Court rejects petition under Companies Act, emphasizing limited jurisdiction over approved schemes.

The court held that the petition under section 392 of the Companies Act was not maintainable as the income tax demands on foreign collaborators were outside the scope of the sanctioned reconstruction scheme approved by the court. The court emphasized that its jurisdiction under section 392 should be limited to matters directly related to the approved scheme and cannot intervene in income tax assessments or liabilities not covered by the scheme. The petition was rejected, upholding the respondent's preliminary objection.

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Issues:
1. Maintainability of the petition under section 392 of the Companies Act.
2. Interpretation of the scheme of reconstruction approved by the court.
3. Liability of the company regarding income tax demands on foreign collaborators.
4. Jurisdiction of the court under section 392 to issue directions beyond the scope of the sanctioned scheme.
5. Corrective jurisdiction of the company court in setting aside regular assessments under the Income Tax Act.

Detailed Analysis:
1. The petition was filed seeking a declaration that no income tax is due on know-how fees under a collaboration agreement and to prevent the enforcement of demands by the Income-tax Officer. The respondent raised a preliminary objection on the maintainability of the petition under section 392 of the Companies Act, questioning the court's jurisdiction to issue directions beyond the sanctioned scheme of reconstruction.

2. The court had previously approved a scheme of reconstruction for the petitioner-company, stating no income tax dues were outstanding, and the directors would indemnify any arising liabilities. The scheme also addressed payments under various acts, but did not specifically cover income tax demands on foreign collaborators. The court's approval of the scheme did not absolve the company from liabilities unrelated to its income.

3. The income tax demands were issued to the company as agents of foreign collaborators, based on assessments that had reached finality. The company argued that the demands were contrary to the sanctioned scheme, but the court held that the liabilities of the foreign collaborators were not covered under the scheme and therefore not within the court's jurisdiction under section 392.

4. The court analyzed the scope of section 392 and the power to issue directions, citing a previous judgment. It was argued that the court retained jurisdiction until the company paid off its creditors, but the court emphasized that the jurisdiction under section 392 should be limited to matters directly related to the sanctioned reconstruction scheme. Since the demands on foreign collaborators were outside the scheme's scope, the court found no basis to intervene.

5. The court rejected the alternative contention that the demands were contrary to the limitations of the Income Tax Act, stating that the company should seek remedies under other laws instead of invoking section 392 of the Companies Act. The court clarified that the company court cannot interfere with regular assessments under the Income Tax Act, affirming the rejection of the petition and upholding the preliminary objection raised by the respondent.

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