SHAHABUDEEN P A Vs. DISTRICT COLLECTOR EKM

JUDGEMENT

(1.) These two Writ Petitions are filed by two brothers separately, who were erstwhile partners of a firm by name 'Shabago Marketing', impeaching the correctness, propriety and legality of the judgments passed by the VI Additional District Judge, Ernakulam in the respective civil miscellaneous appeals preferred by them against the orders passed by the insolvency Court in their respective applications declining protection order against proceeding for realisation of sales tax arrears due from them in respect of their business concern.

(2.) Initially both the petitioners together had filed a petition as IP No. 1 of 2003 for declaring them as insolvents. But, later realising that a joint petition by them for the relief claimed is not entertainable, that petition was withdrawn with liberty to file fresh application. Petitioner in WP (C) No. 6701 of 2008, thereafter, filed IP No. 1 of 2005 and the petitioner in WP (C) No. 19710 of 2008 filed IP No. 2 of 2005, both before the Sub Court, Kochi to declare them as insolvent. The gist of the allegations raised in both petitions were common alleging that the Sales Tax Intelligence Wing carried out an inspection over their business concern and pursuant to verifications of the stocks, registers and accounts on reaching a conclusion that the dealer had suppressed the sales turn over with intention to evade tax imposed a penalty of Rs.29,43,980/- under S.45A of the KGST Act. Both the petitioners stating that they are unable to pay and discharge the liability imposed towards penalty filed the above insolvency petitions to declare them as insolvent. Separate petitions were also filed for orders of protection against coercive step by issuing warrant and detention to realise the penalty towards sales tax arrears. The respondents resisted the application contending that recovery proceedings are in progress and the petitioners who are defaulters are not entitled to get any protection from arrest and detention from the Court.

(3.) The learned Sub Judge, after considering the petitions for protection with reference to the objections raised by the respondents and hearing the counsel on both sides, finding that in the respective insolvency petitions other than the claim of the State and the sales tax officials in respect of the penalty imposed as sales tax arrears the particulars of the claims of the other respondents impleaded as respondent 4 to 13, and also the particulars of the property of the petitioners and its value have not been mentioned, that the petitioners had substantial bank deposits during the period of the assessments involved, and that there was suppression of turn over of huge amount as to their business, concluded that no sufficient cause was made out for grant of orders of protection under S.31 of the Insolvency Act. Petitioners, both of them, preferred separate appeals challenging the orders of the learned Sub Judge before the District Court, Ernakulam. The learned Additional District Judge dismissed the appeals by separate judgments concurring with the views formed by the learned Sub Judge. The learned Additional District Judge while dismissing the appeals had expressed the view that sales tax arrear is not a personal debt of the dealer and the amount demanded by the State towards sales tax arrears from the dealer is the sum which had been collected by the dealer from his customers as the trustee or agent of the Government. Forming such a view sales tax arrear is not a debt, it was held that the appellants / petitioners are not entitled to get protection under the Insolvency Act. Both the petitioners preferring separate Writ Petitions against the respective judgments rendered by the learned Additional District Judge in their civil miscellaneous appeal challenge the correctness of those judgments invoking the supervisory jurisdiction vested with this Court under Art.227 of the Constitution of India.