Sick industrial company protection bars tax recovery action during pendency of rehabilitation proceedings without prior consent.

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars coercive recovery and execution proceedings against an industrial company while a statutory inquiry, rehabilitation scheme, or appeal is pending, unless the Board or Appellate Authority consents. Tax recovery notices issued under section 226(3) of the Income-tax Act are treated as execution-type proceedings and cannot proceed during that protective period without prior consent. The provision is mandatory and is intended to preserve the company's assets while revival proceedings are under consideration; otherwise, the statutory protection would be defeated.

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Issues: Whether recovery proceedings initiated under section 226(3) of the Income-tax Act could continue against an industrial company when an appeal under the Sick Industrial Companies (Special Provisions) Act, 1985 was pending and section 22 of that Act operated.

Analysis: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars not only winding up and distress, but also execution or similar coercive proceedings against the properties of the industrial company during the pendency of the statutory inquiry, scheme process, or appeal, except with the consent of the Board or the Appellate Authority. The notices issued for realisation of tax dues were in the nature of execution proceedings to recover money from the company. The object of the Act is to protect the company while revival proceedings are under consideration, and the statutory bar would be defeated if recovery action were permitted without prior consent. The provision is mandatory and breach may attract penal consequences.

Conclusion: The recovery proceedings could not proceed without obtaining consent from the Appellate Authority, and the impugned notices were liable to remain deferred until such consent was obtained.

Ratio Decidendi: During the pendency of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, coercive recovery or execution proceedings against an industrial company cannot continue without the consent of the Board or the Appellate Authority.

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