2011 (3) TMI 1719 - SC - VAT and Sales Tax

Summary

Issues involved: Interpretation of priority of dues under Section 529-A of the Companies Act, 1956 and Section 38-C of the Bombay Sales Tax Act, 1959.

Summary:
The State of Maharashtra filed a petition challenging the Bombay High Court's order giving priority to workers' dues under Section 529-A of the Companies Act over the State's dues under Section 38-C of the Bombay Sales Tax Act. The delay in filing the petition was condoned. The case involved the winding up of M/s. Konkan Steel Limited and a subsequent application for payment of Sales Tax dues. The Single Judge directed equal treatment for the petitioner and the State of Karnataka along with other creditors based on Section 529-A. The Division Bench allowed an appeal stating that Section 529-A prevails over Section 38-C.

The Supreme Court referred to the Central Bank of India vs. State of Kerala case, emphasizing that the first charge created by legislation takes precedence over other creditors. The Court highlighted that the non obstante clause in Section 529-A of the 1956 Act overrides the clause in Section 38-C of the State Act due to the central legislation's later enactment. It was noted that Section 529-A mandates priority payment of workers' dues over all other debts.

Based on the above analysis, the Supreme Court dismissed the special leave petition, upholding the judgment that workers' dues under Section 529-A hold priority over the State's dues under Section 38-C.