1989 (7) TMI 340 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Legislative competence of the Parliament concerning the Act.
3. Power of Gram Panchayat to levy and recover property taxes under the Bombay Village Panchayats Act, 1958.
4. Interpretation of Article 246 of the Constitution of India.
5. Conflict between Central and State legislation.

Issue-wise Detailed Analysis:

1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985:
The petitioners, a public limited company and its director, contended that the recovery of dues by the Gram Panchayat is stayed by Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. The company, declared as a sick industrial company, argued that no proceedings for execution, distress, or the like against its properties shall lie or be proceeded with further except with the consent of the Board for Industrial and Financial Reconstruction. The court held that Section 22 prohibits coercive recovery procedures against the company's properties.

2. Legislative Competence of the Parliament Concerning the Act:
The respondents argued that if Section 22 of the Act bars the Gram Panchayat from imposing property taxes, then the Act is ultra vires of the legislative competence of the Parliament. The court noted that the Act was passed by the Parliament under Item 52 in List I of the Seventh Schedule of the Constitution, which pertains to industries controlled by the Union. The court concluded that the Act does not restrict the Gram Panchayat's power to impose taxes but only prohibits coercive recovery procedures.

3. Power of Gram Panchayat to Levy and Recover Property Taxes under the Bombay Village Panchayats Act, 1958:
The Gram Panchayat's power to levy property taxes under Section 127 of the Bombay Village Panchayats Act remains unimpaired. However, Section 22(1) of the Sick Industrial Companies Act restricts the recovery of these taxes through coercive measures. The court emphasized that the Gram Panchayat could still impose taxes but could not proceed with coercive recovery without the Board's consent.

4. Interpretation of Article 246 of the Constitution of India:
The court examined Article 246, which delineates the legislative powers of the Parliament and State Legislatures. Clause (1) of Article 246 grants exclusive power to the Parliament to legislate on matters in List I, while State Legislatures have exclusive power over matters in List II, subject to the provisions of clauses (1) and (2). The court reiterated the overriding nature of Parliament's legislative power in matters enumerated in List I.

5. Conflict Between Central and State Legislation:
The court referred to precedents such as Chaturbhai M. Patel v. Union of India and Sudhir Chandra v. Wealth-tax Officer, Calcutta, to highlight that incidental encroachment by Central legislation on State subjects does not invalidate the Central Act. The court held that even if the Act incidentally affects the Gram Panchayat's powers, it must override the State legislation due to the paramountcy of Central laws in List I matters.

Conclusion:
The petition was allowed, and the court ruled in favor of the petitioners. The Gram Panchayat's power to levy taxes was upheld, but the recovery of such taxes through coercive measures was barred under Section 22(1) of the Sick Industrial Companies Act unless consent from the Board is obtained. The court made the rule absolute in terms of prayer clauses (b)(i) and (b)(ii) of the petition, with no order as to costs.