2006 (6) TMI 122 - HC - Central Excise

Court bars attachment of petitioner's properties for excise duty recovery without BIFR consent

The court ruled that the respondents could not attach the properties of the petitioner company for the recovery of excise duty without the consent of the ... Suspension of legal proceedings under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 - Consent of the Board for execution, distress or attachment against properties of a sick industrial company - Effect of declaration of a company as sick and appointment of an operating agency under Section 17(3) - Enforcement of revenue dues during preparation or consideration of a rehabilitation schemeSuspension of legal proceedings under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 - Consent of the Board for execution, distress or attachment against properties of a sick industrial company - Effect of declaration of a company as sick and appointment of an operating agency under Section 17(3) - Whether respondents could attach the properties of the petitioner-company after it was declared a sick company and an operating agency was appointed, for recovery of excise duty. - HELD THAT: - The Court held that Section 22 operates to suspend proceedings for execution, distress or the like against the properties of an industrial company where an inquiry under Section 16 is pending, a scheme under Section 17 is under preparation or consideration, a sanctioned scheme is under implementation, or an appeal under Section 25 is pending. The prohibition operates notwithstanding other laws and bars execution or attachment except with the consent of the Board or the Appellate Authority. In the present case a scheme was under preparation and an operating agency had been appointed under Section 17(3); accordingly the respondents were not entitled to attach the petitioner's properties without the Board's consent. The Court considered and followed Supreme Court authorities that interpret Section 22 as creating an automatic suspension of such proceedings from the relevant stage of the Act and distinguished authorities relied on by respondents to the extent they are limited to amounts covered by a sanctioned scheme (where the scheme is yet to be sanctioned, those limitations do not assist the respondents). [Paras 14, 19]Impugned attachment order quashed; respondents may pursue remedies only after obtaining the Board's permission.Final Conclusion: Writ petition allowed: attachments made after declaration of the company as sick and while a scheme was under preparation were invalid under Section 22 of the Act; respondents may proceed further only with the consent of the Board. Issues Involved:1. Whether the respondents could attach the properties of the petitioner for the purpose of recovery of excise duty.2. The applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 in prohibiting such attachment.Issue-wise Detailed Analysis:1. Attachment of Properties for Recovery of Excise Duty:The petitioner, a company engaged in manufacturing heavy engineering equipment, was declared a sick company by the Board for Industrial and Financial Reconstruction (BIFR) on 6-10-2005. The respondents initiated attachment proceedings on 16-1-2006 and 27-1-2006 to recover excise duty dues. The petitioner argued that after being declared a sick company and the appointment of the State Bank of India as the operating agency, the respondents could not enforce their claims against the company. The respondents contended that there was no provision in the Act that prevented them from enforcing the claim of excise duty, which became due at the time of production.2. Applicability of Section 22 of the Act:Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, suspends legal proceedings, contracts, etc., against a sick industrial company without the consent of the BIFR. The court examined whether the attachment of the petitioner's properties for recovery of excise duty fell under the purview of this section. Section 22(1) states that no proceedings for execution, distress, or the like against any properties of the industrial company shall lie or be proceeded with further, except with the consent of the Board or the Appellate Authority, during the pendency of an inquiry under Section 16 or the preparation or implementation of a scheme under Section 17.The court referred to several Supreme Court judgments to interpret Section 22:- In *The Gram Panchayat v. Shree Vallabh Glass Works Ltd.*, the Supreme Court held that proceedings for execution, distress, or the like against the properties of a sick industrial company are automatically suspended once an inquiry under Section 16 is ordered by the Board.- In *Real Value Appliances Ltd. v. Canara Bank*, the Supreme Court emphasized that no proceedings against the assets of a company should be taken before a final decision is given by the BIFR.- In *M/s. Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd.*, it was reiterated that the effect of Section 22 would be applicable even after a winding-up order is passed, as no proceedings can be continued without the consent of the Board.The respondents cited *Dy. Commercial Tax Officer v. Corromandal Pharmaceuticals*, where the Supreme Court held that the bar under Section 22 applies only to dues included in a sanctioned scheme. However, this judgment was distinguished in *Tata Davy Ltd. v. State of Orissa* and did not apply to the present case, as the scheme for the petitioner company was yet to be sanctioned.Conclusion:The court concluded that the respondents could not attach the properties of the petitioner company without the consent of the BIFR, as a scheme under Section 17 was under preparation. Therefore, the writ petition was allowed, and the impugned attachment order was quashed. However, the respondents were granted the liberty to seek remedies available in law after obtaining permission from the Board.