BYFORD LIMITED Vs. STO

JUDGEMENT

(1.) THIS is an application under S. 391(6) and S. 443 of the Companies Act r/w r. 9 of the Companies (Court) Rules, 1959, wherein it is stated that the ST authorities should be restrained from levying penalty and charging interest.

(2.) THE petitioner -company, inter alia, carried on the business of distribution of cars. The business apparently resulted in huge losses with the result that it owed lakhs of rupees to various creditors. On account of the inability of the petitioner to pay its debts, a winding -up petition, being C.P. No. 50 of 1970, Bank of Madura vs. Byford Ltd., has been filed in this Court which is still pending in this Court. During the pendency of the winding -up proceedings the petitioner has filed an application being C.A. No. 126/80, being an application under S. 391 of the Companies Act. By the said application, C.A. No. 126/80, it is proposed that there should be a scheme of arrangement between the company and its creditors. The salient features of the said scheme is that all the secured as well as the unsecured creditors will be paid in toto over the next ten years. It is, however, proposed in the scheme that no penalty or interest should be levied or imposed under the various enactments including the ST Act.

(3.) IT appears that assessment proceedings for a number of years under the Delhi ST Act are pending against the petitioner -company. The petitioner apprehends that apart from the levy of sales tax by the assessment orders the sales tax Department is also likely to impose penalties as well as charge interest under S. 27 of the Delhi ST Act. In the present application for stay it has been stated that the petitioner -company apprehends that heavy penalties would be imposed in order to punish the petitioner -company and also because a scheme of arrangement has been proposed by it. It is also averred in the present application that the CST has issued instructions that a very harsh view of the non -compliance of different provisions of the ST Act should be taken against the petitioner. It is lastly stated, that the burden of penalties would be very heavy and, if the penalties are permitted to be imposed and the interest charged, then the aforesaid scheme of arrangement would be in serious jeopardy.