1971 (6) TMI 44 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 446(1) of the Companies Act, 1956, to proceedings initiated by the Income-tax Officer.
2. Jurisdiction of the Company Court over Income-tax proceedings.
3. Validity of notices issued under the Income-tax Act during the winding-up process.

Detailed Analysis:

1. Applicability of Section 446(1) of the Companies Act, 1956, to Proceedings Initiated by the Income-tax Officer:
The primary issue was whether Section 446(1) of the Companies Act, 1956, applies to proceedings initiated by the Income-tax Officer against a company in liquidation. The applicant argued that there is a conflict of judicial opinion on this matter and sought the court's direction. The respondent contended that Section 446(1) does not apply to such proceedings and that the Income-tax Officer has jurisdiction to issue the notices without the leave of the court.

The court examined several decisions to determine the scope of the term "other legal proceeding" under Section 446(1). It referred to the Federal Court's decision in Governor-General in Council v. Shiromani Sugar Mills Ltd., which emphasized that "no narrow construction should be placed upon the words 'or other legal proceeding' in section 171 [equivalent to Section 446]." The court also considered the Supreme Court's decision in Damji Valji Shah v. Life Insurance Corporation of India, which held that Section 446(1) does not apply to all legal proceedings and that the jurisdiction of the company court is limited to matters it is empowered to entertain and dispose of under Section 446(2).

2. Jurisdiction of the Company Court Over Income-tax Proceedings:
The court concluded that Section 446(1) applies only to legal proceedings that fall within the jurisdiction of the company court as enumerated in Section 446(2). This section grants the company court jurisdiction over suits or proceedings by or against the company, claims made by or against the company, applications under Section 391, and questions of priorities or other questions related to the winding-up process.

The court noted that assessment or reassessment proceedings and proceedings to impose penalties under the Income-tax Act do not fall within the ambit of Section 446(1) as they are not matters the company court is authorized to entertain and dispose of under Section 446(2). Therefore, these proceedings do not require the leave of the winding-up court.

3. Validity of Notices Issued Under the Income-tax Act During the Winding-up Process:
The court evaluated the validity of the notices issued by the Income-tax Officer under Sections 156, 274 read with 271, 274 read with 273, and 148 of the Income-tax Act. The applicant sought to have these notices declared void and set aside if Section 446(1) was found applicable. However, based on the court's interpretation of Section 446(1) and its limited applicability to proceedings within the company court's jurisdiction, the court held that the notices issued by the Income-tax Officer were valid and did not require the leave of the winding-up court.

Conclusion:
The court dismissed the applications, holding that Section 446(1) of the Companies Act, 1956, does not apply to assessment, reassessment, or penalty proceedings under the Income-tax Act. These proceedings do not fall within the jurisdiction of the company court under Section 446(2), and thus, do not require the leave of the winding-up court. The court made no order as to costs.