Mount Shivalik Industries Limited vs State of Rajasthan and Others

Mohammad Rafiq, J.—This writ petition has been filed by petitioner challenging four show cause notices dated 13.01.2015, by which respondent department called upon petitioner to pay total demand of Rs. 15,34,99,008/-.

Shri Sagar Mal Mehta, learned Senior Counsel appearing for petitioner, argued that petitioner is a Company carrying on business of manufacture and sale of beer at its factory situated at Gunti, Tehsil Behror, Distrait Alwar. It is registered under both the RVAT Act and CST Act. On the basis of reports of survey conducted in factory premise of petitioner Company, respondents have passed assessment order dated 08.03.2014 and also issued recovery notice of disputed demand on 07.04.2014. Since capital of petitioner Company completely ruined, they approached the Board for Industrial and Financial Reconstruction (for short, ''the BIFR'') on 28.02.2014 by filing reference application under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Reference filed by petitioner before the BIFR was registered as Case No. 24/2014, which fact has been confirmed to the petitioner by the BIFR vide letter dated 11.06.2014, which has been placed on record as Annexure-4. Petitioner Company filed a supplementary application dated 11.07.2014 before the BIFR, wherein they have incorporated the demand of sales tax. Even though petitioner company submitted a representation dated 28.07.2014 before the Assistant Commissioner, Commercial Taxes Department, informing about pendency of reference before the BIFR and initiation of inquiry thereabout. It was requested in that representation not to proceed to take any coercive action. The BIFR issued notices dated 29.08.2014 and 02.01.2015 for hearing, wherein name of Commissioner, Commercial Taxes, Rajasthan, Jaipur, was mentioned in the list enclosed to the said notice at serial No. 8. Even then, the Assistant Commissioner has issued repeated notices to the petitioner for effect recovery of aforesaid demand. Reference is made to Notices Annexure Nos. 9, 11 and 13 to 16. Petitioner company submitted representation to the Assistant Commissioner on 19.01.2015 to withdraw the notices and not to press for recovery.

Learned Senior Counsel for petitioners has cited judgment of the Supreme Court in Real Value Appliances Ltd. Etc. v. Canara Bank and Others - Real Value Appliances Ltd. Vs. Canara Bank and Others, , and argued that the Supreme Court in aforesaid case held that Section 22 of the Act deals with suspension of legal proceedings, contracts etc., where an inquiry under section 16 is pending or any scheme under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 is pending before the appellate authority (AAIFR). The Supreme Court, while concurring with view expressed by various High Courts, held that once reference is registered after scrutiny, it is mandatory for the BIFR to conduct an inquiry. If one looks at the format of reference as prescribed in the Regulations, it will be clear that it contains more than fifty columns regarding extensive financial details of the Company''s assets, liabilities, etc. Indeed, it would be practically impossible for the BIFR to reject a reference outright without calling for information/documents or without hearing the Company or other parties. The Act is intended to revive and rehabilitate sick industries before they can be wound up under the Companies Act, 1956. Whether the Company seeks a declaration that it is sick or some other body seeks to have it declared as a sick Company, it is necessary that the Company be heard before any final decision is taken under the Act. The legislative intention is to see that no proceedings against the assets are taken before any such decision is given by the BIFR in case the Company''s assets are sold, or the company wound up it may indeed become difficult later to restore the status quo ante. The Supreme Court, in that judgment referring to Regulation 19(5) of the Regulations, held that according thereto it is necessary that simultaneously with registration of reference, information/documents are to be called for from informant, the inquiry must be deemed to have commenced under section 16 of the Act at that stage itself, namely, at stage of second part of Regulation 19(5) and it is no longer permissible to say that such a stage is reached only when the BIFR issues notices and starts an inquiry under Regulation 20 calling for additional information ''in relation to the inquiry'' or only when orders are passed by the BIFR under Regulation 21, read with section 16(1).

Learned counsel has cited judgment dated 22.11.2013 of this court in M/s. Samleshwari Packaging Pvt. Ltd. v. A.V.V.N.L. and Others - S.B. Civil Writ Petition No. 18270/2011, wherein, in similar circumstances, the Ajmer Vidyut Vitran Nigam Limited was restrained from making recovery from petitioner in said case because of pendency of appeal before AIFR against judgment of the BIFR with liberty to them to approach the AIFR for effecting recovery or till petitioner Company ceases to be sick industry.

Shri R.B. Mathur, learned counsel appearing for respondent Department, submitted that petitioner has already filed appeal before the Appellate Tribunal under the CST Act against impugned demand and, therefore, gave up the kind of prayer the writ petition has been filed the petitioner approached to that Tribunal rather filing of writ petition. The writ petition be dismissed as not maintainable. Alternatively, his submission is that as far as the creditors of the petitioner Company are concerned, there should be no impediment for the respondents in proceeding against them, who owes money to the petitioner, therefore, this court may not restrain the respondent Department in proceeding further.

I am afraid the plea of respondent Department cannot be upheld as it would tantamount to breach of mandate of Section 22 of the Act, which, inter-alia, provides for suspension of legal proceedings, contracts etc. If at all the respondents intend to press for recovery of impugned demand, they ought to approach the BIFR, which, in any case, they would be required to approach because already, it is informed that BIFR has issued notice to them. It is up to the BIFR to consider any such request and pass appropriate order thereabout.

In view of above, the present writ petition is disposed of. The respondents are restrained from enforcing the demand notices against petitioner until the appropriate orders allowing them to do so, are passed by the BIFR.