STATE Vs. PURE MILK SUPPLY CO LTD

JUDGEMENT

(1.) This is an application on behalf of the Punjab State under Section 530 of the Companies Act 1956 praying for permission to be granted by this Court for recovering the amount due to the State from the respondent-company (in liquidation) as arrears of land revenue in priority to the other debts of the company and without waiting to receive payment in winding up proceedings.

(2.) The State Government had advanced a loan of Rs. 5,000/- to the Company in March 1955 under the state Aid to Industries Act (5 of 1935). The loan was advanced in order to enable the Company to manufacture butter and cream and the advance was against the security of the Company's assets including booklets, stock, stores, machinery equipment etc. The advance was evidenced by a deed of mortgage, certified copy of which has been placed on the record as Exhibit P.W. 1/1. It is stated that nothing at all has been refunded to the Government. As required by sections 23 and 24 of the State Aid to Industries Act 1935, a notice was sent to the Company and it was followed by a declaration duly published in the official gazette. Nothing has been paid by the Company. On the above allegations the State wants that in pursuance of the provisions of section 35 of the Act it may be allowed to recover the amount due to it as arrears of land revenue. Section 35 runs as under:

(3.) Mr. K. S. Kwatra, learned counsel for the State has drawn my attention to section 529 of the Companies Act 1956 which is to the effect that in the winding up of the insolvency of the Company, the same rule shall prevail and be observed with regard inter alia to the respective rights of secured and unsecured creditors, as are in force for the time being under the law of insolvency with respect to the state of persons adjudged insolvents. He has also drawn my attention to section 28, sub-section (6) of the Provincial Insolvency Act which provides: