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income-tax Officer, Ernakulam Vs. the Mambad Timber and Estates Private Ltd. and Others. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberAppeal Suit No. 622 of 1972
Reported in(1976)5CTR(Ker)0166C
Appellantincome-tax Officer, Ernakulam
RespondentThe Mambad Timber and Estates Private Ltd. and Others.
Cases Referred and S. S. Gadgil vs. Lal
Excerpt:
.....it should have been omitted, and the omission appears in consequence to have been unintentional'.learned counsel also refers to craies on statute law, viith edition by s. edgar, at page 64 in the chapter on 'construction where the meaning is plain' the learned author has said :it is well at the outset to guard against confusion between the meaning and the legal effect of expression used in a statute, said lindley, l. is to take the words themselves and arrive, if possible, at their meaning without, in the first place, reference to cases'.at page 67 in the same chapter the learned author has said :even though a court is satisfied that the legislature did not contemplate the consequences of an enactment, a court is bound to give effect to its clear language. , that discharge from custody..........act beyond a period of two years form the date of the order of dissolution.3. sri. p. a. francis, learned counsel for the appellant contends that the two years period specified under section 559 of the act is for filing the application and not for the company court to pass orders declaring the dissolution void. hence, according to the learned counsel, the learned judge went wrong in dismissing the application holding that the company court has no jurisdiction to pass an order under section 559 of the act declaring a dissolution as void after two year of the dissolution . the learned counsel relies on a decision of the chancery division in re scad, ltd., 1941 (2) all. e.r. 446, wherein uthwatt, j. said :'this case raises a short point-namely, whether, upon the true construction of the.....
Judgment:

Narendran, J. - The Income-tax Officer, Central Circle, Ernakulam, the applicant in Company Petition No. 1 of 1972, is the appellant in the appeal against the order of the company court. The short question that arises for consideration is whether the company court has jurisdiction to pass an order under section 559 of the Companies Act, 1956 (for short the Act) declaring dissolution of a company void after two years of the date of its dissolution or whether the application under section 559 need be filed within the said period of two years. A further question that arises for consideration is that in view of rule 285 of the Companies Court rules, 1959 (for short the Rules), an application for dissolution under section 559 of the Act made without giving notice to the Central Government and the Registrar of Companies can be taken as made, before proper notice was actually given to the Central Government and the Registrar of Companies.

2. The first respondent, the Mambad Timber and Estates (P) Limited was private limited company. Company Petition No. 5 of 1969 and Application No. 43 of 1969 were filed by the first respondent company under section 391 of the Act for compromise or for making arrangements with creditors and members and under section 394 for amalgamation with second respondent Ruby Rubber Works, Bangalore, (P) Limited. The company court by order dated 18th June 1969 sanctioned a scheme of amalgamation and by order dated 13th February 1970 sanctioned the dissolution of the first respondent transferor company without winding up under section 394 of the Act. The case of the appellant-applicant is as follows : In the course of the assessment proceedings of the first respondent transferor company for the assessment year 1964-65 to 1969-70 the first respondent, transferor company, concealed income earned to the tune of Rs. 40,00,000/-. It also came to the notice of the applicant that large amounts expended were not accounted also. On the above concealed income the transferor company was liable to be assessed to income-tax and also liable for the levy of penalty. For escaping from the liability to tax and penalty the transferor company thought it fit to be dissolved and amalgamated with the 2nd respondent transferor company, which is also another Private Limited Company controlled by the members of the same family. The steps taken by the transferor company were only a calculated move to deceived the Income-tax Department. Application No. 43 of 1969 and Company Petition No. 5 of 1969 were filed by the transferor company to achieve this end. So the applicant on 3rd February 1972 filed Company Petition No. 1 of 1972 before the company court under section 559 of the Act to declare the dissolution of the transferor company by the order dated 13th February 1970 void. But the company court dismissed the Company Petition No. 1 of 1972 on the ground that the court has no jurisdiction to pass orders under section 559 of the Act beyond a period of two years form the date of the order of dissolution.

