Income Tax Department can not recover outstanding dues under MPID Act as it is not investor’s claim

Income Tax Department can not recover outstanding  dues under MPID Act as it cannot be treated like the claim of investors

ABCAUS Case Law Citation:
ABCAUS 3208 (2019) (12) AC

In the instant case, the Income Tax Department (ITD/Revenue)had filed a Miscellaneous Application before the designated Sessions Court seeking direction  to  Competent  Authority  appointed under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act) to hand over proceeds received from auction of attached properties of a business Group to the Income Tax Department towards the arrears of its statutory dues.

According to the Revenue there were are outstanding against  the  accused  company and hence it was necessary to hand over proceeds received from auction of attached properties to the Income Tax Department.  

It was urged that all the properties of accused were attached by the Competent Authority  appointed under MPID Act and therefore the claim of the Income Tax Department be registered with the Competent Authority for payment of  it’s  outstanding dues and refund the same.

On the other hand, The State Public Prosecutor urged that the prayer made by Income Tax Department was not tenable  in law.  It was submitted that the applicant Revenue had to proceed in accordance with the provisions of Income Tax Act in order to recover its outstanding  dues  against the accused company and it  could not take recourse to the MPID Act.     

The Special Judge opined that the application filed by the ITD was not tenable  in law. 

The Hon’ble Judge was of the view that The MPID  Act had been enacted  for protecting the interest of the depositors who have suffered fraudulent default committed by Financial Establishments. It does not provide any mechanism for recovery of outstanding dues of statutory bodies like the ITD.   

The Hon’ble Judge further stated that if there were any outstanding dues of the Income Tax Department   payable   by   the accused, the ITD had to take recourse to appropriate remedy under the Income Tax Act. The claim of applicant cannot be treated like the claim of investors.  

The Hon’ble Judge further noted that it was also not the case of the ITD that it had a charge over any property of the accused which was attached by the Competent Authority.

Accordingly the Special Court rejected the application of the ITD.

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