2006 (6) TMI 122 - HC - Central Excise

Summary

Issues Involved:
1. Whether the respondents could attach the properties of the petitioner for the purpose of recovery of excise duty.
2. The applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 in prohibiting such attachment.

Issue-wise Detailed Analysis:

1. Attachment of Properties for Recovery of Excise Duty:
The petitioner, a company engaged in manufacturing heavy engineering equipment, was declared a sick company by the Board for Industrial and Financial Reconstruction (BIFR) on 6-10-2005. The respondents initiated attachment proceedings on 16-1-2006 and 27-1-2006 to recover excise duty dues. The petitioner argued that after being declared a sick company and the appointment of the State Bank of India as the operating agency, the respondents could not enforce their claims against the company. The respondents contended that there was no provision in the Act that prevented them from enforcing the claim of excise duty, which became due at the time of production.

2. Applicability of Section 22 of the Act:
Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, suspends legal proceedings, contracts, etc., against a sick industrial company without the consent of the BIFR. The court examined whether the attachment of the petitioner's properties for recovery of excise duty fell under the purview of this section. Section 22(1) states that no proceedings for execution, distress, or the like against any properties of the industrial company shall lie or be proceeded with further, except with the consent of the Board or the Appellate Authority, during the pendency of an inquiry under Section 16 or the preparation or implementation of a scheme under Section 17.

The court referred to several Supreme Court judgments to interpret Section 22:
- In *The Gram Panchayat v. Shree Vallabh Glass Works Ltd.*, the Supreme Court held that proceedings for execution, distress, or the like against the properties of a sick industrial company are automatically suspended once an inquiry under Section 16 is ordered by the Board.
- In *Real Value Appliances Ltd. v. Canara Bank*, the Supreme Court emphasized that no proceedings against the assets of a company should be taken before a final decision is given by the BIFR.
- In *M/s. Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd.*, it was reiterated that the effect of Section 22 would be applicable even after a winding-up order is passed, as no proceedings can be continued without the consent of the Board.

The respondents cited *Dy. Commercial Tax Officer v. Corromandal Pharmaceuticals*, where the Supreme Court held that the bar under Section 22 applies only to dues included in a sanctioned scheme. However, this judgment was distinguished in *Tata Davy Ltd. v. State of Orissa* and did not apply to the present case, as the scheme for the petitioner company was yet to be sanctioned.

Conclusion:
The court concluded that the respondents could not attach the properties of the petitioner company without the consent of the BIFR, as a scheme under Section 17 was under preparation. Therefore, the writ petition was allowed, and the impugned attachment order was quashed. However, the respondents were granted the liberty to seek remedies available in law after obtaining permission from the Board.