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Rockland Hotels Ltd Vs. Income Tax Settlement Commission Principal Bench,
October, 20th 2015
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Judgment reserved on: 13th August, 2015
                                    Judgment delivered on: 20th October, 2015

+      W.P.(C) 3557/2014

ROCKLAND HOTELS LTD                                                 ..... Petitioner

                              versus

INCOME TAX SETTLEMENT COMMISSION
PRINCIPAL BENCH, & ORS.                                          ..... Respondents

                                        and

+      W.P.(C) 3558/2014

MONA INFOTECH PVT LTD                                               ..... Petitioner

                              Versus

INCOME TAX STTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                        and

+      W.P.(C) 3559/2014

AVEE MEDI SURGICAL PVT.LTD                                          ..... Petitioner

                              versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH, & ORS.                                          ..... Respondents

                                        and
+      W.P.(C) 3752/2014

AKHIL MEDITECH PVT. LTD                                             ..... Petitioner
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 1 of 33
                              Versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                        and

+      W.P.(C) 3753/2014

HITESH CONSTRUCTIONS PVT. LTD                                       ..... Petitioner

                              Versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                       and

+      W.P.(C) 3754/2014

RADHIKA SURGICAL PVT. LTD                                           ..... Petitioner

                              Versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                        and

+      W.P.(C) 3755/2014

KUNAL MEDICARE PVT. LTD.                                            ..... Petitioner

                              versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                        and

=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 2 of 33
+      W.P.(C) 3756/2014

GLORY LIFESCIENCE PVT. LTD                                          ..... Petitioner

                              Versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                        and

+      W.P.(C) 3757/2014

UMESH PHARMACEUTICALS PVT. LTD.                                     ..... Petitioner

                              versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                       and

+      W.P.(C) 3758/2014

LIPI FINSTOCK LTD.                                                  ..... Petitioner

                   versus
INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                              and

+      W.P.(C) 3759/2014

HIMANSHU MEDICARE PVT. LTD.                                         ..... Petitioner

                              versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 3 of 33
                                              and

+       W.P.(C) 3761/2014

AESTHETICA ENTERPRISES PVT. LTD.                                    ..... Petitioner

                              Versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents

                                        and

+       W.P.(C) 3762/2014

ADITYA MEDICOS PVT. LTD                                             ..... Petitioner

                              Versus

INCOME TAX SETTLEMENT COMMISSION,
PRINCIPAL BENCH & ORS.                                           ..... Respondents


Advocates who appeared in this case:

For the Petitioners   :       Mr Ajay Vohra, Senior Advocate with Mr S.R.Wadhwa,
                              Mr Vaibhav Kulkarni and Ms Kavita Jha, Advocates.

For the Respondents   :       Mr Rohit Madan, Mr Akash Vajpai and Mr Zoheb
                              Hussain, Advocates.

CORAM:
HON'BLE MR. JUSTICE BADAR DURREZ AHMED
HON'BLE MR. JUSTICE SANJEEV SACHDEVA

                                 JUDGMENT



=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
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SANJEEV SACHDEVA, J

1.     These 13 Writ Petitions arise out of a common Judgment dated
23.04.2014 passed by the Income Tax Settlement Commission
(hereinafter referred to as the Settlement Commission), in a batch of
25 settlement applications filed under section 245C (1) of the Income
Tax Act, 1961 (hereinafter referred to as `the said Act'). Out of the 25
applications, 12 applications were admitted and allowed to be
proceeded with under section 245D(1) of the act and 13 applications
were held to be not fit for admission as having been filed by persons
who were not covered in the definition of related parties as per
explanation to sub-section (1) of section 245C of the Act for the
purposes of clause (ia) of the Proviso to sub-section (1) and have been
dismissed.

2.     The question that arises for consideration in these petitions is
whether the petitioner in each of these petitions is a related party of
the respective specified person under section 245C(1)(ia) of the Act ?

3.     Before adverting to the facts of each of the cases, it would be
expedient to examine the provisions of section 245C of the Act to
ascertain as to who qualifies as a related party in terms of clauses
(a)(v) and (a)(vi)(B) of the Explanation to sub-section (1) to section
245C. Since the petitioners in these petitions claim themselves to be

=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 5 of 33
related parties in terms of the above referred clauses only, so the
examination is restricted to only these clauses.

