1979 (1) TMI 197 - HC - Companies Law

Summary

Issues Involved:
1. Legitimacy of the Regional Director's order dated November 30, 1973.
2. Entitlement of the income-tax department to the amount in the company liquidation account.
3. Compliance with statutory requirements under Section 555(7) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Legitimacy of the Regional Director's Order Dated November 30, 1973:
The primary issue revolves around whether the order dated November 30, 1973, by the Regional Director, sanctioning payment of Rs. 20,542.50 to the appellant, was valid. The income-tax department argued that the order was a nullity since the Regional Director failed to verify the pendency of any application before the court under Section 555(7)(a) of the Companies Act, 1956.

The court noted that the Regional Director had written to the Commissioner of Income-tax and the Income-tax Officer multiple times from February 1973 onwards, without receiving any objections. The Regional Director was satisfied that the amount was due to the appellant and that no application under Section 555(7)(a) was pending in court. The court emphasized that the statute did not impose an obligation on the Regional Director to ascertain from the court the pendency of any application. The court concluded that the Regional Director had complied with the statutory requirements, and thus, his order was not a nullity.

2. Entitlement of the Income-tax Department to the Amount in the Company Liquidation Account:
The income-tax department sought payment of Rs. 10,853.55 from the amount of Rs. 20,542.50 available in the company liquidation account. This claim was contingent upon the nullification of the Regional Director's order. The court held that since the Regional Director's order was valid, the income-tax department could not claim any amount from the liquidation account. The court stated, "If the order of the Regional Director dated November 30, 1973, directing payment of that amount to the appellant stands, there will be no amount available with the Regional Director to pay the income-tax department."

3. Compliance with Statutory Requirements under Section 555(7) of the Companies Act, 1956:
The court examined whether the Regional Director complied with Section 555(7)(b) of the Companies Act, which requires the Central Government to be satisfied that no application under Section 555(7)(a) is pending in court. The court interpreted the provision to mean that the Central Government must ensure that the claimant has not simultaneously pursued two remedies-one before the court and another before the Central Government. The court found that the appellant had not filed any application under Section 555(7)(a) before any court, thus fulfilling the statutory requirement.

The court also referred to the Companies Liquidation Accounts Rules, 1965, which support the interpretation that the satisfaction required under Section 555(7)(b) pertains to the claimant not having any pending application under Section 555(7)(a). Rule 9(3) of the Companies Liquidation Accounts Rules, 1965, and the pro forma indemnity bond further reinforced this interpretation.

Conclusion:
The court allowed the appeals, setting aside the order of the learned judge dated August 5, 1975, and dismissing Company Application No. 421/74. Consequently, the income-tax department's application (Company Application No. 461/73) also stood dismissed, as there was no amount available with the Regional Director to pay the income-tax department. The court concluded, "There will be no order as to costs."