Section 22 protection under sick company law does not bar recovery of deferred sales tax instalments after default.

A sick industrial company that received deferment and a moratorium on sales tax under a rehabilitation scheme could not invoke section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 to block recovery after defaulting on the deferred instalments. The controlling principle is that section 22(1) is not an absolute embargo on recovery proceedings; its protection depends on the statutory scheme and prior consent requirements, and it cannot be used indefinitely to defeat recovery of amounts the company had undertaken to pay and then failed to pay. Recovery notices for the defaulted deferred sales tax were therefore sustainable.

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Issues: Whether a sick industrial company, which had been granted deferment and moratorium for payment of sales tax under a rehabilitation scheme, could claim immunity under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 against recovery proceedings when it defaulted in payment of the deferred instalments.

Analysis: The deferred sales tax was part of the rehabilitation arrangement and the Government had extended concession by granting deferment and thereafter a moratorium. The company nevertheless failed to pay the instalments that fell due. The controlling principle, drawn from the Supreme Court decisions relied on, was that section 22(1) does not create an absolute bar against recovery action in all cases involving a sick company; what is required is prior consent of the Board for proceedings in cases covered by the section, but the protection cannot be invoked indefinitely to defeat recovery of amounts that the company had already undertaken to pay under the scheme and then defaulted upon.

Conclusion: The company was not entitled to immunity under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, and the recovery notices were sustainable.

Final Conclusion: A defaulting sick company cannot use section 22(1) to indefinitely bar recovery of deferred sales tax instalments payable under an implemented rehabilitation scheme.

Ratio Decidendi: Section 22(1) is not an absolute embargo on recovery proceedings against a sick company, and its protection cannot be used to prevent recovery of instalments due under a rehabilitation scheme after default.

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