TMI Blog1969 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961, in respect of the assessment years 1965-66, 1966-67 and 1967-68. All these notices are in respect of periods subsequent to the date of the winding-up order. These notices have all been issued by the income-tax department (which is also hereinafter referred to as the department) without obtaining any leave of the court. The official liquidator has taken out the present summons, complaining to the court about the conduct of the department in issuing the said notices without obtaining leave of the court under section 446 of the Companies Act, 1956, and has asked " that the proceedings under sections 142(1) and 148 of the Income-tax Act, 1961, initiated by the income-tax authorities against the company be stayed ". Section 142 of the Income-tax Act, 1961, deals with enquiry before assessment and section 142(1) provides as follows : " (1) For the purpose of making an assessment under this Act, the Income-tax Officer may serve on any person who has made a return under section 139 or upon whom a notice has been served under sub-section (2) of section 139 (whether a return has been made or not) a notice requiring him, on a date to be therein specified,- (i) to produce, or cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the 30th day of June of the assessment year, whichever is later ; (b) in the case of every other person, before the 30th day of June of the assessment year : Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return-- (i) in the case of any person whose total income includes any income, from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in clause (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest ; (ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year, up to the 31st day of December of the assessment year without charging any interest ; and (iii) up to any period falling beyond the dates mentioned in clauses (i) and (ii), in which case, interest at six per cent. per annum shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under subsection (1). (4) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may before the assessment is made furnish the return for any previous year at any time before the end of four assessment years from the end of the assessment year to which the return relates, and the provisions of sub-clause (iii) of the proviso to subsection (1) shall apply in every such case. (5) If any person having furnished a return under sub-section (1) or sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made. (6) The prescribed form of the returns referred to in sub-sections (1), (2) and (3) shall, in the case of an assessee engaged in business or profession, require him to furnish particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by or against the company (including claims by or against any of its branches in India) ; (c) any application made under section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of the company ; Whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding-up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960). (3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court. (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court. The department contends that it is not necessary to obtain any leave from the court to enable the department to com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his contention the official liquidator has referred to the decision in the case of Amrita Lal Kundu v. Amkul Chandra, and also to the decision in the case of Commissioner of Income-tax v. Officer Liquidator of the Agra Spinning and Weaving Mills Co. Ltd. He has also drawn my attention to the definition of a " principal officer " as given in section 2(12) of the Income-tax Act of 1922, and in section 2(35) of the Income-tax Act, 1961, and he contends that the official liquidator cannot be considered to be a " principal officer " within the meaning of the said definition. He has contended that a company in liquidation is not liable to any assessment by the department. It is his contention that the company is only liable to pay the debts and liabilities of the company which existed on the date of the winding up of the company and it is also his contention that there cannot be any question of any assessment to tax in respect of any period subsequent to the winding up order, as the company ceases to carry on business after it is ordered to be wound up. He has argued that as the official liquidator is not an officer of the company and is only an officer of the court, no proceedings can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst obtained. He had argued that, in any event, in view of the express provision contained in section 446 of the Companies Act, leave of court is clearly necessary and the assessment proceeding cannot be commenced by the department without obtaining such leave. It is his contention that the proceeding sought to be taken by the department in the matter of assessment against the company is a legal proceeding within the meaning of section 446(1) of the Companies Act, 1956. In support of his contention, he has referred to the decision of the Federal Court in the case of Governor-General in Council v. Shiromani Sugar Mills Ltd. He has also referred to the decision of the Bombay High Court in the case of In re Colaba Land and Mills Co. Ltd. (In Liquidation) Official Liquidator v. V. M. Deshpand. The official liquidator relies very strongly on this decision, as the very same question had come up for consideration, and the learned judge had upheld the contention of the official liquidator and held that leave of court by the department was necessary. The Bombay decision completely supports the case of the official liquidator. The official liquidator, naturally, places particular reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case. He has submitted that whether leave is