Section 22(1) protection under sick industry law does not bar recovery of post-scheme sales tax dues outside the rehabilitation package.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 suspends coercive recovery only to the extent needed to protect implementation of a sanctioned rehabilitation scheme. Post-scheme sales tax dues that arose after the scheme came into force, and were not reckoned or included in the rehabilitation package, do not receive that statutory protection. The provision is not an absolute bar on recovery merely because the company remains under a sanctioned scheme. Recovery of such later dues may proceed without prior consent of the Board, because the embargo is confined to liabilities covered by the scheme and does not extend to independent subsequent obligations.

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Issues: Whether section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 bars recovery proceedings for sales tax dues that arose after the sanctioned rehabilitation scheme was brought into force and were not included in the scheme.

Analysis: The statutory scheme under sections 15 to 19 of the Sick Industrial Companies (Special Provisions) Act, 1985 is aimed at inquiry, formulation, sanction and implementation of a rehabilitation package for a sick industrial company. Section 22(1) suspends coercive proceedings during that process so that implementation of the sanctioned scheme is not impeded. The Court held that the embargo is not absolute in the sense urged by the assessee and must be understood in the context of the scheme's purpose. Dues that arise after the date of the sanctioned scheme, and which were never reckoned or included in the rehabilitation package, do not attract the protection of section 22(1) merely because the company is under a sanctioned scheme. To hold otherwise would allow the company to collect amounts belonging to the revenue after the scheme and retain them indefinitely, which would be unfair and contrary to the business sense of the statute.

Conclusion: Section 22(1) does not bar recovery of post-scheme sales tax dues not covered by the sanctioned scheme, and the revenue can proceed without obtaining prior consent of the Board for such dues.

Ratio Decidendi: The suspension under section 22(1) applies only to liabilities reckoned or included in the sanctioned rehabilitation scheme and not to liabilities arising thereafter.

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