Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 bars any proceedings for execution, distress, or the like against a sick industrial company without the consent of the Board for Industrial and Financial Reconstruction.

V.S. Kokje, J.

1. In this case a show-cause notice was issued and in response a reply has been filed on behalf of the respondents. Rejoinder to the reply has also been filed on behalf of the petitioner. The only short point is involved in the case and, therefore, with the consent of the parties the case was heard finally. The point is whether Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short "the Act"), bars the impugned action of recovery of arrears of sales tax from petitioner No. 1-company. It is not in dispute that a reference under Section 15 of the Act was made to the Board for Industrial and Financial Reconstruction in respect of petitioner No.1-Company and a Reference Case No. 125 of 1991 was registered by the Board for Industrial and Financial Reconstruction. It is also not in dispute that on July 13, 1992, the Board for Industrial and Financial Reconstruction disposed of the case by passing an order declaring the petitioner company to be a sick industrial company within the meaning of Section 3(1)(o) of the Act. It is also not in dispute that pursuant to the order passed by the Board for Industrial and Financial Reconstruction, the Industrial Credit and Investment Corporation of India Ltd. has been appointed as the operating agency for examining the viability and to prepare the scheme for revival/rehabilitation of the company, if possible.

2. In the aforesaid circumstances the petitioner contends that distress sale of the properties of the company for realising sales tax dues cannot be ordered in view of Section 22(1) of the Act. The respondents, however, contend that the said section is not attracted as what the respondents have done is to demand legitimate dues of arrears of sales tax. It is also contended that the petitioners cannot be allowed to go on collecting sales tax from the parties to whom they sell the goods and keep it with themselves. It is also complained that the petitioners never told the authorities assessing the sales tax that they have gone to the Board for Industrial and Financial Reconstruction.

3. We have heard Shri M.S. Choudhary, learned counsel for the petitioners and Shri M.G. Upadhyaya, learned Deputy Advocate-General for the State and have perused the record. Section 22(1) of the Act reads as under :

"22. Suspension of legal proceedings, contracts, etc.--(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956, or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority."

4. The petitioners have filed as annexure P-2 a scheme prepared for rehabilitation or revival of the petitioner company. It is, therefore, clear that in compliance with the order of the Board for Industrial and Financial Reconstruction dated July 12, 1992 (annexure P-3 to the petition, para 12 of the order), the Industrial Credit and Investment Corporation of India Ltd. submitted its report to the Board for Industrial and Financial Reconstruction which shows that a scheme under Section 17 of the Act is under preparation or consideration in respect of petitioner No. 1-company. This is sufficient to attract the bar under Section 22(1) of the Act.

5. The next question is whether the impugned action is barred by Section 22(1) of the Act. It was contended t