Law:

Section:

JUDGMENT Divan, CJ. -The question of law which arises in both these matters is regarding the preferential claims under section 530(1)(a) of the Companies Act. Under that section, in a winding up, there shall be paid in priority to all other debts, inter alia, 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) of section 530 and having become due and payable within the twelve months next before that date. Company Application No. 26 of 1973 came up for hearing before B.K. Mehta J. on October 11, 1973. In this application priority is claimed by the income-tax department in respect of certain dues. At the same time priority is also claimed in respect of certain sales tax liability of the company in liquidation on behalf of the State Government and in the company application the main question is whether, and if so, to what extent, priority can be recognised for the liabilities for income-tax and sales tax dues. When the matter came up for hearing before B.K. Mehta J. his attention was drawn to the decision of D.A. Desai J. in Company Application No. 94 of 1973 in Company Petition No. 21 of 1966, being the matter of Sales Tax Officer, Petlad v. Rajratna Naranbhai Mills Co. Ltd. [1974] 44 Comp Cas 65 (Guj.) B.K. Mehta J. was unable to agree with the conclusions reached by D.A. Desai J. in Rajratna Naranbhai Mills Co.'s. case (supra) and hence he referred the matter to a larger Bench so that the entire question may be decided. Before this Company Application No. 26 of 1973 could be taken up for final hearing, appeal filed by the Sales Tax Officer, Petlad, inRajratna Naranbhai Mills Company's (supra) case, being O.J. Appeal No. 2 of 1975, became ripe for hearing and since the question in both the matters is the same, we have heard both these matters together and we are disposing of both these matters by this common judgment. Before we proceed with the specific facts of each case, it will be necessary to set out some of the relevant provisions of the Companies Act. Under section 528 of the Companies Act, 1956, provision is made for…

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