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TMI Blog1950 (12) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India, the Income-tax Officer, Companies District I, and the Commercial Tax Officer, Central Section, West Bengal. The notice of this application was not served upon the State of West Bengal, but Mr. Samaren Sen, who is instructed by the Solicitor to the State of West Bengal on behalf of the State, waived service of the notice of motion and I have proceeded upon the footing that the State of West Bengal is adequately represented in these proceedings. The question whether and under what circumstances the petitioners are entitled to restrain the respondents from realizing their claims by execution and attachment has been very much debated before me. The relevant sections of the Indian Companies Act are as follows : "Section 211. Subject to the provisions of this Act as to preferential payments, the property of a company shall, on its winding up, be applied in satisfaction of its liabilities pari passu and subject to such application, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company." "Section 216. (1) The liquidator or any contributory or creditor may apply to the court to determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors... But it is only in very special circumstances such as those that the court will depart from its general practice of staying execution when the company is in voluntary liquidation, for the reason that the execution, if allowed, would necessarily interfere with the distribution of the assets pari passu." In that case the Appeal Court stayed execution proceedings against the company in voluntary liquidation and discharged garnishee order nisi. The latest case on this point is In re Margot Bywaters Ltd., where Mr. Justice Simonds observed as follows: "Where the liquidation is voluntary it is necessary for the liquidator to come to the court to have the distress proceedings stayed, and the court will stay them unless there he exordinary reasons or exceptional circumstances which justify their continuance. . . It is not contended on behalf of the Crown that this is an assessed tax with regard to which preference is given by section 264 of the Companies Act, 1929, and, therefore, this case does not differ from any other case in which the creditor who is not entitled to any preference is seeking in a liquidation to enforce otherwise than by proof his claim against a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was assessed for the sum of Rs. 11,658-9 in respect of income-tax for the year 1943. It is alleged by the petitioner that in fact no income-tax is payable for the year. An appeal has been filed in respect of that assessment and the appeal is still pending, but it is admitted by the petitioner that if any moneys are due to the Union of India in respect of the 1943 income-tax the Union would be entitled to rank as a preferential creditor inasmuch as the demand notice in respect of such tax was served on the company before it went into voluntary liquidation. There have also been assessments of income-tax in respect of periods subsequent to 1943 and large sums of money are claimed by the Union of India to be due to it in respect of such assessments. The demand notices in respect of such assessments were served on the company after it went into voluntary liquidation and the petitioners claim that the Union of India is not entitled to the preferential payment of income-tax subsequent to 1943. There is no doubt about the bona fides of this contention of the petitioners having regard to section 230 of the Indian Companies Act. It is alleged on behalf of the petitioners that a sum of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding appeals in the income-tax proceedings and I am not satisfied at present that there has been any false statement in the declaration of solvency. It is also urged by counsel for the respondents that there has been a long delay in the liquidation proceedings and for the last one year and a half practically nothing has been done, but, on the other hand, it is pointed out by Mr. Chaudhuri that there are a large number of out-standings to be realised and a number of jobs have to be completed and such completions have been undertaken and the jobs are being completed. I do not think that there has been any extraordinary delay in the liquidation proceedings or that there are any exceptional facts in so far as the Union of India is concerned which ought to entitle them to continue the execution proceedings. With regard to the State of West Bengal large sums of money are due to it on account of Sales tax. In respect of sales tax for the period subsequent to December, 1945, the demand notice in respect of such tax was served upon the company after it went into voluntary liquidation and consequently it is disputed that the State is entitled to rank as preferential creditor in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim of the State of West Bengal to a preferential treatment in respect of Rs. 4,141-9-6 is admitted by petitioners. It is not alleged that there are any preferential creditors other than the Union of India. The Union of India, hewever, does not desire that the State of West Bengal should be restrained from realising its claim. In fact Mr. A.K. Sen on behalf of the Union of India expressly requested me to allow the State of West Bengal to realise its claim by execution. I am not prepared to hold that in the case of admitted preferential claims as a matter of course, the preferential creditor ought to be restrained from executing this decree. It seems to me that ordinarily he ought not to be restrained unless there are special circumstances justifying that course. It does not appear that there are any special circumstances in this case justifying restraint on the State of West Bengal from realising by execution its admitted preferential claim for Rs 4,141-9-6. 1 will not determine finally the rights of the parties nor will I determine to what extent, if any, either the State of West Bengal or the Union of India is entitled to preferential payment. That question may be determine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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