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TMI Blog2000 (11) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... 98] 93 Comp. Cas. 1 . 1 2. There is no dispute between the parties that the reference made by the Board of Directors of the petitioner under section 15(1) of the 1985 Act was received by the Board for Industrial and Financial Reconstruction ('the BIFR') on 12-7-1999. The same stands registered as Case No. 240 of 1999, and after taking cognizance of the same, the BIFR has passed two interim orders on 28-10-1999 (Annexure P-16) and 14-9-2000 (Annexure P-17). 3. According to the petitioner, in view of the statutory bar contained in section 22 of the 1985 Act, respondent Nos. 1 to 4 cannot recover the amount of Sales-tax due against it under the 1948 Act and the Central Sales Tax Act, 1956 ('the 1956 Act') and no coercive measure can be taken for effecting the recovery in pursuance of the impugned notices. Respondent Nos. 1 to 4 have controverted the plea of the petitioner by contending that the failure of BIFR to complete the enquiry within 60 days stipulated in section 16(3) of the 1985 Act has the effect of rendering the reference infructuous and, therefore, they can effect recovery of dues under the 1948 Act and the 1956 Act. 4. Shri Puneet Bali referred to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measurers which shall be adopted with respect to the company : Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company, the Board of Directors shall, within sixty days after it has formed such opinion, make a reference to the Board for the determination of the measures which shall be adopted with respect to the company. (2) Without prejudice to the provisions of sub-section (1), the Central Government or the Reserve Bank or a State Government or a public financial institution or a state level institution or a scheduled bank may, if it has sufficient reasons to believe that any industrial company has become, for the purposes of this Act, a sick industrial company, make a reference in respect of such company to the Board for determination of the measures which may be adopted with respect to such company : Provided that a reference shall not be made under this sub-section in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company) shall lie or be proceeded with further, except with the consent of the Board, or, as the case may be, the appellate authority." 7. The ambit and scope of sections 15, 16 and 22 was considered by the Supreme Court in Real Value Appliances Ltd. 's case ( supra ) . After taking note of the view expressed by the various High Courts, their Lordships of the Supreme Court held as under : "... According to section 22, in case an 'inquiry under section 16' is pending, then, notwithstanding anything in the Companies Act or any other instrument, etc., no proceedings for the winding up of the company or for execution or distress or the like against the property of the company or for the appointment of a receiver and no suit for recovery of money or enforcement of any security or of any guarantee shall lie or be proceeded with further, except with the consent of the Board.... ...Under sub-clause (3), of section 16 the Board or the operating agency is to endeavour to complete the inquiry within 60 days from the date of commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any against whom an order of winding up has been passed and whose assets have been taken over by the Official Liquidator, can file an application for reference and whether the protection of section 22 is available to such company. It was argued on behalf of the respondent that the provisions of the 1985 Act should not be interpreted so as to allow an unscrupulous litigant to take advantage of the bar contained in section 22. While rejecting that arguments, the Supreme Court held as under : ". . . Such a grievance may be justified and the submission having substance but in view of the language of sections 15 and 16 of the Act particularly the Explanation to section 16 inserted by Act No. 12 of 1994, this Court has no option but to adhere to its earlier decision taken in Real Value Appliances Ltd. v. Canara Bank [1998] 93 Comp. Cas. 26 . While interpreting, this Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend, modify or repeal it by having recourse to appropriate procedure, if deemed necessary." (p. 290) 9. In Tata Davy Ltd.'s case ( supra ) , a two- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. The reference to Deputy CTO v. Corrornandal Pharmaceuticals [1997] 8 9 Comp. Cas. 1 (SC), is, therefore, inapposite." (p. 5) 10. In Corromandal Pharmaceutical's case ( supra ) , the Supreme Court held that bar contained in section 22 cannot be invoked where the tax is collected after the coming into force of the sanctioned scheme. The facts of that case show that the respondent was declared a sick industrial company under the 1985 Act by the BIFR and the Industrial Re-construction Bank of India was appointed as operating agency. On receipt of the report of operating agency, the BIFR sanctioned a scheme for the rehabilitation of the company. That scheme was brought into force with immediate effect. The assessment orders for the assessment years 1992-93 and 1993-94 were passed by the competent authority constituted under the Andhra Pradesh General Sales Tax Act. The company successfully challenged the recovery proceedings before the High Court, but in Corromandal Pharmaceuticals' case ( supra ) , their Lordships of the Supreme Court reversed the orders of the High Court and held as under : ". . . Under the statute, the BIFR is to consider in what way vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal under section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in section 22(1) of the Act can apply only to such of those dues reckoned or included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the revenue, cannot be and could not have been intended to be covered within section 22 of the Act. Any other construction will be unreasonable and unfair and will lead to a State of Affairs enabling the sick industrial unit to collect amounts due to the Revenue and withhold them indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against spirit of the statute in a business sense, should be avoided." (p. 10) In our opinion, the above observations do not in any manner help the cause of the respondents because they have neither pleaded nor any evidence has been produced before the Court to show that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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