4.     Section 245C of the Act reads as under:
       Application for settlement of cases.
       245C. (1) An assessee may, at any stage of a case relating to
       him, make an application in such form and in such manner as
       may be prescribed, and containing a full and true disclosure
       of his income which has not been disclosed before
       the Assessing Officer, the manner in which such income has
       been derived, the additional amount of income-tax payable on
       such income and such other particulars as may be prescribed,
       to the Settlement Commission to have the case settled and
       any such application shall be disposed of in the manner
       hereinafter provided :

       Provided that no such application shall be made unless,--
       (i)   in a case where proceedings for assessment or
             reassessment for any of the assessment years referred
             to in clause (b) of sub-section (1) of section 153A or
             clause (b) of sub-section (1) of section 153B in case of
             a person referred to in section 153A or section
             153C have been initiated, the additional amount of
             income-tax payable on the income disclosed in the
             application exceeds fifty lakh rupees,

       (ia)    in a case where--
               ( A)   the applicant is related to the person referred to
                      in clause (i) who has filed an application
                      (hereafter in this sub-section referred to as
                      "specified person" ); and
               ( B)   the proceedings for assessment or re-assessment
                      for any of the assessment years referred to in
                      clause (b) of sub-section (1) of section 153A or
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 6 of 33
                      clause (b) of sub-section (1) of section 153B in
                      case of the applicant, being a person referred to
                      in section 153A or section 153C, have been
                      initiated,
               the additional amount of income-tax payable on the
               income disclosed in the application exceeds ten lakh
               rupees,

       (ii)    in any other case, the additional amount of income-tax
               payable on the income disclosed in the application
               exceeds ten lakh rupees,

       and such tax and the interest thereon, which would have been
       paid under the provisions of this Act had the income
       disclosed in the application been declared in the return of
       income before the Assessing Officer on the date of
       application, has been paid on or before the date of making the
       application and the proof of such payment is attached with the
       application.

       Explanation.--For the purposes of clause (ia),--
             ( a)  the applicant, in relation to the specified person
                   referred to in clause (ia), means,--
                   (i)    where the specified person is an
                          individual, any relative of the specified
                          person;
                   (ii)   where the specified person is a company,
                          firm, association of persons or Hindu
                          undivided family, any director of the
                          company, partner of the firm, or member
                          of the association or family, or any
                          relative of such director, partner or
                          member;
                   (iii) any individual who has a substantial
                          interest in the business or profession of

=====================================================================
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                             the specified person, or any relative of
                             such individual;
                      (iv) a company, firm, association of persons
                             or Hindu undivided family having a
                             substantial interest in the business or
                             profession of the specified person or any
                             director, partner or member of such
                             company, firm, association or family, or
                             any relative of such director, partner or
                             member;
                      (v )   a company, firm, association of persons
                             or Hindu undivided family of which a
                             director, partner or member, as the case
                             may be, has a substantial interest in the
                             business or profession of the specified
                             person; or any director, partner or
                             member of such company, firm,
                             association or family or any relative of
                             such director, partner or member;
                      (vi) any person who carries on a business or
                             profession,--
                           (A )     where the specified person being
                                    an individual, or any relative of
                                    such specified person, has a
                                    substantial interest in the business
                                    or profession of that person; or

                            (B )      where the specified person being
                                      a company, firm, association of
                                      persons or Hindu undivided
                                      family, or any director of such
                                      company, partner of such firm or
                                      member of the association or
                                      family, or any relative of such
                                      director, partner or member, has a

=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 8 of 33
                                      substantial interest in the business
                                      or profession of that person;

               ( b)   a person shall be deemed to have a substantial
                      interest in a business or profession, if--
                      ( A)   in a case where the business or
                             profession is carried on by a company,
                             such person is, on the date of search, the
                             beneficial owner of shares (not being
                             shares entitled to a fixed rate of dividend,
                             whether with or without a right to
                             participate in profits) carrying not less
                             than twenty per cent of the voting power;
                             and
                      ( B)   in any other case, such person is, on the
                             date of search, beneficially entitled to not
                             less than twenty per cent of the profits of
                             such business or profession.

       (1A) For the purposes of sub-section (1) of this section , the
       additional amount of income-tax payable in respect of the
       income disclosed in an application made under sub-section
       (1) of this section shall be the amount calculated in
       accordance with the provisions of sub-sections (1B) to (1D).

       (1B) Where the income disclosed in the application relates
       to only one previous year,--
              (i)    if the applicant has not furnished a return in
                     respect of the total income of that year, then, tax
                     shall be calculated on the income disclosed in
                     the application as if such income were the total
                     income;
              (ii)   if the applicant has furnished a return in respect
                     of the total income of that year, tax shall be
                     calculated on the aggregate of the total income
                     returned and the income disclosed in the
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 9 of 33
                       application as if such aggregate were the total
                       income.

       (1C) The additional amount of income-tax payable in
       respect of the income disclosed in the application relating to
       the previous year referred to in sub-section (1B) shall be,--
              ( a)   in a case referred to in clause (i) of that sub-
                     section, the amount of tax calculated under that
                     clause;
              ( b)   in a case referred to in clause (ii) of that sub-
                     section, the amount of tax calculated under that
                     clause as reduced by the amount of tax
                     calculated on the total income returned for that
                     year;
       (1D) Where the income disclosed in the application relates
       to more than one previous year, the additional amount of
       income-tax payable in respect of the income disclosed for
       each of the years shall first be calculated in accordance with
       the provisions of sub-sections (1B) and (1C) and the
       aggregate of the amount so arrived at in respect of each of the
       years for which the application has been made under sub-
       section (1) shall be the additional amount of income-tax
       payable in respect of the income disclosed in the application.

       (2)  Every application made under sub-section (1) shall be
       accompanied by such fees as may be prescribed.

