1979 (1) TMI 48 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Regional Director's order dated November 30, 1973.
2. Entitlement of the income-tax department to claim payment from the company liquidation account.
3. Compliance with statutory provisions under Section 555 of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Validity of the Regional Director's Order Dated November 30, 1973:

The primary issue was whether the order passed by the Regional Director on November 30, 1973, sanctioning payment of Rs. 20,542.50 to the appellant was valid. The income-tax department argued that the order was a nullity because the Regional Director did not verify the pendency of Company Application No. 461/73 before the court. The department claimed that the Regional Director was informed about the application through an inspector and a letter sent on November 27, 1973. However, the court found that the department failed to substantiate this claim with evidence, such as an affidavit from the inspector or examination of witnesses. The Regional Director, in his counter-affidavit, stated that he had not received any objections from the income-tax department despite multiple communications. The court concluded that the Regional Director acted in compliance with Section 555(7)(b) of the Companies Act, 1956, as he was not aware of any pending application under Section 555(7)(a) at the time of passing the order.

2. Entitlement of the Income-Tax Department to Claim Payment:

The income-tax department sought payment of Rs. 10,853.55 from the company liquidation account. The court noted that the entitlement of the department to claim this amount depended on the validity of the Regional Director's order. Since the court upheld the validity of the order dated November 30, 1973, the department's claim failed. The court emphasized that the amount in question was earmarked for the appellant as surplus assets refundable to him and not part of the company's general assets. Therefore, the department could not lay a claim to this specific amount.

3. Compliance with Statutory Provisions Under Section 555 of the Companies Act, 1956:

The court examined the relevant statutory provisions, particularly Section 555, which deals with the payment of unclaimed dividends and undistributed assets into the Companies Liquidation Account. The Regional Director was required to satisfy himself that the claimant was entitled to the amount and that no application under Section 555(7)(a) was pending in court. The court found that the Regional Director had complied with these requirements. The court also clarified that the expression "no application made in pursuance of clause (a) is pending in the court" referred to applications made by the claimant, not by any third party. This interpretation was supported by the Companies Liquidation Accounts Rules, 1965, and the prescribed forms for indemnity bonds.

Conclusion:

The court allowed O.S.A. No. 56/76, setting aside the order of the learned judge dated August 5, 1975, and dismissed Company Application No. 421/74. Consequently, O.S.A. No. 55/76 was also allowed, and Company Application No. 461/73 was dismissed. The court held that the income-tax department was not entitled to any payment from the company liquidation account, and the order of the Regional Director dated November 30, 1973, stood valid. There was no order as to costs.