Calcutta High Court
Allied Resins & Chemicals Ltd. vs Union Of India on 17 May, 2001
Equivalent citations: [2001]106COMPCAS502(CAL), 2001(132)ELT557(CAL)
Author: Sengupta
Bench: Kalyan Jyoti Sengupta
JUDGMENT Sengupta, J.
1. This application has been directed agianst the impugned notice of 8-3-2001, whereby the Deputy Commissioner of Customs, Appraising Section, Customs House, Calcutta, has made demand of payment of Rs. 5,10,58,869 purported to be under Section 142 of the Customs Act, 1962. At the time of admission of the writ petition, upon hearing the learned counsel I decided to hear this writ petition on the limited point whether the petitioner having been declared sick is entitled to get any protection under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 ('the Act') or not. My order dated 9-4-2001, speaks as follows :
"In this matter I do not find any point to be dealt with by this Court excepting the point whether the demand notice can be proceeded with without the leave of the BIFR."
Against this order no appeal has been preferred by either of the parties, so it has reached its finality. It is settled law as laid down by the Supreme Court in the judgment in Smt. Vidya Vati v. Devi Das , that any decision or finding at the interlocutory stage can operate as res judicata at the later stage of the same proceedings. By the aforesaid order by necessary implication I refused to entertain the writ petition on any other grounds. Therefore, the writ petition is to be decided on the aforesaid point only.
2. Mr. Ambar Majumder, the learned counsel appearing in support of the writ petition, contends, drawing my attention to the order passed by the BIFR dated 14-5-1999, that an operating agency has been appointed by the BIFR and Section 17(3) of the Act provides, amongst others, for preparing rehabilitation scheme. The said scheme 'has not yet been prepared. According to him, his client is entitled to get protection under Section 22 inasmuch as the impugned notice issued under Section 142 of the Customs Act, is a step for recovery of the alleged dues by way of distress proceedings as the language of the aforesaid section contemplates further action which is tantamount to distress proceedings. In support of his contention he has relied on,a decision of a learned single judge of this Court in Himalaya Rubber Products Ltd, v. BIFR [1993] 76 Comp. Cas. 281. In that case, he says, withholding of the sales tax declaration form as a measure of recovery of the alleged dues of sales tax was treated to be a distress and/or coercive proceeding. In the aforesaid judgment the learned judge has categorised the nature of the distress and execution proceedings. Under such circumstances, he submits that the interim order which has already been passed would suffice to give protection to his client finally in this writ petition. Mr. Chakraborty, the learned senior counsel for the respondent, with great force contends that the company cannot get any protection under Section 22. First of all, it is a mere demand notice and there is no proceeding as yet taken for recovery of the alleged dues by way of distress proceedings. Secondly, even if the aforesaid notice is termed to be a distress proceeding, still then he cannot get protection because he has filed an application before the BIFR and such application has been entertained. He contends that in an extreme case the Allahabad High Court has held in a case in Amrit Banaspati Co. Ltd. v. Commissioner (Appeals) C. Ex 2000 (119) ELT 524 that even if the scheme is prepared, the benefit of Section 22 will not be applicable in the event the amount which is sought to be recovered remains beyond the purview of the scheme. He contends, therefore, that even if the final scheme is framed in this case, still the petitioner cannot get relief under this Section as it will appear from the materials that the company is otherwise viable to pay the alleged dues of this respondent.
3. Having heard the respective contentions of the learned counsel, the point which has fallen for consideration in the matter is as follows :
(i) Whether the issuance of notice under the aforesaid section can be termed and/or treated to be distress or execution proceedings or not ?
(ii) If so, whether the petitioner can get any protection under Section 22 in view of the order passed by the BIFR appointing an operating agency under Section 17(3) ?