       (3)   An application made under sub-section (1) shall not be
       allowed to be withdrawn by the applicant.

       (4)    An assessee shall, on the date on which he makes an
       application under sub-section (1) to the Settlement
       Commission, also intimate the Assessing Officer in the
       prescribed manner of having made such application to the
       said Commission.
                                  (highlight & underlining supplied)

=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
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5.     From a reading of clause (a) (v) of the Explanation to sub-
section (1) to section 245C, it emerges that the following twelve
categories of persons are covered in the definition of related parties
for the purposes of clause (ia) of the Proviso to sub-section (1) to
section 245C of the Act under that clause.

       (i)     a company, a director of which, has a
               substantial interest in the business or profession
               of the specified person; or
       (ii)    a firm, a partner of which, has a substantial interest
               in the business or profession of the specified
               person; or
       (iii)   an association of persons, a member of which, has
               a substantial interest in the business or profession
               of the specified person; or
       (iv)    a Hindu undivided family, a member of which, has
               a substantial interest in the business or profession
               of the specified person; or

       (v)     any director, of such a company or
       (vi)    any partner, of such a firm or

       (vii) any member, of such an association of persons; or

       (viii) any member, of such a Hindu undivided family; or

       (ix)    any relative of such a director of such company;
               or
       (x)     any relative of such a partner of such firm; or
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 11 of 33
       (xi)    any relative of such a member of such association
               of persons; or

       (xii) any relative of such a member of such Hindu
             undivided family.
                                      (highlight & underlining supplied)

6.     From a reading of clause (a) (vi) of the Explanation to sub-
section (1) to section 245C, it emerges that, if,

       (i)     the specified person (being a company), that
               company; or
       (ii)    the specified person (being a firm), that firm; or
       (iii)   the specified person (being an association of
               persons), that association; or
       (iv)    the specified person (being a Hindu undivided
               family), that family; or

       (v)     any director          of     such     specified      person
               (company); or
       (vi)    any partner of such specified person (firm); or

       (vii) any member of such specified person (association
             of persons); or

       (viii) any member of such specified person (Hindu
              undivided family); or

       (ix)    any relative of such director of such a specified
               person (company); or





=====================================================================
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3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 12 of 33
       (x)     any relative of such partner, of such a specified
               person (firm); or

       (xi)    any relative of such member, of such specified
               person (association of persons); or

       (xii) any relative of such member, of such specified
             person (Hindu undivided family),
                                      (highlight & underlining supplied)


has a substantial interest, in the business and profession of any person,
who carries on a business or profession, then, such person is also
covered in the definition of related parties for the purposes of clause
(ia) of the Proviso to sub-section 1 to section 245C of the Act.

7.     So, under clause (a)(v), only if a director of the applicant
company has a substantial interest in the specified person (company),
then, the applicant company, its directors and relatives of its directors
qualify as related parties. A company would not qualify as a related
party merely because any relative of one of its directors has a
substantial interest in the specified person. However, under clause
(a)(vi), the applicant would qualify as a related party, if a specified
person (company) or any of its directors or any relative of any of its
directors have a substantial interest in the applicant.




=====================================================================
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3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 13 of 33
8.      The following flow chart would explain the provision
graphically:

        Clause (a)(v)

 Specified Person (SP)                                   Related Party (RP)     Qualified

 Director of SP                                          Director of RP         Qualified

 Relative of Director of                                 Relative of Director Qualified
 SP                                                      of RP

        Clause (a)(vi)

 Specified Person (SP), or                               Related Party (RP)     Qualified

 Director of SP, or                                      Director of RP           ------

 Relative of Director of SP                              Relative of Director     ------
                                                         of RP

        (where                signifies having a substantial interest)

9.      We may also note that the Explanation uses the word "means".
It is trite to say that when in the definition clause given in any statute
the word "means" is used, what follows is intended to speak
exhaustively. When the word "means" is used in the definition, to
borrow the words of Lord Esher, M.R. in Gough v. Gough [(1891) 2
QB 665 : 60 LJQB 726 : 65 LT 110] it is a "hard-and-fast" definition
and no meaning other than that which is put in the definition can be
assigned to the same. (Also see P. Kasilingam v. P.S.G. College of
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 14 of 33
Technology[1995 Supp (2) SCC 348 : AIR 1995 SC 1395] .) On the
other hand, when the word "includes" is used in the definition, the
legislature does not intend to restrict the definition: it makes the
definition enumerative but not exhaustive. That is to say, the term
defined will retain its ordinary meaning but its scope would be
extended to bring within it matters, which in its ordinary meaning may
or may not comprise.1 The words "means and includes", on the other
hand, indicate "an exhaustive explanation of the meaning which, for
the purposes of the Act, must invariably be attached to these words or
expressions". (See : Dilworth v. Commissioner of Stamps [1899 AC
99,    105-106        :    (1895-9)       All     ER     Rep      Ext     1576]       (Lord
Watson); Mahalakshmi Oil Mills v. State of A.P. [(1989) 1 SCC 164,
169 : 1989 SCC (Tax) 56].2 Therefore, the use of only the word
"means" without the word "includes" is clearly indicative of the
legislative intent that it is a hard and fast definition and no meaning
other than which is put in the definition can be assigned to the same.

