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2014 (9) TMI 1259 - HC - VAT and Sales TaxDistribution of the sale proceeds of the assets of the company under liquidation - Direction to return the amounts received - priority over mortgage of the same property - Application of insolvency rules in winding up of insolvent companies - Section 17 of the Central Sales Tax Act, 1956, pari materia to the provisions of Section 178 of the Income Tax Act - HELD THAT:- The bulk of the dues claimed by the State applicant is under the Central Sales Tax Act to the tune of Rs. 37,24,377.30 plus interest thereon and a lesser amount of Rs. 1,40,576.68 under the Bihar Finance Act, 1981. The dues relate to the period starting from the financial year 1993-94 till 1996-97 for which certificate cases were filed in the year 2000 and 2001 by the Sales Tax Department. So far as the dues under the Central Sales Tax Act are concerned, the State-applicant essentially relies upon the decision of the Apex Court in IMPERIAL CHIT FUNDS (P.) LTD. VERSUS INCOME-TAX OFFICER [1996 (3) TMI 397 - SUPREME COURT]. What was held in the said decision was that the provision of Section 178 of the Income Tax Act, which is pari materia with the provision of Section 17 of the Central Sales Tax Act, 1956, goes beyond the provisions of Section 530(1)(a) of the Companies Act. It is evident that the question of setting apart any amount would only arise out of the sale of any assets which are not the asset of secured creditor who has not relinquished the security. Thus it is no part of the duty of the O.L. to set apart any amount realized out of the assets which are the security of a secured creditor who has not relinquished the security and proceeded to realize the same. In such case the role of the O.L. is only to see that the pari passu charge of the workmen on such assets to be realized by the secured creditors are protected for the purpose of realizing the workmen’s dues - In the present winding-up proceedings it is evident that the secured creditors have not relinquished their security but have proceeded to realize the same under the aegis of the Liquidator who was acting essentially for protecting the interest of the workmen and for recovery of the expenses for the preservation of the said secured assets. It is thus evident that the secured creditors in terms of the provisions of the Companies Act had merely obtained proportionate interest in the security and neither Section 17 of the Central Sales Tax Act nor Section 530(1)(a) of the Companies Act has the effect of overriding the interest of the secured creditors and the workmen in terms of Section 529A read with Section 529 of the Companies Act over such secured assets. This Court does not find any force in the submission of learned counsel for the State-applicant - Application dismissed.
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