Santosh Kumar Sahu vs Official Liquidator

We have heard Sri R.P. Agarwal, the learned counsel for the appellants, Sri Govind Krishna, learned advocate and Sri Bharat J. Agarwal, learned senior advocate for the Income Tax authorities.

Pursuant to our order passed on 8-1-2001 Sri Bharat Ji Agarwal, the learned senior advocate appealing for Income Tax authorities has filed counter affidavit in this case. He submits that he has obtained instructions pursuant to court''s order dated 8-1-2001 and he has been instructed to point out that the appellants were not the directors at the relevant time. In that view of the matter the order passed by the learned Single Judge directing that a proceeding be initiated against the appellants appears to be uncalled for and there is no basis for the same. The observations made against the Income Tax Department also appear to us that learned Single Judge has unnecessarily commented on the action of the Income Tax authorities and the observations made by the learned Single Judge which are reproduced below should stand deleted :

". . . The Income Tax authorities, instead of being alive to their duty to realise the Income Tax dues as per the provisions of the Income Tax Act, have simply done an eyewash, conveniently ignoring the provisions of section 179 of the Income Tax Act. They have simply performed an empty ritual by lodging the claim before the Official Liquidator impliedly giving a clean chit to the Ex-Directors of the Company who are legally liable to make payment of huge amount Rs. 1,16,85,597."

Mr. Bharat Ji Agarwal, the learned senior advocate further submits that the Income Tax authority was not a party nor was given an opportunity to explain the position or to produce the records. It is further submitted that proceeding has been initiated u/s 179 of the Income Tax Act, 1961 as early as in December, 1995 and the order u/s 179 was passed on 2-1-1996 against the directors. Since the appellants were not the directors at the relevant time, no action was initiated against them. In that view of the matter we are of the view that the directions of the learned Single Judge, so far as they relate to appellants, are uncalled for and unwarranted. There was no occasion for the learned Single Judge to proceed against the aforesaid four appellants. In our view, the Official Liquidator did not properly assist the learned Single Judge. The Official Liquidator should have placed all the relevant records showing the directors who were at the relevant time. When the appeal was argued before us, the Official Liquidator vehemently contended that the proceeding should continue against the appellants. We are of the view that Official Liquidator should be more responsible. Had he placed the relevant records before the learned Single Judge, the learned Single Judge probably might not have passed the said order. Such action on the part of the Official Liquidator is highly deprecated.

In the result the observations made by the learned Single Judge against the appellants, herein, to the extent noted above, stand set aside and are also expunged. The proceeding initiated pursuant to the order of the learned Single Judge against the appellants shall stand withdrawn. It is, however, made clear that this order shall not prevent the Income Tax authorities to proceed with the proceeding against the erstwhile directors.

The special appeal is allowed to the extent indicated above.