and the AO finds then to be in order, the question of sustaining the addition does not arise. 11. We have also gone through the facts of addition of Rs. 60,60,000, we find that the AO had factored the GP at 15.91% and when the additional disclosure of Rs. 45,00,000 is given effect in the results of the assessee, the GP goes to 16.29% as, mentioned by the AR and which has not been objected to by the DR. We, therefore, agree with the conclusion drawn by the CIT(A) on this issue as well. 12. In the result, we do not find any reason to disturb the final outcome of the decision of CIT(A), deleting the additions both on the issue of 41(1) and gross profit. We, sustain the order of the CIT(A). 13. In the result, the appeal filed by the department is dismissed. Order pronounced in the open court on this day of 05/09/2012. Sd/- Sd/- (G.E. VEERABHADRAPPA) (VIVEK VARMA) PRESIDENT JUDICIAL MEMBER Mumbai, Date: 05/09/2012 p/-* Copy to- 1) Appellant 2) Respondent 3) CITA Mumbai. 4) CIT City Mumbai 5) DR Bench Mumbai True Copy By Order Dy/Asst.Registrar,ITAT MUMBAI. |
 | Section 5 of Limitation act for condonation of delay in the presence of only sufficient cause |
| Posted on 02 November 2012 by Apurba Ghosh | |
CourtINCOME TAX APPELLATE TRIBUNAL Brief. The action of the learned DIT(E) rejecting grant of approval u/s 80-G of the Income-tax Act, 1961 by referring to object of general public utility and not considering the applicability object of medical relief is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case CitationGeneral Williams Masonic Polyclinic & Dispensary Management Associat ion, Freemasons Hal l, Janpath, New Delhi (Appellant) V/s. DIT(Exempt ions) Plot No.15, 3rd Floor, Aaykar Bhawan, Laxmi Nagar Dist t . Centre Delhi-92 [PAN :AAATG 5413 F] (Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'C' BENCH BEFORE SHRI I.C. SUDHIR , JM & SHRI A.N. PAHUJA, AM ITA No.2697/Del./2012 Assessment year : NA General Williams Masonic Polyclinic & Dispensary Management Associat ion, Freemasons Hal l, Janpath, New Delhi (Appellant) V/s. DIT(Exempt ions) Plot No.15, 3rd Floor, Aaykar Bhawan, Laxmi Nagar Dist t . Centre Delhi-92 [PAN :AAATG 5413 F] (Respondent) Appellant by Shri K.V.S. Gupta, AR Respondent by Shri Satpal Singh, DR Date of hearing 02-08-2012 Date of pronouncement 07-09-2012 O R D E R A.N.Pahuja:- This appeal filed on 01.06.2012 by the assessee against an order dated 01.09.2011 of the ld. DIT(Exemptions), Delhi, raises the following groundsl:- 1 "The action of the learned DIT(E) in not granting approval u/s 80-G of the Income-tax Act, 1961, is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 2. The action of the learned DIT(E) rejecting grant of approval u/s 80-G of the Income-tax Act, 1961 by referring to object of general public utility and not considering the applicability object of medical relief is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 3. The action of the learned DIT(E) in not granting approval u/s 80-G of the Income-tax Act, 1961 without giving proper opportunity under rule 11AA(5) proviso thereof of the Income Tax Rules is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 4. The appellant reserves the right to add/alter/amend or withdraw any ground of appeal." 2. At the out set, we find that appeal is delayed by 203 days, due date of filing the appeal being 11th November, 2011, the impugned order dated 1.9.2011 having received by the assessee on 12th September, 2011while the appeal was filed only on 1.6.2012 . In their request for condonation of delay, it is mentioned that the assessee society was represented by non professionals in I.T. matters and not by income tax experts and consequently, no appeal was filed against the aforesaid order; rather the assessee moved a fresh application on 1.11.2011 which was pending disposal with the DIT(E). Subsequently, the assessee engaged S/Shri KVS Gupta Advocate & Ajay Goyal, CA in May, 2012 and accordingly, society was advised to prefer appeal before the ITAT against the said order. Since the society was not aware of the legal provisions regarding filing of appeal, the appeal could not be filed within time stipulated under law. In these circumstances, the ld. AR on behalf of the assessee pleaded that delay of 203 days in filing the appeal may be condoned. Inter alia, the ld. AR relied upon the decision in Improvement Trust vs. Ujagar Singh(SC);N Balakrishnan vs. M .Krishnamurthy,AIR 1998SC3222; Shakuntla Devi Jai vs.Kuntal Kumari & others,AIR 1969SC575;CIT vs. Darshan Securities P Ltd., in Appeal(Civil) no.7904/2009 dated 30.11.2009 ; Govind Ballabh Pant Himalaya Paryavaran Evam Vikas Sansthan vs. DIT(E) in ITA no.1210/Del./2007 and Motilal Padmapat Sugar Mills Co. Ltd. vs. State of UP & Others,118 ITR326(SC). 3. On the other hand, the ld. DR vehemently opposed the request for condonation of delay in filing the appeal. 4. We have heard both the parties and gone through the facts of the case as also reasons adduced in the affidavit of Hony Secretary of the society. The issue before us is as to whether or not there was sufficient cause for delay in filing the appeal. In this case, the assesse pleaded that they were not aware of provisions of law. Hon'ble Apex Court in Motilal Padmapat Sugar Mills Co. Ltd.(supra) held that that there is no presumption that every person knows the law. In the case of State of West Bengal vs. Administrator, Howrah Municipality AIR 1972 SC 749, the Hon'ble Supreme Court while considering the scope of expression 'sufficient cause' for condonation of delay have held that the said expression should receive a liberal construction so as to advance the substantial justice when no negligence or inaction or want of bona fide is imputable to the party. In the case of Vedabai alias Vaijayantabai Babulao Patil vs. Shantaram Baburao Patil & Ors., it was held by the Hon'ble Apex Court that while exercising discretion under s. 5 of the Limitation Act, 1963, to condone delay for sufficient cause in not filing the appeal within the period prescribed, Courts should adopt a pragmatic approach. In the facts and circumstances of the case, we are of the opinion that the reasons given in the affidavit by the Hony Secretary of the assessee society reflect sufficient cause for condonation of delay. It has been consistently held by the Hon'ble Apex court that in the matter of condonation of delay, a liberal and pragmatic view should be taken. The reasons given by the assessee for the delay appear to be sufficient cause and, accordingly, the delay is liable to be condoned. The law of limitation is enshrined in the maxim interest reipublicae ut sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties, rather the idea is that every legal remedy must be kept alive for a legislatively fixed period of time. In the case of Collector, Land Acquisition v. Mst. Katiji reported in [1987] 167 ITR 471, Hon'ble Supreme Court held as follows: "The Legislature has conferred the power to condone delay by enacting section 5 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on 'merits'. The expression 'sufficient cause' employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice-that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that: 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. 