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TMI Blog2008 (7) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... HIMANI J.--Heard K. Hema Karthikeyan, learned counsel appearing for the petitioner and V. Rajasekaran, learned Special Government Pleader appearing for the respondents. The writ petitioner-company is a public limited company operating from the year 1989 onwards, engaged in the manufacture and sale of finished paper, newsprint and other ancillary products. The petitioner-company has also registered under the Tamil Nadu General Sales Tax Act, 1959 and Central Sales Tax Act, 1956. The petitioner-company has become sick, since it could not meet out the statutory requirements, a reference was filed before the Board for Industrial and Financial Reconstruction (hereinafter called as "the BIFR"), under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA") for declaring the company as a "sick company" and also for effecting rehabilitation. It is stated that the BIFR by an order dated May 9, 2001, has declared the petitioner-company as a "sick company" and appointed IDBI as its operational agency as per section 17(3) of the SICA, to examine the viability of settlement of the scheme as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money 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. (2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under section 18, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law-- (a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded." The honourable Supreme Court, in similar circumstances, regarding the conduct of the State of Orissa, to proceed to recover the tax amount due under Orissa Sales Tax Act, 1949, against a company, which is pending rehabilitatory measure under the SICA in Tata Davy Ltd. v. State of Orissa [1998] 111 STC 462 (SC); [1998] 93 Comp Cas 1 (SC); [1997] 7 JT 216 (SC), while considering the contention raised on behalf of the Government, namely, the Commercial Tax Department that the taxing power conferred on the State in List II, entry 54 of the Seventh Schedule to the Constitution of India, is an exclusive power of the State, and therefore, the term used under section 22(1) of the SICA "any other law" should exclude the power of the State Government in recovery of the tax amount, has rejected the said contentions and ulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SICA, not only that winding up of the industrial company is put to an end but also any proceedings in execution or any distress proceedings taken against the properties of the sick industrial company, including the appointment of any receivers in respect of any claim are also put an end to, however, subject to the consent and order obtained from the BIFR. In fact, the Supreme Court has held that it may be against the principles of equity, if the creditor is not allowed to recover the amount due, especially, when the creditor happens to be the Government, to drive them to go to the BIFR for getting a sanction in respect of the statutory amount due but nevertheless, the Supreme Court has held that the Board has got discretionary power, since the concept and basis of the SICA, is not merely to take a supervisory role regarding the sick industries but also to give a solution by way of rehabilitatory measures. In view of the said matter, the Supreme Court has ultimately held that such proceedings can be continued only with the approval and consent of the BIFR. The relevant portion is as follows (pages 43 and 44 of 86 STC): "7. Section 22(1) provides that in case the enquiry under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtion of the order of the first Bench of this court, presided over by the honourable Chief Justice Mr. A.P. Shah, as he then was, in paragraph 8 is as follows: "8. In the instant case, proceedings are pending before the BIFR in Case No. 152 of 2004. By order dated May 17, 2006, the Board has appointed Bank of India, as operating agency with a direction to prepare a revival scheme for it, if feasible. The operating agency has been directed to keep in view the provisions of section 18 of the Act and the enclosed guidelines while carrying out this exercise. In the light of the steps taken by the Board under sections 16 and 17 of the Act, no proceedings for execution, distress or the like proceedings against any of the properties of the company shall lie or be proceeded with further except with the consent of the Board. In the light of the above provisions, there would be deeming suspension of such proceedings against the company properties, viz., Gram Panchayat v. Shree Vallabh Glass Works Ltd. [1992] 86 STC 41 (SC); AIR 1990 SC 1017; [1991] 71 Comp Cas 169 (SC) and Tata Davy Ltd. v. State of Orissa [1998] 111 STC 462 (SC); [1998] 93 Comp Cas 1 (SC); [1997] 7 JT 216 (SC). The ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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