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2003 DIGILAW 780 (PAT)

Ally Food Private Limited v. State Of Bihar

2003-07-29

NAGENDRA RAI, R.S.GARG

body2003
Judgment 1. The petitioner has filed this writ application for quashing the order dated 16.5.2003 passed by the Member, Board of Revenue, holding that the petitioner-firm is a proxy/benami firm of one Arun Kumar, proprietor of M/s Bachchan Traders. A copy of the said order has been appended as Annexure 1 to the writ petition. 2. The petitioners case is that it is a registered private limited company and its registered Head Office is situated in Muhalla Kankarbagh, Patna. It was incorporated in 1995-96. 3. On 16.1.2002, a notification was issued inviting tenders for grant of exclusive privilege to trade in wholesale country liquor and wholesale spiced country liquor in the State of Bihar for the period 1.4.2002 to 31.3.2005. The last date for submission of the tender papers was fixed as 27.2.2002. 4. In pursuance of the said tender notice, the petitioner also applied along with other tenderers for grant of special/exclusive privilege for manufacture and supply of wholesale country liquor for Gaya Zone only. The scrutiny Committee found the petitioner eligible for grant of exclusive privilege but later on rejected the same on the ground that the petitioner-firm is a proxy/benami firm of Arun Kumar, proprietor of M/s Bachchan Traders, who is a defaulter as crores of rupees are due against him as sales tax. 5. The State admits in the counter-affidavit that the petitioner applied for grant of special/exclusive privilege of country liquor for the Gaya zone and initially the Scrutiny Committee found the petitioner eligible for grant of special/exclusive privilege of country spirit. In the meantime, one Dr. Ajay Kumar Singh filed C.W.J.C. No. 5020 of 2002 alleging that the sales-tax defaulters have submitted their tenders through proxy/benami firms in order to grab through them the licences for the said special privilege. Thereafter, the State Government constituted two member Enquiry Committee and the Committee, having looked the various documents and papers, held that the petitioner-firm is a proxy/benami firm of Arjun Kumar, proprietor of M/s Bachchan Traders, who is a sales-tax defaulter and on the basis of the same, an opportunity of hearing was given to the petitioner and the Member, Board of Revenue has found that the petitioner-firm is a proxy/benami firm of said Arun Kumar and as such it was not called upon to participate in the selection process. 6. 6. Learned counsel appearing for the petitioner submitted that it has no concern with M/s Bachchan Traders and that the grounds, which have been taken into consideration for holding that the petitioner is a proxy/benami firm of M/s Bachchan Traders are irrelevant and untenable grounds. Even if entire grounds are taken into consideration, no reasonable man can come to the conclusion, which has been arrived at by the Member, Board of Revenue. He also made submissions with regard to each of the grounds given for coming to the aforesaid conclusion, which will be discussed at the appropriate stage. 7. Learned counsel for the State, on the other hand, submitted that the Member, Board of Revenue, having taken into consideration the relevant materials, has found that the petitioner-firm is a proxy/benami firm of Arun Kumar, proprietor of M/s Bachchan Traders. This Court in exercise of writ jurisdiction cannot reappraise the materials as an appellate forum. It is not a case of no material, on the other hand, it is a case of material and the authority, competent to decide the matter, has found sufficient material to come to the conclusion regarding the benami nature of the petitioner-firm. 8. The Member, Board of Revenue, has given five grounds for coming to the conclusion that the petitioner-firm is a proxy/benami firm of M/s Bachchan Traders : (i) The Board of Directors of the Company has never resolved to enter into liquor trade. (ii) The petitioner-Companys two of the three Directors are closely linked with said Arun Kumar and Paras Prasad, an employee of M/s Bachchan Traders as their Accountant and the other Shri Madhusudan Prasad is the own Mama (maternal uncle) of the said Arun Kumar. (iii) The petitioner has lent unsecured loans of substantial amounts to Arun Kumar and his brother Rajeev Ranjan during the year 2002-2003, these being Rs. 11,25,000/- and Rs. 19,97,500/-, respectively. (iv) At the time of registration with the Commercial Taxes Department, said Arun Kumar had stood as a guarantor of the petitioner-firm. (v) The petitioner has opened a Bank Account in the wake of the instant tenderer, which is situated near the house of said Arun Kumar. 9. While deciding the question whether a particular Company or Firm is a proxy/ benami firm, the matter is not required to be proved beyond reasonable doubt. (v) The petitioner has opened a Bank Account in the wake of the instant tenderer, which is situated near the house of said Arun Kumar. 9. While deciding the question whether a particular Company or Firm is a proxy/ benami firm, the matter is not required to be proved beyond reasonable doubt. The matter may be proved by direct evidence or circumstantial evidence and the evidence should be of such a nature, on the basis of which, a reasonable man can come to a conclusion that the particular person, company or firm is proxy or benami. 