6. It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so." 4.1 In N. Balakrishnan v. M. Krishnamurthy reported in [1998] 7 SCC 123, the Hon'ble Apex court explained the scope of limitation and condonation of delay, observing as under (headnote): "The primary function of a court is to adjudicate the dispute between the parties and to advance substantial justice. The time-limit fixed for approaching the court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. The law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. The law of limitation is thus founded on public policy." 4.2 In Shankarrao v. Chandrasenkunwar reported in [1987] Supp SCC 338, the Hon'ble Supreme Court took the view that the court should not adopt an injustice-oriented approach in rejecting the application for condonation of delay. In O.P. Kathpalia v. Lakhmir Singh reported in AIR 1984 SC 1744, the Hon'ble Supreme Court held that if the refusal to condone the delay results in grave miscarriage of justice, it would be a ground to condone the delay. In State of Haryana v. Chandra Mani reported in AIR 1996 SC 1623, Hon'ble Supreme Court considered a large number of its earlier judgments including Binod Bihari Singh v. Union of India reported in [1993] 1 SCC 572, Shakambari and Co. v. Union of India reported in [1993] Suppl 1 SCC 487, Warlu v. Gangotribai reported in [1995] Suppl 1 SCC 37, Ramlal v. Rewa Coalfields Ltd., reported in AIR 1962 SC 361, Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi [1979] 118 ITR 507; AIR 1979 SC 1666; [1979] 49 Comp Cas 463, Mata Din v. A. Narayanan, AIR 1970 SC 1953, and held that expression "each day's delay must be explained", does not mean that a pedantic approach should be made and it must be applied in a rational commonsense pragmatic manner. 4.3 In view of the foregoing and especially in the light of observations of the Hon'ble Apex Court in O.P. Kathpalia v. Lakhmir Singh reported in AIR 1984 SC 1744, that if the refusal to condone the delay results in grave miscarriage of justice, it would be a ground to condone the delay, we are of the opinion that the reasons given by the assessee for the delay in filing the appeal, reflect sufficient cause and, accordingly, the delay of 203 days is condoned. 5. Coming now to merits of the appeal, facts in brief, as per relevant orders are that assessee filed an application in form no.10G before the DIT(Exemptions) on 20.3.2011,seeking approval u/s 80G(5)(vi) of the Act. In pursuance to this application, DIT(E) asked the assessee to furnish a number of documents as mentioned in the impugned order. On perusal of details submitted by the assessee society, the DIT(E) noticed that the society derived income from two units i.e. Bawa Masonic Polyclinic and Noida Centre under various heads like Orthopedic Receipt, echo receipt, registration fee, dental care, eye unit, x-ray, xray fixer sale, pathological laboratory, ECG unit, ultra sound, physiotherapy, ENT Admn. Charges, amounting to ``1.96 crores in the AY 2009-2010 and `1.64 crores 2010-2011. Beside, the assessee reflected other incomes of ``30.37 lakhs in the AY 2010-2011 and ``56.98 lakhs in the AY 2009-2010 under different heads. In the light of these facts, DIT(E) was of the opinion that though the assessee was registered u/s 12A of the Act as a charitable dispensary and health centre, the nature of activities and the amount of fee revealed that medical treatment was not given to the general public free of cost but medical facilities were available on payment basis through its health centre. Accordingly, while holding that activities of the assessee being commercial activities in the garb of medical relief, were hit by proviso to section 2(15) of the Act ,inserted by Finance Act,2008 w.e.f 1.4.2009,the ld. DIT(E) declined approval u/s 80G(5)(vi) of the Act. 6. The assessee society is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. AR on behalf of the assessee while carrying us through the objects of the trust contended that the assessee had been allowed approval u/s 80-G(5)(vi) of the Income-tax Act, 1961 until 31.03.2011, last approval being dated 17.4.2008 for the period 1.4.2008 to 31.03.2011. Since the ld. DITE) did not allow the assessee sufficient opportunity before denying the approval nor considered the CBDT circular no.11/2008 dated 19th December,2008,,accordingly, it was pleaded that matter may be restored to the file of DIT(E) for reconsideration. The ld. DRdid not oppose these submissions of the ld. AR. 7. We have heard both the parties and gone through the facts of the case. Indisputably, the aforesaid society is registered u/s 12A of the Act vide order dated 18.7.1973 and the ld. DIT(E) has not cancelled the said registration nor issued any showcause notice in that direction . The society has been allowed approval u/s 80-G(5)(vi) of the Income-tax Act, 1961 until 31.03.2011, last approval being dated 17.4.2008 for the period 1.4.2008 to 31.03.2011. The objects of the society in the memorandum ( as amended up to 27.9.2006) read as under:- a) "To establish a charitable dispensary, clinic and medical care centre for the needy and the poor under the auspices of the Masonic Fraternity of New Delhi and the Regional Grand Lodge of Northern India; b) To issue appeals and applications for money and funds in furtherance of the said objects and to accept gifts, donations and subscriptions of cash and securities and of any property either movable or immovable; c) To invest and deal with funds and moneys of the association; d) To acquire, purchase or otherwise own or take on lease or hire in the Union Territory of Delhi, temporarily or permanently, any movable or immovable property, necessary or convenient, for the furtherance of the objects of the Association; e) To sell, mortgage, lease, exchange and otherwise transfer or dispose off all or any property, movable or immovable of the Association; f) To construct, maintain, alter, improve or develop any building or works necessary or convenient for the purpose of the association. To undertake and accept the management of any endowment or trust fund or donation; g) To do all such things and to perform all such acts as may be necessary or proper for the achievement of any or all the above objects. h) Without prejudice to the existing objects, the Association may engage in, run, maintain, sponsor, provide funds, subscribe or donate for any other charitable projects and public and Masonic services including schools, journals, libraries, college, institutes for higher learning, sciences and Masonic learning, social subjects, and for excellence in social and physical disciplines and das care centres, old age homes or house for destitutes. i) The association is and shall be authorized to carry these objects all by itself or by joining hands with such other persons, Trusts, Societies, Laboratories, Research Centres or Masonic Bodies considered helpful in achieving all or any of these objects." 