MS HISSAY PALDEN BHUITIA V. THE UNION OF INDIA and 4 ORS

PIL/95/2015

AI Insights

The case involved a PIL questioning the valuation methods of land and archives owned by media companies and the norms for granting security clearance for potential directors in these companies. The Ministry of Information and Broadcasting provided a response detailing the valuation methods used for tangible and intangible assets, stating that these are assessed by Chartered Accountants based on standard commercial and accounting norms. The court found the lack of a specific valuation method for archives unsatisfactory and directed the Ministry to establish a clear valuation framework. Additionally, the court addressed the concerns about delays in security clearance, suggesting that the process should be completed within two months to avoid discouraging potential investors.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 687875 (HC-INDIA)
• Appeal Type: Others
• Pronouncement Date: 10-10-2015
• Assessment Year: misc
• Laws Referred To: Companies Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: S C KEYAL
• Assessee Lawyers: C P SHARMA
• Keywords: Net worth; Valuation of assets; Security clearance; Archives valuation
• Section: 2(29A)

Judgement Text

"PIL 95/2015 BEFORE HON’BLE THE CHIEF JUSTICE (ACTING) MR. K. SREEDHAR RAO HON’BLE MR. JUSTICE P.K. SAIKIA Heard Mr. C.P. Sharma, counsel for the petitioner and Mr. S.C. Keyal, Assistant Solicitor General of India. The Assistant Solicitor General of India has produced a copy of the letter recei ved from the Ministry of Information and Broadcasting, Govt. of India, dated 10. 10.2015, which reads as follows: Sir, Please refer to your e-mail dated 29.9.2015 regarding Hon’ble Court Order dated 28.9.2015 to file the affidavit covering the following points: i) How the net value of the land is assessed? ii) What credit is given to the value of the archives? And iii) What are the norms fixed for giving security clearance and whether any t ime limit is there for giving security clearance? 2. In respect of point (i) and (ii) it is stated that the method for assessment of value of tangible and intangible assets for the purpose of arriving at networ th is done by the Chartered Accountants following the standard methods of commer cial business and accounting, norms of valuation of concerned state, etc. Minist ry of Information & Broadcasting is not the standard setting body for determinin g any of these criteria. However as per the Form 1 prescribed in the application for Uplinking from India, the networth is defined as under: Notes. Networth has been defined in the Companies Act under section 2(29A) as follows. ’networth’ means the sum total of the paid-up capital and free reserves after de ducting the provisions or expenses as may be prescribed. Explanation for the pur pose of this clause, free reserves means all reserves created out of the profi ts and share premium account but does not include reserve created out of revalua tion of assets, write back of depreciation, provisions and amalgamations. (i) Networth : The excess of the book value of assets (other than fictitiou s assets) of an enterprise over its liabilities. (ii) Book value of assets : The amount at which an item appears in the books of account or financial statements. It does not refer to any particular basis o n which the amount is determined. Eg Cost, replacement value etc. (iii) Fictitious Assets : Items grouped under the assets in a balance sheet which has no real value (eg. The debit balance of the profit and loss account). (iv) Liabilities : The financial obligation of an enterprise other than owne r’s funds. Owner’s funds means paid-up capital and free reserves. Explanation for the purpose of this clause, free reserves means all reserves c reated out of the profits and share premium account but does not include reserve d created out of revaluation of assets, write back of depreciation provisions an d amalgamations. 3. Regarding point (iii) the comments received from Ministry of Home Affairs vid e their OM No.II/21021/688/2010-IS-II dated 6.10.2015 have already been forwarde d by this office. Further clarification/detailed reply may be sought from MHA, i f felt necessary. 4. In view of the above, reply to Hon’ble court’s query (i) & (ii) may kindly be filed for their due intimation. This Court had formulated the following questions, which are referred to in the letter stated above to be answered by the respondents: i) How the net value of the land is assessed? ii) What credit is given to the value of the archives? And iii) What are the norms fixed for giving security clearance and whether any t ime limit is there for giving security clearance? In the letter, there is no mention regarding the norms fixed for security cleara nce and the timeframe for security clearance. In this regard, the ASG submits th at the Court may fix some reasonable time for grant of security clearance. The concept of security clearance relates to a situation where a person wants to buy shares of a Company running media channels to help the company financially and wants to become Director. The purchase of share should be governed by the pr ovisions of the Companies Act. However, to become a Director, it is necessary th at there should be security clearance to be given by the Ministry. It is stated that inordinate delay in granting security clearance sometimes may make such per son, who wants to help the company, back-out from his proposal. If an Indian ci tizen wants to purchase share and become Director, the norms for security cleara nce should be similar to the one applicable to the persons holding public office in addition IB clearance can be obtained and the entire process of security cle arance is to be decided within a period of two months from the date of request a nd keeping such request in limbo would make the proposer to back-out. It is the stand of the respondents that no credit will be given to the archives. The stand appears to be unreasonable. Any material of historical, social or sci entific importance in the possession of the channels, particularly sufficiently of long yester-years, should be given due credit. It cannot be said that such ma terial is valueless. Suppose, any letter or work of Pandit Jawaharlal Nehruji is in possession with some channel. Should we call that material valueless? We do not think so. Archives, like antiques, should necessarily carry value. This Cour t, however, cannot lay any guidelines/formula but the Ministry has to workout so me formula or principle to determine the value in terms of money. In this regard , it is just and proper that the Ministry shall make the needed exercise taking opinion of the experts for evolving norms of valuation of the archives and this exercise should be done by the Ministry within a period of six months. With regard to the first question regarding net value of the land owned by the m edia on which its business is run, it is just and proper that the appreciated ma rket value as on the date of the assessment should be taken into consideration a nd not its original value of its purchase. In this regard, the circle value or g uidance value whatever fixed by the Government for registration, can be taken as a standard measure to assess the value of the land. With regard to machinery, whatever principles apply under the Income Tax Act sho uld be made applicable. With these directions, the PIL is disposed of. "