3. Sri. P. A. Francis, learned counsel for the appellant contends that the two years period specified under section 559 of the Act is for filing the application and not for the company court to pass orders declaring the dissolution void. Hence, according to the learned counsel, the learned Judge went wrong in dismissing the application holding that the company court has no jurisdiction to pass an order under section 559 of the Act declaring a dissolution as void after two year of the dissolution . The learned counsel relies on a decision of the Chancery Division in Re Scad, Ltd., 1941 (2) All. E.R. 446, wherein Uthwatt, J. said :

'This case raises a short point-namely, whether, upon the true construction of the Companies Act, 1929, section 294, the jurisdiction of the court to made an order under that section can be exercised only if the order is in fact made within two year of the date of dissolution of the company. That undoubtedly is a plausible way of reading the section, but I think it leads to an incorrect result. It appears to me that, if one reads the section against the background on which the courts necessarily act, and has regard to the fact that neither litigant can control the date at which the court makes its order, the period of 2 years referred to is to decided by taking the period between the date of the dissolution of the company and the date when the application under section 294 made. Therefore, I hold that there is jurisdiction to make the order in this case.'

Learned counsel, then refers to Income-tax Officer vs. Vemulappalli and Sons (Private) Ltd. and others 1967 (66) I.T.R. 331 wherein Naraismham, J. of the Andhra Pradesh High Court following the decision of the Chancery Division referred to above held that the petition under section 559(1) of the Act should be filed within a period of two years from the date of dissolution of the company and that the company court could pass an order at any time thereafter. Learned counsel then refers to the following passage at page 228 of Maxwell on the Interpretation of Statutes (12th Edition) :

'Where the language of a statute, in its ordinary meaning and grammatical construction leads to manifest contradiction of the apparent purpose of the enactment or to some inconvenience of absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the legislature could not possibly have intended what its words signify, and that the modifications made are mere corrections of careless language and really give the true meaning. Where the main object and intention of a statute are clear, it must not be reduced to a nullity by the draftsmans unskilfulness or ignorance of the law except in a case of necessity, or the absolute intractability of the language, used. Lord Reid has said that he prefers to see a mistake on the part of the draftsman in doing his revision rather than a deliberate attempt to introduce an irrational rule : the canons of construction are not so rigid as to prevent a realistic solution.'

Learned counsel also refers to the following passage at page 193 of the Interpretation of Statutes by N. S. Bindra (5th Edition) :

'If the words of an Act are clear the court must follow them even though they lead to a manifest absurdity. The court has nothing to do with the question whether the legislature has committed an absurdity. We are bound to construe a section according to the plain meaning of the language used, unless we can find either in the section itself or in any other part of the statute, anything that will either modify or qualify or alter the statutory language even if the result of such construction lead to anomalies or be productive even of absurdity. It matters not in such a case what the consequence may be. When by the use of clear and unequivocal language capable of only one meaning anything is enacted by the legislature, it must be enforced, even though it be absurd or mischievous. It is a well-known rule of construction that a statute should not be construed so as to impute absurdity to the Legislature.'

Learned counsel, then, points out that the jurisdiction under section 559 of the Act is not suo motu jurisdiction but it can be exercised only when an application is filed within the two years period. Then, it was for the company court to pass orders on that application within a reasonable time and for this it has jurisdiction. In fact no fetter in the matter of exercise of jurisdiction can be there and this was never intended by the section. Learned counsel then refers to sections 559 and 560 of the Act and points out that under section 560 of the Act twenty years time is given for making the application. According to the counsel, under both the above the above sections the remedy provided is against dissolution of a company. It cannot be said that under section 560 of the Act there is not effacement of the company. Learned counsel relies on the decision reported in Tirath Singh vs. Bachittar Singh and others A.I.R. 1955 S.C. 830 and contends that under certain circumstances a statute can be construed modifying the meaning of the words. In the above decision, Venkataram Ayyar, J. speaking for the Court has said :

'Whether the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, persumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence.'

Learned counsel also contends that the provision for notice under rule 285 of the Rules is only a of matter of procedure and since notice was subsequently given the learned Judge ought to have held that the application was filed on 3rd February 1972. According to the learned counsel the learned Judge was highly technical as far as this aspect of the matter is concerned.