8. As is apparent from the aforesaid objects, society has been created for providing medical relief to the needy and poor. The ld. AR contended before us that 1st proviso to amended provisions of section 2(15) of the Act inserted by Finance Act, 2008 w.e.f., 01.04.2009 was not applicable in their case, the object of the society being to provide medical relief. In this connection the ld. AR referred to the aforesaid circular dated 19th December,2008 and decision dated 6th April,2009 of the Mumbai Bench in the case of Kaushalya Medical Foundation in ITA no.423/Mum./2004. There is nothing to suggest that the ld. DIT(E) allowed any opportunity to the assessee before denying the approval nor any showcause notice, invoking the aforesaid 1st proviso to amended provisions of section 2(15) of the Act inserted by Finance Act, 2008 w.e.f., 01.04.2009,seems to have been issued. In these circumstances, we find sufficient merit in the contentions of the ld. AR and accordingly, consider it fair and appropriate to vacate the findings of ld. DIT(E) and restore the matter to his file for readjudication in accordance with law, keeping in view the aforesaid CBDT circular and various decisions, including those referred to above, after allowing sufficient opportunity to the assessee.. Needless to say that while redeciding the issues, the ld. DIT(E) shall pass a speaking order, bringing out clearly as to whether or not the case of the assessee falls within the 1st proviso to amended provisions of section 2(15) of the Act. With these observations, ground nos.1 to 3 in the appeal are disposed of. 9. No additional ground having been raised before us in terms of residuary ground no.4 in the appeal, accordingly this ground is dismissed. 10. No other plea or argument was raised before us. 11.. In result, appeal is allowed but for statistical purposes. Order pronounced in open Court Sd/- Sd/- (I.C. SUDHIR) (A.N. PAHUJA) (Judicial Member) (Accountant Member) NS Copy of the Order forwarded to:- 1 Assessee Society 2. DIT(Exempt ions) Plot No.15,3rd Floor, Aaykar Bhawan, Laxmi Nagar Dist t . Cent re Delhi-92 3. DR, ITAT,'C' Bench, New Delhi 4. Guard File. BY ORDER, Deputy/Asstt.Registrar ITAT, Delhi |
| | One more opportunity can be allowed to assessee in presence of number of cases pending against him |
| Posted on 02 November 2012 by Apurba Ghosh | |
CourtINCOME TAX APPELLATE TRIBUNAL BriefWe have considered the prayer for adjournment and have also gone through the orders and the Affidavit filed by the appellant company, we find that even the revenue authorities are aware that the assessee and its directors are involved in a number of court cases, filed by the various institutions and creditors and also that the factory premises has been taken over by MSFC against the loan outstanding on the assessee. Looking into the financial and factual position of the assessee and the circumstance in which the assessee is involved in, we feel that in the overall interest of justice and compassion, the assessee can be given one more opportunity to present its case on merits before the revenue authorities. CitationM/s. Pivotal Remedies Pvt. Ltd., C/o. Shri Nagendra Sharma, Director, 502, Jogani Apt., Dongarshi Road, Walkeshwar, Mumbai-400 006 (Appellant) Vs. ACIT, Cir. 6(1) Aayakar Bhavan, M. K. Marg, Mumbai-400 020 (Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'D', MUMBAI BEFORE SHRI G. E. VEERABHADRAPPA, HON'BLE PRESIDENT, & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NO. 2649 & 2650/Mum/2006 Assessment Years: 1995-96 & 1996-97 M/s. Pivotal Remedies Pvt. Ltd., C/o. Shri Nagendra Sharma, Director, 502, Jogani Apt., Dongarshi Road, Walkeshwar, Mumbai-400 006 (Appellant) Vs. ACIT, Cir. 6(1) Aayakar Bhavan, M. K. Marg, Mumbai-400 020 (Respondent) Appellant by: Shri Nagendra Sharma, Director Respondent by: Shri N. K. Mehta Date of Hearing: 06.08.2012 Date of Pronouncement: 05.09.2012 O R D E R Per Vivek Varma, J.M.: The appeals were first disposed off by the coordinate Bench at Mumbai, on non prosecution vide order dated 04.07.2008. The consolidated order was recalled and fresh proceedings were initiated, consequent to the order on MAs No. 609 & 610/Mum/2008. 2. At the time of hearing, Mr. Nagendra Sharma, Director attended with a prayer for adjournment, as all the relevant records in connection with the impugned issue were in the factory, taken over by MSFC and the assessee itself was in liquidation and it will take time for getting the same. 3. We have considered the prayer for adjournment and have also gone through the orders and the Affidavit filed by the appellant company, we find that even the revenue authorities are aware that the assessee and its directors are involved in a number of court cases, filed by the various institutions and creditors and also that the factory premises has been taken over by MSFC against the loan outstanding on the assessee. Looking into the financial and factual position of the assessee and the circumstance in which the assessee is involved in, we feel that in the overall interest of justice and compassion, the assessee can be given one more opportunity to present its case on merits before the revenue authorities. 4. We, therefore, set aside the orders of the revenue authorities and direct the A.O. to proceed denovo in framing the assessments afresh, in the impugned years, after giving a reasonable opportunity of being heard. 5. The cases are thus treated as allowed for statistical purposes. Order pronounced in the open court on this day of 05/09/2012. Sd/- Sd/- (G.E. VEERABHADRAPPA) (VIVEK VARMA) PRESIDENT JUDICIAL MEMBER Mumbai, Date: 05/09/2012 Roshani Copy to- 1) Appellant 2) Respondent 3) CITA Mumbai. 4) CIT City Mumbai 5) DR Bench Mumbai True Copy By Order Dy/Asst.Registrar,ITAT MUMBAI. |
| | One more opportunity can be allowed to assessee in presence of number of cases pending against him |
| Posted on 02 November 2012 by Apurba Ghosh | |
