2006 (11) TMI 335 - HC - VAT and Sales Tax

Summary

Issues:
Petitioner seeking writ of certiorarified mandamus to quash recovery proceedings under TNGST Act and SICA. Interpretation of SICA Section 22 for recovery proceedings against sick industrial company.

Analysis:
The petitioner filed a writ petition seeking relief from recovery proceedings under the Tamil Nadu General Sales Tax Act (TNGST Act) and the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The court noted that the provisions for recovery are present in the TNGST Act and that the embargo under SICA Section 22 does not apply to the petitioner. The court referred to the Supreme Court's interpretation in D. CTO v. Corromandal Pharmaceuticals, emphasizing that the consent of the Board is required for proceedings against a sick company, but it is not an absolute bar. The court highlighted that the purpose of SICA is to provide preventive or remedial measures to sick companies through a sanctioned scheme, and recovery steps should not impede the scheme's implementation without consent. The court reasoned that the embargo under SICA Section 22 applies only to dues included in the sanctioned scheme, not to amounts like sales tax collected after the scheme's date.

The court also cited Tata Davy Ltd. v. State of Orissa, where it was emphasized that creditors must obtain consent from the Board for recovery from sick industrial companies under inquiry or scheme consideration. Since there were no pending claims in the present case, the protection under SICA Section 22 did not apply. The court quoted Justice B.P. Jeevan Reddy's opinion, highlighting the Act's objective to provide measures against those responsible for a company's sickness and not to encourage unfair practices. The court concluded that the writ petition failed based on the absence of pending claims and the completion of all proceedings. The court rejected the petitioner's plea for leniency on arrears, stating it is for the Government to decide. As the Government was not a party to the petition, the court could not grant such a direction. Consequently, the writ petition was dismissed without costs, along with connected motions.