SALES TAX OFFICER Vs. BYFORD LIMITED

JUDGEMENT

(1.) On an application under section 391 (6) of the Companies Act 1956 (the Act) by the company, the court stayed proceedings against the company before the sales tax officer. The sales tax officer contests the validity of this order of the company judge. The question is whether the judge can restrain proceedings against the company before the sales tax officer.

(2.) These are the facts. The respondent, Byford Limited (the company), is a dealer in fiat cars. It went into rough weather. It was in troubled waters. It became heavily indebted to various creditors on account of its inability to pay its debts. A winding up petition was presented by the Bank of Madura in 1978. This petition is still pending. The order of winding up has not been made so far.

(3.) During the pendency of the winding up petition, the company made an. application under section 391 of the Act in 1980 suggesting a scheme of arrangement for payment of debts to its creditors. On January 27, 1981, another application was made under section 391(6) and section 443 of the Companies Act against the sales tax officer and the Commissioner of Sales Tax on the allegation that for the assessment year 1976-77 the company was liable to pay a sum of Rs. 11,84,054.58 as sales tax and out of this amount a sum of Rs. 2,25,504.65 had been paid leaving an unpaid balance of Rs. 9,58,550.93 which remains due from the company to the sales tax department. The company father alleged that it apprehended that the sales tax authorities will impose heavy penalties on the company and, therefore, the court should restrain the sales tax officer and the commissioner of sales tax from imposing any penalty and from recovering any interest on its defaults.