The High Court dismissed a writ petition challenging an order refusing refund of attached funds. The Court held that the petitioners were undisclosed guarantors for a debt, suppressing material facts. Thus, no extraordinary jurisdiction could be exercised.
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MGN
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2676 OF 2008
1.Molly Trading Company Pvt. Ltd. )
a Company registered under the )
Companies Act, 1956 having its office)
at 101, Kushal Bazar, 32-33, Nehru )
Place, New Delhi-110 019 )
2.Satinder Ksheterpal, )
The Director of the Petitioner No.1 )
having office at C-571, New Friends )
Colony, New Delhi. )..PETITIONERS
Versus
1.Union of India through the )
Secretary, Ministry of Finance, )
2.The Commissioner of Income Tax, )
Range 16(1) having office at Matru )
Mandir, 2nd Floor, Tardeo, Grant )
Road (W), Mumbai-400 007. )
3.The Tax Recovery Officer, Range 16(1))
having office at Matru Mandir, )
2nd Floor, Tardeo, Grant Road (W), )
Mumbai-400 007 )
4.Amit Jhaveri, of Mumbai Indian )
inhabitant residing at 241, Patil )
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Niwas, Walkeshwar Road,Mumbai-400 006)
5.Mrs. Brader Incorporated through )
its sole Priprietor Mr. Amit Jhaveri )
having office at 73, Atlanta, )
Nariman Point, Mumbai-400 021. )
6.Bank of Baroda, a Banking Company )
incorporated under the Banking )
Companies (Acquisition and Transfer )
of Undertakings) Act, 1969 having )
its Head Office at Mandvi, Baroda, )
Gujarat and a Branch Office at )
Walkeshwar Road, Mumbai-400 006. )..RESPONDENTS
Mr. Zubin Behramkamdin i/b.Wadia Ghandy & Co., for the
Petitioners.
Mr. Yogesh Patki with Mr. B.M. Chatterjee and Mrs. Anuradha
Mane, for respondent Nos. 2 and 3.
Respondent No.4 present in person.
CORAM : F.I. REBELLO &
J.H.Bhatia, JJ.
DATED : 9TH APRIL, 2009
JUDGMENT (PER F.I. REBELLO, J.)
. By an order under Section 226(3)(vi) and Section
226(3)(x) of the Income Tax Act, 1961 the Tax Recovery
Officer 16(1) held that the petitioners and M/s.Subhash
Arora Investment Co. P. Ltd. owed a debt to Shri Amit
Jhaveri and in view of that held that the money attached
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from the bank account of M/s.Molly Trading Co. Pvt. Ltd.,
cannot be termed as wrong and hence the amount cannot be
refunded.
. A notice was issued to the assessee company on 18th
July, 2007 under Section 226(3) directing to pay a sum of
Rs.4,15,54,248/- as due of Shri Amit Jhaveri on account of
Income Tax. A similar notice was issued to HDFC Bank
directing the bank to pay the amount due and/or held by them
on account of M/s.Molly Trading Co. Pvt. Ltd., the
petitioner. Accordingly HDFC had sent the sum of
Rs.4,35,459/- being balance in the account of M/s.Molly
Trading Co. Pvt. Ltd. vide bank’s letter dated 30th July,
2007. On behalf of the assessee company M/s.Jain Singhal &
Associates by letter of 28th July, 2007 had taken a stand
that nothing was payable by the assessee to Mr. Amit
Jhaveri. Subsequent to that the assessee had filed Writ
Petition No.1457 of 2008. This Court accepted the statement
of the respondent therein, that the final order pursuant to
notice dated 18th July, 2007 will be made as expeditiously
as possible. The petitioners also filed an affidavit of
Satinder Kshetrapalas Director of the assessee. It was
stated therein that they had no financial transactions with
Mr. Amit H.Jhaveri of any nature during the last five years
and that no amount is due to Mr. Jhaveri as on date and no
amount is paid to him during the last five years.
. The Tax Recovery Officer in his order noted that Shri
Subhash Arora as a Director of M/s.Subhash Arora Investment
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P. Ltd., has taken the loan of Rs.1.25 crores from Amit
Jhaveri. Shri Subhash Arora is also a Director of the
petitioner company which in fact is a sister concern and the
petitioners had pledged the shares of HCL Infosystems Ltd.,
to Mr. Amit Jhaveri. Considering those facts, the Tax
Recovery Officer held that the money received from the Molly
Trading Company Limited cannot be termed as wrong and hence
cannot be refunded.
2. We may mention that Subhash Arora Investment Pvt.
Ltd., and another had filed Writ Petition bearing No.1456 of
2008 challenging the notice and summons issued to petitioner
No.1 and sister concern under Section 226(3) of the IT Act
and the order dated 23rd November, 2007 whereby the Tax
Recovery Officer had declined to lift the attachment levied
on the petitioners, bankers and its depository participants
or business associates. After considering the contentions
the Tribunal noted that Amit Jhaveri had taken loan and
Overdraft facility from Bank of Bank of Baroda and that
proceedings had been initiated by the Bank against the said
Shri Amit Jhaveri. In those proceedings in the year 1999 it
was agreed that the petitioner will pay Rs.1.70 crores on or
before 10th June, 1999 and the bank will release the share
of the petitioners (Subhash Arora Investment. On
proceedings being transferred to D.R.T. by order dated 7th
April, 2004 the D.R.T. directed the petitioners to deposit
Rs.1.70 crores with 15% interest per annum. Accordingly,
the petitioner No.1 deposited a FDR for a sum of
Rs.3,51,85,723/-. The bank as well as Amit Jhaveri had
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filed Writ Petitions challenging that order. It was
contended that since the liability of the petitioner had
crystallized and arisen before the attachment notice the
petitioner could not have been treated as assessee in
default. The learned Bench after considering the various
contentions held that the decision of the TRO in declining
to lift the attachment cannot be faulted.
