Section 22 SICA protection requires an active rehabilitation process before recovery proceedings are barred

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applies only where a statutory trigger is actually in existence, such as a pending inquiry, scheme preparation or consideration, implementation of a sanctioned scheme, or a pending appeal. Where the earlier rehabilitation scheme has failed, has not been implemented, and no revised scheme is under preparation or consideration, the protective bar against recovery proceedings does not operate. On that basis, certificate proceedings for sales tax recovery and the restraint on operation of the bank account were not invalidated by section 22.

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Issues: Whether the applicants, as a sick industrial company, were entitled to the protection of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 against initiation of certificate proceedings and prohibition of operation of their bank account for recovery of sales tax and interest.

Analysis: Protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applies only when one of the statutory conditions exists, namely pendency of an inquiry under section 16, preparation or consideration of a scheme under section 17, implementation of a sanctioned scheme, or pendency of an appeal under section 25. The record showed that the earlier sanctioned rehabilitation scheme had failed and had not been implemented. The Board for Industrial and Financial Reconstruction had required a revised scheme, but none was submitted and no scheme was under preparation or consideration after the relevant date. In these circumstances, the statutory foundation for invoking the protective bar against recovery proceedings was absent.

Conclusion: The applicants were not entitled to protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and the certificate proceedings and the impugned bank account restraint were not invalid on that ground.

Ratio Decidendi: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 is attracted only when the specific statutory preconditions are actually in existence; where the sanctioned rehabilitation scheme has failed and no scheme is under preparation, consideration, or implementation, recovery proceedings are not barred.

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