necessary in respect of assessment proceedings by the department against a company in liquidation or not, has to be determined on a proper construction of section 446 of the Companies Act, 1956, and it is his submission that, if on a proper construction of the said section assessment proceedings by the department are held to be covered by the said section, leave of court will become necessary and if assessment proceedings are not covered by the said section leave of court will not be necessary. Mr. Mitter contends that, on a true construction of section 446 of the Companies Act, assessment proceedings by the department cannot be said to be covered by the said section and the same do not come within the purview of the said section. Mr. Mitter has argued that for a proper construction of section 446(1) of the Companies Act the said section must be read with section 446(2) and section 537 of the Companies Act. It is his submission that the said section 446(2) and section 537 of the Companies Act indicate the nature of proceedings in respect of which leave is contemplated under section 446(1). In support of this contention Mr. Mitter has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impossible for the court to proceed to make any valid assessment in accordance with the provision of the Income-tax Act in exercise of the power or authority conferred upon it under section 446(2) of the Companies Act. He submits that it cannot be disputed that the Income-tax Officer is the only appropriate authority which has the power and jurisdiction to commence, entertain and decide matters relating to assessment of any company under the Income-tax Act, 1961, and in accordance with the provisions thereof and in view of the provisions contained in the Income-tax Act, the winding-up court has no jurisdiction or power to entertain an assessment proceeding and it should, therefore, follow that leave of the court is not necessary in respect of any proceeding relating to assessment of a company in liquidation. Mr. Mitter has argued that it is the statutory duty of the Income--tax Officer to assess in accordance with the provisions of the Income-tax Act and he has argued that the discharge of the duty cast upon the said officer by the statute should not be considered to be subject to any leave of court. Mr. Mitter further submits that the provisions of the Income-tax Act, which is a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion of the Commissioner reasonable. (4) If the liquidator fails to give the notice in accordance with sub-section (1) or fails to set aside the amount as required by sub-section (3) or parts with any of the assets of the company or the properties in his hands in contravention of the provisions of that sub-section, he shall be personally liable for the payment of the tax which the company would be liable to pay : Provided that if the amount of any tax payable by the company is notified under sub-section (2), the personal liability of the liquidator under this sub-section shall be to the extent of such amount. (5) Where there are more liquidators than one, the obligations and liabilities attached to the liquidator under this section shall attach to all the liquidators jointly and severally. (6) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force." Mr. Mitter contends that the Income-tax Act, 1961, has been enacted years after the commencement of the Companies Act, 1956, and section 178 of the Income-tax Act refers to and deals specifically with companies in liquidation. He arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt really does not have any jurisdiction to deal with the matter relating to assessment and, in view thereof, there cannot be any question of leave under section 446(1) of the Companies Act in the matter of assessment of the company in liquidation. Mr. Mitter has relied on the following observations of the Privy Council in the case of Raleigh Investment Co. Ltd. v. Governor-General in Council : " In conclusion, their Lordships would observe that the scheme of the Act is to set up a particular machinery by the use of which alone total income assessable for income-tax is to be ascertained. The income-tax exigible is determined by reference to the total income so ascertained, and only by reference to such total income. Under the Act (section 45) there arises a duty to pay the amount of tax demanded on the basis of the assessment of total income. Jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligation to pay arising by virtue of the assessment. The only doubt, indeed, in their Lordship mind, is whether an express provision was necessary in order to exclude jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case which is concerned with assessment proceedings. he has contended that the Allahabad High Court in Tika Ram and Sons v. Commissioner of Income-tax correctly interpreted the decision of the Federal Court in the case of Shiromani Sugar Mills and the said interpretation should be accepted by this court and the interpretation put on the said decision of the Federal Court by the Bombay High Court should be rejected. Before I deal with the main contentions of the parties in the present proceeding as to whether leave of court under section 446(1) of the Companies Act, 1956, is necessary or not to enable the department to commence or proceed with the assessment of the company in liquidation, it will be convenient to dispose of the other contentions raised on behalf of the official liquidator. The contention of the official liquidator that he is not an officer of the company to whom any notice regarding assessment can be issued by the department appears, to my mind, to be irrelevant for the purpose of the present application. Mr. Mitter, in my opinion, rightly points out that this is a question which really relates to the merits of the assessment proceedings. Whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on