10.     Further from a reading of clause (b) of the Explanation to sub-
section (1) to section 245C it emerges that a person shall be deemed to
have a substantial interest in a business or profession, where if, the
business or profession is carried on by a company, then on the date of
search, such person is the beneficial owner of shares (not being shares

1.     Bharat Coop. Bank (Mumbai) Ltd. v. Employees Union, (2007) 4 SCC 685 at page 695
2.     P. Kasilingam v. P.S.G. College of Technology, 1995 Supp (2) SCC 348 at page 355
=====================================================================
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entitled to a fixed rate of dividend, whether with or without a right to
participate in profits) carrying not less than twenty per cent of the
voting power and in any other case, such person is, on the date of
search, beneficially entitled to not less than twenty per cent of the
profits of such business or profession.

11.    Out of the 25 applicants, the following two applicants fall in the
category of specified persons:

       (i)     M/s Somya Constructions Pvt. Ltd.
       (ii)    M/s Rockland Hospitals Ltd.

12.    Now let us examine the facts of each of the petitions to
determine whether the respective petitioner qualifies as a related party
to the claimed specified person.

WP(C) 3557of 2014 (M/s Rockland Hotels Ltd.)
13.    The Petitioner claims itself to be a related party to M/s Somya
Constructions Pvt. Ltd. on the ground that both the companies are
substantially controlled by the Srivastava and the Bhandari families
and has common shareholding and directorship. It is also contended
that more than 20% of the equity share capital of the specified person
M/s Somya Constructions Pvt. Ltd. was held by Mrs. Mala Srivastava
wife of Mr. Rajesh Srivastava a director of the petitioner. It claims to
be covered by clause (a)(v) of the explanation.

=====================================================================
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14.    The Settlement Commission, qua the petitioner, by the
impugned judgment has held as under:
               "The matter has been examined. Explanation (a)(v)
               as referred to above makes a company a related
               person if any of its Directors has a substantial
               interest in the business of a specified person. It is
               seen that none of the Directors of Applicant
               Company has any shareholding in M/s. Somya
               Constructions Pvt. Ltd. and accordingly clause (v)
               is not attracted. For purposes of explanation (a)(v),
               it is necessary that any Director of the applicant
               company should have substantial interest in the
               business of specified person. Holding of shares by
               the relatives of such Director either singly or
               jointly is of no significance. Accordingly, holding
               of more than 20% shares of M/s. Somya
               Constructions Pvt. Ltd. by Smt. Mata Srivastava
               and Smt. Sushmita Srivastava is of no significance.
               As no Director of the applicant, company holds
               any substantial interest in the business of M/s.
               Somya Constructions Pvt. Ltd., it cannot be said
               that the conditions of explanation (a)(v) are
               satisfied. We are of the opinion that M/s. Rockland
               Hotels Ltd. is not related to M/s. Somya
               Constructions Pvt. Ltd. From the examination of
               the application of M/s. Rockland Hospitals Ltd., it
               is seen that no person holds substantial interest in
               that company as the highest shareholding by any
               person is less than 20% of total shareholding. As
               no Director of the applicant company holds
               substantial interest in the business of M/s.
               Rockland Hospitals Ltd. applicant is also not
               related to M/s. Rockland Hospitals Ltd.
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
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               Accordingly, it is held that M/s. Rockland Hotels
               Ltd. is not a related person either to Somya
               Constructions Pvt. Ltd. or to M/s. Rockland
               Hospitals Ltd."
                                            (underlining supplied)

15.    Holding a substantial interest in the specified person, by a
director of the applicant, is a necessary qualifying condition. If the
legislature had intended to enlarge the ambit of the qualifying
condition by including a relative of the director it would have
specifically provided so. Wherever the relative of a director is
intended to be included, the legislature has specifically provided so.
As held in Bharat Coop. Bank Ltd. (Supra), use of word `means'
implies that it is a `hard and fast' definition. The court cannot enlarge
the ambit of the qualifying condition and read into it what is not so
specifically provided by the legislature.

16.    For M/s Rockland Hotels Ltd. to qualify as a related party, one
of its directors must hold a substantial interest in the specified person
M/s Somya Constructions Pvt. Ltd.. Admittedly that is not the case
and the said condition is not satisfied. None of the directors of M/s
Rockland Hotels Ltd. hold substantial interest in M/s Somya
Constructions Pvt. Ltd. Merely because a relative of one of the
directors of the applicant/petitioner is stated to be holding a
substantial interest in the specified person would be of no avail. We
do not find any infirmity with the reasoning of the Settlement
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 18 of 33
Commission. Since the conditions of Explanation (a)(v) are not
satisfied, the Writ Petition is thus liable to be dismissed.

