1946 (3) TMI 14 - Other - Companies Law

Issues Involved:
1. Whether the Crown is bound by the provisions of the Indian Companies Act, 1913 regarding the liquidation of companies.
2. Whether the Income-tax authorities require the leave of the Court under section 171 of the Indian Companies Act, 1913, before taking steps under section 46 of the Indian Income-tax Act.
3. Whether the Allahabad High Court had jurisdiction to interfere with the collection of arrears of land revenue by the Income-tax authorities.
4. Interpretation and application of section 226 of the Government of India Act, 1935.

Issue-wise Detailed Analysis:

1. Whether the Crown is bound by the provisions of the Indian Companies Act, 1913 regarding the liquidation of companies:
The judgment clarified that the Crown is bound by the provisions of the Indian Companies Act, 1913, and is subject to the statutory scheme of administration wherein the prerogative right of the Crown to priority no longer exists. The court emphasized that the Crown is not entitled to any prerogative, priority, or preferential rights or treatment, save those expressly conferred and limited by the Act itself, particularly by section 230 and sub-section (2) of section 232. The court referenced several cases, including the English Court of Appeal decision in Webb & Co. and the House of Lords decision in Food Controller v. Cork, which determined that the Crown is not entitled to priority in payment of its claims over other creditors of a company in liquidation.

2. Whether the Income-tax authorities require the leave of the Court under section 171 of the Indian Companies Act, 1913, before taking steps under section 46 of the Indian Income-tax Act:
The court held that section 171 of the Indian Companies Act, 1913, requires that no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court. The court concluded that the words "other legal proceeding" in section 171 comprise any proceeding by the revenue authorities under section 46 (2) of the Indian Income-tax Act. Therefore, before forwarding the requisite certificate under section 46 (2) to the Collector, which would initiate the collection of the arrears of income-tax as arrears of land revenue, the Income-tax authorities should have applied for leave of the winding-up Court.

3. Whether the Allahabad High Court had jurisdiction to interfere with the collection of arrears of land revenue by the Income-tax authorities:
The court examined the provisions of section 226 of the Government of India Act, 1935, which states that no High Court shall have any original jurisdiction in any matter concerning the revenue or concerning any act ordered or done in the collection thereof. The court determined that the High Court was exercising original jurisdiction in a matter concerning an act done in the collection of the revenue. However, the court also considered whether the act ordered or done in the collection of the revenue was "according to the law for the time being in force." The court concluded that the Income-tax authorities acted bona fide and not absurdly in determining to proceed under section 46 (2), and thus, the High Court had no jurisdiction in the matter.

4. Interpretation and application of section 226 of the Government of India Act, 1935:
The court interpreted section 226 of the Government of India Act, 1935, and concluded that the section applies to the jurisdiction conferred on the Allahabad High Court by the Indian Companies Act, 1913. The court held that the High Court's jurisdiction was ousted by section 226 because the act of forwarding the certificate under section 46 (2) for the collection of arrears of income-tax was done bona fide and not absurdly, and thus, was "according to the law for the time being in force." Consequently, the High Court's order was ultra vires and void.

Conclusion:
The appeal was allowed, and the order of the High Court dated 13th November 1944 was set aside. The application of the Liquidators dated 21st September 1944 was dismissed, and any costs received by the Liquidators in respect of the said application in the High Court were to be repaid. No order as to costs was made in respect of the appeal to this Court.

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