4. Sri. Mani, J. Meenattoor, the learned counsel for the second respondent, transferee company, raises two preliminary objections. One is that the first respondent, transferor company, is not now in existence, The other objection is that persons affected by an order under section 559 of the Act are the share-holders and directors of the transferor company and as they were not made parties in the application before the company court the same was not maintainable. We will immediately dispose of the preliminary objections raised by Sri. Mani, J. Meenattoor, The first objection was not taken before the company court and hence the same cannot be raised for the first time in this appeal. The second objection is also not tenable. What rule 285 of the Rules insists is that an application under section 558 shall be made upon notice to the Central Government and the Registrar of Companies. As no notice to the share-holders and the directors is insisted by rule 285 of the Rules or by section 599 of the Act, the application in question is maintainable as notice was already given to the Central Government and the Registrar of Companies.

5. Learned counsel, then, points out that the effect of registration of a company under section 34 of the Act is that a distinct and independent person in law comes into existence and Part VII of the Act which deals with winding up shows how the legal person created under section 34 can be dissolved. Learned counsel contends that winding up is a means by which the dissolution of a company is brought about and its assets realised and applied for the payment of its debts, and after satisfaction of debts the balance, if any, is paid to the members. According to the learned counsel the Liquidator is only an agent of the Court and in a winding up proceeding there is an administration of the assets by the court. Learned counsel contends that there is a lot of difference between dissolution of a company under section 394 of the Act and the striking the name off the register of defunct company by the Registrar under section 560 of the Act. Though, no doubt, the effect of both is that the company ceases to exist, in the cease of a dissolution at every stage the Court has power and control while the striking the name of the register is only ministerial act by the Registrar. Learned Counsel, then, refers to section 599 of the Act which reads :

'Section 559. Power of Court to declare dissolution of company void. -

1. Where a company has been dissolved, whether in pursuance of this part or of section 394 or otherwise, the Court may at any time within two years of the date of the dissolution, on application by the liquidator of the company, or by any other person who appears to the Court to be interested, made an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void; and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

2. It shall be the duty of the person on whose application the order was made, within thirty days after the making of the order or such further time as the Court may allow, to file a certified copy of the order with the Registrar who shall register the same; and if such person fails so to do, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.'

According to the learned counsel power is conferred upon the Court subject to a limitation and the limitation is that the order declaring the dissolution as void has to be passed within two years of the date of dissolution. Learned counsel points out that there is a similar provision in section 153 of the Income-tax Act, 1961, which insists that no order of assessment under section 143 or 144 of that Act shall be made after the periods insisted in that section. It is also pointed out that the Act itself provides for limitation. In this connection, reference is made to section 543(2) of the Act. Learned counsel refers to rule 6 of the Rules in support of his contention that only in cases where the Act or the Rules do not provide for limitation the question of the applicability of the provisions of the Limitation Act arises.

6. Learned counsel then points out that wording of section 559 of the Act is so clear that there is no scope for an interpretation that the two years period insisted by the section is only for making the application and not for the company court to pass the order under the section. According to the learned counsel the primary rule of construction is literal construction and in this connection the learned counsel refers to pages 28 and 29 of Maxwell on the Interpretation of Statutes, XII Edition by E. St. J. Langan wherein the learned author has said :

'The first and most elementary rule of construction is that it is to be assumed that the words and phrases of technical legislation are used in their technical meaning if they have acquired one, and otherwise in their ordinary meaning, and the second is that the phrases and sentences are to be construed according to the rules of grammer. The length and detail of modern legislation wrote Lord Evershed, M.R., has undoubtedly reinforced the claim of literal construction as the only safe rule. If there is nothing to modify, alter or qualify the language which the statute contains, it must be construed in the ordinary and natural meaning of the words and sentences. The safer and more correct course of dealing with a question of construction is to take the words themselves and arrive if possible at their meaning without, in the first instance, reference to cases.

The rule of construction is to intend the legislature to have meant what they have actually expressed. The object of all interpretation is to discover the intention of Parliament, but the intention of Parliament must be deduced from the language used. for it is well accepted that the beliefs and assumptions of those who frame Acts of Parliament cannot make the law.

