1. The facts leading to these applications may be shortly stated as follows:
The Hindu Bank Karur Ltd., Karur, the first respondent, went into voluntary liquidation and was taken up for winding up on October 28, 1963. There were certain proceedings under the Income-tax Act and the company was assessed for the assessment year 1963-64, a sum of Rs. 10,853.55 by way of income-tax and super-tax. The said assessment was appealed against, but without success. Ultimately, by the order in T.C. No. 6 of 1973 [Hindu Bank Karur Ltd. v. Addl. Commissioner of Income-tax : 103ITR553(Mad) ], this assessment became conclusive when the said tax case was dismissed on April 25, 1975.
On August 18, 1964, the liquidator of the company filed in the office of the Registrar of Companies, a statement as required under the provisions of Section 555(3) of the Companies Act, 1956 (hereinafter referred to as the ' said Act '), stating that it appeared that a sum of Rs. 20,542.50 was payable to one L. A. Lakshmanan Chettiar as surplus assets refundable to him in respect of 250 shares held by him in the bank. It also appears that the liquidator has deposited the sum as a part of Rs. 75,730.74 as amounts not claimed and unpaid to the contributories. On November 30, 1973, the Regional Director of the Company Law Board, the third respondent, passed an order sanctioning the payment of Rs. 20,542.50 to the 4th respondent. Claiming the sum of Rs. 20,542.50 in deposit, in the company's liquidation account, as an asset of the company, the applicant (The Commissioner of Income-tax (Recovery), Madras) seeks the payment of Rs. 10,853.55.
It is further claimed that no amount could be earmarked for a contributory and, as such, the claim of the income-tax department has to be satisfied first before the payment could be claimed by the 4th respondent.
Company Application No. 461 of 1973 is for such payment out. Application No. 462 of 1973 is for injunction restraining the third respondentfrom sanctioning the payment. Application No. 421 of 1974 is for a declaration that the order of the third respondent, dated November 30, 1973, isa nullity.
The first respondent contends that the amount of Rs. 20,542.50, lying to the credit of the ' company's liquidation account' cannot be applied in satisfaction of unpaid tax liability.
The counter of the second respondent admits the liquidation and alsothe filing of the statement by the liquidator. It is further alleged that inreply to an enquiry by the Regional Director of the Company Law Board(the third respondent) about the person to whom the amount is payable, thesecond respondent sent a report on March 23, 1972, enclosing a copy of therelevant portion of the statement of the liquidator. On December 1, 1973,the sanction order dated November 30, 1973, was received. But, since acopy of the judge's summons was received, the amount was not actuallypaid.
2. The third respondent states as follows:
' Between 20th of January, 1964, and 20th of July, 1964, the liquidator distributed a sum of Rs. 2,52,015.39, being the assets refundable to the contributories. Later, 5 contributories have claimed and collected a sum of Rs. 18,241-74 between the dates May 22, 1965, and June 13, 1969. The 4th respondent's application was a singular one. Once the amount was declared as an asset refundable to the contributories, and the amount having been deposited into the company's liquidation account on 20th of July, 1964, it ceases to belong to the company as it is a part of the moneys already distributed to the contributories as surplus assets.'
3. The third respondent further states:
' I submit that simply because this sum is lying in the 'company's liquidation account' in the Reserve Bank of India, it cannot be claimed as still being an asset of the company and the claim of the petitioner in this regard in paragraphs 4 and 5 of the affidavit is contrary to law and is untenable in law. The allegations in the affidavit that the amount could be disbursed only on receipt of a certificate from the liquidator and that, in, the absence of the certificate, this money will be available with the company is untenable. There is no statutory requirement under Section 555 of the Companies Act that the certificate is a condition precedent for making the payment. The issue of the certificate by the liquidator is only intended administratively to ensure that the same had not already been paid to the knowledge of the liquidator so that there may not be any wrong payment. It is a matter of administrative prudence only. Any claim under Section 555(7)(b) of the Companies Act, 1956, is determined on the basis of evidence produced by the claimants to prove their title and on the basis of statements filed by the liquidator with the Registrar of Companies under Section 555(3) of the Companies Act, 1956. I further submit that under Section 555(7)(b) of the Companies Act, 1956, a person claiming the amount instead of applying to the court may apply to the Central Government for payment of the money not claimed earlier when it was distributed by the liquidator.'
