2000 (2) TMI 110 - HC - Central Excise

Summary

Issues:
Quashment of detention notice under Rule 230 of the Central Excise Rules, 1944 due to initiation of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis:
The petitioner sought to quash the detention notice issued by the Assistant Commissioner, Central Excise Division, Ujjain, based on the initiation of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985. The petitioner contended that a reference under Section 15 of the Act had been made to the Board for Industrial and Financial Reconstruction (BIFR) for reconstruction of the sick company before the detention notice was issued. The petitioner argued that once the enquiry under Section 16 of the Act commenced, as indicated by the reference made to the BIFR, no recovery action could be taken against the company.

The respondent contested the petition, stating that the mere filing of a reference under Section 15 with the BIFR did not signify the commencement of proceedings under the Act. The respondent argued that the detention notice was valid as no formal proceedings had started under the Act at the time of its issuance.

During the pendency of the petition, the BIFR passed a final order declaring the petitioner-company as a sick company and directed measures for its revival. The court noted that once a company is declared a sick industrial company by the BIFR, all recovery proceedings against the company are automatically suspended, as per Section 22(1) of the Act. The court referred to a previous judgment to support the suspension of recovery proceedings upon such declaration by the BIFR.

The court addressed the petitioner's reliance on a specific case to argue that the right of the department to recover dues remains unaffected by the BIFR's decision. However, the court differentiated between dues accrued before and after the initiation of proceedings under the Act. It emphasized that Section 22(1) imposes restrictions on recovery proceedings related to liabilities accrued before the initiation of proceedings and the BIFR's order.

In conclusion, the court disposed of the petition by suspending the detention notice, allowing the respondents to pursue recovery through the BIFR or the Operating Agency appointed by the Board, and refraining from issuing costs against the petitioner. The court directed the refund of any security deposit to the petitioner upon verification.