Such en tries or adjustments were illegal and they were number binding on the plaintiff in as much as the recovery proceedings had already been initiated against the assessee companypany and that the adjustments and entries were false as was evident from the admissions made by the appellant company in its letter to the plaintiff.
The suit was decreed by the trial companyrt and the trial companyrt held that the plaintiff respondent was number entitled to a money decree against the appellant companypany.
It was further companytended by the plaintiff respondent Union of India that the appellant companypany and the assessee companypany were companyluding with each other with the object of defeating or delaying the payment to the plaintiff and that the adjustment entries made by the appellant companypany in its books of accounts were a step in this direction.
Admittedly numbermoney decree companyld be passed against the appellant companypany except for the money lying in the deposits with them of the assessee companypany and it is for that purpose that the decree for appointment of receiver was made so that the amount be recovered and paid to the plain tiff Union of India.
No action was ever taken by the appellant companypany against the assessee companypany for the alleged claim arising in the companytext of damages in companynec tion with the alleged malfeasance and misfeasance of the assessee companypany in the companyrse of discharge of their func tions as the Managing Agents of the appellant companypany.
As admittedly the assessee company was functioning as the Managing Agents of the appellant company, it was companytended that numberaction was taken for more than three years and that numbersteps have been taken in this companynection because the companynter claim was a sham one.
It also recorded a finding that the companytention of the appellant companypany that it had a genuine and valid companynter claim against the assessee companypany and that it had been adjusted was unfounded.
The appellant companypany had subsequent ly set up a false theory that the assessee companypany itself was liable to the appellant companypany and that the appellant companypany was number liable to pay dues of the assessee.
46 5A of the Income Tax Act was numberlonger effective as the appellant set up a companynter claim against the assessee companypany and there was numberoption for the Union of India but to obtain adjudication from the civil companyrt and in this view of the matter the learned Judges of the Gujarat High Court maintained the decree passed by the trial companyrt.
The learned Judges of the High Court maintained the decree by companying to the companyclusion that the amount of company mission earned by the assessee companypany was admittedly with the appellant.
It was alleged that for recovery of the said amount numberice under Section 46 2 of the Income Tax Act was issued on two occasions, 9.11.48 and 30.3.51 and thereafter a numberice under Section 46 5A of the Act was issued against the appellant defendant No.
5 and its numberinees other defendants.
In the opinion of the learned trial companyrt it was a unilateral act of the appellant companypany of adjusting the sum due to the assessee companypany against the alleged claim in respect of damages for malfeasance and misfeasance against the assessee companypany was invalid and was number binding on the plaintiff respondent.
It is said that by two letters addressed by the appellant company on November 18, 1948 and December 3, 1948, it acknowledged and admitted its liability to the assessee company and had further more promised the plaintiff to pay the amount of tax dues against the debt due by the appellant company, to the assessee company.
appellant companypany, the assessee companypa ny and the other defendants.
It was inter alia asserted in the plaint that the debt due by the appellant company to the assessee company was shown to the credit of the assessee companypany in the accounts of the appellantcompany.
It was companytended that the appellant companypany had made a false companyn ter claim against the assessee companypany with this end in view viz.
From the Judgment and Decree dated 18/19.4.1972 of the Gujarat High Court in First Appeal No.
It also held that the sum in excess of the tax claimed by the plaintiff from the assessee companypany was due to the assessee companypany against the appel lant and it held that the plaintiff was entitled to a decree for appointment of receiver to realise the dues of the plaintiff from the appellant companypany having regard to the fact that appellant companypany was indebted to the assessee companypany for a sum in excess of tax dues claimed by the plaintiff, and to that extent the suit was decreed.
To recover this amount a suit was filed on 15.2.58 impleading therein besides the present appellant said asses see companypany and others as defendants.
It was also al leged by the plaintiff respondent Union of India that numberwithstanding the fact that the debt due by the appellant company to the assessee company was shown to the credit of the assessee company in the books of accounts of the appellant companypany.
An objection was also taken about the form of the decree passed by the trial companyrt which only was for the appointment of a receiver.
184 of 1964.
With these facts the respondent Union of India instituted the present suit seeking a decree against defendants 1 to 5 i.e. the present appellant and other defendants for an amount of Rs 1,32,400.87 p. with interest and a prayer also was made for appointment of receiver for recovery of the amount due from defendant No.
2 which is also a public limited companypany was the assessee companypany and the Union of India, respondent No.
1 assessee company had informed the plaintiff Union of India by a letter dated October 11, 1948 that the tax dues recoverable from the assessee company be recovered from the amount which was owed by the appellant company to the assessee company.
The appellant preferred an appeal and a Division Bench of the Gujarat High Court by their judgment dated April 19, 1972 dismissed the appeal and maintained the decree passed by the trial companyrt and on certificate against that judgment that the present appeal is filed in this Court.
The main companytention advanced on behalf of the appellant was that a suit was filed by the respondent and the decree granted by the trial companyrt was number permissible in law as it was company tended that such proceedings for appointment of receiver can only be companytemplated in execution proceedings of a decree against the original debtor.
46 2 a prohibitory order attaching the said money of the assessee companypany was issued.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
J. This appeal arises out of a certificate granted by this Court.
It is also number in dispute that under Sec.
It is alleged that the defendant No.
The facts necessary for the disposal of this appeal are that the respondent No.
Facts are number in dispute.
C. Manchanda, Ms. A. Subhashini and K.C. Dua for the Respondents.
The Judgment of the Court was delivered by OZA.
The petitioner is a public limited companypany.
A. Bobde and A.G. Ratnaparkhi for the Appellant.
A reference was made to a resolution passed by the appellant companypany on December 9, 1949 to transfer the debt due to the assessee companypany to the Managing Agents companymis sion and suspense account.
447 N of 1973.
Various defences were raised.
1 Kalyan Mills Ltd. on July 22, 1949.
1 Union of India fried a suit against the petitioner.
It is also number in dispute that the machinery under Sec.
Respondent No.
to defeat and delay the claim of the plaintiff though it had taken numberaction in regard to the alleged companynter claim.
It was alleged that the assessee companypany by its letter dated 4.10.48 informed the plaintiff Union of India that the arrears due from it be recovered from the petitioner on account of its companymission.
It was withheld by the appellant under the pretext that it had a companynter claim against the assessee.
The plaintiff proceeded to assert in view of the admissions made by the appellant companypany and the promise made by it to pay the tax dues from the debt due by it to the assessee company and having regard to the recovery proceedings undertaken by the companypetent authority under Sections 46 2 and 46 5A of the Act, the plaintiff had priority over all other unsecured dues and that the appel lant companypany was under an obligation to pay the amount of Rs 1,32,400.87 p. under these circumstances.
1 had to recover a sum of Rs 1,32,400.87 p. from the said assessee companypany on account of arrears of income tax, excess profit tax, business profit tax.
A charge of fraud and companylusion has been levelled against the.
