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Madhya Pradesh High Court · body

2000 DIGILAW 208 (MP)

Shree Synthetics Ltd. v. Assistant Commissioner

2000-02-29

N.K.JAIN

body2000
JUDGMENT N.K. Jain, J. 1. By this petition under Article 226 of the Constitution of India, the petitioner seeks quashment of the notice of detention dated August 12, 1997 (Annexure F) issued under Rule 230 of the Central Excise Rules, 1944, by the Assistant Commissioner, Central Excise Division, Ujjain (respondent No. 1), whereby the goods of the petitioner-company have been detailed and attached. 2. Originally the notice (Annexure F) was sought to be impugned mainly on the ground that even before issuance of the notice (Annexure F), a reference under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, "the Act"), had been made by the petitioner-company to the Board for Industrial and Financial Reconstruction (for short. "the BIFR") for preparation and sanction of schemes for reconstruction of the petitioner-company which had become sick. The application under Section 15 was made on August 8, 1997, to the Registrar of the Board and an information in this regard was given to the respondents on August 11, 1997. Again on August 12, 1997, a letter was served on respondent No. t which enclosed a memo dated August 12, 1997, from the Registrar of' the Board stating that a reference made by the petitioner-company under Section 15 has been registered with the Board. The petitioner thus contended that the enquiry as envisaged under Section 16 of the Act had commenced on receipt by the Board of the reference made by the petitioner-company on August 8, 1997. On such commencement, it was further contended, the consequences as enumerated under Section 22 of the Act would follow and no action for recovery of any dues shall lie or be proceeded with against the petitioner. The detention notice (Annexure F) could not be therefore legally issued by respondent No. l. 3. The petition was contested by the respondent mainly on the ground that no proceedings under Section 15 and onward of the Act had commenced on the date when the detention notice (Annexure F) was issued against the petitioner. Mere filing of reference under Section 15 with the Board, could not and did not amount to the commencement of the proceedings attracting the operation of Section 22. 4. Mere filing of reference under Section 15 with the Board, could not and did not amount to the commencement of the proceedings attracting the operation of Section 22. 4. It is, however, not disputed now that during the pendency of this petition, the BIFR as on September 10, 1999, passed a final order (Annexure J) on the reference made by the petitioner declaring the petitioner-company as sick company in terms of Section 3(1)(o) of the Act. It has further directed for taking measures specified under Section 18 of the Act and also appointed the Industrial Investment Bank of India (IIBI) as operating agency under Section 17(3) of the Act to examine the viability of the company and formulate a rehabilitation scheme for its revival, if possible. In view of this order of the Board for Industrial and Financial Reconstruction, the controversy as to the commencement and what is to be seen now is whether the detention notice (Annexure F) still survives and can be acted upon even after the passing of the order (Annexure J). 5. I have heard Mr. Dholakiya, learned Senior Counsel, with Mr. Saboo, for the petitioner, and Mr. B.G. Neema, learned Counsel for respondents. Section 22(1) of the Act provides that: "(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in 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 areceiver 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." 6. It will be thus seen that when a company is declared a sick industrial company by the Board for Industrial and Financial Reconstruction, all proceedings for execution, distress or the like against the company would automatically be suspended and cannot be proceeded with further, except with the consent of the Board for Industrial and Financial Reconstruction (see Gram Panchayat v. Shree Vallabh Glass Works Ltd., (1990) 2 SCC 440 . In the instant case also the detention notice issued by respondent No. 1 thus stands suspended and cannot be proceeded with further, except with the consent of the Board for Industrial and Financial Reconstruction. The present petition, thus, deserves to be disposed of in these very terms. 7. Learned Counsel for the petitioner has, however, relied upon a decision in Dy. CTO v. CorromandalPharmaceuticals, (1997) 89 Comp Cas 1 (SC), to press his point that the right of the petitioner-Department to make recoveries of its dues does not get washed off on account of the decision of the Board for Industrial and Financial Reconstruction. 8. I have very carefully considered the judgment in Dy. CTO v. Corromandal Pharma-ceuticals, (supra). In fact, that judgment relates to the tax liabilities which have accrued due after the passing of the order under Sections 18(4) and 19(3) of the Act. There can certainly be no quarrel with the proposition that the right of the recovery of such dues which may accrue after the passing off the order under the aforesaid provisions, remains unaffected. However. in the instant case, the recovery relates to the liability accrued before limitation of the proceedings under the Act and the passing of the order by the Board for Industrial and Financial Reconstruction. Section 22(1) of the Act clearly places an embargo on the right of the creditors to proceed with any such recovery proceedings which were pending on the date of limitation of the proceedings and the passing of the order. 9. Section 22(1) of the Act clearly places an embargo on the right of the creditors to proceed with any such recovery proceedings which were pending on the date of limitation of the proceedings and the passing of the order. 9. Accordingly, I dispose of this petition with the undernoted directions -- (a) Notice dated August 12, 1997 (Annexure F) stands suspended : (b) the respondents may not approach the Board for Industrial and Financial Reconstruction or the operating agency appointed by the Board for recovery of its dues against the petitioner-company in terms of Section 22 of the Act and the scheme that may be framed under Section 18; and (c) there shall be no order as to costs of this petition. The security deposit, if any, be refunded to the petitioner on verification.