4. I shall address myself to the first question in the manner as follows :
The words 'for execution', 'distress' or 'like', 'against any of the properties' mentioned in the aforesaid Section 22 have been interpreted and/or explained by the judgment of Justice Ruma Pal (as her Lordship then was) in the aforesaid case in Himalaya Rubber Products Ltd.'s (supra). It has been held that in Section 22(1) both distress and execution relate to methods of recovery of monies due from a sick industrial company. The phrase 'and the like' must, therefore, be read in the same context. What is envisaged in the phrase 'the like' is not the same or identical procedure, but similar procedure. In that case on the factual matrix her Lordship has been pleased to hold that the measure adopted by the sales tax authority for recovery of the alleged sales tax dues by withholding supply of sale tax declaration form is a distress proceeding of like nature. The aforesaid principle may not be applicable universally but will be depending upon each and individual fact and circumstance of the case. The method which might be adopted for recovery of the alleged dues is really meant for recovery for the dues by any harsh method. The notice admittedly was issued under Section 142 of the Customs Act. Therefore, it is to be seen what is the purpose and object of Section 142, If the purpose and object of the aforesaid Act is really to realise and recover forcibly, then this method can be termed to be a distress proceeding and/or forcible measure for recovery. Therefore, it is appropriate to set out the text of Section 142 of the Customs Act.
"142. Recovery of sums due to Government.--(1) Where any duty demanded from any person or any amount of drawback to be recovered from any person or any penalty payable by any person under this Act is not paid,--
(a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owning to such person which may be under the control of the proper officer or such other officer of customs ; or
(b) the Assistant Collector of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the Assistant Collector of Customs or such other officer of customs ; or
(c) if the amount cannot be recovered from such person in the manner provided in Clause(a) or Clause(6), the Assistant Collector of Customs may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector on receipt of such certificate shall proceed to recover from the said person the amount specified thereunder as if it were an arrear of land revenue.
(2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instruments may be recovered in the manner laid down in Sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that subsection."
5. It will be clear from a plain reading of Clause (a) or (b) that these provide for measures for deducting any amount of the debtor and also taking other measures for recovery of the amount. Clause (c) of Sub-section (1) of Section 142 provides for initiation of certificate proceedings in the case of failure under clauses (a) and (b). Therefore, notice under the aforesaid section speaks of such measure being taken in the event the aforesaid amount is not paid. In my view issuance of the aforesaid notice seems to be part and parcel, rather a beginning of taking measures for recovery proceedings which is nothing short of distress proceedings and the test laid down by Justice Ruma Pal is squarely satisfied.
6. The next question remains as to whether the petitioner can get advantage of Section 22 in view of the order passed by the B1FR or not.
7. Admittedly, the BIFR by its order appointed the IDBI as the operating agency for preparing a rehabilitation scheme. Section 22 gives protection to those industrial companies who have made an application and an enquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation for sanction of scheme or is under implementation thereof. Where an appeal under Section 25 relating to industrial companies is pending, the benefit given by the aforesaid section is also available.
8. Mr. Chakraborty has cited the Allahabad High Court's judgment which in my view is not applicable in this case. In that case there was a scheme already sanctioned and the scheme made provisions and allotted separate funds for the company for implementation of the scheme. It has been held by the aforesaid judgment that the amount or the assets which were covered by the scheme cannot be touched as the same operates as a bar under Section 22 without the leave of the BIFR. But the amount which was not mentioned in the scheme itself or any asset which remains outside the purview of the scheme can possibly be touched or can be recovered by any creditor without approaching the BIFR for leave.
9. In this case the scheme has not yet been prepared. Until and unless the scheme is prepared, it will not be understood what assets and properties or funds will be covered by the scheme. Under such circumstances, I am of the view that the petitioner is entitled to get protection under Section 22, as I cannot accept the contention of Mr. Chakraborty that the petitioner cannot get protection under the aforesaid section. Therefore, I uphold the contention of the learned advocate for the petitioner that the recovery proceeding as sought to be done by the aforesaid impugned notice cannot be done without leave of the BIFR. Moreover, I find that under the order of the BIFR ample protection has been given to all the creditors since no assets and properties can be dealt with and disposed of.
Therefore, it would be proper for the respondents to approach the BIFR to obtain leave for proceeding further. I make it clear that the respondents would be at liberty to proceed after obtaining leave from the BIFR.
10. Thus, both the applications are disposed of. There will be no order as to costs.
11. Mr. Chakraborty prays for stay of operation of this judgment and order. Having .considered the submission of Mr. Chakraborty, I refuse to grant stay of this order as the respondents will not be prejudiced in any manner in the event they continue as their interest is protected by the order of the BIFR and, on the other hand, if stay is granted, the petitioner would be seriously prejudiced since the scheme is under implementation.