Section 322 — Company in liquidation. Successor to s.178 of the 1961 Act.
Section 322 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) requires every liquidator of a company being wound up, whether under the orders of a court or otherwise, and every person appointed receiver of any assets of a company, to give notice of his appointment to the Assessing Officer entitled to assess the company's income within thirty days of becoming such liquidator.
Sub-section (2) requires the Assessing Officer, after such inquiries or information as he deems fit, to notify the liquidator within three months from receipt of that notice of the amount which in his opinion would be sufficient to provide for tax then payable, or likely thereafter to become payable, by the company.
Sub-section (3) restrains the liquidator: until notified he may not part with any of the company's assets or the properties in his hands without the leave of the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner; on being notified he must set aside an amount equal to the amount notified, and until he does so may not part with them. Sub-section (4) excepts three purposes — payment of the company's tax, payment to secured creditors whose debts have legal priority over Government debts on the date of liquidation, and such costs and expenses of the winding up as those authorities consider reasonable.
Sub-section (5) makes the liquidator personally liable for the tax the company would be liable to pay if he fails to give the notice, fails to set aside the amount, or parts with assets in contravention of sub-section (3). Sub-section (6) limits that liability to the amount notified where an amount has been notified. Sub-section (7) makes the obligations and liabilities joint and several where there is more than one liquidator. Sub-section (8) gives the section effect irrespective of anything to the contrary in any other law, except the provisions of the Insolvency and Bankruptcy Code, 2016.
Once a company goes into liquidation its assets are distributed, and the revenue's claim can be defeated simply by the estate being paid out before the tax is quantified. The section makes the liquidator report his appointment, freezes distribution until an amount is fixed, and requires that amount to be set aside. Personal liability is what makes the requirement effective, and the cap keeps it proportionate where a figure has been stated.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Time to give notice of appointment | Thirty days | After the person has become the liquidator or receiver; notice to the Assessing Officer entitled to assess the company's income | Sub-section (1) |
| Time for the Assessing Officer to notify the amount | Three months | From the date on which he receives notice of the appointment | Sub-section (2) |
| Ceiling on the liquidator's personal liability | The amount notified under sub-section (2) | Applies only where an amount has been notified; otherwise the liability is for the tax the company would be liable to pay | Sub-section (6) |
Two clocks run from appointment: thirty days for the liquidator's notice, three months from receipt of it for the Assessing Officer's figure. Between appointment and notification the liquidator is frozen and needs leave to part with anything; after notification he may distribute only what remains once the notified amount is set aside, and only for the sub-section (4) purposes. The consequence of getting it wrong is personal, and its size depends on whether an amount was ever notified — so a liquidator who never gave the sub-section (1) notice, and therefore triggered no notification, has no cap to rely on. The override in sub-section (8) is wide but yields to the Insolvency and Bankruptcy Code, 2016.
A liquidator appointed on 10 April gives notice on 5 May, inside the thirty days, and the Assessing Officer notifies Rs 2 crore within three months. He must set that Rs 2 crore aside before parting with anything else; if he distributes the estate and leaves nothing, he is personally liable, but capped at the Rs 2 crore notified. Had he never given the notice, no amount would have been notified and no cap would apply.
At the start of a winding up or receivership: the sub-section (1) notice to the Assessing Officer, his sub-section (2) notification of the amount to be set aside, and any application to the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner for leave under sub-section (3)(a) or approval of winding-up costs under sub-section (4)(c).
shall, within thirty days after he has become such liquidator, give notice of his appointment as such to the Assessing Officer who is entitled to assess the income of the company
The provisions of this section shall have effect irrespective of anything to the contrary contained in any other law in force, except the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)
See the full 1961 to 2025 concordance.
See the notifications index.