Section 529-A of the Companies Act gives overriding preferential treatment to workmen's dues and debts due to secured creditors, and it prevails over the Income Tax Act, 1961.

JUDGMENT

Subodh Abhyankar, J. - Heard on OLR No.40/2017.

2. This OLR has been filed by the Official Liquidator seeking the following reliefs:-

'i) Report of the Official Liquidator may kindly be perused and taken on record.

ii) In view of submission made in Para-4 above, permission may kindly be given to remit a sum of Rs.2,26,940/- to Income Tax Department towards Income Tax payable for the Assessment Year 2010-11, out of funds available in the accounts of the Company (In-Liqn.).

iii) In view of submission made in Para-5 above, Official Liquidator humbly seeks leave of this Hon'ble Court to withdraw OLR no.19/2017 dated 03/03/2017 to avoid future complications.

iv) In view of submission made in Para-7 above, Official Liquidator is humbly opinion that, appropriate orders may kindly be passed by this Hon'ble Court to waive of the Income Tax liability of Rs.16,81,220/-, Rs.21,58,480/- & Rs.15,63,570/- in respect of Assessment Year 2012-13, 2013-14 & 2014-15 respectively.

Or

if this Hon'ble High Court is not inclined to the aforesaid humbly proposal of the Official Liquidator, the Secured Creditors - Kotak Mahindra Bank Ltd, UTI Asset Management Co. Ltd., IFCI Ltd & Assets Stabilization Fund, may be directed to remit back proportionate share to the Official Liquidator as per table given in para 7 above, so as to enable the Official Liquidator to remit Income Tax amount of Rs.16,81,220/ -, Rs.21,58,840/- & Rs.15,63,570/-in respect of Assessment Year 2012-13, 2013-14 & 2014-15 respectively.

And

Such other order(s) as this Hon'ble Court deem fit and proper may kindly be passed in the circumstances of the case.'

3. The case of the Official Liquidator is that there are income tax dues and as per the return filed by the company in liquidation, the demand of Income Tax Department comes to Rs.92,82,230/-excluding the penalty and interest for the year 2010-11 to 2014-15 with tax demand after completion of assessment. Reliance is also placed by shri Mehta on Section 529-A of Companies Act, 1956 (hereinafter referred to as the Companies Act) which provides for overriding preferential payment, as also Section 530 of the same, which refers to preferential payments and it is submitted that since the amount realized from the sale of the assets of the company has already been paid to the secured creditors, and as of now, the company has in its account Rs.20,14,136/- only, the major portion of which is again liable to be set of against the secured creditors' dues. In such circumstances, the aforesaid reliefs have been sought by the OL.

4. Shri Gaurav Chhabra, learned counsel appearing for the Kotak Mahindra Bank has opposed the prayer and it is submitted that the alternative relief sought in the OLR cannot be allowed in any manner as the Bank is a secured creditor and its rights are also saved under Section 529-A of the Companies Act. Counsel has relied upon the decision rendered by the Supreme Court in the case of Stock Exchange, Bombay Vs. V.S. Kandalgaonkar and others reported as AIR 2015 SC 193. He has also relied upon the decision rendered by the Bombay High Court in Company Petition No.910 of 1987 on 28/08/1998 in the case of Starit India Ltd.(In Liquidation), In re. Relevant paras viz.,11 and 12 of the same read as under:-

'11. The scheme and purpose, therefore, which emerges is that the liquidator is bound to make provision for payment determined under Sub -section (2). Once he makes the provision, the bar of Section 178 goes. In other words, once the amount is set aside, as assessed for tax the liquidator is not precluded from disposing of the assets or properties of the company. Sub-sections (1), (2) and (3) therefore read in harmony do not mean that transactions that take place after the compliance by the liquidator with Sub-clause (b) of Sub-section

(3), are prohibited. The very proviso to subsection (3) treats tax, secured creditors and costs and expenses of winding up on the same footing . Section 178(1) and (2), therefore, do not place transacti