2012 (4) TMI 548 - HC - VAT and Sales Tax

Court upholds validity of attachment notice under A.P. Revenue Recovery Act, 1864, dismissing writ petition.

The court dismissed the writ petition challenging a notice of attachment under the A.P. Revenue Recovery Act, 1864, as illegal and contrary to SICA ... Notice of attachment challenged - bar of recovery proceedings under section 22 of the SICA - Held that:- Upon failure of the company to comply with the notice issued by them under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), they have taken over the possession of the movable and immovable assets of the company on January 22, 2005 under section 13(4) of the SARFAESI. All that is required by section 22(1) of the Act is that in cases where an inquiry is pending or scheme is under preparation or consideration or a sanctioned scheme is under implementation or an appeal is pending, no proceedings, as stated in section 22 of the Act for execution, distress or the like, shall be proceeded with except with the consent of the Board or as the appellate authority. What is contemplated by section 22(1) of the Act is only a previous consent of the Board for the proceedings to be initiated against a sick company. It is not an absolute bar. Appeal dismissed. Issues:Challenge to notice of attachment under A.P. Revenue Recovery Act, 1864 as illegal, arbitrary, and contrary to SICA provisions.Detailed Analysis:1. Challenge to Notice of Attachment:The writ petition challenged a notice of attachment issued under section 27 of the A.P. Revenue Recovery Act, 1864, as illegal, arbitrary, and contrary to the provisions of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The petitioner had availed loans from ICICI bank and IDBI, leading to a complex legal battle involving the BIFR, DRT, DRAT, and the High Court. The BIFR's order abating the reference due to non-compliance with SARFAESI Act provisions was a crucial point in the case.2. Bar of Recovery Proceedings under SICA:The primary argument centered around whether section 22 of the SICA bars recovery proceedings. The court analyzed the legal precedence, including the non obstante clause in section 16C of the APGST Act, creating a first charge in favor of the Government for sales tax arrears. Reference was made to the Central Bank of India case, where the Supreme Court upheld the State's first charge over bank dues. The court also cited the Andhra Pradesh State Financial Corporation case, affirming the validity of section 16C of the APGST Act.3. Interpretation of SICA Provisions:The court delved into the interpretation of section 22(1) of the SICA, emphasizing that the provision does not create an absolute bar on recovery proceedings. Citing the Corromandal Pharmaceuticals case, the court highlighted the need for consent from the Board for proceedings against a sick company. The counsel's contention regarding the clarification in subsequent cases like Tata Davy Ltd. and Raheja Universal Limited was dismissed, upholding the principles established in the Corromandal Pharmaceuticals case.4. Final Judgment:Ultimately, the court dismissed the writ petition and the miscellaneous petition without any order as to costs. The decision was based on the analysis that the notice of attachment was not faulted, considering the legal framework and precedents related to recovery proceedings, first charges on property, and the interpretation of SICA provisions. The court's detailed examination of the legal arguments and precedents led to the dismissal of the petition.In conclusion, the judgment provided a comprehensive analysis of the issues raised, focusing on the legality of the notice of attachment, the applicability of SICA provisions, and the precedence set by relevant legal cases. The court's decision was grounded in a thorough examination of the legal framework and established principles, resulting in the dismissal of the petition challenging the notice of attachment.