the same footing. In view of the express provisions made in the Companies Act including the provision contained in section 446(1) of the Companies Act, 1956, there cannot be any question, in my opinion, of exercising any inherent power or jurisdiction by Court and the principle of equitable authority has no application. I therefore, agree with Mr. Mitter that the only question involved in the present application is whether leave of court under section 446(1) of the Companies Act, 1956, is necessary for the assessment by the department. The question, therefore, is really one of interpretation of section 446(1) of the Companies Act, 1956. Before I deal with this question, it will be convenient to consider the cases cited from the Bar. I propose to take up the decision of the Federal Court in Governor-General in Council v. Shiromani Sugar Mills Ltd., first as the decision appears to be the root on which many of the other decisions sprout. In Shiromani's case the Federal Court was concerned, with the question whether leave of court under section 171 of the Companies Act, 1913, which was then in force, was necessary in respect of any recovery proceeding by the department for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sisting proceeding before the Collector at Allababad for the recovery of the said sum of Rs. 18,493-12-0 as an arrear of land revenue in accordance with section 46 of the Income-tax Act, provide nevertheless that the said injunction should be without prejudice to such application, if any, as the department may be advised to make under section 171 of the Companies Act, 1913, for leave to proceed with such recovery. The department went up on appeal to the Federal Court. The Federal Court, on a construction of section 171 of the Companies Act, 1913, which corresponds to and is identical with section 446(1) of the Companies Act, 1956, held that leave of court was necessary under section 171 of the Act of 1913 and the recovery procceding sought to be effected by the department was covered by the said section 171. The Federal Court held : " In our judgment, it need not, and therefore should not, be confided to original proceedings in a court of first instance, analogous to a suit, initiated by means of a petition similar to a plaint'. Section 171 must, in our judgment, be construed with reference to other sections of the Act and the general scheme of administration of the assets of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng '. In fact, in this very case, had the company not been in liquidation, the appellant would have had the choice at his option of (a) proceeding by ' suit ' in the ordinary Courts in respect of the arrears, or (b) by forwarding (under section 46(2) of the Income-tax Act) to the Collector the requisite certificate, initiating and putting into force collection of the arrears as arrears of land revenue under and in accordance with the appropriate provisions of the U. P. Land Revenue Act, 1901 (111 of 1901). Surely, such last-mentioned action on the part of the income-tax authorities would be the adoption of another legal proceeding for the collection of the arrears as opposed to the institution of a suit. The proviso to section 46(2) empowers the Collector, if he so chooses, to exercise all the powers which a civil court may exercise in respect of the attachment and sale of debts due to a judgment-debtor. If the Income-tax Officer will be taking a ' legal proceeding ' when he moves the Collector--as we think he must be held to do-to realise the tax by attachment and sale of debts due to the assessee, it can make no difference in principle that the Collector is asked to exercise his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, but that also the appellant is free to collect these arrears in full without any obligation to account to the liquidators or to bring into court any excess above what the appellant might receive if a claim as an Unsecured creditor had been made. It appears that, excepting the power of the court under section 171 to impose a condition at the time of granting leave, there is no machinery or provision in the Act to compel the appellant to account for or bring into court any such excess. Accordingly, this claim to exercise the machinery of section 46, if successful, would in effect enable the Crown to secure for the arrears set out above, the very priority to which both in England and India the Crown has been held not entitled. " The next case that I propose to consider is the case of M. K. Ranganathan v. Government of Madras. The facts of this case in which the position of secured creditors was considered, are not very material. The Supreme Court in this case considered the decision of the Federal Court in Shiromani's case and laid down certain principles as to the construction of section 171 of the Companies Act, 1913. The Supreme Court observed : " It may be observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections of the Act and the general scheme of administration of the assets of a company in liquidation laid down by the Act. In particular, we would refer to section 232. Section 232 appears to us to be supplementary to section 171 by providing that any creditor (other than Government) who goes ahead, notwithstanding a winding-up order or in ignorance of it, with any attachment, distress, execution or sale, without the previous leave of the court, will find that such steps are void. The reference to 'distress' indicates that leave of the court is required for more than the initiation of original proceedings in the nature of a suit in an ordinary court of law. Moreover, the scheme of the application of the company's property in the pari passu satisfaction of its liabilities, envisaged in section 211 and other sections of the Act, cannot be made to work in Co-ordination, unless all creditors (except such secured creditors as are ' outside the