Pending sick company inquiry bars coercive tax recovery; 60-day inquiry period is directory, not mandatory.

During a pending inquiry under the Sick Industrial Companies (Special Provisions) Act, 1985, section 22 bars coercive recovery of sales tax dues, and the pendency protection continues until the inquiry concludes. Sections 15, 16 and 22 are read together so that a reference-based inquiry is deemed to commence on receipt of the reference. The 60-day period in section 16(3) is directory, not mandatory, because the Board or operating agency is required only to endeavour to complete the inquiry expeditiously. Recovery notices issued during the inquiry were therefore liable to be quashed, and recovery could proceed only with the required permission.

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Issues: Whether, during the pendency of an inquiry under the Sick Industrial Companies (Special Provisions) Act, 1985, the State could use coercive measures to recover sales tax dues despite the expiry of the 60-day period mentioned in section 16(3) and the protection under section 22.

Analysis: The provisions of sections 15, 16 and 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 were construed together. An inquiry under section 16 is deemed to commence on receipt of the reference, and the protection under section 22 operates while such inquiry is pending. The 60-day period in section 16(3) was held to be directory and not mandatory, since the language requires the Board or operating agency to endeavour to complete the inquiry expeditiously. The Court also applied the Supreme Court authorities holding that recovery proceedings are stayed during pendency of the inquiry, and that the bar is not lifted merely because the inquiry has not been concluded within 60 days. The absence of a sanctioned rehabilitation scheme did not assist the revenue on the facts pleaded.

Conclusion: The respondents could not adopt coercive measures to recover the tax dues during the pendency of the inquiry under the 1985 Act, and the demand notices were liable to be quashed.

Final Conclusion: The writ petition succeeded, the impugned recovery notices were invalidated, and the revenue authorities were restrained from proceeding with recovery except by obtaining permission from the Board.

Ratio Decidendi: Once a reference under the sick industrial companies legislation is registered and an inquiry under section 16 is pending, section 22 bars coercive recovery proceedings, and the stipulated period for completing the inquiry is directory rather than mandatory.

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