UjjaIn Nagar Palika Nigam Vs. Official Liquidator and ors.

Decided On : Apr-25-2007

Court : Kolkata

Notice (8): Undefined index: topics [APP/View/Case/meta.ctp, line 36]
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		'Judgement' => array(
			'id' => '887682',
			'acts' => 'Madhya Pradesh Municipal Corporation Act, 1956 - Sections 135, 147, 184 and 185; ;Sick Industrial Companies (Special Provisions) Act, 1986; ;<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 528, 529, 529(1), 529A and 530 and 530(1); ;<a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a> - Section 146; ;Companies (Court) Rules, 1959 - Rules 97 and 147 to 179',
			'appealno' => 'C.A. Nos. 159 and 160 of 2006 and B.I.F.R. No. 503 of 1994',
			'appellant' => 'UjjaIn Nagar Palika Nigam',
			'authreffered' => '',
			'casename' => 'UjjaIn Nagar Palika Nigam Vs. Official Liquidator and ors.',
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			'casesref' => 'Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay;',
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			'counselplain' => ' Debal Kumar Banerjee and ;Devangshu Basak, Advs.;S.N. Mookerjee, Adv.',
			'counseldef' => 'Mukti Ghosh, Adv., ;C.R. Datta, Adv. for respondent No. 2 and ;Pradip Kr. Datta, Adv. for respondent No. 3',
			'court' => 'Kolkata',
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			'decidedon' => '2007-04-25',
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			'judge' => 'Indira Banerjee, J.',
			'judgement' => '<p style="text-align: justify;">Indira Banerjee, J.</p><p style="text-align: justify;">1. The main issue involved in these two appeals under Rule 164 of the Companies (Court) Rules, 1959, made by a judge's summons supported by affidavit, is the admissibility of post liquidation claims against a company in liquidation.</p><p style="text-align: justify;">2. In these two appeals, Ujjain Nagar Palika Nigam established under the provisions of the Madhya Pradesh Municipal Corporation Act, 1956, being the applicant, has challenged four several notices, all dated January 24, 2006, of the official liquidator, two of which are notices of admission of proof of debts, and the other two notices of rejection of proof of debts.</p><p style="text-align: justify;">3. By the notices of admission of proof of debts, the official liquidator has admitted the claims of the applicant towards property tax and towards water tax, for the factory premises and staff quarters of the company in liquidation at Ujjain, in part.</p><p style="text-align: justify;">4. The official liquidator has allowed only Rs. 2,79,955 towards property tax and only Rs. 2,162.20 towards water tax as against a total claim of the applicant of about Rs. 4,66,49,092 towards property tax and about Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">5. By the impugned notices of rejection of proof of debt, the official liquidator rejected the claims of the applicant to the extent of Rs. 4,63,69,137 towards property tax and Rs. 11,12,449.80 towards water tax, on the ground that the claims arose after the date of winding up of the company.</p><p style="text-align: justify;">6. The company, IISCO Ujjain Pipe and Foundry Co. Ltd., became sick and was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1986. The BIFR recommended that the company be wound up. Accordingly, this Court passed an order dated July 10, 1997, for winding up of the company, and directed the official liquidator to take possession of the assets of the company.</p><p style="text-align: justify;">7. The assets of the company in liquidation were ultimately sold to one Mr. Nagendra Jain at Rs. 20,50,00,000 and the sale was finally confirmed by an order dated August 18, 2003. The purchaser has duly paid the entire consideration to the official liquidator.</p><p style="text-align: justify;">8. The official liquidator was obliged to disburse the claims of various creditors of the company, in accordance with the provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Sections 528, 529, 529A and 530 of the said Act. The official liquidator accordingly issued notices in leading newspapers, inviting claims in the form of affidavit of proof of debts from the creditors of the company in liquidation.</p><p style="text-align: justify;">9. The applicant filed an affidavit of proof of debt claiming Rs. 2,79,955 as arrears of property tax for the year 1996-97 and Rs. 4,63,69,137 for the years 1997-98 till 2003-04 for the factory and staff quarters of the company in liquidation at Ujjain.</p><p style="text-align: justify;">10. Another affidavit of proof of debt was filed by the applicant with the official liquidator claiming water tax of Rs. 11,14,612 for the period from June 1, 1996 to October 31, 2005.</p><p style="text-align: justify;">11. Sometime in early November 2005, the official liquidator convened a meeting for considering the claims of the debtors, including the applicant. Another meeting was held on December 5, 2005, wherein the respective parties were duly heard. The claimant apparently appeared through counsel and made submissions.</p><p style="text-align: justify;">12. On or about February 1, 2006, the applicant received four notices, dated January 24, 2006, from the official liquidator, copies of which are annexed to the application. By two several notices of admission of proof the assistant official liquidator informed the applicant, that a sum of Rs. 2,79,955 had been allowed towards its claim against the company in liquidation on account of property tax and a sum of Rs. 2,162 had been allowed towards its claim on account of water tax. No reasons have been disclosed in the notices for disallowing the balance claim of the applicant.</p><p style="text-align: justify;">13. By the other two notices, being the notices of rejection of proof of debt, the official liquidator rejected the claim of the applicant to the extent of Rs. 4,63,69,137 towards property tax and to the extent of Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">14. According to the applicant no grounds were given for rejection of the claim. It is, however, apparent that the balance claims have been withheld on the assumption that the official liquidator had no liability towards post liquidation claims.</p><p style="text-align: justify;">15. Mr. Debal Kr. Banerjee appearing on behalf of the applicant submitted that the official liquidator was liable for both pre-liquidation and post-liquidation rates and taxes.</p><p style="text-align: justify;">16. Mr. Banerjee relied on Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, which is set out hereinbelow:</p><p style="text-align: justify;">185. Liability of buildings, lands, etc., for taxes.-All sums due from any person in respect of taxes on any land or building shall, subject to prior payment of any land revenue in respect of it due to the government, be a first charge upon the said land or building and upon any movable property found within or upon such land or building and belonging to the said person:Provided that no arrears of any such tax shall be recoverable from any occupier who is not the owner, if such arrears are for a period during which the occupier was not in occupation.</p><p style="text-align: justify;">17. Mr. Banerjee argued that the position of the applicant is that of a secured creditor, in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, referred to above.</p><p style="text-align: justify;">18. Mr. Banerjee further argued that the official liquidator was liable to the applicant for arrear rates and charges, outstanding on the date of liquidation as well as rates and charges till the date of sale of the property in question.</p><p style="text-align: justify;">19. Mr. Banerjee submitted that the official liquidator was, in any case, required to give reasons for rejection of any claim either wholly or in part. In the instant case, the official liquidator had not given reasons for rejection of the claim.</p><p style="text-align: justify;">20. In support of his submission Mr. Banerjee referred to Rule 163 of the Companies (Court) Rules, 1959, extracted hereinbelow for convenience:</p><p style="text-align: justify;">Rule 163. Acceptance or rejection of proof to be communicated.- After such investigation as he may think necessary, the liquidator shall in writing admit or reject the proof in whole or in part. Every decision of the liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the creditor concerned by post under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is rejected wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance. Where the liquidator rejects a proof, wholly or in part, he shall state the grounds of the rejection to the creditor in Form No. 69, notice of admission of proof shall be in Form No. 70.</p><p style="text-align: justify;">21. Mr. Mukti Ghosh appearing on behalf of the official liquidator submitted 2 that the official liquidator rightly allowed the claim of the applicant on account of arrears of taxes till the date of winding up and disallowed the claim for the period subsequent to the winding up.</p><p style="text-align: justify;">22. Mr. Ghosh submitted that the official liquidator was liable to pay only taxes which accrued till the date of winding up of the company and became payable within a year thereof. In support of his submissions Mr. Ghosh relied on various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Section 530(1)(a) thereof. The relevant date is the date on which the winding up order is passed.</p><p style="text-align: justify;">23. Mr. Ghosh also relied on Rule 154 of the Companies (Court) Rules, 1959, extracted hereinbelow:</p><p style="text-align: justify;">Rule 154. Value of debts.--The value of all debts and claims against the company shall, as far as is possible, be estimated according to the value thereof at the date of the order of the winding up of the company or where before the presentation of the petition for winding up, a resolution has been passed by the company for voluntary winding up, at the date of the passing of such resolution.</p><p style="text-align: justify;">24. Mr. Ghosh submitted that in view of Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, notwithstanding anything contrary in any other provision of the said Act or any other law for the time being in force, in the winding up of a company, workmen's dues and dues of secured creditors to the extent, they are secured are to be paid pari passu, in priority to all other debts.</p><p style="text-align: justify;">25. Mr. Ghosh submitted that in exercise of power under the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, the Companies (Court) Rules, 1959, have been framed. The Companies (Court) Rules, 1959, and in particular Rule 154 thereof specifically provides for the filing of affidavit of proof of debts as on the relevant date. The official liquidator has, therefore, allowed taxes due on the relevant date, that have been proved.</p><p style="text-align: justify;">26. The question before this Court is whether claims, that might arise against the official liquidator representing the company in liquidation, for any period of time, subsequent to the order of winding up, can outright be rejected. This Court appointed Mr. S.N. Mookerjee, senior advocate, as amicus curiae to assist this Court to adjudicate the aforesaid issue.</p><p style="text-align: justify;">27. The company may be wound up and its business closed down. Yet, the official liquidator would be obliged to protect the assets of the company in liquidation, until such time as the assets are sold. For the protection of assets, the official liquidator representing the company might have to retain rented premises, obtain supply of electricity, engage security guards and take such other steps involving expenses as the official liquidator might deem necessary. Can claims on account of, inter alia, rent, electricity charges that accrued after the date of winding up, be outright rejected only on the ground that the claims were post liquidation claims even though the company in liquidation might have sufficient funds to satisfy the claims ?</p><p style="text-align: justify;">28. An electricity supplier, may, as argued by Mr. Ghosh, have the option of disconnecting supply for non-payment of its dues and appropriating the security deposit of the consumer. The right of disconnection would not, however, make any difference to the maintainability of the claim of the supplier.</p><p style="text-align: justify;">29. It is not in dispute that the official liquidator has been making payments of post liquidation electricity charges. The compulsion to make payment cannot, however, make any difference to the legal status of the claim.</p><p style="text-align: justify;">30. If charges on account of supply of electricity after the date of liquidation are payable, so is rent. The liability of a company to pay rent and/or occupation charges and/or rates and taxes does not automatically come to an end with the order of winding up of the company.</p><p style="text-align: justify;">31. Mr. Pradip Kr. Datta appearing on behalf of the purchaser being respondent No. 3 submitted that in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, the purchaser is not liable for the period prior to the date on which the purchaser occupied the property. The purchaser would be liable for taxes from the date of confirmation of the sale in his favour. For the period prior to the date of confirmation of the sale, the official liquidator would be liable.</p><p style="text-align: justify;">32. Mr. Datta submitted that the official liquidator should be directed to pay all taxes till the execution of the deed of conveyance in favour of the purchaser. It is patently clear, that a devious attempt is being made by Mr. Datta's client, to pass on some part of his burden to pay rates and taxes in respect of the property in question to the official liquidator. The sale was confirmed in favour of the purchaser on July 4, 2003. The purchaser would be liable for rates and taxes on and from the date.</p><p style="text-align: justify;">33. The dispute between the official liquidator and the applicant is with regard to the rates and taxes for the period between July 10, 1997, being the date on which the company was directed to be wound up and July 4, 2003, being the date on which the sale in favour of the purchaser was confirmed. In other words, the dispute is with regard to the taxes claimed for a period of approximately six years.</p><p style="text-align: justify;">34. The official liquidator has rejected the proof of debt on his interpretation of the various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> and the Companies (Court) Rules, 1959, framed thereunder and in particular Sections 528, 529A and 530 and Rule 154 of the Rules.</p><p style="text-align: justify;">35. Section 528 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, provides as follows:</p><p style="text-align: justify;">Section 528. Debts of all descriptions to be admitted to proof.--In every winding up (subject in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.</p><p style="text-align: justify;">36. The object of winding up a company is to realise the assets and discharge the liabilities and then, if there be any surplus, to pay it off to the shareholders, according to their respective interests.</p><p style="text-align: justify;">37. In order to ascertain the liabilities, Section 528 requires that all persons having claims, of whatsoever nature, against the company, should submit proof of what is due to them. Every kind of liability, whether present or future, certain or contingent, and however, difficult of valuation, is provable and has got to be proved.</p><p style="text-align: justify;">38. Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, is extracted hereinbelow:</p><p style="text-align: justify;">Section 529A. Overriding preferential payments.--(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company:</p><p style="text-align: justify;">(a) workmen's dues ; and</p><p style="text-align: justify;">(b) debts due to secured creditors to the extent such debts rank under Clause (c) of the proviso to Sub-section (1) of Section 529 pari passu with such dues,</p><p style="text-align: justify;">shall be paid in priority to all other debts.</p><p style="text-align: justify;">(2) The debts payable under Clause (a) and Clause (b) of Sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.