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TMI Blog1974 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement of the company in the hands of an administrator. The said application has already been heard and the matter is pending for judgment. On September 26, 1973, the managing director of the company in which the applicant is a shareholder wrote to him claiming a sum of Rs. 5,56,866.43 as on August 16, 1973, and wanted confirmation of the balance due from the applicant. The applicant replied on October 18, 1973, saying that he did not owe any sum to the company and repudiated the claim. The applicant is a shareholder of the said company and the managing director is his mother. On January 24, 1974, the Income-tax Officer wrote a letter regarding the tax arrears in the case of T. P. Sokkalal Ramsait Factory Private Ltd., Mukkudal, in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y all further proceedings in pursuance of the certificate issued by the Income-tax Officer, Central Circle IX, Madras-600034, and to appoint an interim receiver to take charge of the accounts and management of the company. To this petition, the applicant's mother and the managing director of the company has filed a counter-affidavit. It is pointed out in the counter-affidavit that Company Petition No. 84 of 1969 was filed by a person claiming to be a next friend of the applicant, who was a minor at the time of the application. On his mother's application the said next friend was removed by an order in O. S. As. Nos. 43 to 46 of 1970. By that time the applicant had attained majority and he filed an affidavit stating that the allegations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sums to the company to the tune of Rs. 5,54,866 as on August 16, 1973. Another point taken in the affidavit is that the applicant could not require this court to adjudicate on the issue of his liability to the company and seek to stay the tax recovery proceedings against the company. At the hearing of the application, the learned counsel for the applicant submitted that the present application arose as a result of mismanagement of the affairs of the company, and that the tax dues were mainly the result of certain transactions which went only to the benefit of the managing director. It was submitted that the provisions of Chapter VI of the Companies Act, 1956, gave ample powers to pass appropriate orders restraining the department from se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m money is due or may become due to the assessee who was in default to pay the amount due to him either forthwith upon the money becoming due or within the time specified in the notice so much of the money as is sufficient to pay the amount due as and by way of arrears. Clause (iv) of section 226(3) provides that every person to whom such a notice was issued was bound to comply with such notice. Where a person, to whom a notice issued under section 226 of the Act was sent, objected to it by a statement on oath that the sum demanded or any part thereof was not due to the assessee who was in default, then nothing contained in section 226(3) shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement was correct, then there was no scope for recovering any money from the person concerned under the garnishee proceedings. If the statement on oath was wrong, then the result would be that the debtor to the assessee in default would himself be treated as having defaulted in payment of his own liability and the consequences contemplated by the statute would then follow. In a case like this, if the applicant had bona fide dispute regarding the payment, he could very well go before the Income-tax Officer and make the statement on oath as contemplated by section 226(3) of the Act. There is nothing to show that he went before the Income-tax Officer. It is clear that the applicant is taking recourse to these proceedings only because he does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 402 of the Act, if analysed, would show that the directions are with reference to the administration and management of the affairs of the company. It does not contemplate directions regarding debts due to third parties. If the applicant is right, then the company court would be the forum for settling disputes about ordinary debts which would ordinarily have to be done in civil suits on payment of appropriate court fees. This is not the object of the provision. Clause (g) of the said provision is only a residuary one and has to be construed in the light of the object with which section 402 has been enacted, viz., to give directions regarding the internal management of the company. Section 402 of the Act, cannot, in my opinion, be utilised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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