CourtINCOME TAX APPELLATE TRIBUNAL BriefWe have considered the prayer for adjournment and have also gone through the orders and the Affidavit filed by the appellant company, we find that even the revenue authorities are aware that the assessee and its directors are involved in a number of court cases, filed by the various institutions and creditors and also that the factory premises has been taken over by MSFC against the loan outstanding on the assessee. Looking into the financial and factual position of the assessee and the circumstance in which the assessee is involved in, we feel that in the overall interest of justice and compassion, the assessee can be given one more opportunity to present its case on merits before the revenue authorities. CitationM/s. Pivotal Remedies Pvt. Ltd., C/o. Shri Nagendra Sharma, Director, 502, Jogani Apt., Dongarshi Road, Walkeshwar, Mumbai-400 006 (Appellant) Vs. ACIT, Cir. 6(1) Aayakar Bhavan, M. K. Marg, Mumbai-400 020 (Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'D', MUMBAI BEFORE SHRI G. E. VEERABHADRAPPA, HON'BLE PRESIDENT, & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NO. 2649 & 2650/Mum/2006 Assessment Years: 1995-96 & 1996-97 M/s. Pivotal Remedies Pvt. Ltd., C/o. Shri Nagendra Sharma, Director, 502, Jogani Apt., Dongarshi Road, Walkeshwar, Mumbai-400 006 (Appellant) Vs. ACIT, Cir. 6(1) Aayakar Bhavan, M. K. Marg, Mumbai-400 020 (Respondent) Appellant by: Shri Nagendra Sharma, Director Respondent by: Shri N. K. Mehta Date of Hearing: 06.08.2012 Date of Pronouncement: 05.09.2012 O R D E R Per Vivek Varma, J.M.: The appeals were first disposed off by the coordinate Bench at Mumbai, on non prosecution vide order dated 04.07.2008. The consolidated order was recalled and fresh proceedings were initiated, consequent to the order on MAs No. 609 & 610/Mum/2008. 2. At the time of hearing, Mr. Nagendra Sharma, Director attended with a prayer for adjournment, as all the relevant records in connection with the impugned issue were in the factory, taken over by MSFC and the assessee itself was in liquidation and it will take time for getting the same. 3. We have considered the prayer for adjournment and have also gone through the orders and the Affidavit filed by the appellant company, we find that even the revenue authorities are aware that the assessee and its directors are involved in a number of court cases, filed by the various institutions and creditors and also that the factory premises has been taken over by MSFC against the loan outstanding on the assessee. Looking into the financial and factual position of the assessee and the circumstance in which the assessee is involved in, we feel that in the overall interest of justice and compassion, the assessee can be given one more opportunity to present its case on merits before the revenue authorities. 4. We, therefore, set aside the orders of the revenue authorities and direct the A.O. to proceed denovo in framing the assessments afresh, in the impugned years, after giving a reasonable opportunity of being heard. 5. The cases are thus treated as allowed for statistical purposes. Order pronounced in the open court on this day of 05/09/2012. Sd/- Sd/- (G.E. VEERABHADRAPPA) (VIVEK VARMA) PRESIDENT JUDICIAL MEMBER Mumbai, Date: 05/09/2012 Roshani Copy to- 1) Appellant 2) Respondent 3) CITA Mumbai. 4) CIT City Mumbai 5) DR Bench Mumbai True Copy By Order Dy/Asst.Registrar,ITAT MUMBAI. |
| In the absence of illegality in procedure adopted in appeal is allowed | ||||||
| Posted on 02 November 2012 by Apurba Ghosh | |
CourtSupreme Court of India BriefWe are, in these appeals, called upon to consider the question whether the Division Bench of the Orissa High Court was justified in directing Orissa State Financial Corporation (OSFC) and Industrial Promotion and Investment Corporation of Odisha Ltd. (IPICOL) to offer afresh the benefit of One-Time Settlement Scheme (OTS) to M/s Hotel Torrento Limited, 1st respondent herein, which had earlier been offered vide communications' dated 18.3.2006 and 3.4.2006, but was not availed off by complying with the terms and conditions stipulated therein. The further question is whether the High Court was right in ordering dispossession of the appellant (auction purchaser) and put 1st respondent back in possession. CitationM/s Micro Hotel P. Ltd. .. Appellant Versus M/s Hotel Torrento Limited & Ors. .. Respondents Judgement REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO . 6347 OF 2012 [Arising out of SLP (Civil) No. 32610 of 2011] M/s Micro Hotel P. Ltd. .. Appellant Versus M/s Hotel Torrento Limited & Ors. .. Respondents WITH CIVIL APPEAL NO . 6348 OF 2012 [Arising out of SLP (Civil) No. 1125 of 2012] J U D G M E N T K. S. RADHAKRISHNAN, J. 1. Leave granted. 2. Common questions arise for consideration in both these appeals and hence we are disposing of both the appeals by a common judgment. 3. We are, in these appeals, called upon to consider the question whether the Division Bench of the Orissa High Court was justified in directing Orissa State Financial Corporation (OSFC) and Industrial Promotion and Investment Corporation of Odisha Ltd. (IPICOL) to offer afresh the benefit of One-Time Settlement Scheme (OTS) to M/s Hotel Torrento Limited, 1st respondent herein, which had earlier been offered vide communications' dated 18.3.2006 and 3.4.2006, but was not availed off by complying with the terms and conditions stipulated therein. The further question is whether the High Court was right in ordering dispossession of the appellant (auction purchaser) and put 1st respondent back in possession. 4. This case has a chequered history, therefore, it is necessary to examine the facts at some length to appreciate the real controversy between the parties and to reach a proper and just decision, on facts as well as on law. OSFC, 2nd respondent herein, disbursed a term loan of Rs.51,27,200/- and loan in lieu of subsidy of Rs.23.30 lakhs to 1st respondent for establishing a hotel project at Janugarji, Balasore in the State of Odisha. The project was jointly financed by OSFC and IPICOL, for which 1st respondent had entered into a loan agreement and mortgaged the title deeds and extended a registered lease deed dated 8.2.1988. Lease was valid for a period of 25 years with a renewable clause. There was default in repayment of the loan amount, which led OSFC issuing a demand notice to 1st espondent on 7.2.1991, followed by a recall notice dated 30.11.1991. The respondent was also served with a show cause notice dated 16.12.1994 followed by recall notices dated 4.1.1995 and 13.3.1996. 5. 