TaxTMI 
TaxTMI 
1944 (11) TMI 16
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....ointed and on 17th April 1942 the winding up order was made by this Court. The position, therefore, was that the assessment was actually made by the Income Tax Officer after the date of the winding up order, but was in respect of the assessment year 1941-42 and was based on the profits of the year 1940-41. The liquidators, having received the assessment took the view that the proper course would be for the Income Tax Officer to prove in the liquidation for the tax claimed and they so informed him. After some correspondence, the Income Tax Department intimated that they proposed to proceed under Section 46, Income Tax Act, and that they had issued a recovery certificate in respect of the amount of the assessment of 25th February 1943 to the Collector of Allahabad for recovery of the tax in question under that section "as if it were an arrear of land revenue." 2. These are the material facts which, have led to the present application by the liquidators to the High Court in the winding up of the Company. In view of the many points raised, it is important to observe that the relief asked for before us by the liquidators is, in effect, only that the Income Tax Officer may be restrain....
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....t first since it is a point which is in the nature of a demurrer and is moreover, one both of difficulty and importance. It rests on Section 226 (1), Government of India Act, 1935, which provides that: Until otherwise provided by Act of the appropriate Legislature, no High Court shall have any original jurisdiction in any matter concerning the revenue or concerning any act ordered or done in the collection thereof according to the usage and practice of the country or the law for the time being in force. 3. We do not propose to embark on the entertaining question whether the jurisdiction exercised by the High Court in winding up under the Indian Companies Act, 1913, is 'original' jurisdiction within the meaning of this section, because we think that this demurrer can be better disposed of on other grounds. Mr. Pathak relies on the case in Governor. General in Council v. Baleigh Investment Co. Ltd. ('44) 31 A.I.R. 1944 P.C. 51 in which the Federal Court, reversing a decision of the Calcutta High Court, has recently held that certain proceedings on the original side of the latter Court were excluded from its jurisdiction by Section 226 (1), Government of India ....
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....he words "any act ordered or done in the collection thereof," but do not, as we read the section, govern the words "concerning the revenue." As we read it, this means that any matter concerning the revenue is placed without any qualification outside the original jurisdiction of a High Court, but only such matters concerning the "collection" of the revenue are placed beyond the jurisdiction of a High Court as are "ordered or done according to the usage or practice of the country or the law for the time being in force." It is, therefore, as we view the matter, a condition precedent to the ousting of the jurisdiction of a High Court in a case concerning any act ordered or done merely in the collection of the revenue (as opposed to an act or order concerning the revenue itself) that the act or order should be one done or ordered in accordance with the usage and practice of the country or the law for the time being in force. 5. At first sight it is possible to say that this construction of Section 226 (1), Government of India Act, 1935, is an inadmissible one in view of the decision of the Judicial Committee in Spooner v. Juddow (1846) 4 M.I.A. 353 on which the Federal Court itself h....
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.... it is. In the Bombay case there was no question but that the Collector, in proceeding against the plaintiff's house, was putting into motion a proceeding which the Bombay Regulation authorised to be taken. What was complained of was, not that he had no power to proceed under the Regulation, but that this manner of doing it was irregular and in that sense only the proceeding became illegal. There was no challenge to the procedure per se, but only to the steps taken in execution of it and this, we think, is what their Lordships refer to when they speak of "an act bona fide believed to be done according to the Regulations...." Now, our case, as we see it, is very different. Section 226 (1), Government of India Act, requires the act or order in the matter of the "collection" of the revenue to be one which is "according" not to a particular Regulation or Statute, but to the whole of "the law for the time being in force." What is challenged before us is not that any particular step taken in enforcing the ascertained law is illegal', but that the Income Tax Department is not proceeding according to "the law for the time being in force" at all. In that case, we see a great diff....
