Telangana High Court
State Of A.P., Hyderabad vs M/S.Boppanna Oil Mills Ltd., Hyderabad ... on 31 January, 2025
Author: T. Vinod Kumar
Bench: T. Vinod Kumar
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
COMPANY APPEAL No.5 OF 2005
in
RCC.No. 09 of 2002
&
COMPANY APPEAL No.21 OF 2005
in
RCC.No. 07 of 1996
&
COMPANY APPEAL No.948 OF 2005
in
RCC.No.2 OF 1995
&
COMPANY Application No.1282 OF 2005
in
CP.No.57 of 1999
&
COMPANY APPLICATION No.1283 OF 2005
in
RCC.No.20 of 2000
&
COMPANY APPLICATION No.1315 OF 2005
in
RCC.No.10 of 1994
&
COMPANY APPLICATION No.1317 OF 2005
in
RCC.No.22 of 2000
&
COMPANY APPLICATION No.1324 OF 2005
in
RCC.No.10 of 2001
&
COMPANY APPLICATION No.1695 OF 2005
in
RCC.No. 05 of 1992
&
COMPANY APPLICATION No.1696 OF 2005
in
RCC.No.2 of 1997
&
COMPANY APPLICATION No.1697 OF 2005
in
CP.No.122 of 1999
&
2
COMPANY APPLICATION No.462 OF 2007
in
CP.No.35 of 1985
&
COMPANY APPEAL No.30 OF 2008
in
CP.No.178 of 2003
&
COMPANY APPEAL No.31 OF 2008
in
RCC.No.14 of 1999
&
COMPANY APPEAL No.12 OF 2015
in
CP.No.35 of 1985
COMMON ORDER :
Since, all these Company Appeals and Company Applications raise a similar question for consideration of this Court, they are all being disposed of by this Common Order.
2. For ease of reference, the prayer set out in one of the Company Appeals and the prayer as set out in the Judges Summons in one of the Company Applications are extracted below:
"CA.No.1317 of 2005
For the reasons stated in the accompanying affidavit, it is prayed that this Hon'ble court may be pleased to allow the appeal duly setting aside the order dt.23.11.2004 of the respondent in proceedings RCC No.9/2002/04/510 to the extent of treating the claim of the appellant as unsecured debt and direct the respondent to admit the claim of the appellant for a sum of Rs.49,66,252/- as secured debt having precedence over all the secured debt and pass such other order......3 COMPA.No.1317 of 2005
......praying the Hon'ble court may be pleased to direct the Official Liquidator to give the status of the claim of the applicant at par with dues to the workers and other secured creditors pursuant to Section 529(A) & 530 of the Companies Act and based on Section 16(C) of APGST Act and consequently direct the Official Liquidator to pay the same, if such determination is accepted by the applicant, as and when the amounts are disbursed to the secured creditors and pass such other order or orders as this Hon'ble Court may deem fit and proper in the circumstances of the case"
3. Heard learned Special Government Pleader for State Tax appearing for appellants/petitioners and Sri Santhosh Jadhav, learned counsel for Official Liquidator and Sri P.V.Markandeyulu, learned counsel appearing for respective respondents, in all these matters, and perused the record.
4. All these Company Appeals and Company Applications are preferred by the concerned Commercial Tax Officials of the State against the Companies-in-Liquidation claiming that the tax dues of the Companies-in-Liquidation are to be given priority over the sums due to the other creditors of the Companies-in-Liquidation by treating the said dues on par with the dues payable to the workers and secured creditors.
5. The case of the appellants/applicants is that on account of Section 16-C of the Andhra Pradesh General Sales Tax Act, 1957 (for short 'Act') the tax dues takes precedent over the other 4 dues, and thus, sought for a direction being issued to the Official Liquidator to record their preferential claim.
6. The appellants, in some of the cases applicants, have assailed the action of the Official Liquidator in registering the claim of the petitioners only in respect of dues that have fallen due within 12 months before the order of the winding up passed by this Court, as the same not being in consonance with Section 16-C of the Act, which provides for treating the eligibility under the Act to be first charge on the property of the dealer or such person.