winding-up ' in the sense indicated by Lord Wrenbury in his speech in Food Controller v. Cork) are subjected as to the actions against the property of the company to the control of the court. Accordingly, in our judgment, no narrow construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit or proceeding and any claim made by or against the company. Sub-section (3) provides that any suit or proceeding by or against the company which is pending in any court other than that in which the winding up is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court. The question is whether these provisions would affect the proceedings of the Tribunal. In this connection, reference may be made to section 41 of the Life Insurance Corporation Act which provides that no civil court shall have jurisdiction to entertain or adjudicate upon any matter which a Tribunal is empowered to decide or determine under that Act. It is not disputed that the Tribunal had jurisdiction to entertain the application of the Corporation and adjudicate on the matters raised thereby. The Tribunal is given the exclusive jurisdiction over this matter. It is in view of the exclusive jurisdiction which sub-section (2) of section 446 of the Companies Act confers on the company court to entertain or dispose of any suit or proceeding by or against a company or any claim made by or against it that the restriction refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained. " The decision of the Allahabad High Court in the case of Tika Ram and Sons is concerned with a case of continuance of assessment proceeding against a company in liquidation without leave of court and is clearly akin to the case in hand. Manchanda J. considered section 446 of the Companies Act, dealt with the case law on the point including the decision of the Federal Court in Shiromani's case and held that leave of court was not necessary for continuing the assessment proceeding against the company in liquidation. The learned judge observed that the judgment of the Federal Court in Shiromani's case made it clear that the expression " other legal proceedings ", so far as it relates to income-tax proceedings, was confined to execution or distress proceedings at the recovery stage under section 46, which is a stage after the assessment has been completed and the learned judge stated as follows at page 410 of the report : " The ratio of the decision is that because other Acts-the U. P. Land Revenue Act and the Civil Procedure Code--in proceedings under section 46 of the Income-tax Act come to the assistance of the Collector, those proceedings can be termed as legal proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the question whether the company in liquidation was at all liable to be assessed for income-tax. The learned judge answered the question in the affirmative and incidentally observed at page 300 of the report : " At the same time, as the issue of any notice, whether under section 178 of the Income-tax Act or under any other provision thereof, is in the eye of law the commencement of, or the necessary condition for commencing, proceedings for the purpose of quantification and collection of the tax, the Income-tax Officer is bound to obtain the leave of the company court under section 446 of the Companies Act. Any failure to do so would amount to contempt of court (vide State v. Topno, Income-tax Officer, Titlagarh)." The learned judge in consideration of his view granted necessary leave to the department. The decision of the Bombay High Court in the case of In re Colaba Land and Mills Co. Ltd. (In liquidation) is one exactly on the point involved in the present proceeding. Similar notices under sections 142(1) and 148 of the Income-tax Act had been served on the official liquidator of the company which was in the process of being wound up by an order of the court. The offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is covered by the phrase " other legal proceedings ". Clearly it is not a proceeding in an ordinary court of law. But we see no reason why in British India no " legal proceedings " can be taken otherwise than in an ordinary court of law, or why a proceeding taken elsewhere than in an ordinary court of law, provided it be taken in the manner prescribed by law and in pursuance of law or legal enactment, cannot properly be described as a ' legal proceeding '. If it be considered that the effect of the income-tax authorities putting the machinery of section 46 of the Income-tax Act in motion for the collection of arrears of income-tax is to bring into operation all the appropriate legal enactments relating to the collection of land revenue in the province concerned, it is, in our judgment, very difficult to say that they are not taking a " legal proceeding".' The Federal Court, therefore, agreed with the Allahabad High Court in holding that the words " other legal proceedings " in section 171 of the Companies Act, 1913, covers any proceeding by the revenue authorities under section 46(2) of the Income-tax Act, 1922, and that, accordingly, before forwarding the requisite certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the expression ' other legal proceedings ' in sub-section (1) of section 446. Since sub-section (2) of that section is a mere empowering provision, the court which is winding up a company would not exercise those powers except in a proper case. It would not, for instance, interfere in assessment proceedings or undertake them itself, unless those proceedings are likely to hold up or delay the liquidation of the company for an inordinate length of time, and in such a case it may well decline to grant leave under section 446(1) to commence or continue those proceedings before the income-tax authorities." Dealing with the decision of the Allahabad High Court in Tika Ram's case Vimadalal J. observed at pages 407-409 of the report : " The learned judge then proceeded to