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Issues: (i) Whether coercive recovery proceedings for property tax dues could be taken against the properties of a sick industrial company in view of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. (ii) Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 could be questioned as encroaching upon the taxing powers of the Gram Panchayat under the Bombay Village Panchayats Act, 1958.
Issue (i): Whether coercive recovery proceedings for property tax dues could be taken against the properties of a sick industrial company in view of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Analysis: Section 22(1) stays proceedings for execution, distress or the like against the properties of an industrial company when an inquiry under section 16 is pending or a scheme under section 17 is under preparation, consideration or implementation. The recovery machinery under the Bombay Village Panchayats Act, 1958 would necessarily involve attachment and sale of the company's properties, which amounts to coercive recovery within the meaning of the statutory bar. Section 22(3) does not control the sweep of section 22(1), because the two sub-sections operate at different stages and in different contexts.
Conclusion: The recovery proceedings were barred by section 22(1), and the company was entitled to protection against coercive recovery absent the Board's consent.
Issue (ii): Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 could be questioned as encroaching upon the taxing powers of the Gram Panchayat under the Bombay Village Panchayats Act, 1958.
Analysis: The taxing power of the Gram Panchayat to levy property tax under the State law remained intact. Section 22 affected only the mode of recovery, not the power to impose the tax. Since the impugned central enactment was traceable to Parliament's legislative field under Article 246, any incidental impact on the State field did not invalidate it. On the principle of pith and substance, the central law prevailed, and incidental trenching upon the State law did not destroy its validity.
Conclusion: The challenge to the central provision on grounds of legislative incompetence failed, and the provision was not required to be read down.
Final Conclusion: The petitioners succeeded because the recovery of the Gram Panchayat's dues from the sick industrial company could not proceed without the Board's consent, while the company's taxing liability itself remained unaffected.
Ratio Decidendi: Where a central law validly enacted in its own legislative field imposes a bar on coercive recovery against the properties of a sick industrial company, that bar prevails notwithstanding an incidental effect on State or local taxing recovery powers, and the tax-levying power itself remains unimpaired.
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