WP(C) 3559/2014 (M/s. Avee Medi Surgical Pvt. Ltd.)
WP(C) 3752/2014 (M/s. Akhil Meditech Pvt. Ltd.)
WP(C) 3753/2014 (M/s. Hitesh Construction Pvt. Ltd.)
WP(C) 3754/2014 (M/s. Radhika Surgical Pvt. Ltd.)
WP(C) 3755/2014 (M/s. Kunal Medicare Pvt Ltd.)
WP(C) 3756/2014 (M/s. Glory Lifescience Pvt. Ltd.)
WP(C) 3758/2014 (M/s. Lipi Finstock Ltd.)
WP(C) 3759/2014 (M/s. Himanshu Medicare Pvt. Ltd.)
WP(C) 3761/2014 (M/s. Aesthetica Enterprises Pvt Ltd.)

17.    The Settlement Commission qua the petitioners hereinabove
has held as under:
               "The AR claims that clause (vi) of the Explanation
               is attracted in respect of these 9 companies.
               Examination of the explanation (a)(vi)(B) reveals
               that it is applicable to a person where the specified
               person being a company itself holds or any
               Director of such company holds or any relative of
               such Director holds a substantial interest in the
               business or profession of that person. In other
               words, first it is necessary to find out who are the
               persons who hold substantial interest in the
               business of applicants.

               Examination of the application of M/s. Avee Medi
               Surgical Pvt. Ltd. reveals that its total
               shareholding is of 4,63,922 shares, with M/s.
               Rockland Pvt. Ltd. holding 4,41,422 shares which
               comes to 95% of shares. Thus, M/s. Rockland Pvt.
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 19 of 33
               Ltd. is the only shareholder having substantial
               interest in M/s. Avee Medi Surgical Pvt. Ltd.
               Neither M/s. Rockland Hospitals Ltd. nor any of
               its Directors or their relative hold any substantial
               interest in the applicant company.

               Examination of the application of M/s. Radhika
               Surgical Pvt. Ltd. reveals that its total
               shareholding is of 18,72,500 shares, with M/s.
               Rockland Pvt. Ltd. holding 18,62,500 shares which
               comes to 99% of shares. Thus, M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
               Hospitals Ltd. nor any of its directors or their
               relative hold any substantial interest in the
               applicant company.

               Examination of the application of M/s. Akhil
               Meditech Pvt. Ltd. reveals that its total
               shareholding is of 17,73,750 shares, with M/s.
               Rockland Pvt. Ltd. holding 17,61,250 shares which
               comes to 99% of shares. Thus, M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
               Hospitals Ltd. nor any of its Directors or their
               relative hold any substantial interest in the
               applicant company.

               Examination of the application of M/s. Hitesh
               Construction Pvt. Ltd. reveals that its total
               shareholding is of 4,44.847 shares, with M/s.
               Rockland Pvt. Ltd. holding 4,34,847 shares which
               comes to 97% of shares. Thus, M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 20 of 33
               Hospitals Ltd. nor any of its Directors or their
               relative hold any substantial interest in the
               applicant company.

               Examination of the application of M/s. Himanshu
               Medicare Pvt. Ltd. reveals that its total
               shareholding is of 18,72,500 shares, with M/s.
               Rockland Pvt. Ltd. holding 18,62,500 shares which
               comes to 99% of shares. Thus, M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
               Hospitals Ltd. nor any of its Directors or their
               relative hold any substantial interest in the
               applicant company.
               Examination of the application of M/s. Aesthetica
               Enterprises Pvt. Ltd. reveals that its total
               shareholding is of 15,57,500 shares, with M/s.
               Rockland Pvt. Ltd. holding 15,47.500 shares which
               comes to 99% of shares. Thus. M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
               Hospitals Ltd. nor any of its Directors or their
               relative hold any substantial interest in the
               applicant company.

               Examination of the application of M/s. Kunal
               Medicare Pvt. Ltd. reveals that its total
               shareholding is of 20,04,250 shares, with M/s.
               Rockland Pvt. Ltd. holding 19,94,250 shares which
               comes to 99%,of shores. Thus, M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
               Hospitals Ltd. nor any of its Directors or their

=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 21 of 33
               relative hold any substantial interest in the
               applicant company.

               Examination of the application of M/s. Glory
               Lifescience Pvt. Ltd. reveals that its total
               shareholding is of 16,74,750 shares, with M/s.
               Rockland Pvt. Ltd. holding 16,64,750 shares which
               comes to 99% of shares. .Thus, M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
               Hospitals Ltd. nor any of its directors or their
               relative hold any substantial interest in the
               applicant company.

               Examination of the application of M/s. Lipi
               Finstock Pvt. Ltd. reveals that its total
               shareholding is of 15,58,200 shares, with M/s.
               Rockland Pvt. Ltd. holding 15,57,400 shares which
               comes to 99% of shares. Thus, M/s. Rockland Pvt.
               Ltd. is the only shareholder having substantial
               interest in this company. Neither M/s. Rockland
               Hospitals Ltd. nor any of its Directors or their
               relative hold any substantial interest in the
               applicant company.