Where the language is plain and admits of but one meaning, the task of interpretation can hardly be said to arise. The decision in this case and Lord Morris of Borth-y-Gest in a revenue case, calls for a full and fair application of particular statutory language to particular facts as found. The desirability or the undesirability of one conclusion as compared with another cannot furnish a guide in reaching a decision. Where, by the use of clear and unequivocal language capable of any one meaning, anything is enacted by the legislature, it must be enforced however harsh or absurd or contrary to common sense the result may be. The interpretation of a statute is not to be collected from any notions which may be entertained by the court as to what is just and expedient : words are not to be construed, contrary to their meaning, as embracing or excluding cases merely because no good reason appears why they should not be embraced or excluded. The duty of the court is to expound the law as it stands, and to leave the remedy (if one be resolved upon) to others.'

Reference is also made to page 33 of Maxwell on the Interpretation of Statutes, XII Edition by P. St. J. Langan, where the learned author had said :

'It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express. Lord Mersey said It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do. We are not entitled said Lord Loreburn, I.C., to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself. A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and the omission appears in consequence to have been unintentional'.

Learned counsel also refers to Craies on Statute Law, VIIth Edition by S.G.G. Edgar, At page 64 in the Chapter on 'construction where the meaning is plain' the learned author has said :

'It is well at the outset to guard against confusion between the meaning and the legal effect of expression used in a statute, said Lindley, L.J. in 1891. The expression construction is applied to a document, at all events as used by English lawyers, includes two things -first, the meaning of the words, and secondly, the effect which is to be given to them. The meaning of the words I take to be a question of fact in all cases, whether we are dealing with a poem or a legal document. The effect of the words is a question of law. Strictly speaking, there is no place for interpretation or construction except where the words of the statute admit of two meanings. As Scott, L.J. said : 'Where the words of an Act of Parliament are clear, there is no room for applying any of the principles of interpretation which are merely presumptions in cases of ambiguity in the statute. The safer and more correct course of dealing with a question of construction said Warrington, L.J. is to take the words themselves and arrive, if possible, at their meaning without, in the first place, reference to cases'.

At page 67 in the same Chapter the learned author has said :

'Even though a court is satisfied that the legislature did not contemplate the consequences of an enactment, a court is bound to give effect to its clear language. Thus Lord Herschell in Cox vs. Hakes said, It is not easy to exaggerate the magnitude of this change (i.e., that discharge from custody by a court of competent jurisdiction does not protect from further proceedings), nevertheless, it must be admitted that, if the language of the legislature, interpreted according to the recognised canons of construction, involves this result, your Lordships must frankly yield to it, even if you should be satisfied that it was not in the contemplation of the legislature.'

Again at pages 70 and 71 the learned author has said.

'In other words, the language of Acts of Parliament, and more especially of modern Acts, must neither be extended beyond its natural and proper limits, in order to supply omissions or defects, nor strained to meet the justice of an individual case. If, said Lord Brougham, in Gwynne vs. Burnell, we depart from the plain and obvious meaning on account of such views (as those pressed in argument on 43 Geo. 3, c. 99), we do not in truth construe the Act, but alter it.'

Learned counsel then contends that in this case it cannot be said there was also even a proper application before the company court before the expiry of the two years period insisted by section 559 of the Act. Not only that the application filed on 4th February 1972 was without proper court fee, but it was not in accordance with rule 285 of the Rules as no notice was given to the Central Government and the Registrar of Companies. Rule 285 of the Rules reads :

'285. Application to declare dissolution void :- An application under section 259 shall be made upon notice to the Central Government and the Registrar of Companies. Where the court declares the dissolution to have been void, the order shall direct that the applicant do file a certified copy of the order with the Registrar of Companies not later than 21 days from the date of the order.'

Learned counsel points out that rule 27 of the Rules insists that notice is to be served not less than 14 days before the date of hearing. In this case company petition No. 1 of 1972 was represented only on 18th February 1972 after paying the deficit court fee, notice was ordered to respondents only on 25th February 1972 and hence notice was actually served on the Central Government and the Registrar of Companies only after that date.