</p><p style="text-align: justify;">39. Section 530, inter alia, provides as follows:</p><p style="text-align: justify;">Section 530. Preferential payments.-(1) In a winding up, subject to the provisions of Section 529A, there shall be paid in priority to all other debts:</p><p style="text-align: justify;">(a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in Clause (c) of Sub-section (8), and having become due and payable within the twelve months next before that date ;</p><p style="text-align: justify;">(b) all wages or salary....</p><p style="text-align: justify;">(8) For the purposes of this section...</p><p style="text-align: justify;">(c) the expression 'the relevant date' means:</p><p style="text-align: justify;">(i) in the case of a company ordered to be wound up compulsorily, the date of the appointment or first appointment of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date ; and</p><p style="text-align: justify;">(ii) in any case where Sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company.</p><p style="text-align: justify;">40. The procedure for fixing of liabilities and settlement of claims is governed by the provisions of Rules 147 to 179 of the Companies (Court) Rules, 1959.</p><p style="text-align: justify;">41. Rule 148 of the said 1959 Rules requires the official liquidator to give not less than 14 day's notice of the date fixed by advertisement for creditors of the company to prove debts of the company in liquidation to such creditor.</p><p style="text-align: justify;">42. Rule 149 provides that, in an winding up by the court, every creditor is required to adduce formal proof of debts of the company in liquidation unless the judge, in any particular case, directs that the claims of any creditors or class of creditors be admitted without proof. The debt may be proved by delivering or sending an affidavit verifying the debt. An affidavit proving the debt is required to be in Form No. 66.</p><p style="text-align: justify;">43. Rules 150 and 151 relate to the mode of proof and verification of debts and the contents of an affidavit in proof of debt. Under Rule 154 the value of all debts and claims against the company are, as far as possible estimated according to the value thereof on the date of winding up of the company.</p><p style="text-align: justify;">44. The contention on behalf of the official liquidator, that debts and claims and particularly claims on account of municipal tax are payable only till the date of winding up of the company, in view of Section 530 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, read with Rule 154 of the Companies (Court) Rules 1959, is patently misconceived. There is no provision either in the Companies Act or in the Companies (Court) Rules which restricts claims and debts only till the date of the winding up order.</p><p style="text-align: justify;">45. Pre-liquidation claims, which had arisen before the official liquidator took possession of the assets and properties of the company, would necessarily have to be estimated by the official liquidator on the basis of available records and the proof adduced by the claimant and/or the creditor. Post liquidation debts and claims do not require to be proved.</p><p style="text-align: justify;">46. Section 530 does not absolve a company in liquidation, represented by the official liquidator, of its liability towards revenue and taxes. The said section merely provides for payment of revenues, taxes, cesses and rates which became due and payable within 12 months from the relevant date, being the date of the winding up order in priority to other pre-liquidation debts. Post-liquidation liabilities are to be treated as part of the costs of winding up of the company in liquidation and such liabilities get priority over all other liabilities of the company.</p><p style="text-align: justify;">47. In the case of Kentish Homes Ltd. In Re reported in [1993] BCLC 1375 (Ch. D), the company was engaged in commercial and residential development which was financed by a building society, on loan basis, on first charge on assets. A receiver was appointed. Because of the company's serious financial difficulties, the company went into voluntary winding up.</p><p style="text-align: justify;">48. The chargees were advised that the sale of the property in an incomplete state would realise very little and accordingly they provided further money to the receiver for completion of the building. In due course the flats were finished and sold. During the period for which the flats remained unsold, a standard community charge became payable. The court held that as this debt arose after the cut off date, that is, after the company went into liquidation, it was not provable as a debt in liquidation.</p><p style="text-align: justify;">49. This decision was, however, overruled by the Court of Appeal and the decision of the Court of Appeal was approved by the House of Lords in Toshoku Finance UK plc In re reported in [2002] 111 Comp Cas 82 : [2002] 1 WLR 671.</p><p style="text-align: justify;">50. The House of Lords held that the official liquidator was bound to discharge post liquidation liabilities on account of corporation tax. The expenses were to be treated as post liquidation expenses.</p><p style="text-align: justify;">51. Freehold Land and Brickmaking Co. In re 9 EC 367, Lord Romily dealing with the claim of a solicitor retained by the official liquidator, towards his fees and charges, laid down the principles of disbursement from out of the assets of a company. Lord Romily held as follows:.and the rule of the court is this, that in the first place, the costs of the petition for winding up are to be paid out of the assets, next the costs of the winding up, and then the remuneration of the official liquidator ; but no remuneration can be given until all the costs of the winding up are paid.</p><p style="text-align: justify;">52. Lord Romily held that the bill of costs of the solicitor was part of the costs of the winding up, and if the official liquidator had paid any costs out of pocket, he might be entitled to be repaid out of the assets pari passu with costs similarly paid by the solicitor.</p><p style="text-align: justify;">53. In the case of Great Eastern Electric Co. In re reported in [1941] 1 All ER 409 : [1942] 12 Comp Cas 96, the Chancery Division was required to decide the rights of two classes of creditors, the pre-liquidation creditors and the post-liquidation creditors. The court held that post-liquidation creditors, paid before any further payment is made to any pre-liquidation creditors. In the aforesaid case, however, on facts, the company had continued its business after the resolution for voluntary winding up of the company.</p><p style="text-align: justify;">54. In the case of Official Liquidators, U.P. Union Bank Ltd. v. Rameshwar Nath Agarwal reported in : [1960]2SCR189 , the Supreme Court held as follows (page 118):</p><p style="text-align: justify;">The High Court held on the facts that the liquidators had remained in occupation of the premises not for the purpose of winding up but 'because they could not think of any suitable method of getting rid of the premises in spite of all their desire to do so'. It was pointed out that the bank had closed its business and the liquidators were not carrying on any business after the winding up and the properties were not used by the liquidators for the purpose of liquidation. The conclusion of the High Court on the evidence has not been challenged. The property not having remained with the liquidators for the purpose of liquidation, unless the court passes an order holding that the debt incurred was part of the costs and expenses of liquidation, the rent accruing due since the date of the winding up cannot be claimed in priority over other ordinary debts.</p><p style="text-align: justify;">We are, therefore, unable to agree with the High Court that under Rule 97 of the Company Rules, if the premises remained in the occupation of the liquidators, not for the purpose of winding up, the landlord is entitled to priority in respect of payment of rent.</p><p style="text-align: justify;">55. In the aforesaid case the Supreme Court did not hold that the rent was not at all payable. The Supreme Court only held that the landlord was not entitled to priority over others. The Supreme Court was not concerned with the statutory taxes under a municipal law, in respect of property which remained with the liquidators for the purpose of liquidation.</p><p style="text-align: justify;">56. National Arms and Ammunition Co. In re reported in [1885] 28 Ch. D 474 (CA), the court held that, where the liquidator had, after the winding up of the company, been occupying the property for the purpose of the company and with a view to acquiring gain or avoiding loss to the company, the rate ought to be paid in full. When the liquidator in possession had not appealed against the assessment the court could not refuse to order payment of rate in full, on the ground of its being too high, except in extreme cases.</p><p style="text-align: justify;">57. In winding up, the liquidators who carry on the company's business continue with rateable occupation of the premises and they are in rateable occupation even if they occupy merely for the purpose of fulfilling the outstanding contracts or preventing damage to the company's property (Halsbury Laws of England, 4th edition, vol. 39).</p><p style="text-align: justify;">58. It is true that the official liquidator did not carry on any business on behalf of the company. The official liquidator, however, retained possession for beneficial winding up of the company.</p><p style="text-align: justify;">59. As rightly argued by Mr. Mukherjee, appointed as an amicus curiae by this Court, and by Mr. Banerjee appearing on behalf of the applicant, the expenses incurred in winding up are payable, not provable. The principle of priority of certain creditors is applicable to liabilities of the company at the time when the order for winding up of the company was made. Costs and expenses incurred on behalf of the company in the winding up ought to be paid in full.</p><p style="text-align: justify;">60. Mahaluxmi Cotton Mills Ltd. (in liquidation), In re [1962] 32 Comp Cas 1186, this Court held that the expenses incurred by the official liquidator in running the mill were to be paid in priority to all other creditors, and the bank which took advantage of the receiver running the mill, could not object claiming priority under Section 529A.</p><p style="text-align: justify;">61. In the case of Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay reported in AIR 2006 Bom 65, the court held that property tax under Section 146 of the <a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a>, had to be paid by the official liquidator and not the purchaser. The purchaser becomes liable for the property tax, only from the date of purchase.</p><p style="text-align: justify;">62. This court acknowledges the immense assistance rendered to this Court by the amicus curiae Mr. S.N. Mukherjee, senior advocate and expresses appreciation for his painstaking efforts in assisting this Court.</p><p style="text-align: justify;">63. Under Section 135 of the Madhya Pradesh Municipal Corporation Act, 1956, property tax might be charged at a rate not less than 6 per cent. and not exceeding 10 per cent. of the annual letting out value, as may be determined by the Corporation for each financial year.</p><p style="text-align: justify;">64. The annual letting out value is to be determined, taking into consideration various factors, including the purposes for which the property is used, its capacity of profitable user and other relevant factors.</p><p style="text-align: justify;">65. Any person aggrieved by the determination of annual letting out value, might object to the valuation, under Section 147 of the Act, on the grounds stated in the objection.</p><p style="text-align: justify;">66. The official liquidator appears to have rejected the claim of the Municipal Corporation towards taxes to the extent stated in the impugned notices on the misconception that the official liquidator was not liable for post-liquidation taxes. The official liquidator has apparently not filed any objection to the determination of the annual value. Nor has the official liquidator filed any appeal under Section 184 of the Madhya Pradesh Municipal Corporation Act.</p><p style="text-align: justify;">67. Unless an objection or appeal is filed and the demand is reduced, the official liquidator would be bound to discharge the tax liability, as per the claim of the Corporation, even for the post liquidation period.</p><p style="text-align: justify;">68. The official liquidator may, however, file an appeal against the demands, if the official liquidator deems it appropriate to do so. Such appeal, if any, shall be filed within thirty days from the date of receipt of a certified copy of this judgment and order.</p><p style="text-align: justify;">69. If an appeal is preferred within the time stipulated in this judgment and order, the same shall be considered on merits, waiving limitation, if any.</p><p style="text-align: justify;">70. There can be no doubt that post-liquidation claims are enforceable, as observed above. The ground on which the claims have been rejected are not sustainable in law. The impugned notices of rejection of proof of debts are set aside.</p><p style="text-align: justify;">71. The applications are allowed in part. There will be an order in terms of prayer (b) of the judges summons.</p><p style="text-align: justify;">If any appeal is filed, the official liquidator shall within eight weeks from the date of receipt of the order under Section 184 consider and dispose of the claims of the applicant, as determined in the appeal, in accordance with law and in the light of the observations made in this judgment and order.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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$desc = array(
	'Judgement' => array(
		'id' => '887682',
		'acts' => 'Madhya Pradesh Municipal Corporation Act, 1956 - Sections 135, 147, 184 and 185; ;Sick Industrial Companies (Special Provisions) Act, 1986; ;<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 528, 529, 529(1), 529A and 530 and 530(1); ;<a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a> - Section 146; ;Companies (Court) Rules, 1959 - Rules 97 and 147 to 179',
		'appealno' => 'C.A. Nos. 159 and 160 of 2006 and B.I.F.R. No. 503 of 1994',
		'appellant' => 'UjjaIn Nagar Palika Nigam',
		'authreffered' => '',
		'casename' => 'UjjaIn Nagar Palika Nigam Vs. Official Liquidator and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay;',
		'citingcases' => '',
		'counselplain' => ' Debal Kumar Banerjee and ;Devangshu Basak, Advs.;S.N. Mookerjee, Adv.',
		'counseldef' => 'Mukti Ghosh, Adv., ;C.R. Datta, Adv. for respondent No. 2 and ;Pradip Kr. Datta, Adv. for respondent No. 3',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2007-04-25',
		'deposition' => '',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Indira Banerjee, J.',
