2005 (1) TMI 411 - HC - Companies Law

Summary

Issues:
1. Recovery notice issued for a decree amount.
2. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985.
3. Interpretation of Section 22 of the Act regarding recovery proceedings.
4. Repeal of the Act and its impact on ongoing cases.

Analysis:

1. The appellant filed a writ petition seeking to quash a revenue recovery notice for a decree amount. The suit went through various stages of litigation, including appeals and second appeals, ultimately resulting in a final decree. The appellant argued that being a sick industrial unit under the Sick Industrial Companies (Special Provisions) Act, 1985, the State was not entitled to recover the amount.

2. The appellant contended that as per the Act, when an enquiry is pending for revival of the unit, no winding-up proceedings can be initiated without the consent of the Board. The appellant relied on relevant case laws to support the argument that only dues included in a sanctioned Scheme for rehabilitation are protected from recovery proceedings.

3. The Revenue argued that the bar against recovery proceedings applies only to dues included in a sanctioned Scheme, and since the appellant failed to show that the amount in question was covered by such a scheme, the recovery notice was valid. The court referred to a Supreme Court judgment to emphasize that the Act aims to prevent impediments in implementing sanctioned schemes and does not protect all dues of a sick industrial unit.

4. The court observed that the Act had been repealed by the Sick Industrial Companies (Special Provisions) Repeal Act, 2003. As the amount in question was not covered by any scheme for rehabilitation, the appellant could not claim the Act's protection. The court held that the mere pendency of an enquiry for unit revival does not absolve the company from its liability, and the bar under Section 22 applies only to dues included in a sanctioned Scheme for rehabilitation. Consequently, the writ appeal was dismissed, emphasizing that the appellant was not entitled to the Act's benefits due to non-inclusion of the amount in any rehabilitation scheme.