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Issues: (i) Whether the Central Government scheme and the State Government's refusal to give guarantee for payment of the sugar cane price differential could be interfered with in writ jurisdiction. (ii) Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 barred recovery of sugar cane dues and other coercive steps for liabilities arising after the cut-off date during the pendency of rehabilitation proceedings.
Issue (i): Whether the Central Government scheme and the State Government's refusal to give guarantee for payment of the sugar cane price differential could be interfered with in writ jurisdiction.
Analysis: The scheme framed by the Central Government was directed to clearing cane price arrears relatable to the statutory minimum price, and in the case of non-performing units it contemplated State Government guarantee. The State Government declined guarantee by relying on Article 293(1) of the Constitution of India. The relief sought was in substance a demand for alteration of policy conditions and for financial support to meet the difference between the statutory minimum price and the State advised price. No legal infirmity, irrationality, or arbitrariness was shown in either the Central or State policy decision.
Conclusion: The challenge to the policy framework and the refusal to grant guarantee was not maintainable and was rejected.
Issue (ii): Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 barred recovery of sugar cane dues and other coercive steps for liabilities arising after the cut-off date during the pendency of rehabilitation proceedings.
Analysis: Section 22 protects a sick company from proceedings that would impede implementation of the rehabilitation scheme. The liabilities in question arose from sugar cane purchases made after the cut-off date fixed in the rehabilitation process. The Court distinguished authorities dealing with pre-scheme liabilities and with claims already absorbed into a sanctioned scheme. It held that a company continuing operations during the pendency of BIFR proceedings cannot refuse to pay for raw material purchased thereafter by invoking section 22. The contractual and statutory obligation to pay for sugar cane within the prescribed time remained enforceable, and coercive recovery was not barred.
Conclusion: Section 22 did not protect the petitioner against recovery of post cut-off date cane dues, and the prayer to restrain coercive recovery was rejected.
Final Conclusion: The writ petition failed in entirety, as the policy challenge was untenable and the statutory protection under the sickness law did not extend to the dues claimed for purchases made after the relevant cut-off date.
Ratio Decidendi: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 protects only those proceedings that would impede a rehabilitation scheme and does not bar recovery of liabilities incurred by a sick industrial company for purchases made after the scheme's cut-off date while the company continues to operate.
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