7. Though on behalf of the appellants/applications it has been contended that on account of insertion of Section 16-C in the Act, any amount of tax due, government loan extended to the dealer due to treating the deferred tax as deemed to have been paid, penalty, interest, and in any other sum if any, payable to be the first charge on the property of dealer or such person, it is to be noted that though Section 16-C of the Act begins with non-abstinence clause, by the use of the word 'notwithstanding anything to the contrary contained in any law', the said overriding effect is in relation to any other dues under the statutes of the State.
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8. On the other hand, Section 529A of the Companies Act, 1956 (for short 'Act 1956'), provides for overriding power with regard to preferential payments, as inserted by Act 35 of 1985 w.e.f., 24.05.1985.
9. Further, as regards the issue as to whether the tax dues under the State enactments are to be given preferential treatment, by considering charge over the property of the Company-in-liquidation, though on behalf of the appellants/applicants reliance is placed on the decision rendered in the case of State Bank of Travancore v. Recovery Officer 1, Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. 2, and Central Bank of India v. State of Kerala 3, it is to be noted that the said issue is no longer res integra in view of the recent decision of the Hon'ble Apex Court in the case of Industrial Development Bank of India vs. Superintendent of Central Excise and Customs and Others 4, wherein the scope of Section 529A and also Section 530 of the Act, 1956 vis- à-vis the provisions of the other Statutes has been explained in detail.
1 2007 SCC Online Ker 314 2 (2000) 5 SCC 694 3 (2009) 4 SCC 94 4 2023 INSC 746 6
10. The Apex Court in the aforesaid judgment had held that the provisions contained in any other statute do not in any manner indicate or override the statutory preferences in terms of Section 529A of the Act, 1956, which treats secured creditors and workmen dues as overriding preferential payments. The Supreme Cout also held that government 'dues' limited to debts 'due and payable' in the twelve months next before the relevant date, are to be treated as preferential payments under Section 530 of the Act, 1956, but are ranked below overriding preferential payments and have to be paid after the payment has been made in terms of Section 529 and 529A of the Act, 1956.
11. The Apex Court by referring to the judgment in Rajratha Naranbhai Mills. Co. Ltd vs. Sales Tax Officer, Petlad 5 had also explained as to when the tax may become due and though become due, but would become 'due and payable' only when the returns were filed in terms of the Statue.
12. The Apex Court further held that the dues prior to 12 months next to the relevant date viz., the date of winding up of the Company-in-Liquidation, can only be considered as 5 (1991) 3 SCC 283 7 preferential payment under Clause (a) of sub-Section (1) of Section 530 of the Act, 1956, but are ranked below the overriding preferential payments and have to be paid only after affecting the payments in terms of Section 529 and 529A of the Act, 1956, and thus, the prior secured creditors are entitled to enforce their charge, notwithstanding the government dues payable.
13. In the aforesaid authoritative pronouncement of the Apex Court clarifying the position of law on Section 529A and 530 vis-à-vis charge being claimed by the petitioners/appellants under the said enactment over the property of the dealer or any such person, this Court is of the view that the claim of the petitioners/appellants in the present appeals/applications cannot be acceded to by giving preferential treatment under Section 529A of the Act, 1956, except for a period of 12 months prior to the relevant date i.e., date of winding up of the Companies-in-Liquidation for the purpose of preferential payment in terms of Section 530(1)(a) of the Act, 1956.
14. Accordingly, the Official Liquidator is directed to consider the claim of the petitioners/appellants for a period of 12 months prior to the relevant date viz., date of winding up of the Companies-in-Liquidation, respectively, for the purpose of 8 preferential payment in terms of Section 530(1)(a) of the Act, 1956 and make necessary payment after paying the workmen dues and debts due to secured creditors, which have an overriding preferential payment as per Section 529A of the Act, 1956, from and out of the sale proceeds of the Companies-in- Liquidation.
15. Subject to the above direction, all these Company Appeals and Company Applications are disposed of. No costs.
_____________________ T. VINOD KUMAR, J 31st January, 2025.
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