The Official Liquidator Of M/S Testeels LTD (In Liqn) vs. Na

Held

The Court permitted the Official Liquidator to make the payment of Rs. 8,42,400/- to M/s. Shubham Protection Force for the period November 2018 to October 2019 from the Common Pool Account, with the understanding that it would be reimbursed on a priority basis from the sale proceeds of the company's property. The Court also permitted the Official Liquidator to pay regular monthly amounts of Rs. 70,200/- plus applicable CGST and SGST to the security agency from November 2019 onwards. The reasoning was based on the Official Liquidator's report and the previous order of the Court dated 10.01.2018, which allowed for monthly payments inclusive of taxes. The Court acknowledged the security agency's request to include applicable taxes in future payments, as they had previously borne the GST burden. The ratio decidendi is that expenses incurred for safeguarding the assets of a company in liquidation, including security services with applicable taxes, are permissible and should be facilitated by the Official Liquidator from available funds, with priority for reimbursement upon realization of assets.

Facts

The Official Liquidator of M/s. Testeels Ltd. (in liquidation) filed a report seeking permission to make a payment of Rs. 8,42,400/- to M/s. Shubham Protection Force, a security agency, for safeguarding the company's assets from November 2018 to October 2019. The payment was to be made from the Common Pool Account, with reimbursement from sale proceeds of the company's property on a priority basis. The Official Liquidator also sought permission to pay regular monthly amounts of Rs. 70,200/- plus applicable CGST & SGST from November 2019 onwards. The company's account lacked sufficient funds for the arrears. The security agency had previously borne the burden of GST, as their bills did not have a separate provision for applicable taxes, and requested future payments to include CGST and SGST.

Key Issues

1. Whether the Official Liquidator should be permitted to make a payment of Rs. 8,42,400/- to M/s. Shubham Protection Force for security services rendered from November 2018 to October 2019, from the Common Pool Account, with reimbursement priority from sale proceeds of the company's assets. 2. Whether the Official Liquidator should be permitted to pay regular monthly amounts of Rs. 70,200/- plus applicable CGST & SGST to M/s. Shubham Protection Force from November 2019 onwards. Petitioner's Arguments: The Official Liquidator argued that the company in liquidation's account lacked sufficient funds to cover the outstanding payment of Rs. 8,42,400/- to the security agency for the period November 2018 to October 2019. The agency had previously absorbed the GST burden due to a lack of separate tax provisions in their bills. The Official Liquidator sought permission to make future payments inclusive of applicable CGST and SGST as requested by the agency. The Official Liquidator relied on a previous order dated 10.01.2018 in Official Liquidator’s Report No.130 of 2017, which permitted monthly payments of Rs. 70,200/- inclusive of all taxes. Revenue's Arguments: No arguments were recorded for the revenue or state.