TMI Blog2015 (12) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... r, IDA, Bidar, Karnataka, is hereby set aside. The Official Liquidator is permitted to take possession of the property belonging to the company (in liquidation) and proceed in accordance with law. The respondents 1 and 2 are directed to hand over books and records, if any with them, to the Official Liquidator. Insofar as the appointment of approved valuer is concerned, the Official Liquidator can move this court after taking possession of the property. - Company Application No. 1374/2014, Company Petition No. 32/2011 - - - Dated:- 6-10-2015 - H. Billappa, J. For the Appellants : Sri K S Mahadevan V Jayaram, Advs For the Respondents : Sri E R Indrakumar, Sr.Counsel for Sri E I Sanmathi, Adv., for R1 R2 ORDER The applicant/Official Liquidator has filed the application praying to remove the attachment and direct the respondents not to proceed with auction sale of the property of the Company (in liquidation) situated at No.24, Kolhar, IDA, Bidar, Karnataka, and direct the respondents to hand over possession of the property to the Official Liquidator and for other reliefs. 2. It is stated, M/s. Jupiter Bioscience Limited (in liquidation) was ordered to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty of the company (in liquidation) situated at No.24, Kolhar, IDA, Bidar, Karnataka has been attached under the provisions of the Income Tax Act, 1961 by the Tax Recovery Officer, Raichur and has initiated the process of auction sale of the said property. It is pending for valuation report. It is stated, the Income Tax Authorities have no locus standi to continue with the auction proceedings. 6. It is stated, under the provisions of section 441(2) of the Companies Act, 1956 the winding up commences from the time of presentation of petition for winding up. The properties and effects of the company (in liquidation) were deemed to be in the custody of the court from the date of presentation of the petition. Therefore, the respondent may be restrained from alienating the property of the company (in liquidation). 7. Further, it is stated, the books and records of the company are also stored at No.24, Kolhar, IDA, Bidar, Karnataka. If the Income Tax authorities are allowed to sell the property, the claims cannot be settled for want of proper records. 8. It is stated, the properties and assets of the company (in liquidation) are required to be valued through Government appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire assets of the Company is deemed to be in the custody of the court from the date of commencement of the winding up proceedings. The respondents are entitled to claim their dues just like any other claims. It will be considered in accordance with law. For the present, the attachment needs to be raised. When the company is under liquidation, the Income Tax Authorities or any other Authority cannot proceed with the auction sale of the property. If there is any income tax due, the respondents can make a claim and it will be considered in accordance with the provisions of the Companies Act. Unless the attachment is raised, the Official Liquidator cannot proceed further. Therefore, the attachment in respect of property No.24, Kolhar, IDA, Bidar, Karnataka, may be raised and the property may be handed over to the Official Liquidator. 12. As against this, the learned counsel for the respondents submitted that the company in liquidation is due in a sum of ₹ 71.23 crores excluding the mandatory interest. The properties were attached prior to the winding up order. The Income Tax Authorities cannot be restrained from recovering the tax due. In response to the communication of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment on Unit-I property situated at No.24, Kolhar, IDA, Bidar, Karnataka. In response to that, the representative of the Income Tax Authorities has visited the office of the Official Liquidator on 23.7.2014 and informed about the pending tax liability of the company in liquidation to the tune of Rs. .71.23 crores and also regarding attachment of Unit 1 belonging to the company (in liquidation) situated at No.24, Kolhar, IDA, Bidar. It is stated, the Tax Recovery Officer, Raichur, has initiated process of auction sale of the said property. The proceedings are pending for want of valuation report. Therefore, the Official Liquidator has prayed to raise the attachment and direct the respondents not to proceed with the auction sale. When once the company is in liquidation, it is deemed that the properties are in the custody of the court. 16. In the present case, the winding up order has been passed on 10.1.2014 and Liquidator has been appointed. The claim of the respondents can be only in terms of section 178 of the Income Tax Act and sections 529, 529A and 530(1)(a) of the Companies Act. The Hon ble Supreme Court in Imperial Chit Funds (P) Limited Vs. Income Tax Officer reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, the amount set aside or earmarked for payment of the tax. For, reading sub-sections (2), (3) and (4) of that section together there can be no doubt that what the section does is to create a first charge on the amount set aside by sub-section (3) thereof for payment of the tax that might be admitted to proof. To say as the liquidator has done that the amount is set aside only for the purpose of paying the dividends that might be declared in respect of the tax liability and not the entire liability as proved in the winding up, so that the section serves only the limited purpose of ensuring that the assets of the company are not distributed beyond recall without reserving sufficient funds for the payment of dividends in respect of the tax liability which might not yet have been determined, and, therefore, not proved, is hardly in keeping with the wording of the section defective though it be. Subsection (2) of the section, it may be noted, speaks of the tax payable by the company, and, sub-section (4), of the payment of the tax on behalf of the company, not of the dividends payable in respect of the tax liability. What the section contemplates is the payment of the tax eventual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up by the company Court - an idea suggested in the judgment of Actg CJ, Raman Nayar, confirmed by the Division Bench. The Andhra Pradesh High Court in the decision reported in ITO Vs Official Liquidator (1975) 101 ITR 470; (1976) 46 Comp Cas 46 has taken a similar view. We are of the opinion that the judgment of the learned Single Judge of the Kerala High Court in ITO Vs Indian Traders Bank Ltd (1968) KLT 595, affirmed in A.S.No. 225 of 1968 and approved by the Full Bench in the judgment under the appeal as also the decision of the Andhra Pradesh High Court in ITO Vs Official Liquidator (1975) 101 ITR 470; (1976) 46 Comp Cas 46; lay down the law correctly. On a total view of the relevant statutory provisions, it appears to us, that the Income-Tax Department, is treated as a secured creditor. The decisions of the Mysore, Calcutta, Rajasthan, Gujarat and the Delhi High Courts have failed to give due importance to the legislative history and background that led to the enactment of the section and the crucial words occurring in section 178(3) and 178(4) of the Income-Tax Act to the effect that the official liquidator shall set aside the amount notified by the Income-T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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