1st respondent then filed a Writ Application No. 2513 of 1996 on 20.3.1996 before the High Court of Orissa to quash the recall notice dated 13.3.1996 and for rehabilitation. The High Court disposed of that writ application with a direction to respondents 2 and 5 (OSFC & IPICOL) to consider the request of 1st respondent for rehabilitation package. On 9.3.2006, an OTS scheme was introduced by OSFC and 1st respondent applied for settlement of its loan account under that scheme. On 18.3.2006, the benefit of the scheme was extended to 1st respondent by OSFC and agreed in principle to settle the term loan account on payment of Rs.1,16,21,200/- on or before 18.4.2006, subject to certain terms and conditions which were as follows: 1. The settlement amount shall either be paid in one lump sum on or before Dt. 18.04.06 (within 30 days of this settlement order) with 3% discount on the ettlement amount. OR Installments as per the sequence mentioned below: a) Upfront payment of Rs.23,61,400.00 (Rupees twenty three lakh sixty one thousand four hundred only) (i.e.25% of settlement amount less initial deposit) shall be paid along with the acceptance letter (format enclosed herewith) on or before Dt. 16.04.06, within 30 days. b) The balance settlement amount of Rs.87,15,900.00 (75%) shall be paid on or before Dt. 15.06.06. 2. Any other expenses chargeable/incurred/debited in the loan accounts towards misc. expenses on L/A with effect from Dt. 11.07.05 (date of application) till the final settlement of loan accounts shall be paid by you along with the settlement amount. 3. It may be noted that (NDC) can only be issued in your favour after liquidation of all the loans availed. 4. You shall have to submit the consent/decree/permission/withdrawal order (wherever applicable) before issue of No Due Certificate (NDC). In case of failure on payment of the aforesaid amount within the stipulated dates, the one time settlement of dues considered in your favour including relief and concession thereon shall be withdrawn without further reference to you." 6. IPICOL also approved the request for OTS at Rs.45 lacs with waiver of Rs.1,88,21,099 subject to certain terms and conditions, which were as follows: "(a) The OTS amount is Rs.45 lacs (Rupees forty-five lacs only) and the resultant sacrifice(s) by way of waiver is Rs.1,88,21,099 (Rupees one crore twelve lakhs seventeen thousand five hundred twenty nine only on account of funded interest and Rs.76,03,570/- (Rupees seventy six lakhs three thousand five hundred seventy only) on account of overdue interest. (b) The OTS amount shall be paid within a period of 1 year from the date of this letter as per the schedule given below: Rs.6,75,000 towards 25% of upfront payment (including initial payment made by you) within 30 days and balance 75% amounting to Rs.33,75,000/- within a period of 1 year in 4 quarterly installments, carrying simple interest @ 14% p.a. on reducing balance. (c) The above OTS is subject to cancellation, if it is found that you have provided incorrect details and information or suppression of any material facts for getting the sanction of OTS. The decision of IPICOL is final in this regard. (d) In case of non payment, IPICOL shall have the right of requital." 7. We notice that despite of waiver of Rs.2,26,85,800 and Rs.1,88,21,099 by OSFC and IPICOL respectively, 1st respondent did not comply with the terms and conditions of the OTS scheme, consequently, OSFC and IPICOL informed 1st respondent that they had withdrawn OTS offer. 8. We find, on 31.3.2007, yet another OTS scheme of 2007 was launched by OSFC and, again, an offer was made to 1st respondent to avail of the benefit of that scheme. OSFC, on 4.10.2007, requested 1st respondent to pay the settlement amount of Rs.1,16,21,200 with delayed payment of interest within 10 days. 1st respondent did not comply with that request as well, consequently, OSFC, on 28.12.2007, withdrew the offer and advised 1st respondent to pay the entire dues as per the agreement, failing which 1st respondent was informed that recovery proceedings would be initiated for realization of the dues. Later, OSFC sent a demand notice dated 22.8.2008 stating that the total loan outstanding as on 31.12.2007 was Rs.4,52,94,691 and 1st respondent was called upon to pay the amount, failing which it was informed that recovery proceedings would be initiated. 9. 1st respondent then, on 10.09.2008, filed a Writ Petition No. 13376 of 2008 before the Orissa High Court to quash the demand notice dated 22.08.2008 and for a direction to consider its claim under the OTS scheme. On 31.10.2008, OSFC had, however, issued a notice recalling the entire amount along with interest and informed 1st respondent that in case of failure to make payment, further action would be taken under Section 29 of the State Financial Corporation Act (SFC Act). Writ Petition came up for hearing before the Orissa High Court on 4.12.2008, and the Court directed OSFC to maintain status-quo and on 7.4.2010, the Court passed an ad-interim order directing 1st respondent to inform as to whether they were willing to deposit the amount or Rs.1 Crore for consideration of their claim under OTS. On 26.11.2008, IPICOL also made a request to OSFC to initiate proceedings under Section 29 of SFC Act and to take over the assets of the unit. 10. Writ Petition No. 13376 of 2008 came up for final hearing on 21.4.2010, and the Court enquired whether 1st respondent was willing to pay Rs.1 Crore, as suggested by the Court on 4.12.2008. The Court was informed that a petition had been filed on 21.4.2010 along with a bank draft of Rs.17,50,000 drawn in favour of the Registrar, Orissa High Court. 1st respondent had also made a request to the Court for time up to 26.2.1010 so as to pay the amount of Rs.1 Crore. The Court ordered the return of the draft to the 1st respondent since the amount was due to both OSFC and IPICOL. The Court was informed by OSFC that 1st respondent had not availed of the earlier proposal for OTS and no new OTS scheme was available, still the Court passed the following order: "The learned counsel for the Corporations submits that the earlier proposal for one-time settlement had been considered by both the Corporations and the matter had been settled. But the petitioner did not pay the amount for which it had to be cancelled and, at present there is no scheme for one-time settlement. Be that as it may, the Petitioner having defaulted in payment of huge amount we dispose of the writ petition directing that the petitioner may deposit a sum of Rs.50,00,000/- (Rupees fifty lakhs) each before each of the two Corporations by 20.6.2010 and applications shall be filed before both the Corporation for settlement of the dues. If any such application is filed the same shall be considered on its own merit by both the Corporations either separately or jointly provided there is any scheme available for such settlement by the Corporations. In the event, the Petitioner fails to deposit the aforesaid amount by 20.6.2010, both the Corporations shall be at liberty to take such action as permissible under law under the State Financia l Corporation Act." (emphasis added) 11. 