Sick company protection under section 22(1) does not cover post-reference sales tax collections payable to the State.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 was confined to dues covered by the pending reference, inquiry, or rehabilitation scheme and did not extend to current sales tax collected after the reference. The Court distinguished pre-reference liabilities, which may fall within the rehabilitation framework, from post-reference tax collections, which belong to the State and cannot be retained by the company. A Board-fixed cut-off date for preparing the viability report and scheme affected only the scheme-preparation process and did not enlarge statutory protection. The State could recover the collected tax without Board consent.

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Issues: Whether section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 bars recovery of sales tax collected by a sick industrial company during the post-reference period and whether the cut-off date fixed by the Board extends protection to such current dues.

Analysis: The reference under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 and the consequent inquiry under section 16 operate only in respect of the subject-matter placed before the Board. The protection under section 22(1) is intended to preserve the status quo in relation to past dues and the matters covered by the pending inquiry or the scheme under preparation or implementation. The Court applied the distinction drawn in earlier authorities between pre-reference dues, which may be brought within the rehabilitation framework, and current sales tax amounts collected by the company after the reference, which belong to the State and cannot be retained by the company. The cut-off date fixed by the Board for preparing a viability report and scheme was held to be relevant to the scheme-preparation exercise and not to enlarge the statutory protection so as to cover post-reference collections of tax. Since the petitioner continued to collect sales tax during the relevant period, the State was entitled to recover those amounts without seeking the Board's consent.

Conclusion: Section 22(1) did not protect the petitioner against recovery of sales tax collected in the post-reference period, and the challenge to the recovery action failed.

Final Conclusion: The statutory protection under the sick companies legislation was confined to dues covered by the reference and could not be used to withhold current tax collections from the State.

Ratio Decidendi: The bar under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 applies only to dues covered by the pending reference or scheme and does not extend to taxes collected by the company after the reference, which are legitimately payable to the Revenue.

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