7. Sri P. A. Francis, the learned counsel for the Appellant in replying to the arguments of Sri Mani, J. Meenattor, contends that the Limitation Act, 1963, applies to special enactments also and hence the appellant had 3 years time from 13th February 1970 for filing the application in question as per Article 137 of the Limitation Act, 1963. In support of his contention, the learned counsel relies on R. K. Kajaria vs. C. Engineering (India) Ltd. AIR 1972 Cal. 381 wherein Murari Mohan Dutt, J. has said :

'It is, therefore, clear that the intention of the legislature was that the Limitation Act, 1963, would apply also to applications and petitions under the special laws. Unlike Art. 181, Art. 137 is not restricted only to applications under the Code of Civil Procedure, but it also applies to applications and petitions under other enactments. In my view, therefore, Article 137 applied to applications for preemption by the petitioner under section 8(1) of the West Bengal Land Reforms Act. The petitioner not having been served with a notice under section 5(5) of the Act, or in other words, the petitioner being a non-notified co-sharer, the period of limitation prescribed by section 8(1) was not applicable but, the period of limitation as prescribed by Article 137 was applicable. The petitioner having made the applications within three years of the transfers, the applications were not barred by limitation.'

Learned counsel also refers to S. S. Gadgil vs. Lal and Co., 1964 (53) I.T.R. 231. Learned counsel concludes by saying that the restriction in sec. 559 of the Act can only be for the filing of the application and as the application in question was filed in time the learned Judge went wrong in dismissing the same on the ground that the court has no jurisdiction to pass the order under the section declaring the dissolution void after two years of the date of dissolution.

8. On a consideration of the contentions of the counsel on both sides in the light of the facts and circumstances of the case we come to following conclusions : section 559 of the Act is clear. Under the section 559 of the Act the company court has power to make an order declaring the dissolution of a company void, only at any time within two years of the date of dissolution. It is true that the jurisdiction under the section is not a suo moto one. It is also true that what the applicant can do is to file a proper application and the passing of the order by the court on that application is not a matter within the control of the applicant. But that does not mean that the application need be made with in two years of the date of dissolution and then court has power to make the order even beyond two years of the dissolution. The language of the section is capable of only one meaning and that is that the order under the section must be within two years of the dissolution. There is no necessity to read into the section words which are not there. The words of the section do not admit of two meanings. There is no limits. Here no modification of the language is required to meet the intention of the legislature. As the language of the section in its ordinary meaning does not lead to any manifest contradiction of the apparent purpose of the enactment or to any absurdity, no occasion for a construction which modifies the meaning of the words also arises even if the same is permissible. Even if the appellants contention that as per the section the application need be filed within two years of the date of dissolution of the company is accepted, the appellant cannot succeed in this appeal. As per rule 285 of the Rules, the application under section 559 of the Act has to be made upon notice to the Central Government and the Registrar of Companies. In this case though the application was filed on 3rd February 1972, it was not with notice to the Central Government and the Registrar of Companies. As a matter of fact, notice was given to the Central Government and the Registrar of Companies only after 25th February, 1972. So, it cannot be said that there was a proper application on 13th February, 1972. The dissolution of the company was ordered on 13th February, 1970. As the order under section 559 is to be within two years of the date of dissolution, the contention that under Article 137 of the Limitation Act, 1963, the appellant need only file the application within three years of the date of dissolution cannot be even countenanced. With great respect to the learned Judges who decided Re Scad Ltd., 1941 (2) All England Reports 446, and Income-tax Officer vs. Vemulappalli and Sons (Private) Ltd. 1967 (66) I.T.R. 331, we express our inability to follow the law laid down in those cases. It maybe noted that in Re-Scad Ltd. there is no discussion as such of the question. In Income-tax Officer vs. Vemulappalli & Sons (Private) Ltd. Narasimham, J. has simply followed the above decision of the Chancery Division. Tirath Singh vs. Bachittar Singh, A.I.R. 1955 S.C. 830, R. K. Kajaria vs. C. Engineering (India) Ltd., AIR 1972 Calcutta 381, and S. S. Gadgil vs. Lal & Co., 1964 (53) I.T.R. 231, are not applicable to the facts of this case. The learned Judge has rightly dismissed the application filed by the appellant and the order does not call for any interference.

In the result, the appeal is dismissed. There will be no order as to costs.


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