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HIGH COURT OF CALCUTTA
Harries, Chatterjee
MOHAMMED AMIN BROS. LTD. - Appellant
Versus
DOMINION OF INDIA - Respondent
A. F. O. O. 83 Of 1949
Decided On : SEPTEMBER 13, 1949
The Court held that the application to wind up the company was not bona fide and therefore the Court should not accede to it. The Court also held that the Crown can invoke the machinery of the winding up Court for the recovery of revenue. However, the Court cannot scrutinise the debts on which the petition is founded and must accept them as good petitioning creditor's debts.
Fact of the Case:
The company was assessed to income-tax and corporation tax for the assessment years 1944-45, 1945-46, and 1946-1947 in the amount of Rs. 4,56,562-5-0. The company was also assessed for the periods ending 31-10-1943, 31-10-1944, and 31-10-1945 at Rs. 30,44, 234/- on account of excess profits tax and compulsory deposits. The total amount of tax for which the co. was assessed was therefore Rs. 35,00,796-5-0. The income-tax assessments for the years 1947-48 and 1948-49 have not been completed and are still pending. On 9-4-1948 notices of demand of the amounts due were served on the Company and some of the assets of the Company were attached in execution and that attachment is still subsisting. On 26-1-1949, the directors of the Company made and filed a declaration of solvency under Section 207, Companies Act The Company passed a resolution for a voluntary winding up and Mr. B. C. Bhattacharjee, a Pleader, who acted for the Company was appointed Liquidator. The declaration of solvency made by Gulam Mohiuddin and Abdul Rezak, two directors of the Company, showed that the Company owed in respect of income-tax, excess profits tax, etc. , a sum of Rs. 3,50,000/- though long before that date the Company had been assessed to the sum of Rs. 35,00,796-5-0. On 7-2-1949 an application was made on behalf of the revenue authorities to wind up this Company, and directions were given for advertisements. On the same date an application was made for the appointment of a provisional liquidator and Mr. G. Basu, an Incorporated Accountant, was appointed provisional liquidator pending the hearing of the application. Later M. G. Basu and Mr. B. C. Bhattacharjee, the liquidator appointed in the voluntary winding up, were appointed provisional liquidators pending the hearing of the winding up application.
Finding of the Court:
The Court held that the application to wind up the company was not bona fide and therefore the Court should not accede to it. The Court also held that the Crown can invoke the machinery of the winding up Court for the recovery of revenue. However, the Court cannot scrutinise the debts on which the petition is founded and must accept them as good petitioning creditor's debts.
Issues: Whether the application to wind up the company was bona fide.
Ratio Decidendi: The Court held that the application to wind up the company was not bona fide and therefore the Court should not accede to it. The Court also held that the Crown can invoke the machinery of the winding up Court for the recovery of revenue. However, the Court cannot scrutinise the debts on which the petition is founded and must accept them as good petitioning creditor's debts.
Final Decision: The Court set aside the order of Sinha J. winding up the appellant company. The application for winding up shall be kept on the tile, but its hearing is adjourned sine die. The Provisional Liquidators who had been appointed will continue to function on the same terms and conditions as before until further order. They shall afford all facilities to the lawyers of the company for the prosecution of the income-tax and excess-profits tax cases or appeals now pending. This case is remanded and the application for winding up shall be heard by the learned Judge taking Company matters after the final determination of the income-tax and excess profits tax cases or appeals now pending. Both the parties will be entitled to file affidavits after the final conclusion of the said income-tax and excess-profits tax cases or appeals stating the liabilities in respect of the income-tax or excess-profits tax as will be determined in those cases or appeals. On the conclusion of such cases or appeals the parties will have liberty to mention to the learned Judge for fixing a date for hearing of the winding up application. Costs of the hearing before Sinha J. and costs of this appeal will abide the final result of the winding up application. Certificate under Section 205 (1), Govt. of India Act is granted. Certified for two counsel.
( 1 ) THIS is an appeal from a Judgment and order of Sinha, J. , winding up the appellant co. The appellants are a limited Company with a nominal capital of Rs. 15,00,000/- divided into 1,500 shares of Rs. 1,000/- each. The amount of capital paid up or credited as paid up is Rs. 15,00,000. The Company carries on the business of Exporters and Importers of hides and skins and other commodities. On 30-3-1948 the Company was assessed to income-tax and corporation tax for the assessment years 1944-45, 1945-46, and 1946-1947 in the amount of Rs. 4,56,562-5-0. On the same date the Company was also assessed for the periods ending 31-10-1943, 31-10-1944, and 31-10-1945 at Rs. 30,44, 234/- on account of excess profits tax and compulsory deposits. The total amount of tax for which the co. was assessed was therefore Rs. 35,00,796-5-0. The income-tax assessments for the years 1947-48 and 1948-49 have not been completed and are still pending. On 9-4-1948 notices of demand of the amounts due were served on the Company and some of the assets of the Company were attached in execution and that attachment is still subsisting. On 26-1-1949, the directors of the Company made and filed a declaration of solvency under Section 207, Companies Act The Company passed a resolution for a voluntary winding up and Mr. B. C. Bhattacharjee, a Pleader, who acted for the Company was appointed Liquidator. The declaration of solvency made by Gulam Mohiuddin and Abdul Rezak, two directors of the Company, showed that the Company owed in respect of income-tax, excess profits tax, etc. , a sum of Rs. 3,50,000/- though long before that date the Company had been assessed to the sum of Rs. 35,00,796-5-0. On 7-2-1949 an application was made on behalf of the revenue authorities to wind up this Company, and directions were given for advertisements. On the same date an application was made for the appointment of a provisional liquidator and Mr. G. Basu, an Incorporated Accountant, was appointed provisional liquidator pending the hearing of the application. Later M. G. Basu and Mr. B. C. Bhattacharjee, the liquidator appointed in the voluntary winding up, were appointed provisional liquidators pending the hearing of the winding up application.
( 2 ) THE Company opposed the application on a number of grounds. In the first place it was said that the assessments to income-tax, super-tax, etc. , were illegal and arbitrary. In the affidavit tiled on behalf of the co. it was said that the Income-tax Officer originally made an assessment of Rs. 1,50,000/- but the Commissioner of Income-tax being dissatisfied with this assessment arbitrarily raised the assessment from Rs. 1,50,000/- to over Rs. 35,00,000/ -. It is to be observed that there is no evidence of this alleged arbitrary action of the Commissioner of Income-tax beyond the statement in this affidavit. It was said, in objection to be petition for winding up, that appeals had been preferred from the various assessments which went to make up the sum of over Rs. 35,00,000/- and that these appeals were pending and had not been disposed of. It appears that one appeal had been disposed of by the Assistant Appellate Commissioner when Sinha, J. , heard this application, but this appeal was unsuccessful and an appeal had been filed against this order before the Income-tax : apellate Tribunal. It was also urged that the Court should not make a winding up order at the instance of the revenue authorities as steps had been already taken by the authorities under the Public Demands Recovery Act to recover the sums due. It appears that the Company had applied under Section 45, Income-tax Act, which gives discretion to the Income-tax Officer not to treat the assessee as a defaulter as long as an appeal or appeals against the assessment order or orders were pending. This application, however, was summarily rejected and steps were taken to realise the tax. The Company contended that the application to wind up the Company was no
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