Case Note & Summary
The petitioner, Hindustan Dorr Oliver Ltd., owner of commercial premises, filed a winding-up petition under Sections 433(e) and 434 of the Companies Act, 1956 against the respondent, Jet Airways (India) Ltd., on the ground that the respondent failed to pay service tax on the rent. The court noted that the issue of service tax on renting of immovable property is a disputed legal matter, as the constitutional validity of the relevant provisions (sub-clause (zzzz) of clause (105) of section 65 read with section 66 of the Finance Act, 1994) is pending before the High Court in the case of Retailers Association of India (RAI) vs. Union of India & Ors. The court observed that the service tax liability is not a clear and undisputed debt, and therefore, the winding-up petition is not maintainable. The petition was dismissed, but the petitioner was granted liberty to pursue other civil remedies available in law.
Headnote
A) Company Law - Winding-Up - Sections 433(e) and 434 Companies Act, 1956 - Service Tax Liability - The petitioner-landlord sought winding-up of the respondent-tenant company for non-payment of service tax on rent. The court held that the service tax liability on renting of immovable property is a disputed legal issue, as its constitutional validity is pending before the High Court. Therefore, the alleged debt is not a clear and undisputed debt, and the winding-up petition is not maintainable. The petition was dismissed with liberty to the petitioner to pursue civil remedies. (Paras 1-4)
Issue of Consideration
Whether non-payment of service tax on rent by a tenant constitutes a debt under Section 433(e) of the Companies Act, 1956, entitling the landlord to file a winding-up petition against the tenant company.
Final Decision
The winding-up petition is dismissed. The petitioner is at liberty to pursue other civil remedies available in law.
Law Points
- Winding-up petition under Sections 433(e) and 434 of Companies Act
- 1956 requires a clear and undisputed debt
- service tax on renting of immovable property is a disputed liability and cannot form basis for winding-up
- constitutional validity of service tax on renting is pending before High Court
- petition dismissed with liberty to pursue civil remedies.
Case Details
2012 LawText (BOM) (11) 51
Company Petition No. 350 of 2012
Mr. Niranjan Vaghela i/by M/s. Pandya & Co. for the Petitioners; Mr. E.P. Bharucha, Sr. Counsel a/with Ms. Sheetal Sabnis, Ms. I. Sen i/by Gagrats for the Respondents
Hindustan Dorr Oliver Ltd.
Jet Airways (India) Limited
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Winding-up petition under Sections 433(e) and 434 of the Companies Act, 1956
Remedy Sought
Winding-up of the respondent company for non-payment of service tax on rent
Filing Reason
Non-payment of service tax liability by the respondent tenant
Issues
Whether non-payment of service tax on rent constitutes a debt under Section 433(e) of the Companies Act, 1956
Whether the service tax liability is a clear and undisputed debt for the purpose of winding-up
Submissions/Arguments
Petitioner argued that the respondent failed to pay service tax on rent, which is a debt under the Companies Act.
Respondent contended that the service tax liability is disputed and its constitutional validity is pending before the High Court.
Ratio Decidendi
A winding-up petition under Sections 433(e) and 434 of the Companies Act, 1956 requires a clear and undisputed debt. The service tax liability on renting of immovable property is a disputed legal issue, as its constitutional validity is pending before the High Court. Therefore, the alleged debt is not a clear and undisputed debt, and the winding-up petition is not maintainable.
Judgment Excerpts
The Petitioner, the owner of the commercial premises which were let out to the Respondent Company, the Licensor, has invoked Sections 433(e) & 434 of the Companies Act, 1956 basically on the ground that the Respondent Company not cleared the service tax liability.
We have dealt with the aspect of service tax on renting in the case of Retailers Association of India (RAI) vs. Union of India & Ors., 2011 (5) Mh.L.J. 660, where a Notification was issued on 22nd May, 2007 which was followed by a circular dated 4th January, 2008 of the Ministry of Finance in the Union Government.
Procedural History
The petition was filed in 2012 and heard finally by consent on 1st November 2012.
Acts & Sections
- Companies Act, 1956: 433(e), 434
- Finance Act, 1994: 65(105)(zzzz), 66
