2004 (7) TMI 362 - HC - Companies Law

Court rules in favor of petitioner, restraining recovery proceedings under Sick Industrial Companies Act

The court ruled in favor of the petitioner, holding that the respondent's actions in pursuing recovery proceedings during pending inquiries and appeals ... Suspension of legal proceedings, etc. Issues:Challenge to execution proceedings for arrears of property tax based on the Sick Industrial Companies (Special Provisions) Act, 1985.Analysis:The petitioner contested execution proceedings initiated by an auction notice for property tax arrears. The respondent claimed unpaid property taxes for specific premises. The petitioner referred to the Sick Industrial Companies (Special Provisions) Act, 1985, asserting a suspension of legal proceedings under section 22 during pending inquiries or schemes. The petitioner communicated this to the Corporation, emphasizing the Act's provisions. Despite this, the respondent proceeded with a warrant of attachment and auction notice, prompting the petitioner to file a writ petition challenging these actions.During the proceedings, the Board for Industrial & Financial Reconstruction (B.I.F.R.) rejected the reference made by the petitioner. Consequently, the petitioner withdrew the initial writ petition and filed an appeal under section 25 of the S.I.C. Act before the Appellate Authority for Industrial & Financial Reconstruction (A.A.I.F.R.). Despite the appeal, the respondent issued a fresh warrant of attachment and auction notice, leading the petitioner to challenge these new notices.The court noted that the respondent's actions during the pending reference and appeal contravened section 22 of the S.I.C. Act, which prohibits recovery proceedings without consent in such circumstances. Citing a Division Bench judgment, the court emphasized that coercive recovery procedures are restricted under the Act. The court also referenced a Supreme Court decision affirming the suspension of proceedings against a company's properties under the Act. The judgment clarified that the rule was made absolute in favor of the petitioner, allowing the respondent to issue fresh notices post the A.A.I.F.R.'s decision, while keeping the petitioner's contentions on merits open. No costs were awarded in the matter.