10. So far as the first ground given by the Member, Board of Revenue, is concerned, it is stated that the Memorandum of Association clearly stipulates that the Company has been incorporated with an object of manufacturing and dealing in food products, which includes alcohol also. 11. So far as the second ground given by the Member, Board of Revenue, is concerned, it is stated that Shri Prasad was not a paid Accountant of M/s Bachchan Traders, on the other hand, he was a professional Accountant and was not looking after the accounts of M/s Bachchan Traders, but of several firms/compensation such as Sri Sunil Kumar, Sri Bhushan Pathak, M/s. Seetal Enterprises and Shri Abhay Kumar. Thus, he is not related to the family of Arun Kumar in any way. Shri Madhusudan Prasad is himself an Income Tax assesses and he has no concern with the affairs of M/s Bachchan Traders. He was having an excise retail licence and adequate experience of dealing in excise goods. 12. So far as the third ground regarding amount of loan is concerned, the same was given by the company to Arun Kumar and others on interest and the entire principle amount with interest has already been repaid. The transaction was through Bank and the loan was paid through the Bank and the same has been returned through Bank only. 13. So far as the fourth ground regarding standing of Arun Kumar as a guarantor of the petitioner-firm is concerned, it appears that the said guarantee was furnished in 1997-98 much prior to the issuance of the tender notice. At that time, Arun Kumar was not a defaulter. As Arun Kumar was known to the Directors of the Company, he agreed to become a guarantor of the petitioner-firm. At that time, Arun Kumar was not a defaulter. As Arun Kumar was known to the Directors of the Company, he agreed to become a guarantor of the petitioner-firm. This is not a circumstance to come to the conclusion as arrived at by the Member, Board of Revenue. 14. So far as the fifth ground regarding opening of Bank Account by the petitioner near the house of said Arun Kumar is concerned, it is stated that the petitioner had approached several Branches for providing financial assistance but the Bank in question agreed to provide financial assistance and as such the account was opened there. That is not a ground to arrive at a finding regarding proxy or benami nature of the firm. 15. The question for consideration is as to whether the aforementioned circumstances, if taken together, will lead to a reasonable inference that the petitioner- firm is a proxy/benami firm of M/s Bachchan Traders. So far as Paras Prasad is concerned, nothing has been shown that he was a paid Accountant of M/s Bachchan Traders, on the other hand, he appears to be a professional Accountant and assertion made on behalf of the petitioner to that effect has not been denied by the respondents. The fact that Shri Madhusudan Prasad is related to said Arun Kumar is, by itself, no ground to say that he has been set up by Arun Kumar, specially when he is a separate lncome Tax Payee and has past experience in excise goods. Registration of the firm was made long back before issuance of the tender notice and as such that cannot be a circumstance for deciding the question in controversy. Opening of a Bank Account near the house of Arun Kumar is not a circumstance to be taken note of for holding that the petitioner-firm is a proxyIbenami firm. According to the Memorandum of Association, the object of the Company was also to engage in the business of food products, and as such it cannot be said that the submission of the tender by the petitioner-firm for grant of special/exclusive privilege for manufacture and supply of wholesale country liquor for Gaya Zone is beyond the object of the Memorandum of Association. Even if it is admitted that that was not the object of the petitioner-firm then on that basis it cannot be inferred that the petitioner has been set up by Arun Kumar. Even if it is admitted that that was not the object of the petitioner-firm then on that basis it cannot be inferred that the petitioner has been set up by Arun Kumar. This apart, in paragraph no. 9 of the order, the Member, Board of Revenue, has himself observed that out of ten share-holders of the petitioner-firm, four are Kolkata based firms, three Patna-based firms and the remaining three are individuals, including the two aforesaid persons. The relationship between the share holders and Shri Arun Kumar of Bachchan Traders has not emerged from the enquiry report. 16. In view of the aforesaid finding, we are of the view that those circumstances, which have been relied upon by the Member, Board of Revenue, to arrive at the aforesaid finding, may cause a strong suspicion but they cannot lead to an inference that the petitioner-firm is a proxy/ benami firm of Arun Kumar, Proprietor of M/s Bachchan Traders. Suspicion, however, strong it may be, can never take place of proof. Thus, we are of the view that the finding arrived at by the Member, Board of Revenue, regarding the proxy/ benami nature of the petitioner-firm is based on irrelevant consideration and, accordingly, the order passed by the Member, Board of Revenue, is quashed. The result is that the case of the petitioner should be considered for grant of special/ exclusive privilege for manufacture and supply of wholesale country liquor for Gaya Zone only in accordance with law. 17. In the result, this writ application is allowed and the impugned order of the Member, Board of Revenue, dated 16.5.2003 (Annexure 1 herein) is quashed.