N DHARMALINGAM Vs. UNION OF INDIA

JUDGEMENT

(1.) OSA No. 55/76 arises out of Company Application No. 461/73, while OSA No. 56/76 arises out of Company Application No. 421/74. The short facts which gave rise to these applications may now be stated : The Hindu Bank Karur Ltd., Karur, went into voluntary liquidation and was taken up for winding-up on October 28, 1963. There were certain proceedings under the I.T. Act for assessing the company and for the assessment year 1963-64, a sum of Rs. 10, 853.55 was assessed to be payable by the company by way of income-tax and super-tax. This liability became final till the stage of the Income-tax Appellate Tribunal's order dated April 24, 1971. However, at the instance of the assessee, a reference was made to this court and the same was TC No. 6/73 [Hindu Bank Karur Ltd. v. Addl. CIT and that ended against the assessee on April 25, 1975.Meanwhile on August 18, 1964, the liquidator of the company filed in the office of the Registrar of Companies, a statement as required under the provisions of s. 555(3) of the Companies Act, 1956 (hereinafter referred to as "the Act"), stating that a sum of Rs. 20, 542.50 was payable to one L. A. Lakshmanan Chettiar, whose legal representative is the appellant before us, as surplus assets refundable to him in respect of 250 shares held by him in the bank. On November 30, 1973, the Regional Director of the Company Law Board (hereinafter referred to as the "Regional Director")passed an order sanctioning payment of Rs. 20, 542.50 to the appellant herein. TheUnion of India represented by the CIT (Recovery), Madras, filed Company Application No. 461/73, purporting to be under s. 555(7)(a) of the Act for payment of a sum of Rs. 10, 853.55 from out of the sum of Rs. 20.542.50 which was deposited by the liquidator of the company on August 18, 1964. Simultaneously, another application No. 462/73 was filed to restrain the Regional Director by interim injunction from sanctioning payment to the claimant of the whole or any part of the sum of Rs. 20, 542.50 referred to already. It is not necessary to elaborately refer to the averments contained in the affidavit and the counter-affidavit of the parties in these applications and it is enough to point out that these applications were heard and orders were reserved. At the time of hearing of these applications, it would appear that a contention was advanced that so long as the order dated November 30, 1973, of the Regional Director stood, the income-tax department could not claim payment of the amount. In view of this, the income-tax department filed another application No. 421/74, purporting to be under s. 518(1)(a) of the Act for a declaration that the order dated November 30, 1973, of the Regional Director was a nullity. All these three applications finally came to be disposed of by Mohan J. (Union of India v. Hindu Bank Karur Ltd. by the order dated August 5, 1975.

(2.) THE learned judge allowed Company Application No. 421/74 and set aside the order dated November 30, 1973, of the Regional Director and simultaneously allowed Company Application No. 461/73 for payment of the sum of Rs. 10, 853.55 to the income-tax department, and directed payment of the balance of the amount to the claimant. It is against these orders, the two appeals have been filed before us by the claimant, namely, the person in whose favour the order dated November 30, 1973, was passed by the Regional Director.It is admitted before us that the only amount that was available in the company liquidation account in the present case was the sum of Rs. 20, 542.50 and, therefore, the income-tax department would be entitled to any payment out of that amount only if the order dated November 30, 1973, of the Regional Director directing payment of Rs. 20, 542.50 in favour of the appellant is declared to be a nullity. In other words, only if the income-tax department succeeds in Company Application No. 421/74, any question will arise as to Company Application No. 461/73, and if the department fails in Company Application No. 421/74, admittedly Company Application No. 461/73 will have to fail. Consequently, we first take up the question as to whether the income-tax department was entitled to have the order dated November 30, 1973, of the Regional Director declared as a nullity in Company Application No. 421/74.In the affidavit filed in support of this application it was stated by the TRO (Headquarters), Madras, that Application No. 461/73 was filed before this court on November 27, 1973, and as on the date of the said application, the application filed by the claimant before the Regional Director was pending and since the deponent of the affidavit was aware of the pendency of the application, he sent his inspector to both the Regional Director and the Registrar of Companies, Madras, to inform them personally of the filing by the department of the Company Application No. 461/73, before this court and the inspector informed them accordingly on the very same day, namely, November 27, 1973, and that the deponent of the affidavit confirmed this by a letter addressed to the Registrar of Companies with a copy marked to the Regional Director bearing the same date, which were despatched on November 28, 1973, by ordinary post and which in the regular course would have reached the 2nd and 3rd respondents (the Registrar of Companies & the Regional Director) on the same or the next day and there was no communication in reply from the Regional Director to the information conveyed by the inspector as aforesaid or his follow up letter. In para. 6 of the affidavit, the TRO put forward his case as follows : "It subsequently transpired that on 30-11-1973, the 3rd respondent (Regional Director) had passed an order on the application of the 4th respondent (appellant) directing payment out to the 4th respondent of the whole of the amount of Rs. 20, 542.50 in the company liquidation account.

(3.) THE Regional Director before passing the order has to satisfy himself that such person is entitled to the whole or any part of the amount claimed and that no application made in pursuance of cl. (a) was pending in court. In this case, we have already referred to the counter-affidavit filed by the Registrar of Companies stating that when the Regional Director made a reference to him he had intimated to him about the statement made by the liquidator and the amount in question being due to L. A. Lakshmanan Chettiar. THErefore, the Regional Director satisfied himself that the amount in question was due to the claimant in the case. With regard to his satisfaction that no application made in pursuance of cl. (a) was pending in the court, we have already referred to the averments of the Regional Director contained in his countef-affidavit to the effect that from February, 1973, onwards, he had been writing to the CIT as well as the ITO as to the claim that has been preferred before him and his not having any response from them, but on the other hand, his having received a letter from the ITO, Tiruchirapalli, on August 7, 1973, in which the attitude was as if the income-tax department never objected to the payment of the money to the claimant. Even according to the income-tax department there was no application pending before the court under s. 555(7)(a) except Application No. 461/73 which the department presented before this court on November 27, 1973, which was numbered and taken on file on November 29, 1973, and we have already dealt with the controversy whether the Regional Director has notice of the same or not, when he passed the order in question, on November 30, 1973. Under these circumstances, it cannot be contended that the Regional Director acted in violation of the requirements of s. 555(7)(b).Mr. A. N. Rangaswami, the learned counsel for the income-tax department, contended that it was the duty of the Regional Director to have ascertained from this court whether any application was pending on the file of this court or not. However, to a specific question put by us, the learned counsel had to admit that the statute itself had not imposed any such obligation on the Regional Director but stated that prudence would have dictated to him to have ascertained from this court whether any application was pending or not. We are unable to accept any such suggestion.