TaxTMI 
TaxTMI 
2007 (8) TMI 343
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....cial Court Act published the name of M/s. Dhanraj Mills Pvt. Ltd. in the gazette as a notified person. In view of section 3(3) of the Special Court Act all the assets belonging to the notified party stand attached to the Special Court. Thus, the assets of M/s. Dhanraj Mills Pvt. Ltd. stood attached to the Special Court. It was found that M/s. Killick Nixon Pvt. Ltd. and its 13 group companies owed substantial amounts of money to M/s. Dhanraj Mills Pvt. Ltd. and M/s. Killick Nixon Pvt. Ltd. also stood as guarantor for the repayment of the money. The Custodian on behalf of M/s. Dhanraj Mills Pvt. Ltd. filed suits for recovery of its dues against M/s. Killick Nixon Pvt. Ltd. and its 13 group companies. The Special Court passed decrees against M/s. Killick Nixon Pvt. Ltd. and its group companies on September 18, 1997. The Custodian then filed execution applications bearing Nos. 98 to 105 of 2001 before the Special Court for recovery of the decretal amounts on behalf of M/s. Dhanraj Mills Pvt. Ltd. The Special Court on February 14, 2003, appointed a receiver for taking charge of certain assets and properties of M/s. Killick Nixon Pvt. Ltd. and the other group companies which were suffic....
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....f such person in the Official Gazette. (3) Notwithstanding anything contained in the Code, and any other law for the time being in force on and from the date of notification under sub-section (2), any property, movable or immovable, or both, belonging to any person notified under that sub-section shall stand attached simultaneously with the issue of the notification. (4) The property attached under sub-section (3) shall be dealt with by the Custodian in such manner as the Special Court may direct. (5) The Custodian may take assistance of any person while exercising his powers or for discharging his duties under this section and section 4." "9A. Jurisdiction, powers, authority and procedure of Special Court in civil matters.-(1) On and from the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act, 1994, the Special Court shall exercise all such jurisdiction, powers and authority as were exercisable, immediately before such commencement, by any civil court in relation to any matter or claim- (a) relating to any property standing attached under sub-section (3) of section 3 ; (b) arising out of transactions in secu....
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....ct by virtue of any law, other than this Act, or in any decree or order of any court, tribunal or other authority." Sub-section (2) of section 3 empowers the Custodian, on being satisfied on information received that any person has been involved in any offence relating to transaction in securities after the first day of April, 1991, and on or before June 6, 1992, to notify the name of such person in the official Gazette. Sub-section (3) of section 3 provides that on and from the date of notification under sub-section (2), any property, movable or immovable, or both, belonging to any person notified under sub-section (2) shall stand attached simultaneously with the issue of the notification. Sub-section (4) of section 3 provides that the property attached under sub-section (3) shall be dealt with by the Custodian in such manner as the Special Court may direct. Section 9A deals with the jurisdiction, powers, authority and procedure of the Special Court in civil matters. Clause (a) of sub-section (1) of section 9A provides that on and from the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act, 1994, the Special Court shall ex....
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....r payment of the money to discharge the income-tax liability of M/s. Killick Nixon Pvt. Ltd. In support of this submission Dr. Padia has placed reliance upon several decisions of this court and notably on Manmohanlal v. ITO [1987] 168 ITR 616, wherein it was held as under: "When an assessee is in default, there are two modes of recovery open to an Income-tax Officer. The first mode is provided under section 222 of the Income-tax Act. Under that section, when an assessee is in default in making a payment of tax, the Income-tax Officer may forward to the Tax Recovery Officer a certificate specifying the amount of arrears due from the assessee, and on such certificate, the Tax Recovery Officer shall proceed to recover from the assessee the said amount by one or more of the modes set out in section 222. The other modes of recovery are specified in section 226. Sub-section (4) of section 226 provides that the Income-tax Officer may apply to the court in whose custody there is money belonging to the assessee for payment to him of the entire amount of such money, or, if it is more than the tax due an amount sufficient to discharge the tax. A perusal of these provisions clearly shows....
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....ent of its dues from the sale proceeds, since there is no amount left with the court to be paid to the State." Learned senior counsel has also referred to the decision of this court in Dena Bank v. Bhikhabhai Prabhudas Parekh and Co. [2001] 247 ITR 165, wherein it was held that the State of Karnataka had a preferential claim to recover arrears of sales tax including penalty from a firm over that of the appellant-bank in relation to debts due to the bank from the firm for the payment of which the partners of the firm had mortgaged properties belonging to them, and the High Court was right in directing that, even though the bank had obtained a decree (in 1992) and was authorized to bring the mortgaged properties to sale, the arrears due to the State had to be paid to the State first and only thereafter the bank could adjust the remaining amount towards the amount due to it under the decree. Learned counsel has thus submitted that it is a settled proposition of law that if money is realized by sale of the properties of the judgment-debtor in execution of the decrees obtained by the decree-holders, until the money is actually paid over to the decree-holders it is the property of ....
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.... 74 of the reports: "Under section 3 of the 1992 Act, all property of notified persons is to stand attached. Under section 3(4), it is only the Special Court which can give directions to the Custodian in respect of property of the notified party. Similarly, under section 11(1), the Special Court can give directions regarding property of a notified party. Under section 11(2), the Special Court is to distribute the assets of the notified party in the manner set out thereunder. Monies payable to the notified parties are assets of the notified party and are, therefore, assets which stand attached. These are assets which have to be collected by the Special Court for the purposes of distribution under section 11(2). The distribution can only take place provided the assets are first collected. The whole aim of these provisions is to ensure that monies which are siphoned off from banks and financial institutions into private pockets are returned to the banks and financial institutions. The time and manner of distribution is to be decided by the Special Court only." The language employed in section 13 of the Special Court Act is clear and explicit when it says that the provisions of t....