MOHANLAL MOJILAL JAVERI Vs. INCOME TAX OFFICER AHMEDABAD

JUDGEMENT

(1.) The question of law which arises in both these matters is regarding the preferential claims under sec. 530(1) (a) of the Companies Act. Under that section in a winding up there shall be paid in priority to all other debts inter alia all revenues taxes cesses and rates due from the Company to the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-sec. (8) of sec. 530 and having become due and payable within the twelve months next before that date. Company Application No. 26 of 1973 came up for hearing before B. K. Metha J. on October 11 1973 In this application priority is claimed by the Income-tax Department in respect of certain dues. At the same time priority is also claimed in respect of certain sales-tax liability of the Company in liquidation on behalf of the State Government and in the Company Application the main question is whether and if so to what extent priority can be recognised for the liabilities for income-tax and sales-tax dues. When the matter came up for hearing before B. K. Mehta J. his attention was drawn to the decision of D. A. Desai J. in Company Application No. 94 of 1973 in Company Petition No. 21 of 1966 being the matter of SALES TAX OFFICER PETLAD V. RAJRATNA NARANBHAI MILLS COMPANY LIMITED. B. K. Metha J. was unable to agree with the conclusions reached by D. A Desai J in Rajratna Naranbhai Mills Companys case and hence he referred the matter to a larger Bench so that the entire question may be decided.

(2.) Before this Company Application No. 26 of 1973 could be taken up for final hearing appeal filed by the Sales-tax Officer Petlad in Rajratna Naranbhai Mills Companys case being O. J. Appeal No. 2 of 1975 became ripe for hearing and since the question in both the matters is the same we have board both these matters together and we are disposing of both these matters by this common judgment.

(3.) Before we proceed with the specific facts of each case it will be necessary to set out some of the relevant provisions of the Companies Act. Under sec. 528 of the Companies Act 1956 provision is made for admitting to proof claims against a Company in winding up proceedings; It provides that in every winding up all debts payable on a contingency and all claims against the Company present or future certain or contingent ascertained or sounding only in damages shall be admissible to proof against the Company a just estimate being made so far as possible of the value of such debts or claims as may be subject to any contingency . or may sound only in damages or for some other reason may not bear a certain value. Sec. 529 provides for application of insolvency rules in winding up of insolvent companies. But the provision which requires consideration in this case is sec 530 sub-sec. (1) (a) which provides for preferential payments. Sec. 530 (1) (a) is in these terms-