		'judgement' => '<p style="text-align: justify;">Indira Banerjee, J.</p><p style="text-align: justify;">1. The main issue involved in these two appeals under Rule 164 of the Companies (Court) Rules, 1959, made by a judge's summons supported by affidavit, is the admissibility of post liquidation claims against a company in liquidation.</p><p style="text-align: justify;">2. In these two appeals, Ujjain Nagar Palika Nigam established under the provisions of the Madhya Pradesh Municipal Corporation Act, 1956, being the applicant, has challenged four several notices, all dated January 24, 2006, of the official liquidator, two of which are notices of admission of proof of debts, and the other two notices of rejection of proof of debts.</p><p style="text-align: justify;">3. By the notices of admission of proof of debts, the official liquidator has admitted the claims of the applicant towards property tax and towards water tax, for the factory premises and staff quarters of the company in liquidation at Ujjain, in part.</p><p style="text-align: justify;">4. The official liquidator has allowed only Rs. 2,79,955 towards property tax and only Rs. 2,162.20 towards water tax as against a total claim of the applicant of about Rs. 4,66,49,092 towards property tax and about Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">5. By the impugned notices of rejection of proof of debt, the official liquidator rejected the claims of the applicant to the extent of Rs. 4,63,69,137 towards property tax and Rs. 11,12,449.80 towards water tax, on the ground that the claims arose after the date of winding up of the company.</p><p style="text-align: justify;">6. The company, IISCO Ujjain Pipe and Foundry Co. Ltd., became sick and was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1986. The BIFR recommended that the company be wound up. Accordingly, this Court passed an order dated July 10, 1997, for winding up of the company, and directed the official liquidator to take possession of the assets of the company.</p><p style="text-align: justify;">7. The assets of the company in liquidation were ultimately sold to one Mr. Nagendra Jain at Rs. 20,50,00,000 and the sale was finally confirmed by an order dated August 18, 2003. The purchaser has duly paid the entire consideration to the official liquidator.</p><p style="text-align: justify;">8. The official liquidator was obliged to disburse the claims of various creditors of the company, in accordance with the provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Sections 528, 529, 529A and 530 of the said Act. The official liquidator accordingly issued notices in leading newspapers, inviting claims in the form of affidavit of proof of debts from the creditors of the company in liquidation.</p><p style="text-align: justify;">9. The applicant filed an affidavit of proof of debt claiming Rs. 2,79,955 as arrears of property tax for the year 1996-97 and Rs. 4,63,69,137 for the years 1997-98 till 2003-04 for the factory and staff quarters of the company in liquidation at Ujjain.</p><p style="text-align: justify;">10. Another affidavit of proof of debt was filed by the applicant with the official liquidator claiming water tax of Rs. 11,14,612 for the period from June 1, 1996 to October 31, 2005.</p><p style="text-align: justify;">11. Sometime in early November 2005, the official liquidator convened a meeting for considering the claims of the debtors, including the applicant. Another meeting was held on December 5, 2005, wherein the respective parties were duly heard. The claimant apparently appeared through counsel and made submissions.</p><p style="text-align: justify;">12. On or about February 1, 2006, the applicant received four notices, dated January 24, 2006, from the official liquidator, copies of which are annexed to the application. By two several notices of admission of proof the assistant official liquidator informed the applicant, that a sum of Rs. 2,79,955 had been allowed towards its claim against the company in liquidation on account of property tax and a sum of Rs. 2,162 had been allowed towards its claim on account of water tax. No reasons have been disclosed in the notices for disallowing the balance claim of the applicant.</p><p style="text-align: justify;">13. By the other two notices, being the notices of rejection of proof of debt, the official liquidator rejected the claim of the applicant to the extent of Rs. 4,63,69,137 towards property tax and to the extent of Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">14. According to the applicant no grounds were given for rejection of the claim. It is, however, apparent that the balance claims have been withheld on the assumption that the official liquidator had no liability towards post liquidation claims.</p><p style="text-align: justify;">15. Mr. Debal Kr. Banerjee appearing on behalf of the applicant submitted that the official liquidator was liable for both pre-liquidation and post-liquidation rates and taxes.</p><p style="text-align: justify;">16. Mr. Banerjee relied on Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, which is set out hereinbelow:</p><p style="text-align: justify;">185. Liability of buildings, lands, etc., for taxes.-All sums due from any person in respect of taxes on any land or building shall, subject to prior payment of any land revenue in respect of it due to the government, be a first charge upon the said land or building and upon any movable property found within or upon such land or building and belonging to the said person:Provided that no arrears of any such tax shall be recoverable from any occupier who is not the owner, if such arrears are for a period during which the occupier was not in occupation.</p><p style="text-align: justify;">17. Mr. Banerjee argued that the position of the applicant is that of a secured creditor, in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, referred to above.</p><p style="text-align: justify;">18. Mr. Banerjee further argued that the official liquidator was liable to the applicant for arrear rates and charges, outstanding on the date of liquidation as well as rates and charges till the date of sale of the property in question.</p><p style="text-align: justify;">19. Mr. Banerjee submitted that the official liquidator was, in any case, required to give reasons for rejection of any claim either wholly or in part. In the instant case, the official liquidator had not given reasons for rejection of the claim.</p><p style="text-align: justify;">20. In support of his submission Mr. Banerjee referred to Rule 163 of the Companies (Court) Rules, 1959, extracted hereinbelow for convenience:</p><p style="text-align: justify;">Rule 163. Acceptance or rejection of proof to be communicated.- After such investigation as he may think necessary, the liquidator shall in writing admit or reject the proof in whole or in part. Every decision of the liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the creditor concerned by post under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is rejected wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance. Where the liquidator rejects a proof, wholly or in part, he shall state the grounds of the rejection to the creditor in Form No. 69, notice of admission of proof shall be in Form No. 70.</p><p style="text-align: justify;">21. Mr. Mukti Ghosh appearing on behalf of the official liquidator submitted 2 that the official liquidator rightly allowed the claim of the applicant on account of arrears of taxes till the date of winding up and disallowed the claim for the period subsequent to the winding up.</p><p style="text-align: justify;">22. Mr. Ghosh submitted that the official liquidator was liable to pay only taxes which accrued till the date of winding up of the company and became payable within a year thereof. In support of his submissions Mr. Ghosh relied on various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Section 530(1)(a) thereof. The relevant date is the date on which the winding up order is passed.</p><p style="text-align: justify;">23. Mr. Ghosh also relied on Rule 154 of the Companies (Court) Rules, 1959, extracted hereinbelow:</p><p style="text-align: justify;">Rule 154. Value of debts.--The value of all debts and claims against the company shall, as far as is possible, be estimated according to the value thereof at the date of the order of the winding up of the company or where before the presentation of the petition for winding up, a resolution has been passed by the company for voluntary winding up, at the date of the passing of such resolution.</p><p style="text-align: justify;">24. Mr. Ghosh submitted that in view of Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, notwithstanding anything contrary in any other provision of the said Act or any other law for the time being in force, in the winding up of a company, workmen's dues and dues of secured creditors to the extent, they are secured are to be paid pari passu, in priority to all other debts.</p><p style="text-align: justify;">25. Mr. Ghosh submitted that in exercise of power under the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, the Companies (Court) Rules, 1959, have been framed. The Companies (Court) Rules, 1959, and in particular Rule 154 thereof specifically provides for the filing of affidavit of proof of debts as on the relevant date. The official liquidator has, therefore, allowed taxes due on the relevant date, that have been proved.</p><p style="text-align: justify;">26. The question before this Court is whether claims, that might arise against the official liquidator representing the company in liquidation, for any period of time, subsequent to the order of winding up, can outright be rejected. This Court appointed Mr. S.N. Mookerjee, senior advocate, as amicus curiae to assist this Court to adjudicate the aforesaid issue.</p><p style="text-align: justify;">27. The company may be wound up and its business closed down. Yet, the official liquidator would be obliged to protect the assets of the company in liquidation, until such time as the assets are sold. For the protection of assets, the official liquidator representing the company might have to retain rented premises, obtain supply of electricity, engage security guards and take such other steps involving expenses as the official liquidator might deem necessary. Can claims on account of, inter alia, rent, electricity charges that accrued after the date of winding up, be outright rejected only on the ground that the claims were post liquidation claims even though the company in liquidation might have sufficient funds to satisfy the claims ?</p><p style="text-align: justify;">28. An electricity supplier, may, as argued by Mr. Ghosh, have the option of disconnecting supply for non-payment of its dues and appropriating the security deposit of the consumer. The right of disconnection would not, however, make any difference to the maintainability of the claim of the supplier.</p><p style="text-align: justify;">29. It is not in dispute that the official liquidator has been making payments of post liquidation electricity charges. The compulsion to make payment cannot, however, make any difference to the legal status of the claim.</p><p style="text-align: justify;">30. If charges on account of supply of electricity after the date of liquidation are payable, so is rent. The liability of a company to pay rent and/or occupation charges and/or rates and taxes does not automatically come to an end with the order of winding up of the company.</p><p style="text-align: justify;">31. Mr. Pradip Kr. Datta appearing on behalf of the purchaser being respondent No. 3 submitted that in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, the purchaser is not liable for the period prior to the date on which the purchaser occupied the property. The purchaser would be liable for taxes from the date of confirmation of the sale in his favour. For the period prior to the date of confirmation of the sale, the official liquidator would be liable.</p><p style="text-align: justify;">32. Mr. Datta submitted that the official liquidator should be directed to pay all taxes till the execution of the deed of conveyance in favour of the purchaser. It is patently clear, that a devious attempt is being made by Mr. Datta's client, to pass on some part of his burden to pay rates and taxes in respect of the property in question to the official liquidator. The sale was confirmed in favour of the purchaser on July 4, 2003. The purchaser would be liable for rates and taxes on and from the date.</p><p style="text-align: justify;">33. The dispute between the official liquidator and the applicant is with regard to the rates and taxes for the period between July 10, 1997, being the date on which the company was directed to be wound up and July 4, 2003, being the date on which the sale in favour of the purchaser was confirmed. In other words, the dispute is with regard to the taxes claimed for a period of approximately six years.</p><p style="text-align: justify;">34. The official liquidator has rejected the proof of debt on his interpretation of the various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> and the Companies (Court) Rules, 1959, framed thereunder and in particular Sections 528, 529A and 530 and Rule 154 of the Rules.</p><p style="text-align: justify;">35. Section 528 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, provides as follows:</p><p style="text-align: justify;">Section 528. Debts of all descriptions to be admitted to proof.--In every winding up (subject in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.</p><p style="text-align: justify;">36. The object of winding up a company is to realise the assets and discharge the liabilities and then, if there be any surplus, to pay it off to the shareholders, according to their respective interests.</p><p style="text-align: justify;">37. In order to ascertain the liabilities, Section 528 requires that all persons having claims, of whatsoever nature, against the company, should submit proof of what is due to them. Every kind of liability, whether present or future, certain or contingent, and however, difficult of valuation, is provable and has got to be proved.</p><p style="text-align: justify;">38. Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, is extracted hereinbelow:</p><p style="text-align: justify;">Section 529A. Overriding preferential payments.--(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company:</p><p style="text-align: justify;">(a) workmen's dues ; and</p><p style="text-align: justify;">(b) debts due to secured creditors to the extent such debts rank under Clause (c) of the proviso to Sub-section (1) of Section 529 pari passu with such dues,</p><p style="text-align: justify;">shall be paid in priority to all other debts.</p><p style="text-align: justify;">(2) The debts payable under Clause (a) and Clause (b) of Sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.</p><p style="text-align: justify;">39. Section 530, inter alia, provides as follows:</p><p style="text-align: justify;">Section 530. Preferential payments.-(1) In a winding up, subject to the provisions of Section 529A, there shall be paid in priority to all other debts:</p><p style="text-align: justify;">(a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in Clause (c) of Sub-section (8), and having become due and payable within the twelve months next before that date ;</p><p style="text-align: justify;">(b) all wages or salary....</p><p style="text-align: justify;">(8) For the purposes of this section...</p><p style="text-align: justify;">(c) the expression 'the relevant date' means:</p><p style="text-align: justify;">(i) in the case of a company ordered to be wound up compulsorily, the date of the appointment or first appointment of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date ; and</p><p style="text-align: justify;">(ii) in any case where Sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company.</p><p style="text-align: justify;">40. The procedure for fixing of liabilities and settlement of claims is governed by the provisions of Rules 147 to 179 of the Companies (Court) Rules, 1959.</p><p style="text-align: justify;">41. Rule 148 of the said 1959 Rules requires the official liquidator to give not less than 14 day's notice of the date fixed by advertisement for creditors of the company to prove debts of the company in liquidation to such creditor.</p><p style="text-align: justify;">42. Rule 149 provides that, in an winding up by the court, every creditor is required to adduce formal proof of debts of the company in liquidation unless the judge, in any particular case, directs that the claims of any creditors or class of creditors be admitted without proof. The debt may be proved by delivering or sending an affidavit verifying the debt. An affidavit proving the debt is required to be in Form No. 66.</p><p style="text-align: justify;">43. Rules 150 and 151 relate to the mode of proof and verification of debts and the contents of an affidavit in proof of debt. Under Rule 154 the value of all debts and claims against the company are, as far as possible estimated according to the value thereof on the date of winding up of the company.</p><p style="text-align: justify;">44. The contention on behalf of the official liquidator, that debts and claims and particularly claims on account of municipal tax are payable only till the date of winding up of the company, in view of Section 530 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, read with Rule 154 of the Companies (Court) Rules 1959, is patently misconceived. There is no provision either in the Companies Act or in the Companies (Court) Rules which restricts claims and debts only till the date of the winding up order.