3. It may be noted that in Writ Petition No.8136 of 2004
with Writ Petition No.10325 of 2004 which are against the
orders of D.R.T. and order passed in Appeal on behalf of
Mr. Arora a statement was made that he wants to apply for
withdrawal of the FDR worth about Rs.3.5 crores without
prejudice. Liberty has been granted to him.
4. Shri Amit Jhaveri has also filed his affidavit and
has filed compilation of documents. He has produced first a
subscription agreement dated 5th May, 1990 whereby M/s.
Molly Trading Company Limited is a party as a guarantor. In
terms of Clause 4.5(a) the guarantor has agreed that the
guarantee therein is continuing guarantee till the entire
liability of the debenture holder is fully met. M/s. Molly
Trading Private Limited has also pledged the shares of HCL
with Jhaveri. Apart from that, there are atleast two
promissory notes dated 5th May, 1993 and 8th April, 1993 in
the sum of Rs.25.00 lakhs and Rs.50.00 lakhs wherein
M/s.Molly Trading Company Pvt. Ltd., is the guarantor for
the money advanced by Jhaveri to M/s.Subhash Arora
Investments (I) Pvt. Ltd. Neither in the affidavit filed
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before the Tax Recovery Officer nor in the petition has the
petitioner disclosed these aspects.
5. It is, therefore, clear from the pleadings and
documents on record that the petitioner is a guarantor for
the loan taken by Shri Subhash Arora on behalf of the
M/s.Subhash Arora Investments (I) Pvt. Ltd., The amount is
crystalized and in respect of which M/s.Subhash Arora
Investments (I) Pvt. Ltd., had deposited the F.D.R. before
the DRT which FDR they had sought leave to apply for
withdrawal.
6. During the course of the hearing as it was noticed
that the same Lawyers are appearing both for M/s. Molly
Trading Company Pvt. Ltd., and another as also M/s.Subhash
Arora Investments (I) Pvt. Ltd., learned Counsel was asked
whether Subhash Arora as the common Director, would make a
statement and give undertaking on behalf of Subhash
Investment through Subhash Arora that F.D. deposited before
the D.R.T. would not be withdrawn, the learned Counsel on
taking instructions states that he has no such instructions.
7. From the documents on record once the petitioner is a
guarantor for the loan taken by M/s.Subhash Arora (I)
Private Limited and that debt has not been discharged, the
liability of the petitioners continues to remain joint and
several along with M/s.Subhash Investments. Apart from that
the petitioners have suppressed the fact that they had stood
as guarantors for the loan atleast to the tune of Rs.75.00
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lakhs as can be seen from the documents on record. The
affidavit filed by the petitioner before the T.R.O.,they
only averred that they do not owe any monies for the last
five years.
8. It is true that the Tax Recovery Officer has not
dealt with this aspect as this was not set out in the
affidavit of the petitioner before the Tax Recovery Officer.
We are, however, concerned with the exercise of extra
ordinary jurisdiction. Both on merits as also on account of
suppression of material facts (that they were guarantors) in
our opinion this would not be a fit case to exercise our
extra ordinary jurisdiction.
9. Learned Counsel has sought to draw our attention to
the judgment of the Madhya Pradesh High Court in New Amir
Iron Works and Anr. vs. Union of India & Ors., 252 ITR 663
(M.P.). The M.P. High Court proceeded on the footing that
it was for the Recovery Officer to show that the affidavit
was false and ought to have afforded sufficient opportunity
to the assessee. We are really not concerned with the ratio
of that judgment for the reasons set out in the order. Even
otherwise from the facts on record before the Court it is
clear that a false affidavit was filed before the Tax
Recovery Officer.
10. For the aforesaid reasons there is no merits in this
petition. Consequently petition dismissed.
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(J.H..BHATIA,J) (F.I.REBELLO, J)
2 issues framed by the court
Whether the petition filed by the petitioner company to set aside a tax recovery order is maintainable in light of suppressed facts regarding a continuing guarantee.
Whether the High Court should exercise its extraordinary jurisdiction to quash the Tax Recovery Officer's order given that material facts were concealed during proceedings.
Colour shows how this judgement treated each authority
New Amir Iron Works and Anr. vs. Union of India & Ors., 252 ITR 663(M.P.)Referred¶35
1 provisions across 1 enactments
Molly Trading Company Pvt. Ltd.
Satinder Ksheterpal
Union of India
Commissioner of Income Tax
Tax Recovery Officer
Amit Jhaveri
F.I. REBELLO
J.H. BHATIA
As recorded by the court registry
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