4. The 4th respondent claims the amount under a will of one Lakshmanan Chettiar. He states in his counter as follows :
' On November 21, 1970, the 2nd respondent sent another reminder to the liquidator of the 1st respondent-bank that settlement of my claims is pending and the liquidator may furnish the necessary certificate for payment out from the company's liquidation account. On November 25, 1970, the liquidator sent a reply stating that the appeal proceedings in respect of income-tax relating to the bank was still pending and hence he was unable to comply with the direction. After several reminders, the 3rd respondent sent a communication to me dated August 10, 1971,enclosing a copy of the letter written by the liquidator of the 1st respondent-bank to the effect that the appeal was dismissed by the Income-tax Appellate Tribunal and the Appellate Tribunal itself referred the matter by way of further reference to the High Court on July 24, 1971, and until matters reached a finality in the High Court, the certificate called for cannot be furnished.
On October 20, 1971, I wrote to the 2nd respondent that since the liquidator was not in a position to issue the certificate at least 80% of the value of the shares may be paid over to me. On October 28, 1971, the 2nd respondent sent a reply stating that unless the necessary certificate was issued by the liquidator no payment could be made and the liquidator in his communication dated September 27, 1971, stated that the income-tax proceedings have not reached a finality. '
5. Learned counsel for the income-tax department makes two submissions : (1) that though the amount was deposited in the company's liquidation account and a statement was filed, as required under Section 555(3) of the Act by the liquidator, it does not cease to be an asset of the company, since it is one amalgam and cannot be earmarked for such payment and even by chance the payment had been made ignoring the claim of the income-tax department, the contributory has to repay it. In support of this stand, the learned counsel relies on Spence v. Coleman  2 KB 199 , Hari Prasad Jayantilal and Co. v. V.S. Gupta, Income-tax Officer : 59ITR794(SC) , In re Aidall Ltd.  Ch 323;  18 TC 617 and Subbarama Naidu v. Subbarayudu  34 Comp Cas 81 (AP).
6. Even assuming that the amount does not belong to the company, in so far as the requirement of Section 555(7)(b) has not been complied with, the order of the third respondent, dated 30th of November, 1973, is liable to be set aside.
7. In meeting these submissions, the learned counsel appearing for the Registrar of Companies would state that once the income-tax department did not claim preferentially, as it could have done under Section 530 of the Act, it took a calculated risk and it cannot now come forward and ask the contributory to repay, especially when the statement filed under Section 553(3) does not show any other claim.
8. The stand of the third respondent, the Regional Director of the Company Law Board, is that he went by the statement filed by the liquidator and he was otherwise satisfied even without a certificate that the 4th respondent was entitled to the same as the legatee of the original contributory, and, therefore, the order was passed in favour of the 4th respondent on 30th of November, 1973, and no exception could be taken to the same. It is not correct to contend that these amounts are still the assets of the company since in the statement filed under Section 555(3)it has been specifically earmarked for that contributory. In the absence of any specific claim by the income-tax department, it would be open to the Company Law Board to make an order sanctioning the payment.
9. I will now take up the first question whether the amount of Rs. 20,542.50 is still an asset of the company. The relevant sections may briefly be referred to.
10. Section 511 of the Act speaks of the distribution of all the property of the company. Section 512(3) requires the liquidator to pay the dues of the company and to adjust the rights of the contributories among themselves. Section 555 requires the liquidator to deposit the unclaimed dividends and undistributed assets in the company's liquidation account. Section 555(3) and (4) read as follows :
' 555. (3) The liquidator shall, when making any payment referred to in Sub-sections (1) and (2), furnish to such officer as the Central Government may appoint in this behalf, a statement in the prescribed form, setting forth, in respect of all sums included in such payment, the nature of the sums, the names and last known addresses of the persons entitled to participate therein, the amount to which each is entitled and the nature of his claim thereto, and such other particulars as may be prescribed.
(4) The liquidator shall be entitled to a receipt from the Reserve Bank of India for any money paid to it under Sub-sections (1) and (2); and such receipt shall be an effectual discharge of the liquidator in respect thereof.'
11. The powers of the third respondent to sanction the payment is laid down under Section 555(7)(b), which is extracted below :
' Any person claiming as aforesaid may, instead of applying to the court, apply to the Central Government for an order for payment of the money claimed, and the Central Government may, if satisfied whether on a certificate by the liquidator or the official liquidator or otherwise, that such person is entitled to the whole or any part of the money claimed and that no application made in pursuance of clause (a) is pending in the court, make an order for the payment to that person of the sum due to him, after taking such security from him as it may think fit.'