</p><p style="text-align: justify;">45. Pre-liquidation claims, which had arisen before the official liquidator took possession of the assets and properties of the company, would necessarily have to be estimated by the official liquidator on the basis of available records and the proof adduced by the claimant and/or the creditor. Post liquidation debts and claims do not require to be proved.</p><p style="text-align: justify;">46. Section 530 does not absolve a company in liquidation, represented by the official liquidator, of its liability towards revenue and taxes. The said section merely provides for payment of revenues, taxes, cesses and rates which became due and payable within 12 months from the relevant date, being the date of the winding up order in priority to other pre-liquidation debts. Post-liquidation liabilities are to be treated as part of the costs of winding up of the company in liquidation and such liabilities get priority over all other liabilities of the company.</p><p style="text-align: justify;">47. In the case of Kentish Homes Ltd. In Re reported in [1993] BCLC 1375 (Ch. D), the company was engaged in commercial and residential development which was financed by a building society, on loan basis, on first charge on assets. A receiver was appointed. Because of the company's serious financial difficulties, the company went into voluntary winding up.</p><p style="text-align: justify;">48. The chargees were advised that the sale of the property in an incomplete state would realise very little and accordingly they provided further money to the receiver for completion of the building. In due course the flats were finished and sold. During the period for which the flats remained unsold, a standard community charge became payable. The court held that as this debt arose after the cut off date, that is, after the company went into liquidation, it was not provable as a debt in liquidation.</p><p style="text-align: justify;">49. This decision was, however, overruled by the Court of Appeal and the decision of the Court of Appeal was approved by the House of Lords in Toshoku Finance UK plc In re reported in [2002] 111 Comp Cas 82 : [2002] 1 WLR 671.</p><p style="text-align: justify;">50. The House of Lords held that the official liquidator was bound to discharge post liquidation liabilities on account of corporation tax. The expenses were to be treated as post liquidation expenses.</p><p style="text-align: justify;">51. Freehold Land and Brickmaking Co. In re 9 EC 367, Lord Romily dealing with the claim of a solicitor retained by the official liquidator, towards his fees and charges, laid down the principles of disbursement from out of the assets of a company. Lord Romily held as follows:.and the rule of the court is this, that in the first place, the costs of the petition for winding up are to be paid out of the assets, next the costs of the winding up, and then the remuneration of the official liquidator ; but no remuneration can be given until all the costs of the winding up are paid.</p><p style="text-align: justify;">52. Lord Romily held that the bill of costs of the solicitor was part of the costs of the winding up, and if the official liquidator had paid any costs out of pocket, he might be entitled to be repaid out of the assets pari passu with costs similarly paid by the solicitor.</p><p style="text-align: justify;">53. In the case of Great Eastern Electric Co. In re reported in [1941] 1 All ER 409 : [1942] 12 Comp Cas 96, the Chancery Division was required to decide the rights of two classes of creditors, the pre-liquidation creditors and the post-liquidation creditors. The court held that post-liquidation creditors, paid before any further payment is made to any pre-liquidation creditors. In the aforesaid case, however, on facts, the company had continued its business after the resolution for voluntary winding up of the company.</p><p style="text-align: justify;">54. In the case of Official Liquidators, U.P. Union Bank Ltd. v. Rameshwar Nath Agarwal reported in : [1960]2SCR189 , the Supreme Court held as follows (page 118):</p><p style="text-align: justify;">The High Court held on the facts that the liquidators had remained in occupation of the premises not for the purpose of winding up but 'because they could not think of any suitable method of getting rid of the premises in spite of all their desire to do so'. It was pointed out that the bank had closed its business and the liquidators were not carrying on any business after the winding up and the properties were not used by the liquidators for the purpose of liquidation. The conclusion of the High Court on the evidence has not been challenged. The property not having remained with the liquidators for the purpose of liquidation, unless the court passes an order holding that the debt incurred was part of the costs and expenses of liquidation, the rent accruing due since the date of the winding up cannot be claimed in priority over other ordinary debts.</p><p style="text-align: justify;">We are, therefore, unable to agree with the High Court that under Rule 97 of the Company Rules, if the premises remained in the occupation of the liquidators, not for the purpose of winding up, the landlord is entitled to priority in respect of payment of rent.</p><p style="text-align: justify;">55. In the aforesaid case the Supreme Court did not hold that the rent was not at all payable. The Supreme Court only held that the landlord was not entitled to priority over others. The Supreme Court was not concerned with the statutory taxes under a municipal law, in respect of property which remained with the liquidators for the purpose of liquidation.</p><p style="text-align: justify;">56. National Arms and Ammunition Co. In re reported in [1885] 28 Ch. D 474 (CA), the court held that, where the liquidator had, after the winding up of the company, been occupying the property for the purpose of the company and with a view to acquiring gain or avoiding loss to the company, the rate ought to be paid in full. When the liquidator in possession had not appealed against the assessment the court could not refuse to order payment of rate in full, on the ground of its being too high, except in extreme cases.</p><p style="text-align: justify;">57. In winding up, the liquidators who carry on the company's business continue with rateable occupation of the premises and they are in rateable occupation even if they occupy merely for the purpose of fulfilling the outstanding contracts or preventing damage to the company's property (Halsbury Laws of England, 4th edition, vol. 39).</p><p style="text-align: justify;">58. It is true that the official liquidator did not carry on any business on behalf of the company. The official liquidator, however, retained possession for beneficial winding up of the company.</p><p style="text-align: justify;">59. As rightly argued by Mr. Mukherjee, appointed as an amicus curiae by this Court, and by Mr. Banerjee appearing on behalf of the applicant, the expenses incurred in winding up are payable, not provable. The principle of priority of certain creditors is applicable to liabilities of the company at the time when the order for winding up of the company was made. Costs and expenses incurred on behalf of the company in the winding up ought to be paid in full.</p><p style="text-align: justify;">60. Mahaluxmi Cotton Mills Ltd. (in liquidation), In re [1962] 32 Comp Cas 1186, this Court held that the expenses incurred by the official liquidator in running the mill were to be paid in priority to all other creditors, and the bank which took advantage of the receiver running the mill, could not object claiming priority under Section 529A.</p><p style="text-align: justify;">61. In the case of Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay reported in AIR 2006 Bom 65, the court held that property tax under Section 146 of the <a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a>, had to be paid by the official liquidator and not the purchaser. The purchaser becomes liable for the property tax, only from the date of purchase.</p><p style="text-align: justify;">62. This court acknowledges the immense assistance rendered to this Court by the amicus curiae Mr. S.N. Mukherjee, senior advocate and expresses appreciation for his painstaking efforts in assisting this Court.</p><p style="text-align: justify;">63. Under Section 135 of the Madhya Pradesh Municipal Corporation Act, 1956, property tax might be charged at a rate not less than 6 per cent. and not exceeding 10 per cent. of the annual letting out value, as may be determined by the Corporation for each financial year.</p><p style="text-align: justify;">64. The annual letting out value is to be determined, taking into consideration various factors, including the purposes for which the property is used, its capacity of profitable user and other relevant factors.</p><p style="text-align: justify;">65. Any person aggrieved by the determination of annual letting out value, might object to the valuation, under Section 147 of the Act, on the grounds stated in the objection.</p><p style="text-align: justify;">66. The official liquidator appears to have rejected the claim of the Municipal Corporation towards taxes to the extent stated in the impugned notices on the misconception that the official liquidator was not liable for post-liquidation taxes. The official liquidator has apparently not filed any objection to the determination of the annual value. Nor has the official liquidator filed any appeal under Section 184 of the Madhya Pradesh Municipal Corporation Act.</p><p style="text-align: justify;">67. Unless an objection or appeal is filed and the demand is reduced, the official liquidator would be bound to discharge the tax liability, as per the claim of the Corporation, even for the post liquidation period.</p><p style="text-align: justify;">68. The official liquidator may, however, file an appeal against the demands, if the official liquidator deems it appropriate to do so. Such appeal, if any, shall be filed within thirty days from the date of receipt of a certified copy of this judgment and order.</p><p style="text-align: justify;">69. If an appeal is preferred within the time stipulated in this judgment and order, the same shall be considered on merits, waiving limitation, if any.</p><p style="text-align: justify;">70. There can be no doubt that post-liquidation claims are enforceable, as observed above. The ground on which the claims have been rejected are not sustainable in law. The impugned notices of rejection of proof of debts are set aside.</p><p style="text-align: justify;">71. The applications are allowed in part. There will be an order in terms of prayer (b) of the judges summons.</p><p style="text-align: justify;">If any appeal is filed, the official liquidator shall within eight weeks from the date of receipt of the order under Section 184 consider and dispose of the claims of the applicant, as determined in the appeal, in accordance with law and in the light of the observations made in this judgment and order.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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			(int) 1 => 'Ujjain Nagar Palika Nigam',
			(int) 2 => 'Nagendra Jain',
			(int) 3 => 'Debal Kr',
			(int) 4 => 'Banerjee',
			(int) 5 => 'Banerjee',
			(int) 6 => 'Banerjee',
			(int) 7 => 'Banerjee',
			(int) 8 => 'Banerjee',
			(int) 9 => 'Mukti Ghosh',
			(int) 10 => 'Ghosh',
			(int) 11 => 'Ghosh',
			(int) 12 => 'Ghosh',
			(int) 13 => 'Ghosh',
			(int) 14 => 'pari',
			(int) 15 => 'Ghosh',
			(int) 16 => 'S.N. Mookerjee',
			(int) 17 => 'issue.27',
			(int) 18 => 'Ghosh',
			(int) 19 => 'Pradip Kr',
			(int) 20 => 'Datta',
			(int) 21 => 'Datta',
			(int) 22 => 'Romily',
			(int) 23 => 'Romily',
			(int) 24 => 'Mukherjee',
			(int) 25 => 'Banerjee',
			(int) 26 => 'S.N. Mukherjee',
			(int) 27 => 'aside.71'
		),
		'NORP' => array(
			(int) 0 => 'J.1'
		),
		'CARDINAL' => array(
			(int) 0 => 'two',
			(int) 1 => '164',
			(int) 2 => 'two',
			(int) 3 => 'four',
			(int) 4 => 'two',
			(int) 5 => 'two',
			(int) 6 => '2,79,955',
			(int) 7 => '2,162.20',
			(int) 8 => '4,66,49,092',
			(int) 9 => '11,14,612',
			(int) 10 => '4,63,69,137',
			(int) 11 => '11,12,449.80',
			(int) 12 => 'one',
			(int) 13 => '20,50,00,000',
			(int) 14 => '529A',
			(int) 15 => '530',
			(int) 16 => '2,79,955',
			(int) 17 => '2005.11',
			(int) 18 => 'four',
			(int) 19 => 'two',
			(int) 20 => '2,162',
			(int) 21 => 'two',
			(int) 22 => '4,63,69,137',
			(int) 23 => '11,14,612',
			(int) 24 => '163',
			(int) 25 => '163',
			(int) 26 => '69',
			(int) 27 => '70.21',
			(int) 28 => '2',
			(int) 29 => '154',
			(int) 30 => '154',
			(int) 31 => '28',
			(int) 32 => '3',
			(int) 33 => '529A',
			(int) 34 => '530',
			(int) 35 => '154',
			(int) 36 => '1',
			(int) 37 => '1',
			(int) 38 => '8)',
			(int) 39 => '147',
			(int) 40 => '179',
			(int) 41 => '1959.41',
			(int) 42 => '148',
			(int) 43 => '149',
			(int) 44 => '66.43',
			(int) 45 => '150',
			(int) 46 => '151',
			(int) 47 => '154',
			(int) 48 => '154',
			(int) 49 => '111',
			(int) 50 => '82',
			(int) 51 => '1',
			(int) 52 => '671.50',
			(int) 53 => '9',
			(int) 54 => '1941',
			(int) 55 => '12',
			(int) 56 => 'two',
			(int) 57 => '1960]2SCR189',
			(int) 58 => '118):The',
			(int) 59 => '28',
			(int) 60 => '32',
			(int) 61 => 'less than 6'
		),
		'DATE' => array(
			(int) 0 => '1959',
			(int) 1 => '1956',
			(int) 2 => 'January 24, 2006',
			(int) 3 => '1986',
			(int) 4 => 'July 10, 1997',
			(int) 5 => 'August 18, 2003',
			(int) 6 => '1956',
			(int) 7 => '529',
			(int) 8 => 'the year 1996-97',
			(int) 9 => 'the years 1997-98',
			(int) 10 => '2003-04',
			(int) 11 => 'June 1, 1996 to October 31',
			(int) 12 => 'early November 2005',
			(int) 13 => 'December 5, 2005',
			(int) 14 => 'about February 1, 2006',
			(int) 15 => 'January 24, 2006',
			(int) 16 => '2,79,955',
			(int) 17 => '1956',
			(int) 18 => '1956',
			(int) 19 => 'arrear',
			(int) 20 => '1959',
			(int) 21 => 'a year',
			(int) 22 => '1956',
			(int) 23 => '1959',
			(int) 24 => '1956',
			(int) 25 => '1956',
			(int) 26 => '1959',
			(int) 27 => '1959',
			(int) 28 => '1956',
			(int) 29 => 'July 4, 2003',
			(int) 30 => 'the period',
			(int) 31 => 'between July 10, 1997',
			(int) 32 => 'July 4, 2003',
			(int) 33 => '1956',
			(int) 34 => '1959',
			(int) 35 => '1956',
			(int) 36 => '1956',
			(int) 37 => 'the twelve months next before that date',
			(int) 38 => '1959',
			(int) 39 => 'less than',
			(int) 40 => '1956',
			(int) 41 => '1959',
			(int) 42 => '12 months',
			(int) 43 => '1993',
			(int) 44 => '2002',
			(int) 45 => '2002',
			(int) 46 => '1942',
			(int) 47 => '96',
			(int) 48 => '1885',
			(int) 49 => '1962',
			(int) 50 => '1186',
			(int) 51 => '1888',
			(int) 52 => '1956',
			(int) 53 => 'annual',
			(int) 54 => 'annual',
			(int) 55 => 'annual',
			(int) 56 => 'annual',
			(int) 57 => 'thirty days',
			(int) 58 => 'eight weeks'
		),
		'GPE' => array(
			(int) 0 => 'liquidation.2',
			(int) 1 => 'Ujjain',
			(int) 2 => 'claims.15',
			(int) 3 => 'question.19',
			(int) 4 => 'paid.52'
		),
		'ORG' => array(
			(int) 0 => 'the Madhya Pradesh Municipal Corporation Act',
			(int) 1 => 'IISCO Ujjain Pipe',
			(int) 2 => 'Foundry Co. Ltd.',
			(int) 3 => 'the Board for Industrial and Financial Reconstruction',
			(int) 4 => 'the Sick Industrial Companies (Special Provisions) Act',
			(int) 5 => 'Court',
			(int) 6 => 'Sections 528',
			(int) 7 => 'the Madhya Pradesh Municipal Corporation Act',
			(int) 8 => 'the Madhya Pradesh Municipal Corporation Act',
			(int) 9 => 'the Companies (Court) Rules',
			(int) 10 => 'passed.23',
			(int) 11 => 'the Companies (Court) Rules',
			(int) 12 => 'The Companies (Court) Rules',
			(int) 13 => 'Court',
			(int) 14 => 'Court',
			(int) 15 => 'inter alia',
			(int) 16 => 'the Madhya Pradesh Municipal Corporation Act',
			(int) 17 => 'the Companies (Court) Rules',
			(int) 18 => 'Sections 528',
			(int) 19 => 'and(b',
			(int) 20 => 'inter alia',
			(int) 21 => 'Central',
			(int) 22 => 'the Companies (Court',
