SC held liability to discharge arrears of property tax & water tax inspite of being post-liquidation liability

Official Liquidator Vs Ujjain Nagar Palika Nigam & Ors. (Supreme Court of India)

Conclusion: Arrears of property tax and water tax until the date of confirmation of sale, i.e., 04.07.2003, would qualify as the expenses for “preserving, realising or getting in” the assets of the company and thus, should have to be paid in priority by the appellant OL.

Held: Appellant, being the Official Liquidator of the company had questioned the common judgment, whereby the High Court dismissed the appeals, in allowing the company applications preferred by Ujjain Nagar Palika Nigam, claiming property tax and water tax from the appellant in relation to the company in liquidation, from the date of order of winding up and until the date of confirmation of sale of assets to the auction purchaser. It was contended on of behalf the Official Liquidator that he was liable to pay only those taxes which accrued till the date of winding up and became payable within one year thereof and that in view of Section 529A of the Companies Act, 1956, workmen’s dues and the dues of secured creditors to the extent they were secured, were to be paid pari passu, and prioritised over all other debts. The Official Liquidator also contended that he had not carried on any business of the company and consequently, did not in any way earn profit from the use of the assets of the company in liquidation; that the provisions of the Companies Act did not envisage payment of post-liquidation taxes on property and water and the assets were only custodia legis after the winding up order until the sale. The respondent contended that the official liquidator would be liable to pay taxes to the Nigam out of sale proceeds, and apart from this, reiterated the submissions made before the Company Court. It was held that as regards the operation of the said Rule 338 of the Rules of 1959, the reasoning of the High Court was to be accepted that on the facts and in the circumstances of the present case, arrears of property tax and water tax until the date of confirmation of sale, i.e., 04.07.2003, would qualify as the expenses for “preserving, realising or getting in” the assets of the company and thus, should have to be paid in priority by the appellant OL.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

1. By way of these appeals, the appellant, being Official Liquidator¹ of the company named IISCO Ujjain Pipe and Foundry Company Limited², has questioned the common judgment and order dated 05.02.2009 in APOT No. 248 of 2008 and APOT No. 235 of 2008, whereby the Division Bench of the High Court at Calcutta has dismissed the appeals against the common judgment and order dated 25.04.2007 in C.A. No. 159 of 2006 and C.A. No. 160 of 2006, as passed by the learned Company Judge of the High Court³ in allowing the company applications preferred by respondent No.1 Ujjain Nagar Palika Nigam⁴, claiming property tax and water tax from the appellant in relation to the company in liquidation, from the date of order of winding up and until the date of confirmation of sale of assets to the auction purchaser, who is now represented by respondent No. 3.

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