Kerala High Court
Aluminium Industries Ltd. vs State Of Kerala on 24 January, 2005
Equivalent citations: III(2005)BC395, [2006]133COMPCAS530(KER), 2005(1)KLT889, [2005]62SCL261(KER), (2008)11VST516(KER)
Author: K.S. Radhakrishnan
Bench: K.S. Radhakrishnan, M.N. Krishnan
JUDGMENT K.S. Radhakrishnan, J.
1. Writ Petition was preferred by the appellant seeking a writ of certiorari to quash Ext.P3 revenue recovery notice issued by the Tahsildar for recovery of an amount of Rs. 76,138.50 in realisation of the decree amount in O.S.No. 1064 of 1972 of the Munsiff's Court, Quilon.
2. Suit was instituted by the writ petitioner for a declaration that the initiation of recovery proceedings against it for recovery of damages is illegal. Suit was originally decreed and the same was confirmed by the Appellate Court. In S.A.No. 281 of 1978 judgment was set aside and the Trial Court was directed to consider the matter afresh. Suit was then dismissed. State took up the matter in appeal, A.S.No. 154 of 1981. Appellate Court set aside the judgment and later the suit was decreed as prayed for Writ petitioner then took up the matter in second appeal, S.A. No. 1029 of 1989 which was dismissed and the decree has become final.
3. Counsel appearing for the appellant Sri. Antony Dominic contended that the State is not entitled to recover the amount since the appellant company is a sick industrial unit falling within the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. Counsel submitted that the Board for Industrial and Financial Reconstruction in exercise of the powers under Section 18(4) read with Section 19(3) of the Act can frame Scheme for rehabilitation and the same shall come into force on such date as the Board may specify in that behalf. Placing reliance on Section 22 of the Act counsel submitted that an enquiry under Section 16 is pending for revival of the unit. As per Section 22 when an enquiry is pending under Section 16 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, notwithstanding anything contained in the Companies Act, 1956 or any other law, no proceeding for the winding up of the industrial company shall lie or be proceeded with further, except with the consent of the Board, as the case may be, the Appellate Authority. Counsel placed reliance on the decision in Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. ((1993) 2 SCC 144). Reliance was also placed on the decision of the Apex Court in Real Value Appliances Ltd. v. Engineering Kamgar Sangh (AIR 1998 SC 2064).
4. Learned Counsel appearing for the Revenue Sri. Raju Joseph on the other hand contended, placing reliance on the decision of the Apex Court in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals (AIR 1997 SC 2027), that the bar applies only to such of those dues reckoned or included in sanctioned Scheme for rehabilitation. Appellant has not produced any document or material to show that such amount has been included in the Scheme for rehabilitation.
5. We are of the view, the mere fact that an enquiry is pending is no reason to hold that State cannot initiate proceedings for the recovery of the decree debt. The contention raised by the counsel for the petitioner was pointedly considered by the Apex Court in Corromandal Pharmaceuticals's case (supra) (AIR 1997 SC 2027) and held as follows:
On a fair reading of the provisions contained in Chapter III of Act/1936 and in particular Sections 15 to 22, we are of the opinion that the plea put forward by the Revenue is reasonable and fair in all circumstances of the case. Under the statute, the B.I.F.R. is to consider in what way various preventive or remedial measures should be afforded to a sick industrial company. In that behalf, B.I.F.R. is enabled to frame an appropriate Scheme. To enable the B.I.F.R. to do so, certain preliminaries are required to be followed. It starts with the reference to be made by the Board of Directors of the sick company. The B.I.F.R. is directed to make appropriate inquiry as provided in Sections 16 and 17 of the Act. At the conclusion of the inquiry, after notice and opportunity afforded to various persons including the creditors, the B.I.F.R. is to prepare a scheme which shall come into force on such date as it may specify in that behalf. It is in implementation of the scheme wherein various preventive remedial or other measures, are designed for the sick industrial company, steps by way of giving financial assistance etc. by Government, banks or other institutions, are contemplated. In other words, the Scheme is implemented or given effect to, by affording financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices by Government, banks, public financial institutions and other authorities. In order to see that the scheme is successfully implemented and no impediment is caused for the successful carrying out of the Scheme, the Board is enabled to have a say when the steps for recovery of the amounts or other coercive proceedings are taken against sick industrial company which, during the relevant time, acts under the guidance/control or supervision of the Board (B.I.F.R.). Any step for execution, distress or the like against the properties of the industrial company or other similar steps should not be pursued which will cause delay or impediment in the implementation of the sanctioned scheme. In order to safeguard such state of affairs an embargo or bar is placed under Section 22 of the Act against any step for execution, distress or the like or other similar proceedings against the company without the consent of the Board, or, as the case may be, the Appellate Authority. The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in by Section 22 of the Act. So, we are of the view that though the language 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 it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against spirit of the statute in a business sense, should be avoided."
We are of the view, the above mentioned decision of the Apex Court would be a complete answer to the issue involved in this case. The mere fact that some enquiry is going on for revival of the unit by itself will not absolve the liability of the company. Only the liability or amounts covered by the scheme would be taken in by Section 22. Section 22(1) could 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. The bar under Section 22 therefore would apply only to such dues reckoned or included in the sanctioned Scheme for rehabilitation.
5. We may incidentally point out that the Sick Industrial Companies (Special Provisions) Act, 1985 has also been repealed by the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (Act 1 of 2004) to which assent of the President has already been received on 1.1.2004 and published in the Gazette of India dated 2.1.2004, In view of the above mentioned circumstances we are of the view, appellant is not entitled to the benefit of the Act since the amount has not been included or covered by the Scheme. Mere pendency of the enquiry would not absolve the Company from the liability. Writ Appeal lacks merits and the same would stand dismissed.