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....will, or may, re-act unfavourably on the statutory rights of others. For any purpose now before us, the assessment stands as a perfectly valid assessment. The question is, therefore, in our view, one concerning an act "ordered or done in the collection" of the revenue, and not one concerning the revenue itself. In our judgment, it follows that we have first to decide whether the collection of the revenue in the particular way chosen by the Income Tax department in this case is one which is in accordance with the law for the time being in force. If it is, then Section 226, Government of India Act, sweeps away our jurisdiction. If it is not, then we retain our jurisdiction., 7. But it is contended by the department that even if this is so, then the law for the time being in force" is so far as it is concerned to be found in the Income Tax, Act 1922, and nowhere else. In other words, it is said that in the present case Section 46, Income Tax Act, is the law, so far as the Income Tax department is concerned. This we cannot accept. The law for the time being in force concerning any particular matter, whether it be the collection of the revenue or anything else, is a comprehensive ....
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....rown to prefer its own debt to the debt of the subject, nor its particular rights under Section 46 have been taken away by anything in the Companies Act, 1913. This rests on a general argument that the prerogatives of the Crown cannot be taken away except by express enactment, and on a particular argument that there is that to be found in the Companies Act which, so far from taking away the Crown's rights, expressly preserves them. 8. The former of these propositions, so far as its effect on Section 171, Companies Act, is concerned relies on a decision of the Calcutta High Court in In the matter of West Laikdih Coal Co. Limited ('26) 13 which has been followed in this Court in Commissioner of Income Tax v. Official Liquidators, Agra Spinning and Weaving Mills Co AIR1934All170 both of which we are respectfully compelled to think were wrongly decided, and indeed, would not have been so decided, if the attention of the Court had been drawn to the decision of the House of Lords in Food. Controller v. Cork (1923) 1923 A.C. 647. In the Calcutta case Page J., as he then was, considered the effect of Section 171, Companies Act, on the right to recover cess from a company in liqu....
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.... the Crown any longer having a prerogative of preference for its own debt, it has to be content with a status of equality with servants, workmen and other classes. It cannot be supposed that the Crown's rights were so dealt with in this way otherwise than deliberately and it cannot, therefore, any longer be suggested that there was no express or implied intention on the part of the Legislature to subject the prerogatives of the Crown, in the matter of preferential payment in any competition with the subject, to the general statutory scheme introduced by the Companies Act for the distribution of assets in a winding up. To carry this to its logical conclusion it is, we think, a necessary implication that the intention of the Legislature is that the Crown shall conform to the general scheme for the distribution of assets, except to the extent that the statute itself otherwise provides. This has been made abundantly plain by the House of Lords in 1923 A.C. 6475 To take one passage from the speech of Lord Wrenbury: Section 209 of the Act of 1908 does bind the Crown, and it binds the Crown to a statutory scheme of administration of the assets, wherein the prerogative of the ....
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....they are by the Government, they shall not be void. Very well. Assuming that the class of proceedings we are considering is not made void under Section 232, this simply means that it remains for us to consider under Section 171 whether it shall go on. If it had been avoided by Section 232, there would have been no necessity to consider under Section 171 whether it should continue and in considering under Section 171 whether it should be "proceeded with" we are certainly not declaring any attachment, distress or execution to be void. The conclusion we have reached, therefore, is that, subject to the final question whether a revenue proceeding taken in pursuance of Section 46, Income Tax Act, 1922, is an "other legal proceeding" at all within the meaning, of Section 171, Companies Act, we are unable to hold that the assessment of 25th February 1943, constitutes a debt which is protected from the general scheme for the distribution of the assets in the winding up. We should perhaps add that we have assumed throughout, as is clear, that the assessment of 23rd February 1913, does not constitute a preferential debt within the meaning of Section 230, Companies Act, 1913, since it was not ....
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....Report. After setting out the language of Section 171, they say: The terms of this section are clear and imperative. They create an absolute bar against the commencement or continuance of a suit or other legal proceeding against the company except with the leave of the Court. Neither the word 'suit' nor the expression 'legal proceeding' is, however, defined in the Companies Act, the Civil Procedure Code or the General Clauses Act. They have different meanings in different statutes according to the context, but there is no doubt as to their meaning in Section 171. As stated in Section 26, Civil P.C. a 'suit' is a proceeding under the Code which is instituted with the presentation of a plaint in a Court of original jurisdiction and it is in this sense that this word is used here. The expression 'legal proceeding' in this section is coupled with 'suit' and obviously means proceedings ejusdem generis, that is to say, original proceedings in a Court of first instance analogous to a suit, initiated by means of a petition similar to a plaint. It does not include proceedings taken in the course of the suit nor proceedings arising from the su....