1st respondent did not comply with even the above mentioned order. OSFC then issued a registered notice dated 8.7.2010 to 1st respondent pointing that since it had failed to comply with the above mentioned order of the Court, OSFC would be at liability to initiate proceeding under the SFC Act. The 1st respondent was, therefore, asked to liquidate the entire outstanding amount as on 0.6.2010, failing which 1st respondent was informed that OSFC would be initiating action under Section 29 of SFC Act. Later, OSFC issued a seizure order dated 2.8.2010 of the property and that order was executed on 15.9.2010 and the possession of the unit was taken over "as is where is" basis. 12. OSFC, during seizure, got prepared a valuation report dated 17.09.2010 from its panel valuer. Based upon that valuation report, off-set price of the unit was fixed at Rs.1,75,45,000. Later, the sale notice was published in the Daily newspapers, Samaj and the New Indian Express on 18.9.2010. On 21.9.2010, again, OSFC issued a notice to 1st respondent to clear the outstanding dues with up to date interest of Rs.6,18,62,238/- collected up to 30.6.2010 before Default-cum-Disposal Advisory Committee (DDAC) on 29.9.2010 so also to get the assets released. 1st respondent was informed of the sale notice published in the daily newspapers requesting to clear up the dues before the DDAC meeting scheduled to be held on 29.9.2010. 1st respondent was also informed that in the event of non-payment of dues, it could still match or better the highest bid price. 1st respondent, however, did not take any steps to clear the outstanding dues, but preferred a Review Petition No. 99 of 2010 for reviewing the order passed by the Orissa High Court on 21.4.2010 in Writ Petition No. 13376 of 2008. The Court rejected the review petition on 22.9.2010. The Court, after noticing that 1st respondent had not deposited any amount in pursuance to its order dated 21.4.2010, held as follows: "Apart from the above, from the conduct of the petitioner, we find that the petitioner did not pay any amount when the account was settled under the scheme earlier and waited for another demand notice. Even in the writ petition though the petitioner was directed to deposit Rs.50,00,000/- (Rupees fifty lakhs) each with the two Corporations, the same was not complied with. In course of hearing of this review petition, the petitioner has offered only Rs.40,00,000/- (Rupees forty lakhs) to be deposited with the two Corporations against the outstanding dues of more than seven crore. We are, therefore, of the view that the petitioner has no intention to clear the dues of the two Corporations which had financed for establishing a hotel. In the meantime possession o f the said hotel has been taken by OSFC under section 29 o f the State Financial Corporation Act and the same has been advertised for sale . The sale notice, a copy whereof was produced before us shows that the loanee can appear before the DDAC on the date fixed i.e. 29th of September, 2010 for the purpose of getting release the seized asset." (emphasis added) 13. 1st respondent then submitted a proposal to DDAC, which was considered by DDAC on 29.9.2010 and the order was communicated to the 1st respondent. 14. DDAC, in pursuance to the auction notification in the newspapers, received altogether 9 bids and, after negotiations with the auctioneers, the offer of the appellant was found to be the highest at Rs.774 lacs, which was accordingly accepted OSFC delivered the possession of the land, building and machinery/furniture and fixtures to the appellant vide possession letter dated 11.10.2010. 15. 1st respondent, as already stated, then approached the Orissa High Court and filed the present writ petition No. 17711 of 2010 to uash the cancellation of the OTS dated 28.12.2007, sale letter dated 1.10.2010 and also for other consequential reliefs, which were granted by the Division Bench of the Orissa High Court, the operative portion of which reads as follows: "For the reasons stated supra the writ petition is allowed. Rule issued. The letters dated 28.12.2007 and 1.10.2010 (Annexure-5 & Annexure-8 series) cancelling the proposal for OTS and rejecting the representation dated 29.9.2010, the public sale notice dated 19.9.2010 (Annexure-6), the sale letter dated 1.10.2010 (Annexure-8 series), the sale agreement dated 11.10.2010 (Annexure-A/5) and the alleged delivery of possession are hereby quashed. The Orissa State Financial Corporation and IPICOL are directed to place fresh demand with the petitioner, within four weeks from the date of receipt of this order, with regard to the amount of OTS offered in the communications dated 18.3.2006 and 3.4.2006 of the OSFC and IPICOL along with interest at the rate of 9% on the said amount from that date till the date of payment or at the rate of interest, stipulated under the OTS Scheme, 2007 in case of similarly placed persons. The petitioner is directed to make payment within six weeks thereof. Thereafter the possession of the property shall be delivered to the petitioner within a reasonable time. If the petitioner fails to deposit the amount, as directed, the OSFC and IPICOL are at liberty to proceed in the matter in accordance with law." 16. Shri C.A. Sundram, learned senior counsel appearing for the appellant (auction purchaser) submitted that the High Court has ompletely misread and misunderstood the facts of the case which resulted in incorrect reasoning, leading to wrong conclusions. Learned senior counsel also submitted that the judgment in writ petition No. 13376 of 2008 as well as the order in Review Petition No. 99 of 2010 had attained finality and, consequently, the orders dated 28.12.2007 and 01.10.2010 cancelling the proposal for OTS cannot be questioned. Learned senior counsel also pointed out that the conditions stipulated in the above mentioned orders were also not complied with by 1st respondent, consequently, the only course open to 1st respondent was to pay the entire amount demanded by OSFC and IPICOL. The 1st respondent did not pay the amount demanded, hence, Section 29 of SFC Act was rightly invoked. 17. Ms. Shubhranshu Padhi, learned counsel appearing for the appellant in SLP(C) No. 1125 of 2012 fully supported the arguments advanced by the learned senior counsel Shri C.A. Sundaram and explained the various steps taken by OSFC which resulted in invoking Section 29 of SFC Act. 18. Shri Ashok Panigrahi, learned counsel appearing on behalf of the respondent, however, supported the judgment of the Hon'ble Court and submitted that there is no justification in interfering with the judgment of the Hon'ble Court, since the conditions laid down in OTS Scheme were onerous and that procedures were not followed for the sale of the mortgaged properties. 