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

Kaveri Foods Ltd is being wound up by the Tribunal. A State tax authority starts proceedings to recover tax dues from the company's assets without seeking the Tribunal's leave. Under Section 335, what is the position?

Section 335 does not apply. Its sub-section (2) provides that the voiding of attachments, executions and sales without the Tribunal's leave does not cover proceedings for recovery of any tax or impost or dues payable to the Government, so the tax proceedings are not void.

  1. AThe proceedings are void because no leave was obtained
  2. BThe proceedings are void unless the tax is below the company's reserves
  3. CThe proceedings can be validly continued only after the winding up order is set aside
  4. DSection 335 does not apply to proceedings for recovery of any tax or impost or dues payable to the GovernmentCorrect

Explanation

Section 335(1) voids attachments, executions and sales without leave, but Section 335(2) says nothing in the section applies to proceedings for recovery of any tax or impost or any dues payable to the Government. The tax recovery is therefore not void for lack of leave.

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