TMI Blog1961 (4) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that the classification of the debts due to the respondents as preferential was made by a mistake and that the respondents had no justification to claim that their debts should be treated as secured ones under section 530 of the Companies Act, 1956. He has, therefore, filed this report praying for permission of this court to expunge the claims of the respondents in so far as they relate to preferential claims and for treating their claims as unsecured debts. The report is submitted by the official liquidator under rule 176 of the Companies (Court) Rules, 1959. Sub-rule (1) of rule 176 of the Companies (Court) Rules, 1959, so far as it is relevant for our purpose, reads as follows : "Expunging of proof. (1) If after the admission of a proof, the liquidator has reason to think that the proof has been improperly admitted or admitted by a mistake, he may apply to the court upon notice to the creditor who made the proof to expunge the proof or reduce its amount, as the case may be." Sub-rule (2) of rule 176 of the Companies (Court) Rules, 1959, is not necessary for our purpose. The above rule clearly enables the official liquidator in case of a mistake to apply to this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claim of this respondent cannot come within the category of "revenues, taxes and cesses". The only clause under which the respondent can press the claim for preferential treatment is on the ground that it is "rates" due from the company to the Central or a State Government. It is clear from the statements made by this respondent that it is on account of the trading activity of the Sericulture Department of the Government of Mysore that this debt became due to the third respondent. In my opinion it cannot be put under the category of "rates" due from the company to the State Government. If this respondent supplies silk worm eggs or seed cocoons or silk worm seeds to the mills, he did so just like any other customer, who was supplying silk worm eggs and seeds for the purpose of manufacture of silk goods. Merely because the third respondent happens to be a department of the Government of Mysore and is entrusted with the duty of promoting the silk industry in Mysore, it cannot by any stretch of imagination be said that this respondent is entitled to get a treatment different from the one that any customer, who was similarly placed and who supplied the silk worm eggs and seed cocoons, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faintly suggested that the department is carrying on the governmental activity and as such it is entitled to be treated as a State Government for the purpose of claiming preferential payments under section 530(1)( a ) of the Companies Act. I will now proceed to consider as to whether this claim of the Mysore State Electricity Board is tenable. The Electricity (Supply) Act created the Mysore State Electricity Board which is a body corporate having perpetual succession and a common seal with power to acquire and hold property both moveable and immoveable and shall by the said name sue and be sued in its own way. The members of the corporation as well as the chairman are appointed by the State Government. It is no doubt true that in the discharge of its functions the board shall be guided by such directions on the questions of policy as may be given to it by the State Government. In all other matters the board is autonomous. The object and purpose of the statute was the creation of a body autonomous in regard to its day-to-day administration and free from ministerial control except as to broad lines of policy and, therefore, outside plenary parliamentary surveillance save perhaps in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by a name having perpetual succession and a common seal with power to acquire and hold property both moveable and immoveable, and shall by the said name sue and be sued. The Central Electricity Authority shall be constituted by the Central Government, and the State Government shall constitute the State Electricity Board. In the discharge of the functions of the board it shall be guided by such directions on the questions of policy as may be given to it by the State Government. Thus it will be seem that the provisions of the Life Insurance Corporation Act and the Electricity (Supply) Act are more or less identical. In dealing with the Life Insurance Corporation Act their Lordships in Narayanaswamy v. Krishnamurthi AIR 1958 Mad. 343. , after referring to the judgment of Devlin J. in Bank Voor Handel v. Slatford [1952] 1 All ER 314 , and the judgment of Denning L. J. in Tamlin v. Hannaford [1950] 1 KB 18 , observed at page 355 as follows : ' (2) The Government created for themselves the sole ownership of that business, in other words, they excluded private enterprise from this field. For these purposes legislation was essential. So far there could be no dispute, nor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or entrusted by the Government with, the control or management of a municipal or local fund." It is urged by both the counsel for these respondents that the Mysore State Electricity Board and the Mysore Housing Board are legally entrusted by the Government with the control or management of the Municipal or local fund and as such they come within the definition of the local authority. But it was fairly conceded by the counsel appearing for the respondents that the Mysore State Electricity Board and the Mysore Housing Board are created by respective statutes and are independent corporations and there is no entrustment by the Government with the control or management of any local or municipal fund as such. So long as these respondents are not entrusted by the Government with the control or management of a municipal or local fund it is difficult for me to accept that these can be considered as "a local authority". The Privy Council had an occasion to consider a claim of a corporate body for a preferential claim on the ground that it came within the term of a local authority in Metropolitan Meat Industry Board v. Sheedy [1927] AC 899 . Their Lordships were dealing with the Meat In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes no doubt are public purposes but it is not a Government department nor do its powers fall within the province of Government." In Madras State Electricity Board v. Commissioner of Labour, Madras [1960-61] 19 FJR 465, 470 (Mad.), their Lordships observed in the course of their judgment as follows : "The learned counsel contended that the Electricity Board is an authority legally entitled to or entrusted by the Government with the control or management of local fund. Without deciding the question whether the term 'local fund' is applicable to the Electricity Board, we are of opinion that the statute has created the Electricity Board as an independent corporation and there is no entrustment by the Government with the control or management of any fund. This contention therefore fails." It is clear from the above discussion that neither the Mysore State Electricity Board nor the Mysore Housing Board is a local authority as defined in the General Clauses Act and there fore their claim for preferential payments under section 530(1)( a ) of the Companies Act on the basis that they are local authorities cannot at all be sustained. Relying upon sub-section (3) of section 3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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