19. We express our strong disapproval of the manner in which the Division Bench of the High Court has virtually sat in judgment over the judgment of another co-ordinate Bench. We are of the view that the Division Bench of the High Court overlooked some vital facts which have considerable bearing on the outcome of this dispute, consequently, reopened a lis which has attained finality, due to non-compliance of the various directions issued by the coordinate Bench of the High Court. Failure to comply with the various directions issued by the co-ordinate Bench in Writ Petition No. 13376 of 2008 and the order passed in Review Petition No. 99 of 2010 was completely overlooked by the Division Bench. Appreciation of Facts 20. Litigations in courts are won or lost mainly on facts more on law. Duty is cast on all the parties who appear in a court of law to place the correct facts so that the court can draw correct inferences which enable it reach a logical, reasonable and just conclusion. Wrong facts lead a Court to wrong reasoning and wrong conclusions. Duty is also cast on the Court to take note of the facts which are correctly placed. Wrong appreciation of facts leads to wrong reasoning and wrong conclusions and justice will be the casualty. Deciding disputes involves, according to Dias on Jurisprudence, knowing the facts, knowing the law applicable to those facts and knowing the just way of applying the law to them. If any of the above mentioned ingredients is not satisfied, one gets a wrong verdict. A Judge has to reason out truth from falsehood, good from evil which enables him to deduce inferences from facts or propositions. Facts are correctly stated in the instant case but the Division Bench wrongly understood those facts and wrongly applied the law, consequently, wrong inferences were drawn and ultimately reached wrong conclusions. 21. Following are the facts and conclusions overlooked by the Division Bench: (1)OSFC introduced an OTS scheme in the year 2006 and 1st respondent had applied for settlement of its loan account under that scheme. On 18.03.2006, the benefit of the scheme was extended to 1st respondent and OSFC agreed in principle to settle the term loan account on payment of Rs.1,16,21,200/-, subject to certain conditions. IPICOL also approved the request of 1st respondent for OTS at Rs.45 lacs with waiver of Rs.1,88,21,099/-, subject to certain conditions. (2)OSFC and IPICOL, therefore, waived an amount of Rs.2,26,85,800/- and Rs.1,88,21,099 and gave the benefit of the OTS scheme to 1st respondent, subject to few other conditions like period of payment, interest etc. (3) The 1st respondent had failed to comply with those conditions imposed, consequently, OSFC and IPICOL had to withdraw the benefits extended under the OTS scheme. (4)OSFC lodged another OTS scheme in the year 2007. Opportunity was given to 1st respondent again to avail of the benefit of that scheme. OSFC on 04.10.2007 requested 1st respondent to pay the settlement amount of Rs.1,16,21,200/- with delayed payment of interest within 10 days. The benefit of the said scheme was not availed of by 1st respondent, consequently OSFC on 28.12.2007 withdrew that offer as well and advised 1st respondent to pay the entire dues as per the agreement, failing which it was informed that recovery proceedings would be initiated. (5) 1st respondent filed a Writ Petition No.13376 of 2008 to quash the demand notice dated 22.08.2008 where it was pointed out by OSFC that 1st respondent had not availed of all the benefits of the OTS scheme extended by the Corporation, consequently they had to cancel the said scheme. Further, it was also stated that in spite of public notification and their intimation and frequent requests, 1st respondent did not apply for the OTS 2007 Scheme. (6)When Writ Petition came up for hearing on 07.04.2010, the Court had enquired whether 1st respondent would be still willing to deposit the amount of Rs. 1 crore for consideration of their claim under OTS. The matter again came up for hearing before the Division Bench on 21.04.2010 on which the Court disposed of the writ petition directing 1st respondent to deposit Rs.50,00,000/- each before each of the two Corporations by 20.6.2010, failing which it was ordered that the Corporations would be at liberty to take such action as permissible under law under the State Financial Corporation Act. (7)OSFC issued a loan recall notice to 1st respondent on 8.7.2011, since it did not comply with the directions in WP No. 13376 of 2008 with a request to pay the entire outstanding amounts within 30 days, failing which the 1st respondent was informed that action would be taken under Section 29 of SFC Act. (8)OSFC issued a seizure order on 02.08.2010 and during seizure, a valuation report dated 17.09.2010 was prepared. Based upon the valuation report, off- set price of the unit was fixed at Rs.1,75,45,000/-. Sale notice was published in the Daily newspapers "Samaj" and the "New Indian Express" on 18.09.2010. On 21.09.2010, again OSFC issued a notice to 1st respondent to clear the outstanding dues with up-to-date interest of Rs.6,18,62,238/-. (9) Review Petition No. 99 of 2010 filed by 1st respondent in writ petition No. 13376 of 2008 came up for hearing before the Division Bench on 22.9.2010. While dismissing the Review Petition, the Bench found that 1st respondent had no intention to clear the dues of the Corporations which had financed for establishing a hotel. The court also noticed that the mortgaged properties were taken over by OSFC invoking Section 29 of SFC Act and advertised for sale. (10) 1st Respondent filed a representation before DDAC on 29.9.2010 which was rejected and the order of rejection was communicated vide letter dated 1.10.2010 and 1st respondent was informed that the assets were already taken over under Section 29 of SFC Act on 15.9.2010 and was put to public auction, with due intimation. (11) Auction was concluded as per rules and ultimately, the appellant was found to be the highest bidder at Rs.774,00,000 which was accepted and sale letter dated 1.10.2010 was issued to the appellant, who had paid the entire amount by 11.10.2010. (12) Sale Memo, Agreement to Sale was executed with the appellant on 11.10.2010 and possession was handed over to the appellant on that date. (13) 1st respondent then on 11.10.2010 filed the present WRIT Petition No. 17711 of 2010. 22. We are of the view that the above mentioned facts had considerable bearing for rendering a just and proper judgment in writ petition No. 17711 of 2010, but those vital facts were completely overlooked by the Division Bench and it had also ignored the binding judgment of the co-ordinate Bench rendered in writ petition No. 13376 of 2008 and the order passed in Review Petition No. 99 of 2010 and the steps taken by the Corporations as permitted by the Division Bench. 