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....Here the ejusdem generis rule may possibly apply to limit the construction of the word "chattel" in the context to something of the same "genus" as a chair, i.e., furniture. Applying this reasoning therefore to the words of Section 171, the first thing to observe is that the words are "suit or other legal proceeding" and not "suit or other proceedings" which, it is interesting to notice, are the words of the Companies (Consolidation) Act, 1908, and are the words of the Companies Act, 1929. The word "legal" has been added in the Indian Act to give further definition to the word "proceeding". The Legislature has, therefore, itself exhaustively defined the " genus" of the alternative by limiting it to "legal" proceedings, and, as we view the matter, we can find no reason for the further application of the ejusdem generis rule. The proceeding must ex hypothesi be a "legal proceeding" i.e., a proceeding of the same "genus" as a suit. In our view therefore there is no reason on a strict construction of the section, for limiting any further the character of the "legal proceedings", an expression which by itself already accurately defines the "genus" by confining it to that particular type....
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....pellant in each case was the defendant to an action, and the point was whether an appeal by her in an action to which the married woman was a defendant was an "action or proceeding...instituted." The emphasis was throughout laid down on the word "instituted", and it was held that it was not. Lord Hersehell says: Unless the proceeding is one which initiates litigation, it seems to me that it is not a proceeding within the true intent and meaning of the clause.... The words of Section 171, Companies Act, are quite different, and moreover there is no such guiding context in the Married Women's Property Act, 1893, as is to be found in the winding up scheme of the Indian Companies Act pointing to the principle of pari passu distribution unless expressly otherwise provided. In our judgment, therefore, the real question we have to consider is not whether the particular proceedings in question are analogous to a "suit" but simply whether they are "legal proceedings" at all. If they are "legal proceedings" at all they are, we think, forbidden without leave by Section 171, Companies Act. If they are not "legal proceedings", then they may be freely commenced or proceeded with.....
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....ction or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court"; and in In re Perkins Beach Lead Mining Company (1877) 7 Ch.D. 371 Vice Chancellor Bacon held that an execution perfected by seizure before the commencement of the winding up was a "proceeding" within the meaning of the same section of the Companies Act, 1862. In In re Lancashire Cotton Spinning Company; Ex parte Carnelley (1887) 35 Ch.D. 656 Cotton L.J. conceded that the word "proceeding" in Section 87, Companies Act, 1862, would include "proceedings in the nature of actions and modes of enforcing payments against a company...." and the only reason why he was doubtful whether a distress for rent was actually included in the section was that it had already been provided for by being rendered void under Section 163 of the same Act. In Queen v. London, Chatham and Dover Railway Co. (1868) 3 Q.B. 170 it was held that a taxation of costs fell within the words "no actions, suits, executions, attachments, or other proceedings..." There appears to us therefore to be sufficient English authority for concluding that the word "proceeding," apart from a particular context, ma....
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....ngs." They may not be proceedings of a judicial nature, but they are, we think, nevertheless legal proceedings (see Section 199, Land Revenue Act). We appreciate that in speaking of legal proceedings, we must not confuse the word "legal" with the word "lawful" which is quite a different thing. Lawful they certainly are. But we think that they are also "legal" proceedings. They owe their origin to a statute which prescribes in great detail a methodical way, based on the provisions of the Code of Civil Procedure, which for many purposes is incorporated in the statute, in which the Collector is to proceed to recover. The Collector is an officer with extensive judicial powers and for this particular purpose he is specially equipped with the powers of a civil Court. The proceedings are given a completely formal character in which many of the attributes of strict legal procedure are to be found. The debtor whose property is being dealt with has by law to be given notice. He has a right to come in and stop the proceedings on payment. His property is sold by methods which, if not under, are in strict analogy to those of the Civil Procedure Code. He has, in at least one instance, power to i....