			(int) 23 => 'Kentish Homes Ltd.',
			(int) 24 => 'the Court of Appeal',
			(int) 25 => 'the Court of Appeal',
			(int) 26 => 'the House of Lords',
			(int) 27 => 'Toshoku Finance UK',
			(int) 28 => 'The House of Lords',
			(int) 29 => 'Land and Brickmaking Co.',
			(int) 30 => 'EC',
			(int) 31 => 'Great Eastern Electric Co.',
			(int) 32 => 'the Chancery Division',
			(int) 33 => 'Official Liquidators',
			(int) 34 => 'U.P. Union Bank Ltd.',
			(int) 35 => 'Rameshwar Nath Agarwal',
			(int) 36 => 'the Supreme Court',
			(int) 37 => 'the High Court',
			(int) 38 => 'the High Court',
			(int) 39 => 'the Supreme Court',
			(int) 40 => 'The Supreme Court',
			(int) 41 => 'The Supreme Court',
			(int) 42 => 'National Arms and Ammunition Co.',
			(int) 43 => 'CA',
			(int) 44 => 'Court',
			(int) 45 => 'Cotton Mills Ltd.',
			(int) 46 => 'Court',
			(int) 47 => 'Anchor Health',
			(int) 48 => 'Beauty Care Ltd.',
			(int) 49 => 'Municipal Corporation of Greater Bombay',
			(int) 50 => 'AIR 2006 Bom 65',
			(int) 51 => 'the Mumbai Municipal Corporation Act',
			(int) 52 => 'Court',
			(int) 53 => 'the Madhya Pradesh Municipal Corporation Act',
			(int) 54 => 'Corporation',
			(int) 55 => 'the Municipal Corporation',
			(int) 56 => 'the Madhya Pradesh Municipal Corporation',
			(int) 57 => 'Corporation'
		),
		'ORDINAL' => array(
			(int) 0 => 'first',
			(int) 1 => 'first',
			(int) 2 => 'first',
			(int) 3 => 'first'
		),
		'PRODUCT' => array(
			(int) 0 => '367'
		),
		'WORK_OF_ART' => array(
			(int) 0 => '1 All ER',
			(int) 1 => '4th edition'
		),
		'MONEY' => array(
			(int) 0 => '10 per cent'
		)
	),
	'desc' => array(
		'Judgement' => array(
			'id' => '887682',
			'acts' => 'Madhya Pradesh Municipal Corporation Act, 1956 - Sections 135, 147, 184 and 185; ;Sick Industrial Companies (Special Provisions) Act, 1986; ;<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 528, 529, 529(1), 529A and 530 and 530(1); ;<a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a> - Section 146; ;Companies (Court) Rules, 1959 - Rules 97 and 147 to 179',
			'appealno' => 'C.A. Nos. 159 and 160 of 2006 and B.I.F.R. No. 503 of 1994',
			'appellant' => 'UjjaIn Nagar Palika Nigam',
			'authreffered' => '',
			'casename' => 'UjjaIn Nagar Palika Nigam Vs. Official Liquidator and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay;',
			'citingcases' => '',
			'counselplain' => ' Debal Kumar Banerjee and ;Devangshu Basak, Advs.;S.N. Mookerjee, Adv.',
			'counseldef' => 'Mukti Ghosh, Adv., ;C.R. Datta, Adv. for respondent No. 2 and ;Pradip Kr. Datta, Adv. for respondent No. 3',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2007-04-25',
			'deposition' => '',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Indira Banerjee, J.',
			'judgement' => '<p style="text-align: justify;">Indira Banerjee, J.</p><p style="text-align: justify;">1. The main issue involved in these two appeals under Rule 164 of the Companies (Court) Rules, 1959, made by a judge's summons supported by affidavit, is the admissibility of post liquidation claims against a company in liquidation.</p><p style="text-align: justify;">2. In these two appeals, Ujjain Nagar Palika Nigam established under the provisions of the Madhya Pradesh Municipal Corporation Act, 1956, being the applicant, has challenged four several notices, all dated January 24, 2006, of the official liquidator, two of which are notices of admission of proof of debts, and the other two notices of rejection of proof of debts.</p><p style="text-align: justify;">3. By the notices of admission of proof of debts, the official liquidator has admitted the claims of the applicant towards property tax and towards water tax, for the factory premises and staff quarters of the company in liquidation at Ujjain, in part.</p><p style="text-align: justify;">4. The official liquidator has allowed only Rs. 2,79,955 towards property tax and only Rs. 2,162.20 towards water tax as against a total claim of the applicant of about Rs. 4,66,49,092 towards property tax and about Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">5. By the impugned notices of rejection of proof of debt, the official liquidator rejected the claims of the applicant to the extent of Rs. 4,63,69,137 towards property tax and Rs. 11,12,449.80 towards water tax, on the ground that the claims arose after the date of winding up of the company.</p><p style="text-align: justify;">6. The company, IISCO Ujjain Pipe and Foundry Co. Ltd., became sick and was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1986. The BIFR recommended that the company be wound up. Accordingly, this Court passed an order dated July 10, 1997, for winding up of the company, and directed the official liquidator to take possession of the assets of the company.</p><p style="text-align: justify;">7. The assets of the company in liquidation were ultimately sold to one Mr. Nagendra Jain at Rs. 20,50,00,000 and the sale was finally confirmed by an order dated August 18, 2003. The purchaser has duly paid the entire consideration to the official liquidator.</p><p style="text-align: justify;">8. The official liquidator was obliged to disburse the claims of various creditors of the company, in accordance with the provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Sections 528, 529, 529A and 530 of the said Act. The official liquidator accordingly issued notices in leading newspapers, inviting claims in the form of affidavit of proof of debts from the creditors of the company in liquidation.</p><p style="text-align: justify;">9. The applicant filed an affidavit of proof of debt claiming Rs. 2,79,955 as arrears of property tax for the year 1996-97 and Rs. 4,63,69,137 for the years 1997-98 till 2003-04 for the factory and staff quarters of the company in liquidation at Ujjain.</p><p style="text-align: justify;">10. Another affidavit of proof of debt was filed by the applicant with the official liquidator claiming water tax of Rs. 11,14,612 for the period from June 1, 1996 to October 31, 2005.</p><p style="text-align: justify;">11. Sometime in early November 2005, the official liquidator convened a meeting for considering the claims of the debtors, including the applicant. Another meeting was held on December 5, 2005, wherein the respective parties were duly heard. The claimant apparently appeared through counsel and made submissions.</p><p style="text-align: justify;">12. On or about February 1, 2006, the applicant received four notices, dated January 24, 2006, from the official liquidator, copies of which are annexed to the application. By two several notices of admission of proof the assistant official liquidator informed the applicant, that a sum of Rs. 2,79,955 had been allowed towards its claim against the company in liquidation on account of property tax and a sum of Rs. 2,162 had been allowed towards its claim on account of water tax. No reasons have been disclosed in the notices for disallowing the balance claim of the applicant.</p><p style="text-align: justify;">13. By the other two notices, being the notices of rejection of proof of debt, the official liquidator rejected the claim of the applicant to the extent of Rs. 4,63,69,137 towards property tax and to the extent of Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">14. According to the applicant no grounds were given for rejection of the claim. It is, however, apparent that the balance claims have been withheld on the assumption that the official liquidator had no liability towards post liquidation claims.</p><p style="text-align: justify;">15. Mr. Debal Kr. Banerjee appearing on behalf of the applicant submitted that the official liquidator was liable for both pre-liquidation and post-liquidation rates and taxes.</p><p style="text-align: justify;">16. Mr. Banerjee relied on Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, which is set out hereinbelow:</p><p style="text-align: justify;">185. Liability of buildings, lands, etc., for taxes.-All sums due from any person in respect of taxes on any land or building shall, subject to prior payment of any land revenue in respect of it due to the government, be a first charge upon the said land or building and upon any movable property found within or upon such land or building and belonging to the said person:Provided that no arrears of any such tax shall be recoverable from any occupier who is not the owner, if such arrears are for a period during which the occupier was not in occupation.</p><p style="text-align: justify;">17. Mr. Banerjee argued that the position of the applicant is that of a secured creditor, in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, referred to above.</p><p style="text-align: justify;">18. Mr. Banerjee further argued that the official liquidator was liable to the applicant for arrear rates and charges, outstanding on the date of liquidation as well as rates and charges till the date of sale of the property in question.</p><p style="text-align: justify;">19. Mr. Banerjee submitted that the official liquidator was, in any case, required to give reasons for rejection of any claim either wholly or in part. In the instant case, the official liquidator had not given reasons for rejection of the claim.</p><p style="text-align: justify;">20. In support of his submission Mr. Banerjee referred to Rule 163 of the Companies (Court) Rules, 1959, extracted hereinbelow for convenience:</p><p style="text-align: justify;">Rule 163. Acceptance or rejection of proof to be communicated.- After such investigation as he may think necessary, the liquidator shall in writing admit or reject the proof in whole or in part. Every decision of the liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the creditor concerned by post under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is rejected wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance. Where the liquidator rejects a proof, wholly or in part, he shall state the grounds of the rejection to the creditor in Form No. 69, notice of admission of proof shall be in Form No. 70.</p><p style="text-align: justify;">21. Mr. Mukti Ghosh appearing on behalf of the official liquidator submitted 2 that the official liquidator rightly allowed the claim of the applicant on account of arrears of taxes till the date of winding up and disallowed the claim for the period subsequent to the winding up.</p><p style="text-align: justify;">22. Mr. Ghosh submitted that the official liquidator was liable to pay only taxes which accrued till the date of winding up of the company and became payable within a year thereof. In support of his submissions Mr. Ghosh relied on various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Section 530(1)(a) thereof. The relevant date is the date on which the winding up order is passed.</p><p style="text-align: justify;">23. Mr. Ghosh also relied on Rule 154 of the Companies (Court) Rules, 1959, extracted hereinbelow:</p><p style="text-align: justify;">Rule 154. Value of debts.--The value of all debts and claims against the company shall, as far as is possible, be estimated according to the value thereof at the date of the order of the winding up of the company or where before the presentation of the petition for winding up, a resolution has been passed by the company for voluntary winding up, at the date of the passing of such resolution.</p><p style="text-align: justify;">24. Mr. Ghosh submitted that in view of Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, notwithstanding anything contrary in any other provision of the said Act or any other law for the time being in force, in the winding up of a company, workmen's dues and dues of secured creditors to the extent, they are secured are to be paid pari passu, in priority to all other debts.</p><p style="text-align: justify;">25. Mr. Ghosh submitted that in exercise of power under the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, the Companies (Court) Rules, 1959, have been framed. The Companies (Court) Rules, 1959, and in particular Rule 154 thereof specifically provides for the filing of affidavit of proof of debts as on the relevant date. The official liquidator has, therefore, allowed taxes due on the relevant date, that have been proved.</p><p style="text-align: justify;">26. The question before this Court is whether claims, that might arise against the official liquidator representing the company in liquidation, for any period of time, subsequent to the order of winding up, can outright be rejected. This Court appointed Mr. S.N. Mookerjee, senior advocate, as amicus curiae to assist this Court to adjudicate the aforesaid issue.</p><p style="text-align: justify;">27. The company may be wound up and its business closed down. Yet, the official liquidator would be obliged to protect the assets of the company in liquidation, until such time as the assets are sold. For the protection of assets, the official liquidator representing the company might have to retain rented premises, obtain supply of electricity, engage security guards and take such other steps involving expenses as the official liquidator might deem necessary. Can claims on account of, inter alia, rent, electricity charges that accrued after the date of winding up, be outright rejected only on the ground that the claims were post liquidation claims even though the company in liquidation might have sufficient funds to satisfy the claims ?</p><p style="text-align: justify;">28. An electricity supplier, may, as argued by Mr. Ghosh, have the option of disconnecting supply for non-payment of its dues and appropriating the security deposit of the consumer. The right of disconnection would not, however, make any difference to the maintainability of the claim of the supplier.</p><p style="text-align: justify;">29. It is not in dispute that the official liquidator has been making payments of post liquidation electricity charges. The compulsion to make payment cannot, however, make any difference to the legal status of the claim.</p><p style="text-align: justify;">30. If charges on account of supply of electricity after the date of liquidation are payable, so is rent. The liability of a company to pay rent and/or occupation charges and/or rates and taxes does not automatically come to an end with the order of winding up of the company.</p><p style="text-align: justify;">31. Mr. Pradip Kr. Datta appearing on behalf of the purchaser being respondent No. 3 submitted that in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, the purchaser is not liable for the period prior to the date on which the purchaser occupied the property. The purchaser would be liable for taxes from the date of confirmation of the sale in his favour. For the period prior to the date of confirmation of the sale, the official liquidator would be liable.</p><p style="text-align: justify;">32. Mr. Datta submitted that the official liquidator should be directed to pay all taxes till the execution of the deed of conveyance in favour of the purchaser. It is patently clear, that a devious attempt is being made by Mr. Datta's client, to pass on some part of his burden to pay rates and taxes in respect of the property in question to the official liquidator. The sale was confirmed in favour of the purchaser on July 4, 2003. The purchaser would be liable for rates and taxes on and from the date.</p><p style="text-align: justify;">33. The dispute between the official liquidator and the applicant is with regard to the rates and taxes for the period between July 10, 1997, being the date on which the company was directed to be wound up and July 4, 2003, being the date on which the sale in favour of the purchaser was confirmed. In other words, the dispute is with regard to the taxes claimed for a period of approximately six years.</p><p style="text-align: justify;">34. The official liquidator has rejected the proof of debt on his interpretation of the various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> and the Companies (Court) Rules, 1959, framed thereunder and in particular Sections 528, 529A and 530 and Rule 154 of the Rules.</p><p style="text-align: justify;">35. Section 528 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, provides as follows:</p><p style="text-align: justify;">Section 528. Debts of all descriptions to be admitted to proof.--In every winding up (subject in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.