Official liquidator need not fund or defend an ex-director in pre-liquidation tax proceedings arising from personal liability.

Section 457(1)(a) of the Companies Act, 1956 does not require an official liquidator to engage counsel or finance a defence for an ex-director facing income-tax proceedings in her personal capacity. The assessments related to periods long before the winding-up order, and the company had already filed the appeals before liquidation. The notice under section 179 of the Income-tax Act, 1961 was issued personally to the ex-director, so the responsibility to appear and contest it remained with her. Reassessment proceedings of this kind were also treated as outside the legal proceedings contemplated by section 457(1)(a) in the context of liquidation.

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Issues: Whether the official liquidator could be directed to engage counsel and defend the pending income-tax appeals and related proceedings on behalf of the company in liquidation in respect of assessments made for periods prior to the winding-up order.

Analysis: The assessments in question related to assessment years long before the winding-up order, and the appeals had already been filed by the company before liquidation. The notice under section 179 of the Income-tax Act, 1961, was issued to the ex-director in her personal capacity, so it was for her to appear and contest the same. On these facts, the Court held that section 457(1)(a) of the Companies Act, 1956, could not be invoked to require the official liquidator to take over the defence of the ex-director or bear the expense of counsel. The Court also indicated that reassessment proceedings of this nature did not fall within the scope of legal proceedings contemplated by section 457(1)(a) as applied to the liquidation.

Conclusion: The request to compel the official liquidator to engage counsel and defend the ex-director in the tax proceedings was rejected.

Ratio Decidendi: Section 457(1)(a) of the Companies Act, 1956, does not require an official liquidator to defend or finance proceedings arising from pre-winding-up tax assessments against an ex-director in her personal capacity.

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