deal with the second question that arose before him. After quoting section 446(1) of the Companies Act, 1956, Manchanda J. proceeded to deal with the case-law on the point including the decision of the Federal Court in Shiromani's case already discussed by me above, and observed that the judgment of the Federal Court made it clear that the expression ' other legal proceedings ', so far as it relates to income-tax p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o recover the amount found due without the leave of the company judge. I fail to see how he could make that observation in the face of the decision of the Federal Court in Shiromani's case, which is a direct decision on the point, and in which it was held that proceedings for recovery under section 46 of the Income-tax Act cannot be taken without the leave of the company judge. Manchanda J., therefore, dismissed the writ petition, filed by the company. I do not agree either with the construction placed upon the decision of the Federal Court in Shiromani case by Manchanda J. in Tika Ram's case or with the construction placed by him upon the expression ' other legal proceeding ' in section 446(1) of the Companies Act. It is true that the question which arose before the Federal Court in Shiyomani's case related to recovery proceedings under section 446 of the Companies Act, but the Federal Court has in unambiguous terms construed the expression ' other legal proceeding ' as including any proceeding taken in pursuance of a legal enactment which need not be in a court of law. I do not see how the distinction which Manchanda J. has sought to draw in Tika Ram's case can be drawn at all on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory duty under the proviso to that sub-section should be controlled by anything in the language of section 171 of the Companies Act." It may be noted that this decision of the Patna High Court came up before the Supreme Court on appeal. The Supreme Court held that in the facts of the case it was not necessary to consider whether leave of court under section .171 of the Companies Act, 1913, was required to be obtained as the company which was in liquidation was not a party to the reference. The Supreme Court observed at page 236 of the report : "The company thus not being a party to the reference the proceedings which were commenced on 2nd December, 1954, before the Tribunal were not proceedings against the company (in liquidation). This being the position on a true construction of the terms of the notification by which the reference was made, the question whether the reference was a legal proceeding within the meaning of section 171 of the Indian Companies Act does not arise for our decision and we prefer not to express any opinion on that part of the question." The decision of the Patna High Court and also the decision of the Supreme Court in the case of S. K. G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s court and put in their claims as regards actual possession (the words are mandatory). If it were so, the result would be that in such cases the magistrate would be powerless to prevent a breach of the peace. " The next decision referred to is the decision of the Madras High Court in R. G. N. Price v. M. Chandrasekharan. In this case the Madras High Court was concerned with a declaration made by the Government under section 15(2) of the Industrial Disputes Act after the company had been ordered to be wound up and the Madras High Court held that no leave under section 171 of the Companies Act, 1913, was necessary to be obtained by the Government from court before making the required declaration under section 15(2) of the Industrial Disputes Act. The court observed : " Even if we construe the words ' other legal proceeding ' in the widest manner possible, we fail to see how the declaration made by the Government can be held to be a ' legal proceeding '. Section 15(2) of the Industrial Disputes Act says that on receipt of an award from the Industrial Tribunal, the Government ' shall, by order in writing, declare the award to be binding '. There is no proceeding taken by the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members of the company, it is not reasonable that these interests should be subjected to the control of the winding-up court, a control which it is to exercise for the benefit of the creditors and the members. A criminal prosecution against the company would doubtless be a legal proceeding against it., But I do not suppose that it has ever been said that a criminal prosecution falls within the scope of section 446(1) of the Companies Act. And it seems to me that sub-sections (2) and (3) of section 446 give some indication of the kind of legal proceeding that comes within the mischief of sub-section (1). For, sub-section (2) gives the winding-up court jurisdiction to entertain or dispose of any suit or proceeding by or against the company, while sub-section (3) gives it the power to withdraw and dispose of any such suit or proceeding pending in any other court. I am inclined to think that a suit or proceeding for which leave is necessary under subsection (1) must be a suit or proceeding capable of being withdrawn and disposed of by the winding-up court. In S. N. Mukerjee v. Krishna Dassi, it was observed that section 171 of the 1913 Act was a provision intended to safeguard the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty and is, therefore, clearly distinguishable. Though the said decision is entitled to great respect, yet it is to be noted that in the said decision there is really no discussion of this aspect and no authorities on this aspect of the matter including even the decision of the Federal Court in Shiromani's case had been cited or considered by the learned judge. The learned judge merely proceeds to observe in dealing with section 171 of the Companies Act, 1913, that " the language of the section is