Andhra HC (Pre-Telangana)
Pranami Press vs Vinedale Distilleries Ltd. on 23 October, 1997
Equivalent citations: [1998]94COMPCAS926(AP)
JUDGMENT Krishna Saran Shrivastav, J.
1. The question for determination is whether further proceedings should be stayed in view of the orders passed by BIFR on September 24, 1991, for framing the scheme for rehabilitation of the respondent-company ?
2. The petitioner-company has filed an application under sections 433(e), 434(1)(a) and 439(1)(c) of the Companies Act, 1956 ("the Act"), for winding up the respondent-company on the ground extent of Rs. 5,45,677 as per the statement of accounts of the petitioner-company with the respondent for the periods of 1992-93, 1993-94 and 1994-95. The last payment which was made by the respondent-company of Rs. 60,000 was in the month of November, 1994, leaving a balance as on December 11, 1995, to the extent of the aforesaid amount of Rs. 5,45,677 and by adding interest on that amount up to January 15, 1997, the total indebtedness comes to Rs. 7,78,431.
3. Heard learned counsel for both sides.
4. Notice before admission was given to the respondent-company. In answer to the show-cause notice, the respondent-company filed its counter and denied the claim of the petitioner-company. It has also been mentioned in the counter that the respondent-company is under the BIFR rehabilitation scheme and, therefore, the petitioner-company, which is aware of all these proceedings, cannot take action against it under the law. After filing the counter, no representation was made on behalf of the respondent-company. Therefore, by docket order dated July 29, 1997, the petition was admitted on taking the view that a prima facie case has been made out representation was made on behalf of the respondent-company and time was taken to file the package of the BIFR. Subsequently, on September 17, 1997, some documents were filed on behalf of the respondent-company.
5. It is urged on behalf of the respondent-company that in Case No. 70 of 1989, the BIFR had drawn proceedings and had sanctioned the are liable to be stayed. Reliance has been placed on the case of Tata Davy Ltd. v. State of Orissa , and on the case of Asian Bearings and Tools Corporation v. Coastal Chemicals Ltd. .
6. On the other hand, it has been urged on behalf of the petitioner-company that it had supplied goods on credit subsequent to the scheme framed by the BIFR on September 24, 1991, and, therefore, proceedings in this case should not be stayed.
7. In the case of Deputy CTO v. Corromandal Pharmaceuticals :
"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 hove 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 them indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against the spirit of the statute in a business sense, should be avoided."
8. In the case of Deputy CTO v. Corromandal Pharmaceuticals , the scheme was sanctioned on November 19, 1990, and the sales tax dues under order passed on January 3, 1994, and in 1995, long after the sanction of the scheme were to be recovered. The apex court, under these circumstances, held that the collected sales tax is payable to the revenue without permission of the BIFR.
9. This case has been relied on in the case of Tata Davy Ltd. v. State of Orissa . In the case of Tata Davy Ltd. v. State of Orissa , the appellant, that is, Tata Davy Ltd., was in arrears of sales tax under the Orissa Sales Tax Act, 1947, for the years 1983-84, 1984-85, and that company was declared a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 ("the Central Act") on December 13, 1989, and, therefore, it was observed in this case that the respondent State cannot recover the aforementioned arrears of sales tax from the appellant without seeking the consent of the BIFR in this behalf. But, in this case, the proposition of law laid down in the case of Deputy CTO v. Corromandal Pharmaceuticals , has been reiterated that such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of sanctioned scheme legitimately belonging to the revenue cannot and could not have been intended to be covered within section 22.
10. The position of law that emerges from the aforementioned authorities, in short, is that in case a sick company incurs a debt subsequent to the scheme framed by the BIFR for rehabilitation, no permission is required by the BIFR for taking action against the debtor company including the application for winding up.
11. For the foregoing reasons, in the winding up case, proceedings cannot be stayed because the debts had been incurred by the respondent-company subsequent to the scheme framed by the BIFR for rehabilitation of the respondent-company.