</p><p style="text-align: justify;">36. The object of winding up a company is to realise the assets and discharge the liabilities and then, if there be any surplus, to pay it off to the shareholders, according to their respective interests.</p><p style="text-align: justify;">37. In order to ascertain the liabilities, Section 528 requires that all persons having claims, of whatsoever nature, against the company, should submit proof of what is due to them. Every kind of liability, whether present or future, certain or contingent, and however, difficult of valuation, is provable and has got to be proved.</p><p style="text-align: justify;">38. Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, is extracted hereinbelow:</p><p style="text-align: justify;">Section 529A. Overriding preferential payments.--(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company:</p><p style="text-align: justify;">(a) workmen's dues ; and</p><p style="text-align: justify;">(b) debts due to secured creditors to the extent such debts rank under Clause (c) of the proviso to Sub-section (1) of Section 529 pari passu with such dues,</p><p style="text-align: justify;">shall be paid in priority to all other debts.</p><p style="text-align: justify;">(2) The debts payable under Clause (a) and Clause (b) of Sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.</p><p style="text-align: justify;">39. Section 530, inter alia, provides as follows:</p><p style="text-align: justify;">Section 530. Preferential payments.-(1) In a winding up, subject to the provisions of Section 529A, there shall be paid in priority to all other debts:</p><p style="text-align: justify;">(a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in Clause (c) of Sub-section (8), and having become due and payable within the twelve months next before that date ;</p><p style="text-align: justify;">(b) all wages or salary....</p><p style="text-align: justify;">(8) For the purposes of this section...</p><p style="text-align: justify;">(c) the expression 'the relevant date' means:</p><p style="text-align: justify;">(i) in the case of a company ordered to be wound up compulsorily, the date of the appointment or first appointment of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date ; and</p><p style="text-align: justify;">(ii) in any case where Sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company.</p><p style="text-align: justify;">40. The procedure for fixing of liabilities and settlement of claims is governed by the provisions of Rules 147 to 179 of the Companies (Court) Rules, 1959.</p><p style="text-align: justify;">41. Rule 148 of the said 1959 Rules requires the official liquidator to give not less than 14 day's notice of the date fixed by advertisement for creditors of the company to prove debts of the company in liquidation to such creditor.</p><p style="text-align: justify;">42. Rule 149 provides that, in an winding up by the court, every creditor is required to adduce formal proof of debts of the company in liquidation unless the judge, in any particular case, directs that the claims of any creditors or class of creditors be admitted without proof. The debt may be proved by delivering or sending an affidavit verifying the debt. An affidavit proving the debt is required to be in Form No. 66.</p><p style="text-align: justify;">43. Rules 150 and 151 relate to the mode of proof and verification of debts and the contents of an affidavit in proof of debt. Under Rule 154 the value of all debts and claims against the company are, as far as possible estimated according to the value thereof on the date of winding up of the company.</p><p style="text-align: justify;">44. The contention on behalf of the official liquidator, that debts and claims and particularly claims on account of municipal tax are payable only till the date of winding up of the company, in view of Section 530 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, read with Rule 154 of the Companies (Court) Rules 1959, is patently misconceived. There is no provision either in the Companies Act or in the Companies (Court) Rules which restricts claims and debts only till the date of the winding up order.</p><p style="text-align: justify;">45. Pre-liquidation claims, which had arisen before the official liquidator took possession of the assets and properties of the company, would necessarily have to be estimated by the official liquidator on the basis of available records and the proof adduced by the claimant and/or the creditor. Post liquidation debts and claims do not require to be proved.</p><p style="text-align: justify;">46. Section 530 does not absolve a company in liquidation, represented by the official liquidator, of its liability towards revenue and taxes. The said section merely provides for payment of revenues, taxes, cesses and rates which became due and payable within 12 months from the relevant date, being the date of the winding up order in priority to other pre-liquidation debts. Post-liquidation liabilities are to be treated as part of the costs of winding up of the company in liquidation and such liabilities get priority over all other liabilities of the company.</p><p style="text-align: justify;">47. In the case of Kentish Homes Ltd. In Re reported in [1993] BCLC 1375 (Ch. D), the company was engaged in commercial and residential development which was financed by a building society, on loan basis, on first charge on assets. A receiver was appointed. Because of the company's serious financial difficulties, the company went into voluntary winding up.</p><p style="text-align: justify;">48. The chargees were advised that the sale of the property in an incomplete state would realise very little and accordingly they provided further money to the receiver for completion of the building. In due course the flats were finished and sold. During the period for which the flats remained unsold, a standard community charge became payable. The court held that as this debt arose after the cut off date, that is, after the company went into liquidation, it was not provable as a debt in liquidation.</p><p style="text-align: justify;">49. This decision was, however, overruled by the Court of Appeal and the decision of the Court of Appeal was approved by the House of Lords in Toshoku Finance UK plc In re reported in [2002] 111 Comp Cas 82 : [2002] 1 WLR 671.</p><p style="text-align: justify;">50. The House of Lords held that the official liquidator was bound to discharge post liquidation liabilities on account of corporation tax. The expenses were to be treated as post liquidation expenses.</p><p style="text-align: justify;">51. Freehold Land and Brickmaking Co. In re 9 EC 367, Lord Romily dealing with the claim of a solicitor retained by the official liquidator, towards his fees and charges, laid down the principles of disbursement from out of the assets of a company. Lord Romily held as follows:.and the rule of the court is this, that in the first place, the costs of the petition for winding up are to be paid out of the assets, next the costs of the winding up, and then the remuneration of the official liquidator ; but no remuneration can be given until all the costs of the winding up are paid.</p><p style="text-align: justify;">52. Lord Romily held that the bill of costs of the solicitor was part of the costs of the winding up, and if the official liquidator had paid any costs out of pocket, he might be entitled to be repaid out of the assets pari passu with costs similarly paid by the solicitor.</p><p style="text-align: justify;">53. In the case of Great Eastern Electric Co. In re reported in [1941] 1 All ER 409 : [1942] 12 Comp Cas 96, the Chancery Division was required to decide the rights of two classes of creditors, the pre-liquidation creditors and the post-liquidation creditors. The court held that post-liquidation creditors, paid before any further payment is made to any pre-liquidation creditors. In the aforesaid case, however, on facts, the company had continued its business after the resolution for voluntary winding up of the company.</p><p style="text-align: justify;">54. In the case of Official Liquidators, U.P. Union Bank Ltd. v. Rameshwar Nath Agarwal reported in : [1960]2SCR189 , the Supreme Court held as follows (page 118):</p><p style="text-align: justify;">The High Court held on the facts that the liquidators had remained in occupation of the premises not for the purpose of winding up but 'because they could not think of any suitable method of getting rid of the premises in spite of all their desire to do so'. It was pointed out that the bank had closed its business and the liquidators were not carrying on any business after the winding up and the properties were not used by the liquidators for the purpose of liquidation. The conclusion of the High Court on the evidence has not been challenged. The property not having remained with the liquidators for the purpose of liquidation, unless the court passes an order holding that the debt incurred was part of the costs and expenses of liquidation, the rent accruing due since the date of the winding up cannot be claimed in priority over other ordinary debts.</p><p style="text-align: justify;">We are, therefore, unable to agree with the High Court that under Rule 97 of the Company Rules, if the premises remained in the occupation of the liquidators, not for the purpose of winding up, the landlord is entitled to priority in respect of payment of rent.</p><p style="text-align: justify;">55. In the aforesaid case the Supreme Court did not hold that the rent was not at all payable. The Supreme Court only held that the landlord was not entitled to priority over others. The Supreme Court was not concerned with the statutory taxes under a municipal law, in respect of property which remained with the liquidators for the purpose of liquidation.</p><p style="text-align: justify;">56. National Arms and Ammunition Co. In re reported in [1885] 28 Ch. D 474 (CA), the court held that, where the liquidator had, after the winding up of the company, been occupying the property for the purpose of the company and with a view to acquiring gain or avoiding loss to the company, the rate ought to be paid in full. When the liquidator in possession had not appealed against the assessment the court could not refuse to order payment of rate in full, on the ground of its being too high, except in extreme cases.</p><p style="text-align: justify;">57. In winding up, the liquidators who carry on the company's business continue with rateable occupation of the premises and they are in rateable occupation even if they occupy merely for the purpose of fulfilling the outstanding contracts or preventing damage to the company's property (Halsbury Laws of England, 4th edition, vol. 39).</p><p style="text-align: justify;">58. It is true that the official liquidator did not carry on any business on behalf of the company. The official liquidator, however, retained possession for beneficial winding up of the company.</p><p style="text-align: justify;">59. As rightly argued by Mr. Mukherjee, appointed as an amicus curiae by this Court, and by Mr. Banerjee appearing on behalf of the applicant, the expenses incurred in winding up are payable, not provable. The principle of priority of certain creditors is applicable to liabilities of the company at the time when the order for winding up of the company was made. Costs and expenses incurred on behalf of the company in the winding up ought to be paid in full.</p><p style="text-align: justify;">60. Mahaluxmi Cotton Mills Ltd. (in liquidation), In re [1962] 32 Comp Cas 1186, this Court held that the expenses incurred by the official liquidator in running the mill were to be paid in priority to all other creditors, and the bank which took advantage of the receiver running the mill, could not object claiming priority under Section 529A.</p><p style="text-align: justify;">61. In the case of Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay reported in AIR 2006 Bom 65, the court held that property tax under Section 146 of the <a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a>, had to be paid by the official liquidator and not the purchaser. The purchaser becomes liable for the property tax, only from the date of purchase.</p><p style="text-align: justify;">62. This court acknowledges the immense assistance rendered to this Court by the amicus curiae Mr. S.N. Mukherjee, senior advocate and expresses appreciation for his painstaking efforts in assisting this Court.</p><p style="text-align: justify;">63. Under Section 135 of the Madhya Pradesh Municipal Corporation Act, 1956, property tax might be charged at a rate not less than 6 per cent. and not exceeding 10 per cent. of the annual letting out value, as may be determined by the Corporation for each financial year.</p><p style="text-align: justify;">64. The annual letting out value is to be determined, taking into consideration various factors, including the purposes for which the property is used, its capacity of profitable user and other relevant factors.</p><p style="text-align: justify;">65. Any person aggrieved by the determination of annual letting out value, might object to the valuation, under Section 147 of the Act, on the grounds stated in the objection.</p><p style="text-align: justify;">66. The official liquidator appears to have rejected the claim of the Municipal Corporation towards taxes to the extent stated in the impugned notices on the misconception that the official liquidator was not liable for post-liquidation taxes. The official liquidator has apparently not filed any objection to the determination of the annual value. Nor has the official liquidator filed any appeal under Section 184 of the Madhya Pradesh Municipal Corporation Act.</p><p style="text-align: justify;">67. Unless an objection or appeal is filed and the demand is reduced, the official liquidator would be bound to discharge the tax liability, as per the claim of the Corporation, even for the post liquidation period.</p><p style="text-align: justify;">68. The official liquidator may, however, file an appeal against the demands, if the official liquidator deems it appropriate to do so. Such appeal, if any, shall be filed within thirty days from the date of receipt of a certified copy of this judgment and order.</p><p style="text-align: justify;">69. If an appeal is preferred within the time stipulated in this judgment and order, the same shall be considered on merits, waiving limitation, if any.</p><p style="text-align: justify;">70. There can be no doubt that post-liquidation claims are enforceable, as observed above. The ground on which the claims have been rejected are not sustainable in law. The impugned notices of rejection of proof of debts are set aside.</p><p style="text-align: justify;">71. The applications are allowed in part. There will be an order in terms of prayer (b) of the judges summons.</p><p style="text-align: justify;">If any appeal is filed, the official liquidator shall within eight weeks from the date of receipt of the order under Section 184 consider and dispose of the claims of the applicant, as determined in the appeal, in accordance with law and in the light of the observations made in this judgment and order.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'UjjaIn Nagar Palika Nigam Vs. Official Liquidator and ors. Semantic Analysis'
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		(int) 29 => 'Land and Brickmaking Co.',
		(int) 30 => 'EC',
		(int) 31 => 'Great Eastern Electric Co.',
		(int) 32 => 'the Chancery Division',
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$desc = array(
	'Judgement' => array(
		'id' => '887682',
		'acts' => 'Madhya Pradesh Municipal Corporation Act, 1956 - Sections 135, 147, 184 and 185; ;Sick Industrial Companies (Special Provisions) Act, 1986; ;<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 528, 529, 529(1), 529A and 530 and 530(1); ;<a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a> - Section 146; ;Companies (Court) Rules, 1959 - Rules 97 and 147 to 179',
		'appealno' => 'C.A. Nos. 159 and 160 of 2006 and B.I.F.R. No. 503 of 1994',
		'appellant' => 'UjjaIn Nagar Palika Nigam',
		'authreffered' => '',
		'casename' => 'UjjaIn Nagar Palika Nigam Vs. Official Liquidator and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay;',
		'citingcases' => '',