12. Rules 3 and 9 of the Company's Liquidation Account Rules, 1965, lay down as follows :
'3. Head of account.--All moneys representing unpaid dividends or undistributed assets in the hands or under the control of the liquidator which, under Sub-sections (1) and (2) of Section 555 of the Act, are required to be paid into public account of India, shall be paid into the Reserve Bank within a period of fourteen days from the date on which the moneys became so due to the credit of the company's liquidation account (hereinafter referredto as the said account) under the major head ' Civil Deposits' in section 'T --Deposits and advances--Part II--Deposits not bearing interest--(c)--other Deposit Accounts-- Departmental and Judicial Deposits'. The said moneys shall be paid into an office of the Reserve Bank situated in the State in which the registered office of the company in liquidation is situated:
Provided that in respect of the amounts paid under Sub-section (2) of Section 17 of the Deposit Insurance Corporation Act, 1961 (XLVII of 1961), and any provision for unpaid amounts made under Section 20 of that Act by the Deposit Insurance Corporation, the liquidator shall make payment to the Corporation as required by clause (a) of Sub-section (2) of Section 21 of the Act.
9. Claims for payment through Central Government.--(1) Any person applying to the Central Government under clause (b) of Sub-section (7) of Section 555 of the Act shall make such application under his own signature or through a power of attorney-holder, giving details of the amount and name of the company from which the amount is due to him.
(2) Every such application shall be accompanied by a treasury chalan in token of payment of fees chargeable for the amount of the claims in terms of the Companies (Fees on Applications) Rules, 1961. Such fee shall be deposited into the Government Treasury under the head 'XXI--Miscellaneous Department--Miscellaneous--Registration of Joint Stock Companies'.
(3) The application received by the Central Government shall be sent to the Registrar of Companies concerned, who shall verify from his records and certify whether the claimant is entitled to the money claimed by him and whether according to the records with the Registrar, no application from the claimant is pending in any court for payment of the money.
(4) The Central Government may direct the Registrar of Companies concerned to obtain from the liquidator of the company, in case the company has not been finally wound up, a report certifying whether the claimant is or is not entitled to the whole or any part of the amount claimed, and on receipt of a communication from the Registrar in that regard, the liquidator shall submit a report to the Central Government through the Registrar specifying the amount, if any, to which the claimant is entitled.
(5) Where the claimant's title to the aforesaid money has been established to the satisfaction of the Central Government, that Government shall direct the claimant (not being the Central Government itself, a State Government, a Government company within the meaning of Section 617 of the Act, or a local authority) to execute an indemmity bond with or without surety in the form set out in annexure II or as near thereto as may be on a non-judicial stamp paper of the value payable in the State of execution or acceptance.
(6) On receipt of the report referred to in Sub-rule (4) and the indemnity bond, if any, duly executed by the claimant, the Central Government shall issue a payment order sanctioning the payment of the amount due to the climant.
(7) Notwithstanding anything in Sub-rule (4) or Sub-rule (5), the Central Government may, where the amount claimed is not more than five hundred rupees and the claimant establishes his title to the money to its satisfaction, issue an order sanctioning the payment of the amount due to the claimant.
(8) The climant, on receipt of the order under Sub-rule (6) or Sub-rule (7), shall obtain payment of the amount from the Registrar of Companies concerned or such other Registrar of Companies as may be specified in that order after delivering to him a stamped receipt bearing the signature of two witnesses.
(9) The Registrar of Companies concerned shall in the accounts maintained by him, cause a note to be made therein of any payment having been made.'
13. From the above sections, it will follow that where there are unclaimed dividends and undistributed assets, the liquidator will have to deposit them into the company's liquidation account. But the question is, when such deposit is made and statement is filed, as required under Section 555(3), does it cease to be an asset of the company It is, in this connection, the case law will have to be examined.
14. In Spence v. Coleman  2 KB 199 the Court of Appeal, while considering the proportion of the surplus assets of a company in liquidation belonging to a shareholder who could not be found was, in compliance with Sub-section (3) of Section 15 of the Companies (Winding-up) Act, 1890, paid by the liquidator, to the 'company's liquidation account' with the Bank of England, held that the sum so paid in was not a 'debt' due to the shareholder, and that it could not be attached by his judgment creditor by means of a garnishee order under Order XLV, Rule 1, of the Rules of the Supreme Court.
15. In re Aidall Ltd,  Ch 323 is very much relied on, because in that case, a shareholder received moneys from the liquidator, upon a distribution of surplus assets with notice that the liquidator had not provided for payment of a debt and, therefore, he was directed to repay the amount. Under those circumstances, it was held by Maugham J. and the Court of Appeal: (1) that A.G.W. had properly been put upon the list of contri-butories, notwithstanding the definition of 'contributory' in Section 124 of the Act of 1908; (2) that A.G.W., having received moneys from the liquidator upon a distribution of surplus assets of the company in liquidation, with notice that the liquidator had not provided for payment of adebt due by the company, ought to be ordered to pay the amount of the debt to the credit of the liquidator's account at the Bank of England.