               Accordingly, it is clear that in all 9 companies,
               M/s. Rockland Pvt. Ltd. is the only shareholder-
               having substantial interest. Explanation (a)(vi)(B)
               requires that either M/s. Rockland Hospitals Ltd
               (specified person) should hold substantial interest
               in the applicant companies or any of its Directors
               or any relative of Directors should hold substantial
               interest in the applicant company. The examination
               made above reveals that M/s. Rockland Hospitals
               Ltd. does not hold any shares in these 9
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 22 of 33
               companies. None of the Directors of M/S.
               Rockland Hospitals Ltd. hold any substantial
               interest in these 9 companies. None of the relatives
               of the directors of Rockland Hospitals Ltd. hold
               any substantial interest in these 9 companies. M/s.
               Rockland Pvt. Ltd. is neither a Director in M/s.
               Rockland Hospitals Ltd. nor a relative of
               Directors. Thus, conditions mentioned in
               explanation (a)(vi)(B) are not satisfied.
               Accordingly, it cannot be held that the 9 applicant
               companies are related to M/s. Rockland Hospitals
               Ltd.

               Regarding the issue of beneficial shareholding,
               explanation (b) to proviso below section 245C(1)
               defines when a person is deemed to have a
               substantial interest. In the case of a company, sub-
               clause (A) defines that a person who is a beneficial
               owner of shares (not being shares entitled to a
               fixed rate of dividend, whether with or without a
               right to participate in the profits), carrying not less
               than 20% of voting power, is deemed to have
               substantial interest. So the section envisages a
               situation where a shareholder has a right to
               participate in the profits and has voting power. It is
               only the equity shareholders who are normally
               entitled to voting power and participate in the
               profits. Such an equity shareholder may hold
               shares in his own name or in the name of his
               relatives or associates, but be the beneficial owner
               of such shares. In such a situation, the
               shareholding of such a person both in his own
               name or in the name of other persons will be
               clubbed to find out whether he has 20% voting
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 23 of 33
               power or not. But in the case of above 9 applicant
               companies, Rockland Pvt. Ltd. holds substantial
               interest, 3 directors of Rockland Hospitals Ltd. are
               claimed to have substantial interest in Rockland
               Pvt. Ltd. individually. The issue is whether these 3
               directors have substantial interest in the cases of 9
               applicant companies also. These 3 Directors either
               do not have shareholdings in these 9 companies or
               their shareholding in less than 9%. Consequently,
               voting power of these Directors in 9 applicant
               companies is either zero or of a percentage less
               than 20%. Rockland Pvt. Ltd. is an independent
               company and exists on its own as a legal entity.
               The company is a legal person entirely, different
               from its shareholders even if there is only one
               shareholder. Rights and liabilities of a company
               are different from the rights and liabilities of its
               shareholders. Participation in profits of Rockland
               Pvt. Ltd. in 9 applicant companies is not the same
               thing as the participation in profits of 9 applicant
               companies by three Directors. The dividend, which
               may accrue to Rockland Pvt. Ltd. from the
               shareholding in the above 9 applicant companies
               does not pass to the shareholders of Rockland Pvt.
               Ltd. automatically. Shareholders of Rockland Pvt.
               Ltd. having right of participation in profits of
               Rockland Pvt. Ltd., have no right of participation
               in profits of the companies in which Rockland Pvt.
               Ltd. has a substantial interest. Thus, the Directors
               of Rockland Hospitals neither participate in the
               profits of the above 9 applicant companies nor
               have any voting power in these companies. We are
               accordingly of the view that the definition of
               beneficial owner of the share in explanation (b)
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 24 of 33
               applies only to shares held in a company by a
               person either in his own name or in the name of
               other, persons. But this does not apply to the
               situation in the applicant's case, we are accordingly
               of the view that even if 3 Directors of Rockland
               Hospitals Ltd. holds substantial interest in
               Rockland Pvt. Ltd. and Rockland Pvt. Ltd. in turn
               holds substantial interest in 9 applicant companies,
               it cannot be said that 3 Directors hold substantial
               interest in 9 applicant companies.

               The argument that M/s. Rockland Pvt. Ltd. holds
               substantial interest in these 9 companies and the
               Directors of M/s. Rockland Hospitals Ltd. hold
               practically the entire share capital of M/s.
               Rockland Pvt. Ltd. and therefore these 9
               companies are related to Rockland Hospitals Ltd.
               is to be rejected as it is without any substance. The
               definition of related person has been provided in
               the Explanation (a) to proviso below section
               245C(1). The words used are "the applicant, in
               relation to specified person referred to in clause
               (ia), means". Thus, the definition provided in
               Explanation is a complete definition and does not
               provide for any inclusive definition. Thus, if any
               person satisfies any of the conditions mentioned in
               clauses (i) to (vi), that person would be a related
               person. If any person does not satisfy any of these
               conditions, that person would not be a related
               person. In the case of applicant, Rockland Pvt. Ltd.
               holds substantial interest in the applicant
               companies. But M/s. Rockland Hospitals Ltd., any
               of its Directors or any relative of Director does not
               hold substantial interest in the applicant company.
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 25 of 33
               Accordingly, conditions of clause (vi) are not
               satisfied. None of the Directors of these 9
               companies holds substantial interest in M/s.
               Rockland Hospitals Ltd., a specified person.
               Accordingly, conditions of clause (v) of the
               Explanation are also not satisfied. Clause (i) and
               (iii) of Explanation are not applicable. Similarly,
               clauses (ii) and (iv) are also not applicable. Thus,
               under the facts and circumstances of the case, there
               is no relationship of these 9 companies with M/s
               Rockland Hospitals Ltd. within the meaning of
               Explanation (a) to proviso below section 245C(1).
               Accordingly, these 9 companies cannot be treated
               as related persons."
                              (Highlight and underlining supplied)