		'counselplain' => ' Debal Kumar Banerjee and ;Devangshu Basak, Advs.;S.N. Mookerjee, Adv.',
		'counseldef' => 'Mukti Ghosh, Adv., ;C.R. Datta, Adv. for respondent No. 2 and ;Pradip Kr. Datta, Adv. for respondent No. 3',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2007-04-25',
		'deposition' => '',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Indira Banerjee, J.',
		'judgement' => '<p style="text-align: justify;">Indira Banerjee, J.</p><p style="text-align: justify;">1. The main issue involved in these two appeals under Rule 164 of the Companies (Court) Rules, 1959, made by a judge's summons supported by affidavit, is the admissibility of post liquidation claims against a company in liquidation.</p><p style="text-align: justify;">2. In these two appeals, Ujjain Nagar Palika Nigam established under the provisions of the Madhya Pradesh Municipal Corporation Act, 1956, being the applicant, has challenged four several notices, all dated January 24, 2006, of the official liquidator, two of which are notices of admission of proof of debts, and the other two notices of rejection of proof of debts.</p><p style="text-align: justify;">3. By the notices of admission of proof of debts, the official liquidator has admitted the claims of the applicant towards property tax and towards water tax, for the factory premises and staff quarters of the company in liquidation at Ujjain, in part.</p><p style="text-align: justify;">4. The official liquidator has allowed only Rs. 2,79,955 towards property tax and only Rs. 2,162.20 towards water tax as against a total claim of the applicant of about Rs. 4,66,49,092 towards property tax and about Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">5. By the impugned notices of rejection of proof of debt, the official liquidator rejected the claims of the applicant to the extent of Rs. 4,63,69,137 towards property tax and Rs. 11,12,449.80 towards water tax, on the ground that the claims arose after the date of winding up of the company.</p><p style="text-align: justify;">6. The company, IISCO Ujjain Pipe and Foundry Co. Ltd., became sick and was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1986. The BIFR recommended that the company be wound up. Accordingly, this Court passed an order dated July 10, 1997, for winding up of the company, and directed the official liquidator to take possession of the assets of the company.</p><p style="text-align: justify;">7. The assets of the company in liquidation were ultimately sold to one Mr. Nagendra Jain at Rs. 20,50,00,000 and the sale was finally confirmed by an order dated August 18, 2003. The purchaser has duly paid the entire consideration to the official liquidator.</p><p style="text-align: justify;">8. The official liquidator was obliged to disburse the claims of various creditors of the company, in accordance with the provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Sections 528, 529, 529A and 530 of the said Act. The official liquidator accordingly issued notices in leading newspapers, inviting claims in the form of affidavit of proof of debts from the creditors of the company in liquidation.</p><p style="text-align: justify;">9. The applicant filed an affidavit of proof of debt claiming Rs. 2,79,955 as arrears of property tax for the year 1996-97 and Rs. 4,63,69,137 for the years 1997-98 till 2003-04 for the factory and staff quarters of the company in liquidation at Ujjain.</p><p style="text-align: justify;">10. Another affidavit of proof of debt was filed by the applicant with the official liquidator claiming water tax of Rs. 11,14,612 for the period from June 1, 1996 to October 31, 2005.</p><p style="text-align: justify;">11. Sometime in early November 2005, the official liquidator convened a meeting for considering the claims of the debtors, including the applicant. Another meeting was held on December 5, 2005, wherein the respective parties were duly heard. The claimant apparently appeared through counsel and made submissions.</p><p style="text-align: justify;">12. On or about February 1, 2006, the applicant received four notices, dated January 24, 2006, from the official liquidator, copies of which are annexed to the application. By two several notices of admission of proof the assistant official liquidator informed the applicant, that a sum of Rs. 2,79,955 had been allowed towards its claim against the company in liquidation on account of property tax and a sum of Rs. 2,162 had been allowed towards its claim on account of water tax. No reasons have been disclosed in the notices for disallowing the balance claim of the applicant.</p><p style="text-align: justify;">13. By the other two notices, being the notices of rejection of proof of debt, the official liquidator rejected the claim of the applicant to the extent of Rs. 4,63,69,137 towards property tax and to the extent of Rs. 11,14,612 towards water tax.</p><p style="text-align: justify;">14. According to the applicant no grounds were given for rejection of the claim. It is, however, apparent that the balance claims have been withheld on the assumption that the official liquidator had no liability towards post liquidation claims.</p><p style="text-align: justify;">15. Mr. Debal Kr. Banerjee appearing on behalf of the applicant submitted that the official liquidator was liable for both pre-liquidation and post-liquidation rates and taxes.</p><p style="text-align: justify;">16. Mr. Banerjee relied on Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, which is set out hereinbelow:</p><p style="text-align: justify;">185. Liability of buildings, lands, etc., for taxes.-All sums due from any person in respect of taxes on any land or building shall, subject to prior payment of any land revenue in respect of it due to the government, be a first charge upon the said land or building and upon any movable property found within or upon such land or building and belonging to the said person:Provided that no arrears of any such tax shall be recoverable from any occupier who is not the owner, if such arrears are for a period during which the occupier was not in occupation.</p><p style="text-align: justify;">17. Mr. Banerjee argued that the position of the applicant is that of a secured creditor, in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, referred to above.</p><p style="text-align: justify;">18. Mr. Banerjee further argued that the official liquidator was liable to the applicant for arrear rates and charges, outstanding on the date of liquidation as well as rates and charges till the date of sale of the property in question.</p><p style="text-align: justify;">19. Mr. Banerjee submitted that the official liquidator was, in any case, required to give reasons for rejection of any claim either wholly or in part. In the instant case, the official liquidator had not given reasons for rejection of the claim.</p><p style="text-align: justify;">20. In support of his submission Mr. Banerjee referred to Rule 163 of the Companies (Court) Rules, 1959, extracted hereinbelow for convenience:</p><p style="text-align: justify;">Rule 163. Acceptance or rejection of proof to be communicated.- After such investigation as he may think necessary, the liquidator shall in writing admit or reject the proof in whole or in part. Every decision of the liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the creditor concerned by post under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is rejected wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance. Where the liquidator rejects a proof, wholly or in part, he shall state the grounds of the rejection to the creditor in Form No. 69, notice of admission of proof shall be in Form No. 70.</p><p style="text-align: justify;">21. Mr. Mukti Ghosh appearing on behalf of the official liquidator submitted 2 that the official liquidator rightly allowed the claim of the applicant on account of arrears of taxes till the date of winding up and disallowed the claim for the period subsequent to the winding up.</p><p style="text-align: justify;">22. Mr. Ghosh submitted that the official liquidator was liable to pay only taxes which accrued till the date of winding up of the company and became payable within a year thereof. In support of his submissions Mr. Ghosh relied on various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, and in particular Section 530(1)(a) thereof. The relevant date is the date on which the winding up order is passed.</p><p style="text-align: justify;">23. Mr. Ghosh also relied on Rule 154 of the Companies (Court) Rules, 1959, extracted hereinbelow:</p><p style="text-align: justify;">Rule 154. Value of debts.--The value of all debts and claims against the company shall, as far as is possible, be estimated according to the value thereof at the date of the order of the winding up of the company or where before the presentation of the petition for winding up, a resolution has been passed by the company for voluntary winding up, at the date of the passing of such resolution.</p><p style="text-align: justify;">24. Mr. Ghosh submitted that in view of Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, notwithstanding anything contrary in any other provision of the said Act or any other law for the time being in force, in the winding up of a company, workmen's dues and dues of secured creditors to the extent, they are secured are to be paid pari passu, in priority to all other debts.</p><p style="text-align: justify;">25. Mr. Ghosh submitted that in exercise of power under the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, the Companies (Court) Rules, 1959, have been framed. The Companies (Court) Rules, 1959, and in particular Rule 154 thereof specifically provides for the filing of affidavit of proof of debts as on the relevant date. The official liquidator has, therefore, allowed taxes due on the relevant date, that have been proved.</p><p style="text-align: justify;">26. The question before this Court is whether claims, that might arise against the official liquidator representing the company in liquidation, for any period of time, subsequent to the order of winding up, can outright be rejected. This Court appointed Mr. S.N. Mookerjee, senior advocate, as amicus curiae to assist this Court to adjudicate the aforesaid issue.</p><p style="text-align: justify;">27. The company may be wound up and its business closed down. Yet, the official liquidator would be obliged to protect the assets of the company in liquidation, until such time as the assets are sold. For the protection of assets, the official liquidator representing the company might have to retain rented premises, obtain supply of electricity, engage security guards and take such other steps involving expenses as the official liquidator might deem necessary. Can claims on account of, inter alia, rent, electricity charges that accrued after the date of winding up, be outright rejected only on the ground that the claims were post liquidation claims even though the company in liquidation might have sufficient funds to satisfy the claims ?</p><p style="text-align: justify;">28. An electricity supplier, may, as argued by Mr. Ghosh, have the option of disconnecting supply for non-payment of its dues and appropriating the security deposit of the consumer. The right of disconnection would not, however, make any difference to the maintainability of the claim of the supplier.</p><p style="text-align: justify;">29. It is not in dispute that the official liquidator has been making payments of post liquidation electricity charges. The compulsion to make payment cannot, however, make any difference to the legal status of the claim.</p><p style="text-align: justify;">30. If charges on account of supply of electricity after the date of liquidation are payable, so is rent. The liability of a company to pay rent and/or occupation charges and/or rates and taxes does not automatically come to an end with the order of winding up of the company.</p><p style="text-align: justify;">31. Mr. Pradip Kr. Datta appearing on behalf of the purchaser being respondent No. 3 submitted that in view of the statutory provisions of Section 185 of the Madhya Pradesh Municipal Corporation Act, 1956, the purchaser is not liable for the period prior to the date on which the purchaser occupied the property. The purchaser would be liable for taxes from the date of confirmation of the sale in his favour. For the period prior to the date of confirmation of the sale, the official liquidator would be liable.</p><p style="text-align: justify;">32. Mr. Datta submitted that the official liquidator should be directed to pay all taxes till the execution of the deed of conveyance in favour of the purchaser. It is patently clear, that a devious attempt is being made by Mr. Datta's client, to pass on some part of his burden to pay rates and taxes in respect of the property in question to the official liquidator. The sale was confirmed in favour of the purchaser on July 4, 2003. The purchaser would be liable for rates and taxes on and from the date.</p><p style="text-align: justify;">33. The dispute between the official liquidator and the applicant is with regard to the rates and taxes for the period between July 10, 1997, being the date on which the company was directed to be wound up and July 4, 2003, being the date on which the sale in favour of the purchaser was confirmed. In other words, the dispute is with regard to the taxes claimed for a period of approximately six years.</p><p style="text-align: justify;">34. The official liquidator has rejected the proof of debt on his interpretation of the various provisions of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> and the Companies (Court) Rules, 1959, framed thereunder and in particular Sections 528, 529A and 530 and Rule 154 of the Rules.</p><p style="text-align: justify;">35. Section 528 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, provides as follows:</p><p style="text-align: justify;">Section 528. Debts of all descriptions to be admitted to proof.--In every winding up (subject in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.</p><p style="text-align: justify;">36. The object of winding up a company is to realise the assets and discharge the liabilities and then, if there be any surplus, to pay it off to the shareholders, according to their respective interests.</p><p style="text-align: justify;">37. In order to ascertain the liabilities, Section 528 requires that all persons having claims, of whatsoever nature, against the company, should submit proof of what is due to them. Every kind of liability, whether present or future, certain or contingent, and however, difficult of valuation, is provable and has got to be proved.</p><p style="text-align: justify;">38. Section 529A of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, is extracted hereinbelow:</p><p style="text-align: justify;">Section 529A. Overriding preferential payments.--(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company:</p><p style="text-align: justify;">(a) workmen's dues ; and</p><p style="text-align: justify;">(b) debts due to secured creditors to the extent such debts rank under Clause (c) of the proviso to Sub-section (1) of Section 529 pari passu with such dues,</p><p style="text-align: justify;">shall be paid in priority to all other debts.</p><p style="text-align: justify;">(2) The debts payable under Clause (a) and Clause (b) of Sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.</p><p style="text-align: justify;">39. Section 530, inter alia, provides as follows:</p><p style="text-align: justify;">Section 530. Preferential payments.-(1) In a winding up, subject to the provisions of Section 529A, there shall be paid in priority to all other debts:</p><p style="text-align: justify;">(a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in Clause (c) of Sub-section (8), and having become due and payable within the twelve months next before that date ;</p><p style="text-align: justify;">(b) all wages or salary....</p><p style="text-align: justify;">(8) For the purposes of this section...</p><p style="text-align: justify;">(c) the expression 'the relevant date' means:</p><p style="text-align: justify;">(i) in the case of a company ordered to be wound up compulsorily, the date of the appointment or first appointment of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date ; and</p><p style="text-align: justify;">(ii) in any case where Sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company.