Rehabilitation scheme protection bars coercive sales tax recovery against a sick industrial company without Board consent.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 bars execution, distress and similar coercive recovery measures against a sick industrial company while a sanctioned rehabilitation scheme is under implementation, unless the Board for Industrial and Financial Reconstruction or the appellate authority gives consent. That embargo operates independently of section 19, which concerns reliefs, concessions and tax treatment within a rehabilitation scheme and does not narrow the protection against recovery action. Recovery proceedings under section 17 of the Andhra Pradesh General Sales Tax Act, 1957 are coercive in nature and fall within the statutory suspension. Sales tax recovery could therefore not proceed without Board consent.

---

---

Issues: Whether, while a sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 was under implementation, the sales tax authorities could continue or initiate coercive recovery proceedings under the Andhra Pradesh General Sales Tax Act, 1957 without the consent of the Board for Industrial and Financial Reconstruction.

Analysis: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 operates notwithstanding anything contained in any other law and suspends proceedings for execution, distress or the like against the properties of a sick industrial company when a sanctioned scheme is under implementation. The provision is intended to protect the revival process and prevents coercive recovery measures unless the Board or appellate authority grants consent. Section 19 deals with reliefs, concessions, sacrifices, or deferred tax treatment that may be incorporated in a rehabilitation scheme with consent of the concerned Government, but that does not dilute the independent embargo created by section 22(1) against coercive recovery. Recovery action under section 17 of the Andhra Pradesh General Sales Tax Act, 1957 is a coercive step within the reach of section 22(1).

Conclusion: The sales tax recovery proceedings could not be pursued without the consent of the Board for Industrial and Financial Reconstruction, and the objection to coercive recovery succeeded.

---