Section 22 protection under sick-company law does not bar recovery of unremitted sales tax arrears linked to statutory liability.

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was held not to bar recovery of sales tax arrears on the facts presented, because the demand concerned tax collected from customers but not remitted to the Department after the rehabilitation scheme, which was treated as a statutory liability outside the claimed protection. The Court read Raheja Universal Limited as consistent with Corromandal Pharmaceuticals, holding that paragraph 52 of Raheja preserved the earlier principle and that paragraphs 55 and 56 only explained the reach of Section 22 in relation to matters connected with a sanctioned rehabilitation scheme. It also noted that the earlier Division Bench decision did not address this distinction and was not a precedent on the point.

---

---

Issues: Whether recovery of sales tax arrears from a company declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 was barred by Section 22 of that Act in the facts of the case, and whether the later decision in Raheja Universal Limited diluted the earlier rule in Corromandal Pharmaceuticals.

Analysis: The Court held that the later decision in Raheja Universal Limited did not depart from the principle laid down in Corromandal Pharmaceuticals. It read paragraph 52 of Raheja Universal as consistent with Corromandal Pharmaceuticals, and held that paragraphs 55 and 56 merely explained the scope of Section 22 in relation to matters connected with the sanctioned rehabilitation scheme. The Court further distinguished the facts before it, noting that the demand related to sales tax collected from customers but not remitted to the Department after the rehabilitation scheme, which was a statutory liability outside the protective ambit claimed by the appellant. The Court also found that the earlier Division Bench decision did not consider this distinction and therefore did not constitute a precedent on the point.

Conclusion: The Court held that Section 22 did not bar recovery of the sales tax arrears in the facts of the case, and that Corromandal Pharmaceuticals continued to govern the issue.

---