</p><p style="text-align: justify;">40. The procedure for fixing of liabilities and settlement of claims is governed by the provisions of Rules 147 to 179 of the Companies (Court) Rules, 1959.</p><p style="text-align: justify;">41. Rule 148 of the said 1959 Rules requires the official liquidator to give not less than 14 day's notice of the date fixed by advertisement for creditors of the company to prove debts of the company in liquidation to such creditor.</p><p style="text-align: justify;">42. Rule 149 provides that, in an winding up by the court, every creditor is required to adduce formal proof of debts of the company in liquidation unless the judge, in any particular case, directs that the claims of any creditors or class of creditors be admitted without proof. The debt may be proved by delivering or sending an affidavit verifying the debt. An affidavit proving the debt is required to be in Form No. 66.</p><p style="text-align: justify;">43. Rules 150 and 151 relate to the mode of proof and verification of debts and the contents of an affidavit in proof of debt. Under Rule 154 the value of all debts and claims against the company are, as far as possible estimated according to the value thereof on the date of winding up of the company.</p><p style="text-align: justify;">44. The contention on behalf of the official liquidator, that debts and claims and particularly claims on account of municipal tax are payable only till the date of winding up of the company, in view of Section 530 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>, read with Rule 154 of the Companies (Court) Rules 1959, is patently misconceived. There is no provision either in the Companies Act or in the Companies (Court) Rules which restricts claims and debts only till the date of the winding up order.</p><p style="text-align: justify;">45. Pre-liquidation claims, which had arisen before the official liquidator took possession of the assets and properties of the company, would necessarily have to be estimated by the official liquidator on the basis of available records and the proof adduced by the claimant and/or the creditor. Post liquidation debts and claims do not require to be proved.</p><p style="text-align: justify;">46. Section 530 does not absolve a company in liquidation, represented by the official liquidator, of its liability towards revenue and taxes. The said section merely provides for payment of revenues, taxes, cesses and rates which became due and payable within 12 months from the relevant date, being the date of the winding up order in priority to other pre-liquidation debts. Post-liquidation liabilities are to be treated as part of the costs of winding up of the company in liquidation and such liabilities get priority over all other liabilities of the company.</p><p style="text-align: justify;">47. In the case of Kentish Homes Ltd. In Re reported in [1993] BCLC 1375 (Ch. D), the company was engaged in commercial and residential development which was financed by a building society, on loan basis, on first charge on assets. A receiver was appointed. Because of the company's serious financial difficulties, the company went into voluntary winding up.</p><p style="text-align: justify;">48. The chargees were advised that the sale of the property in an incomplete state would realise very little and accordingly they provided further money to the receiver for completion of the building. In due course the flats were finished and sold. During the period for which the flats remained unsold, a standard community charge became payable. The court held that as this debt arose after the cut off date, that is, after the company went into liquidation, it was not provable as a debt in liquidation.</p><p style="text-align: justify;">49. This decision was, however, overruled by the Court of Appeal and the decision of the Court of Appeal was approved by the House of Lords in Toshoku Finance UK plc In re reported in [2002] 111 Comp Cas 82 : [2002] 1 WLR 671.</p><p style="text-align: justify;">50. The House of Lords held that the official liquidator was bound to discharge post liquidation liabilities on account of corporation tax. The expenses were to be treated as post liquidation expenses.</p><p style="text-align: justify;">51. Freehold Land and Brickmaking Co. In re 9 EC 367, Lord Romily dealing with the claim of a solicitor retained by the official liquidator, towards his fees and charges, laid down the principles of disbursement from out of the assets of a company. Lord Romily held as follows:.and the rule of the court is this, that in the first place, the costs of the petition for winding up are to be paid out of the assets, next the costs of the winding up, and then the remuneration of the official liquidator ; but no remuneration can be given until all the costs of the winding up are paid.</p><p style="text-align: justify;">52. Lord Romily held that the bill of costs of the solicitor was part of the costs of the winding up, and if the official liquidator had paid any costs out of pocket, he might be entitled to be repaid out of the assets pari passu with costs similarly paid by the solicitor.</p><p style="text-align: justify;">53. In the case of Great Eastern Electric Co. In re reported in [1941] 1 All ER 409 : [1942] 12 Comp Cas 96, the Chancery Division was required to decide the rights of two classes of creditors, the pre-liquidation creditors and the post-liquidation creditors. The court held that post-liquidation creditors, paid before any further payment is made to any pre-liquidation creditors. In the aforesaid case, however, on facts, the company had continued its business after the resolution for voluntary winding up of the company.</p><p style="text-align: justify;">54. In the case of Official Liquidators, U.P. Union Bank Ltd. v. Rameshwar Nath Agarwal reported in : [1960]2SCR189 , the Supreme Court held as follows (page 118):</p><p style="text-align: justify;">The High Court held on the facts that the liquidators had remained in occupation of the premises not for the purpose of winding up but 'because they could not think of any suitable method of getting rid of the premises in spite of all their desire to do so'. It was pointed out that the bank had closed its business and the liquidators were not carrying on any business after the winding up and the properties were not used by the liquidators for the purpose of liquidation. The conclusion of the High Court on the evidence has not been challenged. The property not having remained with the liquidators for the purpose of liquidation, unless the court passes an order holding that the debt incurred was part of the costs and expenses of liquidation, the rent accruing due since the date of the winding up cannot be claimed in priority over other ordinary debts.</p><p style="text-align: justify;">We are, therefore, unable to agree with the High Court that under Rule 97 of the Company Rules, if the premises remained in the occupation of the liquidators, not for the purpose of winding up, the landlord is entitled to priority in respect of payment of rent.</p><p style="text-align: justify;">55. In the aforesaid case the Supreme Court did not hold that the rent was not at all payable. The Supreme Court only held that the landlord was not entitled to priority over others. The Supreme Court was not concerned with the statutory taxes under a municipal law, in respect of property which remained with the liquidators for the purpose of liquidation.</p><p style="text-align: justify;">56. National Arms and Ammunition Co. In re reported in [1885] 28 Ch. D 474 (CA), the court held that, where the liquidator had, after the winding up of the company, been occupying the property for the purpose of the company and with a view to acquiring gain or avoiding loss to the company, the rate ought to be paid in full. When the liquidator in possession had not appealed against the assessment the court could not refuse to order payment of rate in full, on the ground of its being too high, except in extreme cases.</p><p style="text-align: justify;">57. In winding up, the liquidators who carry on the company's business continue with rateable occupation of the premises and they are in rateable occupation even if they occupy merely for the purpose of fulfilling the outstanding contracts or preventing damage to the company's property (Halsbury Laws of England, 4th edition, vol. 39).</p><p style="text-align: justify;">58. It is true that the official liquidator did not carry on any business on behalf of the company. The official liquidator, however, retained possession for beneficial winding up of the company.</p><p style="text-align: justify;">59. As rightly argued by Mr. Mukherjee, appointed as an amicus curiae by this Court, and by Mr. Banerjee appearing on behalf of the applicant, the expenses incurred in winding up are payable, not provable. The principle of priority of certain creditors is applicable to liabilities of the company at the time when the order for winding up of the company was made. Costs and expenses incurred on behalf of the company in the winding up ought to be paid in full.</p><p style="text-align: justify;">60. Mahaluxmi Cotton Mills Ltd. (in liquidation), In re [1962] 32 Comp Cas 1186, this Court held that the expenses incurred by the official liquidator in running the mill were to be paid in priority to all other creditors, and the bank which took advantage of the receiver running the mill, could not object claiming priority under Section 529A.</p><p style="text-align: justify;">61. In the case of Anchor Health and Beauty Care Ltd. v. Municipal Corporation of Greater Bombay reported in AIR 2006 Bom 65, the court held that property tax under Section 146 of the <a href="/act/134305/the-mumbai-municipal-corporation-act-1888-complete-act">Mumbai Municipal Corporation Act, 1888</a>, had to be paid by the official liquidator and not the purchaser. The purchaser becomes liable for the property tax, only from the date of purchase.</p><p style="text-align: justify;">62. This court acknowledges the immense assistance rendered to this Court by the amicus curiae Mr. S.N. Mukherjee, senior advocate and expresses appreciation for his painstaking efforts in assisting this Court.</p><p style="text-align: justify;">63. Under Section 135 of the Madhya Pradesh Municipal Corporation Act, 1956, property tax might be charged at a rate not less than 6 per cent. and not exceeding 10 per cent. of the annual letting out value, as may be determined by the Corporation for each financial year.</p><p style="text-align: justify;">64. The annual letting out value is to be determined, taking into consideration various factors, including the purposes for which the property is used, its capacity of profitable user and other relevant factors.</p><p style="text-align: justify;">65. Any person aggrieved by the determination of annual letting out value, might object to the valuation, under Section 147 of the Act, on the grounds stated in the objection.</p><p style="text-align: justify;">66. The official liquidator appears to have rejected the claim of the Municipal Corporation towards taxes to the extent stated in the impugned notices on the misconception that the official liquidator was not liable for post-liquidation taxes. The official liquidator has apparently not filed any objection to the determination of the annual value. Nor has the official liquidator filed any appeal under Section 184 of the Madhya Pradesh Municipal Corporation Act.</p><p style="text-align: justify;">67. Unless an objection or appeal is filed and the demand is reduced, the official liquidator would be bound to discharge the tax liability, as per the claim of the Corporation, even for the post liquidation period.</p><p style="text-align: justify;">68. The official liquidator may, however, file an appeal against the demands, if the official liquidator deems it appropriate to do so. Such appeal, if any, shall be filed within thirty days from the date of receipt of a certified copy of this judgment and order.</p><p style="text-align: justify;">69. If an appeal is preferred within the time stipulated in this judgment and order, the same shall be considered on merits, waiving limitation, if any.</p><p style="text-align: justify;">70. There can be no doubt that post-liquidation claims are enforceable, as observed above. The ground on which the claims have been rejected are not sustainable in law. The impugned notices of rejection of proof of debts are set aside.</p><p style="text-align: justify;">71. The applications are allowed in part. There will be an order in terms of prayer (b) of the judges summons.</p><p style="text-align: justify;">If any appeal is filed, the official liquidator shall within eight weeks from the date of receipt of the order under Section 184 consider and dispose of the claims of the applicant, as determined in the appeal, in accordance with law and in the light of the observations made in this judgment and order.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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LAW: the Companies Act, Section 185, Section 185, the Companies Act, Section 530(1)(a, Section 529A, the Companies Act, the Companies Act, Rule 154, Section 185, the Companies Act, Section 528 of the Companies Act, Section 528, Section 528, the Companies Act, Section 529, Section 530, Section 530, Section 529A, Section 530, the Companies Act, the Companies Act, Section 530, Rule 97, Section 529A.61, Section 146, Section 135, Section 147, Section 184, Section 184

PERSON: Indira Banerjee, Ujjain Nagar Palika Nigam, Nagendra Jain, Debal Kr, Banerjee, Banerjee, Banerjee, Banerjee, Banerjee, Mukti Ghosh, Ghosh, Ghosh, Ghosh, Ghosh, pari, Ghosh, S.N. Mookerjee, issue.27, Ghosh, Pradip Kr, Datta, Datta, Romily, Romily, Mukherjee, Banerjee, S.N. Mukherjee, aside.71

NORP: J.1

CARDINAL: two, 164, two, four, two, two, 2,79,955, 2,162.20, 4,66,49,092, 11,14,612, 4,63,69,137, 11,12,449.80, one, 20,50,00,000, 529A, 530, 2,79,955, 2005.11, four, two, 2,162, two, 4,63,69,137, 11,14,612, 163, 163, 69, 70.21, 2, 154, 154, 28, 3, 529A, 530, 154, 1, 1, 8), 147, 179, 1959.41, 148, 149, 66.43, 150, 151, 154, 154, 111, 82, 1, 671.50, 9, 1941, 12, two, 1960]2SCR189, 118):The, 28, 32, less than 6

DATE: 1959, 1956, January 24, 2006, 1986, July 10, 1997, August 18, 2003, 1956, 529, the year 1996-97, the years 1997-98, 2003-04, June 1, 1996 to October 31, early November 2005, December 5, 2005, about February 1, 2006, January 24, 2006, 2,79,955, 1956, 1956, arrear, 1959, a year, 1956, 1959, 1956, 1956, 1959, 1959, 1956, July 4, 2003, the period, between July 10, 1997, July 4, 2003, 1956, 1959, 1956, 1956, the twelve months next before that date, 1959, less than, 1956, 1959, 12 months, 1993, 2002, 2002, 1942, 96, 1885, 1962, 1186, 1888, 1956, annual, annual, annual, annual, thirty days, eight weeks

GPE: liquidation.2, Ujjain, claims.15, question.19, paid.52

ORG: the Madhya Pradesh Municipal Corporation Act, IISCO Ujjain Pipe, Foundry Co. Ltd., the Board for Industrial and Financial Reconstruction, the Sick Industrial Companies (Special Provisions) Act, Court, Sections 528, the Madhya Pradesh Municipal Corporation Act, the Madhya Pradesh Municipal Corporation Act, the Companies (Court) Rules, passed.23, the Companies (Court) Rules, The Companies (Court) Rules, Court, Court, inter alia, the Madhya Pradesh Municipal Corporation Act, the Companies (Court) Rules, Sections 528, and(b, inter alia, Central, the Companies (Court, Kentish Homes Ltd., the Court of Appeal, the Court of Appeal, the House of Lords, Toshoku Finance UK, The House of Lords, Land and Brickmaking Co., EC, Great Eastern Electric Co., the Chancery Division, Official Liquidators, U.P. Union Bank Ltd., Rameshwar Nath Agarwal, the Supreme Court, the High Court, the High Court, the Supreme Court, The Supreme Court, The Supreme Court, National Arms and Ammunition Co., CA, Court, Cotton Mills Ltd., Court, Anchor Health, Beauty Care Ltd., Municipal Corporation of Greater Bombay, AIR 2006 Bom 65, the Mumbai Municipal Corporation Act, Court, the Madhya Pradesh Municipal Corporation Act, Corporation, the Municipal Corporation, the Madhya Pradesh Municipal Corporation, Corporation

ORDINAL: first, first, first, first

PRODUCT: 367

WORK_OF_ART: 1 All ER, 4th edition

MONEY: 10 per cent