9911796707
TMI Blog1998 (8) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... y has been declared as a sick industrial company under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Sick Industrial Companies Act or SICA). For its rehabilitation the Board for Industrial and Financial Reconstruction (BIFR) has finalised a scheme which is in the stage of implementation. In view of the provisions of section 22 of the said Act dues against a sick industrial company cannot be recovered by coercive means until the period envisaged in the rehabilitation scheme is over. 3.. It may be stated at the outset that against the assessment orders with respect to sales tax liability passed by the assessing authority under the Bihar Finance Act, 1981 the petitioner had filed a separate writ petition being C.W.J.C. No. 3033 of 1997(R) which was disposed of by this Court directing the petitioner to seek alternative remedy under the Bihar Finance Act. It was stated in course of hearing that in the light of the said order of this Court the petitioner has filed revision before the Commissioner of Commercial Taxes which is pending. In these petitions, thus, we are not concerned with the question of the correctness or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is practicable for the company to make its net worth exceed the accumulated losses within reasonable time. If the BIFR comes to the conclusion that it is practicable for a sick industrial company to do so within reasonable time it shall give such company time as it may deem fit to make its net worth exceed the accumulated losses. If, on the other hand, the BIFR comes to the conclusion that it is not practicable for a sick industrial company to do so within reasonable time, it may direct any operating agency to prepare a scheme for rehabilitation of the company. Sections 18 and 19 provide for preparation and sanction of schemes pursuant to order under section 17 as aforesaid. Where the BIFR after making enquiry under section 16 and after considering all the relevant facts and circumstances comes to the conclusion that the sick industrial company is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record its opinion to that effect and forward the same to the concerned High Court for winding up of the company in accordance with the provisions of the Companies Act, 1956. 5.. Section 22 which is the sheet anchor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) ....................." 6.. According to the petitioner, a scheme has been sanctioned by the BIFR after enquiry in terms of the provisions of sections 17 and 19 of the Act for revival of the company which is in the stage of implementation and, therefore, at this stage no proceeding "for execution, distress or the like" against any of the properties of the petitioner-company can be initiated or proceed except with the consent of the BIFR. 7.. From the documents brought on record it is not clear as to when and in what manner the enquiry within the meaning of section 16 of the Sick Industrial Companies Act commenced before the BIFR. From the documents on record however it appears that an order as contemplated under section 17(2) of the said Act was passed on March 3, 1992. It may be useful to quote the relevant part of that order as follows: "On the basis of the material put forward before us and the submissions made at today's hearing, we are satisfied that the company will be able to make its net worth positive by its own efforts within a reasonable time, under the ongoing agreed rehabilitation scheme with the financial assistance reliefs and concessions as envisaged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recovered by the Commercial Tax Officer however related to the subsequent period, namely, 1992-93 and 1993-94 on the basis of assessment orders passed on January 3, 1994 and in 1995, i.e., after the sanctioned scheme had come into effect on November 19, 1990. The Supreme Court observed that the provisions of SICA are certainly wide but in the totality of the circumstances, the safeguard is only against the impediments which are likely to be caused in the implementation of the scheme. The court held that the bar or embargo envisaged in section 22(1) can apply to only such dues which have been reckoned or included in the sanctioned scheme. Amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belong to the Revenue and the same is not covered by section 22. 12.. I am afraid, the ratio of the decision in Corromandal Pharmaceuticals case [1997] 105 STC 327 (SC); (1997) 10 SCC 649 is of no avail to the respondents. In the present case, as noted above, the sanctioned scheme under section 19(3) of the Act has come into effect from January 11, 1996. The alleged dues for recovery of which the order of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nicated by letter dated January 11, 1996 (annexure 3), one would have expected the petitioner-company to have improved its financial position to the extent enabling it to clear the tax dues by now. It may be mentioned that the sanctioned scheme contemplates liquidation of different kinds of dues in the manner laid down therein. The scheme, inter alia, lays down"The carry forward losses of the company of Rs. 152 lakh would be absorbed by the profits earned in 1995-96 and 1996-97, and hence the company would be liable to pay tax in the year 1996-97 itself. As the losses would be wiped off in 1996-97.........." However, this cannot be a ground to allow the respondents to recover the tax dues. In terms of provisions of sub-section (1) of section 22, as noted above, it is open to the respondents to approach the BIFR and subject to consent which may be granted by it, proceed for recovery of the dues. If the respondents, therefore, think that despite improving its financial position to the extent envisaged in the rehabilitation scheme, the company is not clearing its tax dues and resisting recovery on the basis of the provisions of section 22, or that its performance has been below the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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