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CS Professional · Insolvency and Bankruptcy - Law and Practice · Winding-Up by Tribunal

A winding-up petition against Deccan Steels Ltd was presented on 3 August. On 20 August, (i) a private creditor attached the company's machinery under a civil decree without leave of the Tribunal, and (ii) the tax department attached a bank account to recover income tax dues. The company is being wound up by the Tribunal. Which is correct?

The private creditor's attachment is void, but the tax attachment is not affected. Section 335(1) voids post-commencement attachments made without Tribunal leave, while section 335(2) excludes proceedings for recovery of tax, impost or Government dues from that rule.

  1. ABoth attachments are void
  2. BBoth attachments are valid as the winding-up order was not yet passed
  3. CAttachment (i) is void; section 335 does not apply to attachment (ii) for Government tax duesCorrect
  4. DAttachment (ii) is void; attachment (i) is valid

Explanation

Section 335(1) voids attachments or executions put in force without Tribunal leave after commencement. Section 335(2) exempts proceedings for recovery of any tax or impost or dues payable to the Government. So the private creditor's attachment is void while the tax recovery stands.

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