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2016 (4) TMI 1058

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..... Act and Section 53 of the 1994 Act. In the hands of a transferee for consideration without notice, such charge would not prevail over the dues of secured creditors who are subsequent transferees without notice. Since this question was not urged, the Court is of the opinion that the parties’ right to raise the contentions in this regard should also be kept open. In the light of the foregoing discussion, the impugned decision is hereby set aside and the matter remitted on the above question, i.e. whether the statute reserved for the assent of the President, specifically drew to the notice of the President (i.e. the Central Government) the issue of repugnancy between the provisions, i.e. Section 33-C of the 1958 Act and Section 53 of the 1994 Act on the one hand, and Section 529A and Section 530 of the 1956 Act on the other. - CO. APP. 27/2013, CO.APP. 28/2013, C. M. APPL. 7624/2013 - - - Dated:- 7-4-2016 - S. Ravindra Bhat And Deepa Sharma, JJ. For the Petitioner : Sh. R.D. Makheeja, Advocate, Sh. Buddy. A. Ranganadhan and Sh. D.V. Raghuvanshi, Advocate, Sh. Jaswinder Singh, Advocate, Sh. Rajiv Bahl, Advocate For the Respondent : Ms. Sunita Arora, Advocate OR .....

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..... Act of 1994 (under which the appellant is claiming his right) clearly specifies that the tax liability will be subject to the provisions of Section 530 of the Companies Act; Section 530 of the Companies Act has to be read subject to the provisions of Section 529-A of the said Act. There appears to be no conflict between the State Act and the Central Act. That apart, even if there is a conflict between a State legislation and a Central legislation, the Central legislation must prevail. See:- (2012) 7 SCC 106 State of Kerala and Others Vs. Mar Appraem Kuri Company Ltd. 4. Sh. R.D. Makheeja, learned counsel for the State relies upon Section 33-C of the 1958 Act and Section 53 of the 1994 Act. Besides, reliance is also placed upon a judgment of the Supreme Court in State of Madhya Pradesh and Ors. v. State Bank of Indore and Ors. 2002 (126) STC 1 (SC) which inter alia held as follows: Section 33-C creates a statutory first charge that prevails over any charge that may be in existence. Therefore, the charge thereby created in favour of the State in respect of Sales Tax dues of the second Respondent prevailed over the charge created in favour of the Bank in respect of the loan .....

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..... condition was not followed, the question of State s dues acquiring primacy and being ranked with those secured creditors did not arise in this case. Analysis and conclusion: 7. As is evident from the above discussion, the questions which arises for decision is narrow. The State s Sales Tax dues and the extent are not in dispute. The OL has verified them. The only question is whether the State s claim that it can legitimately rank as a secured creditor in line with others is valid. 8. The relevant provisions of the Companies Act are as follows: 529A. OVERRIDING PREFERENTIAL PAYMENTS (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company - (a) workmen's dues; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions .....

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..... in the case of any one claimant, [exceed such sum as may be notified by the Central Government in the Official Gazette.] (3) Where any compensation under the Workmen's Compensation Act, 1923 (8 of 1923) is a weekly payment, the amount due in respect thereof shall, for the purposes of clause (e) of sub-section (1), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the said Act. (4) Where any payment has been made to any employee of a company, - (i) on account of wages or salary ; or (ii) to him, or in the case of his death, to any other person in his right, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee or other person in his right, would have been entitled to priority in the winding up has been diminished by reason of the payment having been made. (5) The foregoing debts shall - (a) rank equally amon .....

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..... winding up order, unless in either case the company had commenced to be wound up voluntarily before that date ; and (ii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company. (9) This section shall not apply in the case of a winding up where the date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913 (7 of 1913) occurred before the commencement of this Act, and in such a case, the provisions relating to preferential payments which would have applied if this Act had not been passed, shall be deemed to remain in full force. 9. The State relies primarily upon two provisions. Section 33-C of the 1958 Act (introduced with effect from 19.01.1976) reads as follows: 33-C. Tax to be first charge Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax and/or penalty, if any, payable by a dealer or other person under this Act shall be a first charge on the property of the dealer or such person. 10. It is not in dispute that the original enactment, i.e. 1958 Act as it stood when it was brought into force with .....

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..... etween the proposed State law and the earlier law made by the Parliament and the necessity of having such a law, in facts and circumstances of the matter, which is repugnant to a law enacted by the Parliament prevailing in a State. The word 'consideration' would manifest that after careful thinking over and due application of mind regarding the necessity of having State law which is repugnant to the law made by the Parliament, the President may grant assent. This aspect is further reaffirmed by use of word assent in Clause (2) which implies knowledge of the President to the repugnancy between the State law and the earlier law made by the Parliament on the same subject matter and the reasons for grant of such assent. The word assent would mean in the context as an expressed agreement of mind to what is proposed by the State. XXXXXX XXXXXX XXXXXX 16. Applying the aforesaid meaning of the word assent' and from the phraseology used in Clause (2) the object of Article 254(2) appears that even though the law made by the Parliament would have supremacy, after considering the situation prevailing in the State and after considering the repugnancy between the State .....

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..... nd provisions of enactments 'A' and 'B' without mentioning anything with regard to enactment 'C'. In this set of circumstances, if the assent of the President is obtained, the State law with regard to enactments 'A' and 'B' would prevail but with regard to 'C' there is no proposal and hence there is no 'consideration' or 'assent'. Proposal by the State pointing out repugnancy between the State law and of the law enacted by the Parliament is sine qua non for 'consideration and assent'. If there is no proposal no question of 'consideration' or 'assent' arises. For finding out whether 'assent' given by the President is restricted or unrestricted, the letter or the proposal made by the State Government for obtaining 'assent' is required to be looked into. XXXXXX XXXXXX XXXXXX 25. In our view, for finding out whether the assent was given qua the repugnancy between the State legislation and the earlier law made by the Parliament, there is no question of deciding validity of such assent nor the assent is subjected to any judicial review. That is to say, merely looking at the .....

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..... pality v. Haji Abdul AIR 1971 SC 1201, where it was held that provision for merely a charge would mean the enacting a charge without further providing its enforcement against the property charged. In the hands of a transferee for consideration without notice, such charge would not prevail over the dues of secured creditors who are subsequent transferees without notice. Since this question was not urged, the Court is of the opinion that the parties right to raise the contentions in this regard should also be kept open. At the same time, this Court observes that both Ahmedabad Municipality (supra) and a subsequent judgment of the Supreme Court in AI Champdany Industries Ltd. v. The Official Liquidator and Anr. [Civil Appeal No.1118/2009] which followed Ahmedabad Municipality (supra) have drawn a distinction between crown debt and the amounts due to a Municipality created by special statute. That apart, it seems a bit startling that the absence of some express words, the entire purpose and intent of the State in the creation of a charge is to be defeated in this manner. In any event, a final opinion in this regard is not expressed; as stated earlier, it is open to the parties to cont .....

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