wide enough to include proceedings under the Income-tax Act. " The decision of the Mysore High Court in the case of Mysore Spin Silk Mills Ltd. I may appear to lay down that leave of court is necessary in respect of assessment proceedings. It is, however, to be noted that the decision of the Mysore High Court was not really concerned with this aspect of the question and the observations of the Court are based mainly on the decision of the Orissa High Court in State v. P. Topno, Income-tax Officer, Titlagarh. This aspect of the matter does not appear to have been argued or considered and no discussion of this question appears in the judgment. The observations appear to be incide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsider, as the decision of the Federal Court is clearly binding. I have already dealt with the decision of the Federal Court in the earlier part of my judgment. On an anxious and very careful consideration of the decision of the Federal Court in Shiromani's case, I am, however, of the opinion that the said decision does not conclude the question involved in the present proceeding. It is to be noted that in Shiromani's case the Federal Court was concerned with the question of recovery proceeding and not with any assessment proceeding. The point for decision before the Federal Court was whether recovery proceeding by the department was a legal proceeding within the meaning of section 171 of the Companies Act, 1913, and the Federal Court held that it was. The conclusion of the Federal Court may best be stated in the words of the learned Chief Justice at page 21: Accordingly, we agree with the learned judges of the Allahabad High Court in holding that the words ' other legal proceeding ' in section 171 of the Indian Companies Act, 1913, comprise any proceeding by the revenue authorities under section 46(2), Indian Income-tax Act, and that accordingly before forwarding the requisite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court, itself points out at page 20 of the report : " But the observations of the learned judges must of course be read in the light of the point before them for decision, which was a very narrow one." The main consideration which led the Federal Court to its conclusion, to my mind, appears to be that if the department would be allowed to go on with the recovery proceeding without obtaining leave of court, the department would gain for itself in the matter of realisation an advantage over the other creditors of the company, an advantage to which the department was not otherwise entitled in law. I have already quoted the relevant observations of the Federal Court at pages 19-20 of the report earlier in my judgment and it may be apposite in this connection to set out the following observations of the Federal Court in Shiromani's case : " It appears that, excepting the power of the court under section 171 to impose a condition at the time of granting leave, there is no machinery or provision in the Act to compel the appellant to account for or bring into court any such excess. Accordingly, this claim to exercise the machinery of section 46, if successful, would in effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment, and yet the Supreme Court held that no leave of court under section 446(1) of the Companies Act, 1956, was necessary in respect of the said proceeding. Similarly, in the case of proceedings against the company under the provisions of the Industrial Disputes Act, which again is a legal enactment, the courts have decided in cases noted earlier that leave of court is not necessary. Also in the case S. N. Mukherjee v. Krishna Dassi a Division Bench of this court held that no leave of court was necessary in respect of a proceeding against the liquidator under section 145 of the Criminal Procedure Code which is also a legal enactment. The decision of the Supreme Cout is binding on all the courts and the decision of the Division Bench of this court is binding on me. In view of the said decisions and for reasons already stated, I regret, with great respect to Vimadalal J my inability to agree with the view expressed by him. It is also important and interesting to note in this connection that even in Shiromani's case before the Federal Court, assessment proceeding had commenced and concluded after the company had gone into liquidation. The winding-up petition had been presented on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of it, with any attachment, distress, execution or sale, without the previous leave of the court, will find that such steps are void. The reference to ' distress ' indicates that leave of the court is required for more than the initiation of original proceedings in the nature of a suit in an ordinary court of law. Moreover, the scheme of the application of the company's property in the pari Passu satisfaction of its liabilities, envisaged in section 211 and other sections of the Act, cannot be made to work in co-ordination, unless all creditors (except such secured creditors as are I outside tile winding-up' in the sense indicated by Lord Wrenbury in his speech in rood Controller v. Cork) are subjected as to their actions against the property of the company to the control of the court. Accordingly, in our judgment, no narrow construction should be placed upon the words ' or other legal proceeding ' in section 171 In our judgment, the words can and should be held to cover distress and execution proceedings in the ordinary courts. In our view, such proceedings are other legal proceedings against the company, as contrasted with ordinary suits against the company. " The Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court proceeds to lay down at the same page : " It is in view of the exclusive jurisdiction which sub-section (2) of section 446 of the Companies Act confers on the company court to entertain or dispose of any suit or proceeding by or against