18.    Applying the parameters of clauses (a)(v) and (a)(vi), only if a
director of the petitioner companies has a substantial interest in the
specified person (company), then, the petitioner companies, their
directors and relatives of their directors qualify as related parties. The
Petitioner companies would not qualify as a related party merely
because any relative of one of its directors has a substantial interest in
the specified person. Further, the petitioner companies would qualify
as a related party, if a specified person (company) or any of its
directors or any relative of any of its directors have a substantial
interest in the petitioner companies.

19.    In the case of the abovementioned 9 petitioners clause (a)(vi) is
stated to be applicable and they are stated to be related parties to M/s
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 26 of 33
Rockland Hospitals Ltd. Therefore the specified person (i.e. M/s
Rockland Hospitals Ltd.) or any of its directors or any relative of any
of its directors should have a substantial interest in the petitioner
companies. Admittedly, neither M/s. Rockland Hospitals Ltd. nor any
of its directors or their relatives hold any substantial interest in the
applicant companies. In all the 9 petitioners, M/s. Rockland Pvt. Ltd
and not the specified person (M/s Rockland Hospitals Ltd.) is the only
shareholder having substantial interest. Though, 3 directors of the
specified person (M/s Rockland Hospitals Ltd.) claim to have
substantial interest in Rockland Pvt. Ltd. Individually, however, these
3 Directors either do not have shareholdings in the 9 petitioners or
their shareholding is less than 9%. Consequently, these Directors do
not have a substantial interest in either of the 9 petitioners. The plea
that the directors of the specified person (M/s Rockland Hospitals
Ltd.) hold an indirect share in the Petitioner company, i.e. through
M/s Rockland Pvt. Ltd. and is thus qualified, in our view, is not
sustainable in as much as we have held that the use of the word
"means" signifies the intention of the legislature to make the
definition "hard and fast". If the intention of the legislature had been
to permit scope of the same to be enlarged to include having
substantial interest indirectly through another entity, the legislature
would have specified so as has been done in the case of Explanation
(b)(A).
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 27 of 33
20.    Beneficial owner of the share as referred to in Explanation
(b)(A) refers to shares held in a company by a person either in his own
name or in the name of other, persons. A corporate entity is a separate
legal entity. Merely because a director of the specified person holds
shares in a company which in turn holds shares in the Petitioner would
not make the director the beneficial holder of the shares of the
Petitioner and thus qualify the petitioner as a related party. We do not
find any infirmity with the reasoning of the Settlement Commission.
Since the conditions of Explanation (a)(vi)(B) are not satisfied, these
writ petitions are thus liable to be dismissed.

WP(C) 3558 of 2014 (M/s Mona Infotech Pvt. Ltd.)
WP(C) 3757 of 2014 (M/s. Umesh Pharmaceuticals Pvt. Ltd.)
WP(C) 3762 of 2014 (M/s. Aditya Medicos Pvt Ltd.)
21.    The Settlement Commission qua the petitioners hereinabove
has held as under:
               "The AR has referred to clause (vi) of the
               Explanation to apply in respect of these 3
               companies. Examination of the explanation
               (a)(vi)(B) reveals that it is applicable to a person
               where the specified person being a company itself
               holds or any Director of such company holds or
               any relative of such Director holds a substantial
               interest in the business or profession of that
               person. In other words, first it is necessary to find
               out who are the persons who hold a substantial
               interest in the business of applicants.




=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 28 of 33
               Examination of the application of M/s. Mona
               Infotech Pvt. Ltd. reveals that its total
               shareholding is of 6,74,875 shares. 20% of holding
               comes to 1,34,975 shares. The details of
               shareholding filed with the application reveals that
               there is no shareholder holding 20% of shares.
               Thus there is no person having substantial holding
               in M/s. Mona Infotech Pvt. Ltd.
               Examination of application of M/s. Aditya
               Medicos Pvt. Ltd. reveals that total shareholding
               of this company is of 7,62,375 shares. 20% of
               shareholding comes to 1,52,475. Details of
               shareholding have been filed with the settlement
               application. Examination of the shareholding
               details reveals that there is no shareholder having
               substantial interest in this company.

               Examination of the application of M/s. Umesh
               Pharmaceuticals Pvt. Ltd. reveals that the total
               shareholding of the company is of 7,40,625 shares
               20% of shareholding comes to 1,48,125 shares.
               Examination of the shareholding details provided
               in the settlement application reveals that there is no
               shareholder having substantial shareholding in this
               company.

