Held: Upon import of the goods, the Company had entered the goods for home consumption u/s.46, Customs Act – However, the goods were stored in a private bonded warehouse, in the terms of s.68, Customs Act – Goods were not released on non-payment of customs duty etc. and, thereupon, show cause notices were issued and two adjudication orders dated 15.09.2000 and 10.10.2000 were passed – The debt had become ‘due’ in terms of the aforesaid two adjudication orders and ‘payable’ immediately – Thus, the customs duty became ‘due and payable’ prior to twelve months next to the ‘relevant date’; the ‘relevant date’ being the date of winding up of the Company on 01.12.2003 – The amount ‘due and payable’ in terms of the two adjudication orders would, thus, not fall in the category of preferential payments u/clause(a) to s.530(1), Companies Act – Provisions in the Customs Act do not, in any manner, negate or override the statutory preference in terms of s.529A, Companies Act, which treats CONSTITUTED BY THE GoI) v. SUPT. OF CENTRAL EXCISE AND CUSTOMS AND OTHERS
the secured creditors and the workmen’s dues as overriding preferential creditors; and the government dues limited to debts ‘due and payable’ in the twelve months next before the relevant date, which are to be treated as preferential payments u/s.530, Companies Act, but are ranked below overriding preferential payments and have to be paid after the payment has been made in terms of s.529 and 529A, Companies Act – Therefore, the prior secured creditors are entitled to enforce their charge, notwithstanding the government dues payable under the Customs Act – Impugned judgment set aside – Company Application filed by the Official Liquidator allowed – Sale proceeds deposited in Supreme Court and converted into fixed deposit receipts, along with the interest accrued thereon, be paid to the Official Liquidator to be distributed in accordance with the provisions of ss.529A and 530, Companies Act – Constitution of India – Article 372(1). [Paras 22, 23, 26 and 28]
Customs Act, 1962 – s.142A – Companies Act, 1956 – ss.529A, 530: Held: Provision of s.142A, insofar as it protects the rights of overriding preferential creditors governed and covered by s.529A, Companies Act, is clarificatory and declaratory in nature, and does not lay down a new dictum or confer any new right as far as the present case is concerned – However, the enactment of s.142A of the Customs Act does confer or create a first charge on the dues ‘payable’ under the Customs Act, notwithstanding provisions under any Central Act, but not in cases covered u/s.529A of the Companies Act, RDDBFI Act, SARFAESI Act and the IBC – s.142A, Customs Act, post its enactment, would dilute the impact of s.530 of the Companies Act, which had restricted preferential treatment to government taxes ‘due and payable’ limited to twelve months prior to the ‘relevant date’, without preferential right for taxes that had become ‘due and payable’ in the earlier period. [Para 25]
Companies Act, 1956 – ss.529A, 530 – Non-obstante nature of s.529A:
Held: In view of the non-obstante nature of s.529A of the Companies Act, notwithstanding anything contained in any other provision of the Companies Act or any other law for the time being in force on 24.05.1985, on winding up of a company, the debt due to the workmen and the debt due to secured creditors as specified, rank pari passu and are to be paid in the manner prescribed therein in priority to all other debts – Provisions of s.529A of the Companies Act prevail over s.530 of the Companies Act – s.529A of the Companies Act, a non-obstante provision, is to be given primacy in case of conflict, and consequently, in case of disharmony, this section will override the discordant provisions of the Companies Act and all other enactments in force and the debts are to be paid in terms of s.529A. [Paras 8, 10 and 11]
Companies Act, 1956 – s.530(1)(a) – debts ‘due’ in the first portion of clause (a) to s.530(1) and the words ‘become due and payable within the twelve months next before that date’ in the latter portion – Interpretation:
Held: The words debt ‘due’ occurring in the first part and the words debt ‘due and payable’ in the latter part of s.530(1)(a) of the Companies Act are different expressions meant to convey different and not the same meaning – Therefore, for a government debt to be covered under clause (a) to s.530(1), it must not only be a debt ‘due’, but it must also be a debt ‘due and payable’ within twelve months next before the relevant date – The requirements of the latter portion of clause (a) to s.530(1) are dual and cumulative, which is debt ‘due and payable’, and not one that is ‘due’ – The debt ‘due’ must have become payable at any time within twelve months next before the relevant date – The debt ‘due and payable’ prior to twelve months next to the relevant date is not a preferential debt in terms of s.530(1)(a) – Such debt will rank pari passu with ordinary or unsecured creditors, without any preferential treatment. [Paras 18]
Companies Act, 1956 – s.530(8)(c) - ‘relevant date’: Held: As per sub-clause (i) to clause (c) to sub-Section (8) to s.530, the ‘relevant date’ in case where a company has been ordered to be wound up compulsorily, shall be the date of appointment or first appointment of a provisional liquidator, or if no such appointment is made, the date of the winding up order, unless the company had commenced to be wound up voluntarily before that date – The present case is one of compulsory winding up and, therefore, the ‘relevant date’, in the absence of appointment of a provisional liquidator, would be the date on which the winding up order was passed against the Company, 01.12.2003. [Para 12] CONSTITUTED BY THE GoI) v. SUPT. OF CENTRAL EXCISE AND CUSTOMS AND OTHERS
Companies Act, 1956 – ss.447, 456, 468, 528, 529 – Effect of – Object and purpose – Objective of giving jurisdiction to the Company Court/tribunal during the process of liquidation –Discussed – Doctrine of pari passu.
LIST OF CITATIONS AND OTHER REFERENCES
Collector of Customs v. Dytron (India) Ltd. 1998 SCC OnLine Cal
674 – overruled.
Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. and Others, (2000)
5 SCC 694:[2000] 3 SCR 509; J.K. (Bombay) (P) Ltd. v. New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. (1970) 40 Comp Cas 689; Rajratha Naranbhai Mills Co. Ltd. v. Sales Tax Officer, Petlad (1991) 3 SCC 283:[1991] 1 SCR 527; Commissioner of Customs, Calcutta and Another v. Biecco Lawrie Ltd. (2008) 3 SCC 264:[2008] 2 SCR 257; Punjab National Bank v. Union of India and Others (2022) 7 SCC 260; Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs (2023) 1 SCC
472 – relied on.
The Superintendent of Central Excise and Customs v. M/s. Sri Vishnupriya Industries Ltd. (in liqn.) and Others Original Side Appeal No. 1 of 2005; UTI Bank Ltd. v. Deputy Commissioner of Central Excise and Another (2007) 135 Company Cases 329 (Mad.); In Re Savin, [1872] L.R. 7 Ch. App. 760, 764; Sales Tax Officer, Petlad v. Rajratna Naranbhai Mills Co. Ltd. and Another (1974) 44 Comp Cas 65 (Guj); Builders Supply Corporation v. Union of India and Others (1965) 2 SCR 289; Collector of Aurangabad and Another v. Central Bank of India and Another (1967) 3 SCR 855; Imperial Chit Funds (P) Ltd. v. Income Tax Officer, Ernakulam (1996) 8 SCC 303:[1996] 3 SCR 640 – referred to.
‘Rashbehary Ghose: Law of Mortgage’ TLL, 7th Edn., p. 386. OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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