a company or any claim made by or against it that the restriction referred to in sub-section (1) has been imposed on the commencement of the proceedings or proceeding with such proceedings against a company after a windidg-up order has been made. In view of section 41 of the Life Insurance Corporation Act, the company court has no jurisdiction to entertain and adjudicate upon any matter which the Tribunal is empowered to decide or determine under that Act. It is not disputed that the Tribunal has jurisdiction under the Act to entertain and decide matters raised in the petition filed by the Corporation under section 15 of the Life Insurance Corporation Act. It must follow that the consequential provisions of sub-section (1) of section 446 of the Companies Act will not operate on the proceedings which may be pending before the Tribunal or which may be sought to be commenced before it. These decisions, to my mind, establish : (1) Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If a valid debt arises, the department may seek to prove its claim in liquidation and will rank equally in respect of its claim amongst the same class of creditors. The department may also seek to have recourse to recovery proceeding under the provisions of the Income-tax Act and, in that case, the department must obtain prior leave of court. The court, while granting such leave, may impose necessary terms and conditions which will prevent the department from gaining any undue or preferential advantage over the creditors of the same class who are to rank equally with the department. At and during the stage of assessment of any company, there can, therefore, be no question, to my mind, of any interference with the assets and properties of the company in liquidation or with any scheme of administration thereof. It is the duty of the Income-tax Officer to assess persons which include companies and make no exception in favour of any company in liquidation. This duty is cast upon the Income-tax Officer under the Income-tax Act ; and, under the provisions thereof, the Income-tax Officer is the only authority competent to make an assessment and the jurisdiction as to assessment is vest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passage in the judgment in Damji Valji's case has occurred there per incuriam, in so far as section 446(2) is an empowering provision which confers an overriding controlling power on the court which is winding up a company, so that liquidation proceedings cannot be impeded or delayed in any manner, and so as to ensure a fair and equitable distribution of the assets of the company." With due respect to the learned judge I regret my inability to agree with the view expressed by him that the word " exclusive ", which is to be found in the judgment of the Supreme Court in Damji Valji's case has occurred there per incuriam. It is stated in article 1687 at page 800 in Halsbury's Laws of England, third edition, volume 22: " A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of co-ordinate jurisdiction which covered the case before it, or when it has acted in ignorance of a decision of the House of Lords. In the former case, it must decide which decision to follow, and in the latter it is bound by the decision of the House of Lords. A decision may also be given per incuriam when it is given in ignorance of the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as a whole and the larger interests transcend the interests of the creditors and the members of the company. The Income-tax Act, 1961, is also a later enactment than the Companies Act of 1956. To my mind, a duty imposed by a statute on any appropriate authority in the larger interests of the nation should not be considered to be subject to the control of the winding-up court. In my opinion, it is not reasonable to hold that the statutory duty imposed on the Income-tax Officer under the Income-tax Act in the larger interests of the country should be subjected to the control of the winding-up court, as in the event of any such control by court, there arises a possibility that the Income-tax Officer may not be in a position to discharge the duty entrusted to him by the statute, if the court, for some reason or other, chooses not to grant leave in exercise of its control. In such a case, there may be no assessment at all, although the company under the Income-tax Act may be liable to be assessed and taxed. Assessment proceedings and recovery proceedings, although both are proceedings under the Income-tax Act, do not, to my mind, stand on the same footing in so far as leave under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive or privilege and preference, not warranted by the provisions of the Income-tax Act, over the other creditors of the company of the same class in clear violation of the scheme and provisions of the Companies Act, 1956, which postulate and lay down that all creditors of the same class, except those who are outside the scope of winding-up, must rank equally and not be discriminated against. Both the Acts, in my opinion, should be so construed as will lead to harmonious and smooth working of the provisions of the respective Acts and will not create any conflict between the two. This principle of harmonious construction of the two Acts, namely, the Income-tax Act and the Companies Act, indicates, to my mind, that leave of court is necessary by the department in respect of any recovery proceeding and no leave of court is necessary by the department in respect of any assessment proceeding of the company. I have to note that the decision of the Supreme Court in the case of Lalji Haridas referred to and relied on by the official liquidator, is not of any assistance in considering the question involved in the present case. The said decision does not lay down that an Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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