23. A 3-Judge Bench of this Court in Haryana Financial Corporation and Another v. Jagdamba Oil Mills and Another, (2002) 3 SCC 496 while dealing with the scope of Section 29 of SFC Act held as follows: "6. The Corporation as an instrumentality of the State deals with public money. There can be no doubt that he approach has to be public oriented. It can operate effectively if there is regular realization of the instalments. While the Corporation is expected to act fairly in the matter of disbursement of the loans, there is corresponding duty cast upon the borrowers to repay the instalments in time, unless prevented by unsurmountable difficulties. Regular payment is the rule and non-payment due to extenuating circumstances is the exception. If the repayments are not received as per the scheduled time frame, it will disturb the equilibrium of the financial arrangements of the Corporations. They do not have at their disposal unlimited funds. They have to cater to the needs of the intended borrowers with the available finance. Non-payment of the instalment by a defaulter may stand on the way of a deserving borrower getting financial assistance." 24. The Court again reminded of the fact that the fairness required of the Corporations could not be carried to the extent of disabling them from recovering what is due to them and held as follows: "13. …….The Corporation is an independent autonomous statutory body having its own constitution and rules to abide by, and functions and obligations to discharge. As such in the discharge of its functions, it is free to act according to its own light. The views it forms and decisions it takes are on the basis of the information in its possession and the advice it receives and according to its own perspective and calculations. Unless its action is mala fide, even a wrong decision by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however, more prudent, commercial or businesslike it may, for the decision of the Corporation…..." 25. The Court while explaining and over-ruling Mahesh Chandra v. Regional Manager, U.P. Financial Corporation and Others, (1993) 2 SCC 279 held as follows: "Indulgence shown to chronic defaulter would amount to flogging a dead horse without any conceivable result being expected. As the facts in the present case show not even a minimal portion of the principal amount has been repaid. That is a factor which should not have been lost sight by the courts below. It is one thing to assist the borrower who has intention to repay, but is prevented by insurmountable difficulties in meeting the commitments. That has to be established by adducing material. In the case at hand factual aspects have not even been dealt with, and solely relying on the decision in Mahesh Chandra's cases (supra), the matter has been decided." 26. We are of the view that the principles laid down by this Court in the above judgments apply to the case on hand, if the facts are properly appreciated. The Division Bench, in the impugned judgment, took the view that the Corporations had not followed the guidelines laid down by this Court in Kerala Financial Corporation v. Vincent Paul and Another, (2011) 4 SCC 171. In our view, this is factually incorrect. This Court, in the above judgment, indicated that the authority concerned should serve to the borrower a notice of 30 days for sale of immovable assets. In this case, Corporation had issued the recall notice dated 08.07.2010 with a request to pay the entire outstanding dues within 30 days otherwise, failing which, it was stated that action under section 29 of SFC Act would be initiated against the 1st respondent. Seizure order was issued by the Corporation and the entire assets of the unit were taken over under Section 29 of the Act on 15.09.2010 which was after the expiry of 30 days from the date of notice dated 08.07.2010. Therefore the guidelines laid down in the above referred judgment have also been complied with. Even otherwise, the guidelines issued by this Court in Vincent Paul case would operate only prospectively and that too depends upon the facts and circumstances of each case. 27. We have found that the procedure laid down under Section 29 of SFC Act has been followed by the Corporations. The independent valuer submitted his report on 17.09.2010 and the off-set price of the unit was fixed after getting it valued by an independent valuer. It was based upon the valuation report that the off-set price of the unit was fixed at Rs.1,77,45,000/- on 17.09.2010. Sale notice was published in the News Papers on 18.09.2010 and the auction was conducted on 29.09.2010. In our view, the High Court has committed an error in holding that off-set price of property was not valued before the conduct of auction and that there was no due publication of auction. Sale notice, it is seen, was published in the "Samaj" a vernacular paper and also in the "New India Express" a widely circulated English newspaper on 18.09.2010 and the Corporation had received nine offers and after protracting negotiations with all the bidders, the offer of the appellant was accepted being the highest. The Corporation before putting the appellant in possession again issued a notice dated 21.9.2010 to 1st respondent enquiring whether he would match the offer. 1st Respondent did not avail of that opportunity as well. It is under such circumstances that sale letter dated 1.10.2010 was issued to the appellant with a copy to all the Directors/Promoters/Guarantors of 1st respondent company. The appellant paid the balance consideration of Rs.5,65,20,000 on 11.10.2010 and the Sale Memo was extended on that date and the property was also delivered. 28. We find no illegality in the procedure adopted by the Corporation, since 1st respondent had failed to comply with the directions issued by the co-ordinate Bench of the Orissa High Court in writ petition No. 13376 of 2008, which gave liberty to the Corporations to proceed in accordance with Section 29 of SFC Act. We are of the view that the Division Bench of the High Court had overlooked those vital facts as well as the binding judgment of a coordinate Bench in writ petition No. 13376 of 2008 and had wrongly reopened a lis and issued wrong and illegal directions. 29. In the said circumstances, we are inclined to allow both the appeals and set aside the judgment of the Division Bench of the Orissa High Court. However, in the facts and circumstances of the case, there will be no order as to costs. ……………….……………………..J. (K. S. RADHAKRISHNAN) ………………………………….…..J. (DIPAK MISRA) | |
| Tags :- absence illegality procedure adopted appeal allowed |
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