1976 (12) TMI 21

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..... t of the fund in the hands of the official liquidator, being Mr. S. Acharyya. In this particular case, from time to time, I also made certain orders relying on the relevant decision of the Supreme Court as to the authority of the liquidator vis-a-vis the court to go into the question of assessment of tax liabilities, but now the only point which has been raised and required for consideration and decision by me is whether between the ordinary creditors of the company, the dues of the Union of India in respect of the liabilities of the company should get priority or not. The learned Advocate-General, appearing with Mr. Ajit Sengupta for the income-tax authority submitted, relying on the Supreme Court decision in Builders Supply Corporation .....

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..... g for the appellant before the Supreme Court that though the English common law doctrine of priority of Crown debts regarding tax dues might have been recognised by judicial decisions in India prior to 1950, there is no sanction for its continued operation after the Constitution came into force, which naturally proceeded on the assumption that the judicial recognition of the relevant common law doctrine cannot claim protection of article 372(1) of the Constitution of India, was negatived and it has been laid down that the common law priority of tax dues of Crown is to continue as a law in force under article 372(1) of the Constitution of India. Further, the contention of the counsel before the Supreme Court was that by reason of the provisi .....

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..... rinciple of law with which we are concerned. These provisions merely indicate the manner in which and the procedure according to which public debts should be recovered. There is no positive provision in respect of respondent No. 1's claim to recover arrears of tax." Therefore, the decision of the Supreme Court in [1965] 56 ITR 91 is the law of the land in which it has been laid down that the arrears of tax dues to the Union of India will have priority over all other ordinary creditors of the debtors, i.e., it will have priority over all other creditors other than secured creditors. In the present application by the official liquidator for payment out of the funds lying in his hands, the official liquidator will first pay the arrears of t .....

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