Case BriefsHigh Courts

Bombay High Court: A Division Bench comprising of A.S. Oka and M.S. Sonak, JJ. dismissed an appeal filed against the order of the Company Judge wherein he had directed the appellant- Bank to pay the dues of the workmen that shall be recovered by it as directed therein.

During the liquidation proceedings of one Zadona Electronics Ltd., the appellant and the Union representing the workmen of ZEL filed certain consent terms regarding the settlement of workmen dues. As per the terms, the Bank deposited over rs, 41 crores with the official liquidator to be distributed among over 800 workmen. Out of it, a sum of over Rs 50 lakhs was paid to 12 workmen whose claims were wrongly adjudicated as priority claims. On re-adjudication, the orders for recovery of such sum from the said 12 workmen was made and the recovery was in progress. However, as a result of such payment, there was a proportionate shortfall in the amounts to be disbursed to the remaining employers. The main issue before the Company Judge was whether the payment to remaining workmen should be deferred until the said recovery or whether the tank should make good the shortfall. The Judge decided for the latter. Aggrieved thereby, the Bank filed the instant appeal.

The High Court observed that as between the interests of the workmen and Bank, the Judge correctly exercised discretion in favour of the former. The court was satisfied that the order impugned was made in furtherance of Section 529-A of Companies Act, 1956. The object behind the provision was reiterated “since resources of companies constitute a major segment of the material resources of the community and common good demands that the ownership and control of the resources of every company are so distributed that in the unfortunate event of its liquidation, workers, whose labour and effort constitute an invisible but easily perceivable part of the capital of the company are not deprived of their legitimate right to participate in the product of their labour and effort. Therefore, the provision to accord a priority status to the workmen’s dues.” Furthermore, it was held that no prejudice would be caused to the Bank as it was entitled to receive the payment from the amount recovered from the said 12 workmen. In light of the above, the appeal was dismissed. [Kotak Mahindra Bank Ltd. v. Official Liquidator of Zadona Electronics Ltd.,2018 SCC OnLine Bom 4205, decided on 17-10-2018]

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Supreme Court: The bench of R.K. Agrawal and A.M. Sapre, JJ agreed to examine a plea of the income tax department whether the North Okhla Industrial Development Authority (NOIDA) is a corporation established by the Uttar Pradesh government under the state industrial development law or not. The Court said that it will look into the appeal filed by the IT department against an order of the Allahabad High Court which held that NOIDA is a corporation established under the Act and, therefore, banks are not liable to deduct income tax at source on fixed deposits.

The issue arose in 2013, when the IT department imposed a tax liability on the banks for non- deduction of TDS on the interest income on fixed deposit receipts (FDRs) of NOIDA. The banks, hence, preferred an appeal before the Commissioner of Income Tax (Appeals) (CIT-A), saying the NOIDA is a corporation established by the state law and banks are not under the statutory obligation to deduct and pay the income tax.

The IT department approached the Court against the order of the High Court and sought for determination of the issue as to whether NOIDA is a corporation entitled for exemption from deduction of income tax at source under the provisions of a notification issued in 1970 under the Income Tax Act.

Source: PTI

Case BriefsSupreme Court

Supreme Court: Interpreting the provisions of the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 (PMP Act), the Court said that the definition “Corporation” is wide enough to take within its sweep entities in private sector as well. Considering the nature of activity where entities in private sector are encouraged to participate, it would be incorrect to put any restricted meaning as regards the expression “Corporation”. This definition is designedly kept wide enough to include all such possibilities and there is no reason for giving any restricted meaning to such expression.

Regarding the contention that “Competent Authority” is given wide ranging powers under Section 5 of the PMP Act, the Court said that a person who occupies the position of Competent Authority under the PMP Act must evoke and enjoy public confidence. Neither the Act nor the Rules framed thereunder deal with the qualifications required of a person before his appointment as Competent Authority nor do they deal with any transparent process for such appointment. Stating that like the PMP Act, the Metro Railway (Construction of Works) Act, 1978 also confers power upon the Competent Authority therein to consider objections to the construction of the Metro Railway or any other work and to determine the amount payable for acquisition, the Court noticed that the Competent Authority under the provisions of the PMP Act must also be someone who is holding or has held a Judicial Office not lower in rank than that of a Subordinate Judge or is a trained legal mind as is the case under the Metro Act . If such requirement is not read into and not taken as an integral and essential qualification before appointment of any person as Competent Authority, the provisions in that behalf will not be consistent with the doctrine of fairness under Article 14 of the Constitution of India.

The Bench of V. Gopala Gowda and U.U. Lalit, JJ, however, clarified that the actions taken by the Competent Authority till now, will not in any way stand impaired or be invalidated purely on this count. But the Central Government should step in immediately and remedy the situation with appropriate measures. [Laljibhai Kadvabhai Savaliya v. State of Gujarat, 2016 SCC OnLine SC 1101, decided on 05.10.2016]