Decided on March 26,2014

Official Liquidator of M/s. Path Parth Engineering Ltd. Respondents


Vijay Manohar Sahai, J. - (1.) WE have heard Ms. Manisha Lavkumar learned advocate for the appellant and Mr. Gaurang H. Bhatt learned advocate for the Official Liquidator. The learned advocate for the appellant has urged that since the appellant was secured creditor and the amount has already been disbursed to the secured creditor on 5.8.2008, therefore, after expiry of 12 months period as per section 530(1)(a) of the Act, no amount can be recovered from the appellant beyond the period of 12 months and the directions given by the learned Single Judge for refunding the amount of Rs. 4,52,398/ - for payment of tax dues by the Official Liquidator, is illegal and is liable to be set aside. On the other hand, Mr. Gaurang H. Bhatt learned advocate for the Official Liquidator has urged that in view of the written undertaking given by the appellant before withdrawing the amount on 5.8.2008, the appellant is under legal duty to refund the amount so that the tax liability of the Company could be paid.
(2.) THE learned advocate for the appellant has placed reliance on section 529A and section 530(1)(a) of the Companies Act, which are reproduced hereinbelow: [Overriding preferential payments. 529A. (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company - (a) workmen's dues' and (b) debts due to secured creditors to the extent such debts rank under clause(c) of the proviso to sub -section(1) of section 529 pari passu with such dues, shall be paid in priority to all other debts. (2) The debts payable under clause(a) and clause (b) of subsection (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.] Preferential payments. 530. (1) In a winding up, [subject to the provisions of section 529A,] there shall be paid in prior to all other debts - (a) 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 subsection (8), and having become due and payable within the twelve months next before that date; The learned advocate for the appellant has placed reliance on the decision of the Hon'ble Apex Court in the case of Rajratha Naranbhai Mills Co. Lt. vs. Sales Tax Officer, Petlad, reported in : (1991) 3 SCC 283, wherein, in para -13, the Hon'ble Apex Court has held as under: 13..... To put it in simpler words, the State has a priority over debts, liability and obligation of which was born within the time frame of those twelve months and as such due and becoming due and payable within those twelve months next before the relevant date, ascertainable if necessary later, if not already ascertained. We are of the respectful agreement with the interpretation put by the Court of Appeal to Section 264 of the English Companies Act in Airedale Garage case, analogous as it is to the provision in hand, warranting the same interpretation; more so when any other interpretation would lead to the results feared by the Company Law Committee extracted above. In such view of the matter, we need not elaborately comment, discuss or demolish, sentence by sentence, the reasoning given by the Single Bench as also the Division Bench of the High Court towards interpreting the provision. The words 'having become due and payable within 12 months next before the relevant date' need be understood to meaning putting a restriction or cordoning off the amount for which priority is claimable and not in respect of each and every debt on account of taxes, rates and cesses etc. which may be outstanding at that time and payable. And further that such priority is in respect only of debts those of which become due and payable because the liability to those is rooted, founded and belonging to that period of twelve months prior to the relevant date and none other; both the conditions existing.
(3.) THE Hon'ble Apex Court after making the aforesaid observation directed the liquidator in paragraph 14 of the decision "to re -examine the claim for priority in accordance with the interpretation of the provision put by us, that is to say, he must first ascertain as to whether the liability to sales tax belongs to and is founded within the period of 12 months next before June 26, 1967, and as such due and payable but preserving, however, the order of the Division Bench in relation to the view it has taken about penalties.";

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