Court grants relief by staying impugned notices under Income-Tax Act, directs deposit undertaking balancing interests.

The court granted the petitioner relief by staying the impugned notices under section 226(3) of the Income-Tax Act, 1961, regarding payment of arrears held by banks. The court directed the petitioner to file an undertaking to deposit an amount equal to the current bank account balance if the petition failed, protecting the petitioner from immediate payments but ensuring provision for potential liabilities. The court emphasized the need to balance the interests of the petitioner and the revenue, considering the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, and the implications of the notices while providing interim relief and guidance for future proceedings.

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Issues involved:
Challenge to notices under section 226(3) of the Income-Tax Act, 1961 regarding payment of arrears held by banks for the petitioner. Interpretation of provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) regarding coercive actions for recovery of outstanding dues. Consideration of interim relief and attachment of bank accounts to protect the interest of revenue and the petitioner.

Detailed Analysis:
The petitioner sought permission to delete the first respondent-Union of India, which was granted. The challenge in the petition was against notices issued to banks under section 226(3) of the Income-Tax Act, 1961, to pay the amount held for the petitioner as arrears. An order had directed no payment by the bank to the Department, but the petitioner was not allowed to operate the bank accounts.

The petitioner's counsel argued that being registered as a sick industrial company under SICA, no coercive action for recovery of dues should be taken. Reference was made to a previous court decision for interim relief in a similar case. The petitioner requested modification of the interim relief to operate bank accounts.

The respondent's counsel opposed, emphasizing the substantial amount due as income tax and the need to consider the revenue's interest. Reference was made to a Supreme Court decision regarding payment obligations of a sick company. Suggestions were made for maintaining a certain amount in bank accounts or continuing the attachment.

The petitioner's counsel argued against full disclosure of bank account details at this stage, agreeing to provide if required later. The court found the matter needing consideration and issued a rule. The court protected the petitioner from making payments but allowed the petitioner to furnish an undertaking for a possible deposit in case of an unfavorable outcome.

The court opined that continuing the attachment of bank accounts would be contrary to SICA provisions and not serve any purpose. It directed the petitioner to file an undertaking to deposit an amount equal to the current bank account balance if the petition failed. The impugned notices were stayed until the final disposal of the petition, with the petitioner required to provide the undertaking.

In conclusion, the court balanced the interests of the petitioner and the revenue, considering the legal provisions of SICA and the implications of the notices under the Income-Tax Act, 1961, while providing interim relief and guidance for future actions in the case.

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