Sick company protection under Section 22 bars attachment and penalty recovery, while director liability needs express statutory authority.

Section 22 of the Sick Industrial Companies Act, 1985 barred coercive recovery measures against the sick company during the relevant period, so the direction to pre-deposit penalty and the attachment proceedings against its properties were unsustainable. Excise duty collected after reference could be considered for pre-deposit purposes, but penalty stood on a different footing and remained within the statutory protection. The company's director could not be fastened with duty liability or personal penalty in the absence of an express statutory provision, including under rule 26 of the Central Excise Rules, 2002. The impugned pre-deposit, dismissal for non-compliance, and attachment orders were quashed and the appeal restored for merits.

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Issues: (i) whether the protective umbrella of section 22 of the Sick Industrial Companies Act, 1985 barred pre-deposit of penalty and attachment proceedings against a sick company; (ii) whether the duty demand and penalty could be fastened on the director in the absence of a specific statutory provision.

Issue (i): whether the protective umbrella of section 22 of the Sick Industrial Companies Act, 1985 barred pre-deposit of penalty and attachment proceedings against a sick company.

Analysis: The company was under reference before the Board and the statutory protection under section 22 of the Sick Industrial Companies Act, 1985 operated during the relevant period. While excise duty collected from customers after registration of the reference could be taken into account for pre-deposit purposes, the penalty stood on a different footing. Proceedings in the nature of distress or attachment against the property of the sick company were also hit by the statutory bar.

Conclusion: The direction requiring pre-deposit of penalty against the sick company was unsustainable, and the attachment proceedings against its properties were barred.

Issue (ii): whether the duty demand and penalty could be fastened on the director in the absence of a specific statutory provision.

Analysis: The liability for central excise duty of a company cannot be recovered from its director unless the statute specifically so provides. The same approach applied to personal penalty, and the director had made out a prima facie case against the pre-deposit direction in respect of penalty under rule 26 of the Central Excise Rules, 2002.

Conclusion: The duty liability and the penalty could not be fastened on the director in the absence of statutory authority.

Final Conclusion: The impugned orders of pre-deposit, dismissal for non-compliance, and attachment were quashed, and the appeal was restored for decision on merits.

Ratio Decidendi: Section 22 of the Sick Industrial Companies Act, 1985 bars coercive recovery measures, including attachment and penalty enforcement, against a sick industrial company, and a director cannot be made personally liable for the company's duty or penalty without an express statutory provision.

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