               Accordingly, it is clear that in none of the 3
               companies there is any shareholder having
               substantial interest. Explanation (a)(vi)(B) requires
               that either M/s. Rockland Hospitals Ltd. (specified
               person) should hold substantial interest in the
               applicant companies or any of its Directors or any
               relative of Directors should hold substantial
               interest in the applicant company. As there is no
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 29 of 33
               person holding substantial interest in these 3
               companies, conditions mentioned in explanation
               (a)(vi)(B) are not satisfied. Accordingly, it cannot
               be held that the above 3 applicant companies are
               related to M/s. Rockland, Hospitals Ltd.

               The argument of AR that cumulative holding of
               the Directors of M/s. Rockland Hospitals in the
               above companies exceeds 20% and therefore they
               have substantial interest, cannot be accepted. The
               provisions of Explanation (a) very clearly define
               the relationship based on any Director or his
               relative having substantial interest. The provisions
               of the Explanation do not provide that cumulative
               holding of 2 or more Directors can be taken into
               account for purpose of establishing the substantial
               interest. Explanation (b) provides definition of a
               person having a substantial interest in the business
               or profession of another person. This definition is
               applicable in respect of a person and not in respect
               of 2 or more persons having cumulative interest.
               Had the intention of Legislature been to provide
               for cumulative holding of 2 or more persons to
               decide whether they have substantial interest, the
               definition of substantial interest and also the
               definition of related person as provided in
               Explanation (a) and (b) would have suitably
               provided for it. The present definition is very
               clearly applicable only in respect of a person
               having a substantial interest. Two or more persons
               cumulatively having substantial interest cannot be
               read into the present definition. We accordingly
               find no merit in the argument that cumulative
               holding of Directors should be taken into account
=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 30 of 33
               to determine whether they have substantial interest
               in the business of applicant. As mentioned above,
               conditions mentioned in Explanation (a)(vi)(B) are
               not satisfied and therefore we hold that the above 3
               applicant companies are not related to M/s.
               Rockland Hospitals Ltd. Since, tax payments in
               these 3 applications are less than Rs. 50 lakh and
               therefore these cases cannot be admitted u/s
               245D(1)."
                               (highlight and underlining supplied)

22.    In the case of the abovementioned 3 petitioners also clause
(a)(vi) is stated to be applicable and they are stated to be related
parties to M/s Rockland Hospitals Ltd. Therefore the specified person
(i.e. M/s Rockland Hospitals Ltd.) or any of its directors or any
relative of any of its directors should have a substantial interest in the
petitioner companies. Admittedly, neither M/s. Rockland Hospitals
Ltd. nor any of its directors individually or their relatives individually
hold any substantial interest in the applicant companies.

23.     The finding of the Settlement Commission is that there is no
shareholder having substantial interest in this company i.e. there is no
shareholder having more than 20% shares in the Petitioner companies.
As there is no person holding substantial interest in these 3
companies, conditions mentioned in Explanation (a)(vi)(B) are not
satisfied. The words used are "any director of such company" and
"any relative of such director". If the intention of the legislature of

=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 31 of 33
had been to cumulatively consider the shareholding of more than one
directors or more than one relative of such directors to constitute
substantial interest, then it would have specified so. Since the
legislature has not provided for clubbing of the shareholding of
different persons to determine substantial interest, the same cannot be
considered. The fact that the legislature has catered for a situation of
beneficial ownership of shares shows that the omission of clubbing of
shareholding is not unintentional.

24.    The alleged fact that four directors of the specified person (M/s
Rockland Hospitals Ltd.) hold 50% shares of the petitioner companies
does not satisfy the condition. The requirement is that an individual
director must hold more than 20% shares, which apparently is not the
case. The further plea that the family members of Srivastava family
and the Bhandari Family hold more than 20% of the shares of the
specified person (M/s Rockland Hospitals Ltd.) and the petitioner
companies and further that the petitioner companies have invested
100% share capital in the specified person (M/s Rockland Hospitals
Ltd.)is of no avail. As elucidated hereinabove, under clause (a)(v),
only if a director of the Petitioner companies had a substantial interest
in the specified person (M/s Rockland Hospitals Ltd.), then, the
petitioner companies, their directors and relatives of their directors
qualify as related parties.           Under clause (a)(vi), the petitioner

=====================================================================
WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 32 of 33
companies would qualify as related parties, if the specified person
(M/s Rockland Hospitals Ltd.) or any of its directors or any relative of
any of its directors had a substantial interest in the petitioner
companies. This is clearly not the case. Thus, we do not find any
infirmity with the reasoning of the Settlement Commission. These
writ petitions are also liable to be dismissed.

25.    In view of the above, all the 13 Writ Petitions are dismissed,
leaving the parties to bear their own costs.


                                            SANJEEV SACHDEVA, J.


OCTOBER 20, 2015                           BADAR DURREZ AHMED, J.
HJ




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WP(C) 3557/2014, 3558/2014, 3559/2014, 3752/2014, 3753/2014, 3754/2014,
3755/2014, 3756/2014, 3757/2014, 3758/2014, 3759/2014, 3761/2014 & 3762/2014 33 of 33

 
 
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