16. In Hari Prasad Jayantilal and Co. v. V.S. Gupta, Income-tax Officer, : 59ITR794(SC) the Supreme Court has held as below :
' On the passing of a special resolution by the company that it be wound up voluntarily under the Companies Act, 1956 (1 of 1956), the company does not stand dissolved. That is so expressly provided by Section 487 of the Companies Act. A company which has resolved to be voluntarily wound, up may be dissolved in the manner provided by Section 497(5): till then the company has corporate existence and corporate powers. The property of the company does not vest in the liquidator : it continues to remain vested in the company. On the appointment of a liquidator, all the powers of the board of directors and of the managing or whole-time directors, managing agents, secretaries and treasurers cease (section 491) and the liquidator may exercise the powers mentioned in Section 512, including the power to do such things as may be necessary for winding up the affairs of the company and distributing its assets.'
17. Reliance is sought to be placed on Subbarama Naidu v. V. Subbarayudu  34 Comp Cas 81 for the contention that merely because there is an order of payment in favour of the 4th respondent, he cannot claim the amount to be his, since it was held in that case as follows :
' The shareholders took the assets of the company subject to payment of debts due by it. Indisputably, the company was liable to pay the decree debt and the shareholders could not evade this liability by going into voluntary liquidation and distributing the assets thereof amongst themselves.'
18. A reading of the above decisions, particularly Hari Prasad JayantUal and Co. v. Gupta, Income-tax Officer : 59ITR794(SC) makes it clear that unclaimed dividends undoubtedly constitute the asset of the company. No doubt, as per Rule 9 of the Company's Liquidation Account Rules, 1965, it has to be deposited into the company's liquidation account. But, while making the payment into the public account, the liquidator has also to file a statement in the prescribed form setting forth in respect of the sums included in such payment, the nature of the sum and the persons entitled to participate therein, the amount to which he is entitled and the nature of the claim thereto. This is the enabling provision by which the officer appointed under the Central Government can come to a conclusion about the claims and the nature of the claims.
19. On a careful consideration, I am of the view that the respective stands of the applicant and respondents are extreme. Merely because the statement is filed showing the nature of the claim and the claimant is entitled to the amount, it does not cease to be an asset of the company and is earmarked for the contributory. It can only mean that the contributoryis prima facie entitled to the said sum and that entitlement can be defeated by the preferential claims like the arrears of revenue to the State. Equally, it cannot be held that the moment moneys are deposited into the Reserve Bank of India, the assets would cease to be that of the company. It still retains that character till the payment is made to the contributory. In this light, the above cited decisions are of great assistance to the applicant.
20. The more important question in this case is whether the third respondent had acted in conformity with the provisions of Section 555(7)(b) of the Act, which casts an onerous duty on him. It is open to him to sanction the payment without any difficulty, if he is armed with the certificate. But, in the instant case, from the counter of the 4th respondent, it would appear that the third respondent sent a communication on August 10, 1971, about the pendency of the income-tax proceedings, which, at that time, was pending before the Income-tax Appellate Tribunal, which had referred the matter to the High Court on July 24, 1971, and that the certificate cannot be issued. This prompted the 4th respondent to write to the second respondent to pay at least 80 per cent, of the shares. The second respondent sent a reply stating that unless necessary certificates were issued by the liquidator, no payment could be made.
21. From the above, it is obvious that both the second and third respondents were aware of the proceedings relating to the payment of income-tax. That stood in the way of issuing of the certificate.
22. In the light of this, to get over Section 555(7)(b) of the Act, the third respondent was obliged to take the extreme stand that there is no statutory requirement under Section 555 and the certificate is not a condition precedent. According to him, it is a matter of administrative prudence. No doubt, Section 555(7)(b) says that the Central Government may order the payment, ' if satisfied with the certificate issued by the liquidator or official liquidator, or otherwise......' As seen from the counter-affidavit of the4th respondent, if the third respondent had knowledge of the income-tax proceedings, which proceedings constituted an impediment for the issue of the certificate, how was the order sanctioning the payment made on November 30, 1973 How was the third respondent satisfied otherwise, in the absence of a certificate Has he been prudent enough administratively These questions remain unanswered, since there is absolutely no material on which he came to be satisfied, in the absence of a certificate. The third respondent as well as the second respondent were aware of the income-tax proceedings, as seen from the correspondence that passed between the parties. They pleaded inability to pay to the 4th respondent, in the absence of the certificate. But, how then this volie face The present stand of the third respondent is only an attempt to bypass the statutory obligation imposed on him under Section 555(7)(b).
23. Thus, I have no other option but to set aside the order of the third respondent, dated November 30, 1973. Accordingly, Application No. 421 of 1974 will stand allowed. Consequently, the 4th respondent will be entitled only to the balance, after meeting the income-tax liability of the company, to the tune of Rs. 10,853.55.
24. In the above terms Applications Nos. 461 and 462 of 1973 are ordered. In the peculiar circumstances of these applications, I make no order as to costs.