Sick industrial company protection bars coercive tax recovery without prior Board consent under the special rehabilitation statute.

Coercive recovery of tax arrears against a sick industrial company is barred during the operation of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, including while an appeal is pending and a winding-up order has been stayed. Recovery proceedings may proceed only if the competent Board or appellate authority gives prior consent. In the absence of such consent, distraint and similar enforcement action are inconsistent with the statutory protection afforded to the sick company, and the impugned recovery action is liable to be set aside.

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Issues: Whether distraint and coercive recovery proceedings for tax arrears could be initiated against a sick industrial company during the subsistence of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 and pending appeal before the appellate authority.

Analysis: The petitioner was declared a sick industrial company and the Board for Industrial and Financial Reconstruction had directed winding up under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. An appeal under section 25 was pending before the Appellate Authority for Industrial and Financial Reconstruction, and operation of the winding-up order had been stayed. In this situation, section 22(1) operated as a bar against coercive recovery of arrears unless the consent of the Board was obtained. The recovery authority had not secured such consent before issuing the distraint order, and the impugned action was therefore inconsistent with the statutory protection available to a sick company.

Conclusion: The distraint order was quashed and the recovery proceedings were held impermissible without prior consent from the Board or the appellate authority under the special statute.

Ratio Decidendi: Coercive recovery of tax arrears against a sick industrial company is prohibited during the operation of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 unless the competent Board grants consent.

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