OFFICIAL LIQUIDATOR Vs. CANARA BANK

JUDGEMENT

(1.) The common question that arises in these applications is whether the income tax claim against a company in liquidation can be satisfied from out of proceeds of the sale of the company's assets either as 'cost, charges and expenses incurred in the winding up' under S.476 of the Companies Act and / or as amount set aside under S.178 of the Income tax Act in priority to the claims under S.529A of the Companies Act.

(2.) Company Application 478 of 1989 is filed by the Canara Bank for an order permitting the bank to appropriate a sum of Rs.75,00,000/- from out of the sale proceeds of the assets of Giovanola Binny Ltd, (in liquidation) towards the amounts due to the bank from the said company. M.C.A.No.37 of 1989 is filed by the Official Liquidator, who is the liquidator of the said company, for an order to sanction to declare a first dividend of 27 paise in the rupee to the creditors of the company under S.529 and 529A of the Companies Act. Notice of these applications was given to the Income tax Department. This Court passed order dated 30-3-1989 permitting the bank to appropriate a sum of Rs.75,00,000/-from out of the sale proceeds towards the amounts due to the bank under the loan transactions of M/s. Giovanola Binny Ltd. (in liquidation). However, this Court made it clear that if it was found later that the balance amount is not sufficient to meet the claims of the income tax department as well as other claims it will be open to this Court to reopen this order and to direct the Bank to bring to the common pool the whole or any portion of the amount allowed to be appropriated. Subsequently by order dated 3-7-1989 on M.C.A. 37 of 1989 this Court granted sanction to the Liquidator to declare a first dividend of 27 paise in a rupee as shown in Annexure A to the said application, to the creditors of the company under S.529 and 529A of the Companies Act. In the very same order this Court directed the Canara Bank to provisionally set apart Rs.27,00,000/- for capital gains tax on the basis of the representation of the learned Standing Counsel for the department. It was also made clear that the reservation made for capital gains tax will be subject to further order of this Court regarding the liability of the company and all matters connected with payment of capital gains tax.

(3.) In M.C.A. No. 106 of 1988" the applicant is a former employee of M/s. Brunton & Company (Engineers) Ltd. (in liquidation). His prayer is to pay him the amounts due to him from the company. According to him there is no justification in setting apart Rs.25,00,000/- for payment of income tax of that company. The Liquidator has filed a counter statement stating that the applicant was paid two dividends aggregating to 27% and therefore the prayer for further dividend cannot be allowed at this stage as there is no sufficient funds to the credit of the company.