ORDER
L.N. Ray, Chairman
1. The question involved in this application is whether in the given facts applicant No. 1-company is entitled to the protection of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short, Act of 1985), against proceedings for realisation of sales tax and interest thereon under the Bengal Finance (Sales Tax) Act, 1941 (henceforth referred to as “the Act of 1941”). The application is filed under Section 8 of the West Bengal Taxation Tribunal Act, 1987, enacted under Article 323B of the Constitution of India, being one in the nature of a writ application under Article 226 of the Constitution.
2. Applicant No. 1 is a company incorporated under the Companies Act, 1956, having a jute mill at Sijberia in the district of Howrah. Applicant No. 2 is the managing director and a shareholder of the company. The case of applicant No. 1 is that on September 15, 1987, it was declared a sick company within the meaning of the Act of 1985. The Board for Industrial and Financial Reconstruction (hereinafter referred to as “the BIFR”) appointed the Industrial and Financial Corporation of India as the operating agency (O.A.) to formulate a scheme for revival of the company. As no scheme was forthcoming, applicant No. 2 submitted a scheme, which was accepted and approved by the BIFR in or about February, 1991. However, applicant No. 2 was allowed to reopen the jute mill on January 16, 1991, after thorough renovation, overhaul and capital outlay with an investment of rupees one crore. But the financial institutions failed or neglected to provide finance as per the sanctioned scheme. Hence, the directors of applicant No. 1 faced financial difficulties. The order dated March 17, 1993, of the BIFR will show that the sanctioned scheme could not be implemented for failure of the Bank of India and other financial institutions to release funds or credit facilities. In the meantime, a section of workers started taking various disruptive steps, as a result of which production at the mill remained suspended for the period from November, 1993, to September, 1994. The mill could be reopened on October 1, 1994, after protracted negotiations. On and from October 18, 1994, the activities of the mill again stopped, as a section of workers resorted to an allegedly illegal strike. The mill was reopened on and from December 11, 1994, after a bipartite settlement was arrived at. On September 21, 1994, the BIFR gave certain directions which are at annexure “C”. A writ petition was filed by the applicants in the High Court at Calcutta, inter alia, challenging the said directions. By an interim order passed on September 28, 1994, operation of the BIFR’s directions dated September 21, 1994, and proceedings of Case No. 11 of 1987, before the BIFR were stayed. Assessment cases for the four quarters ending March 31, 1988, under the Act of 1941, and the West Bengal Sales Tax Act, 1954, were taken up for hearing by the Commercial Tax Officer. The representative of the applicants appeared before him on several dates and prayed for adjournments on the ground of closure of the mill since 1987 till January, 1991. But the Commercial Tax Officer refused to grant adjournment and passed ex parte orders of assessment under the said two Acts as well as under, the Central Sales Tax Act, 1956. He also passed ex parte orders for payment of interest on assessed taxes. The assessment orders were passed allegedly on the basis of mere surmises and conjectures. The applicants were not given opportunity to produce necessary documents. Several appeals have been preferred by the applicants before the Assistant Commissioner, Commercial Taxes, against the said assessments. The case of the applicants is that under the scheme sanctioned by the BIFR a substantial amount is payable by the Government of West Bengal on account of sales tax loan. By a letter dated June 15, 1992, the applicants wrote to the Assistant Secretary to the Government of West Bengal requesting disbursement of that loan in order to tide over the problems they were facing in relation to the sales tax authorities. A request was also made to the State Government to keep the sales tax cases in abeyance till sanction of the said loan. By letter dated July 9, 1992, the Deputy Secretary to the Government of West Bengal informed the Additional Commissioner, Commercial Taxes, that sanction of the sales tax loan for payment of arrears of sales tax, raw jute tax and interest up to December 31, 1990 was under consideration under the scheme approved by the BIFR and it would be disbursed to the company after completion of necessary formalities. He also requested, the Additional Commissioner to keep in abeyance the proceedings initiated against the company, if possible. That letter dated July 8, 1992 is annexure “G-1”. In or about December, 1992, the applicants received a letter dated December 1, 1992, annexure “H”, from the State Government wanting to know particulars of financial assistance, if any, released by financial institutions/banks under the BIFR scheme. Meanwhile, appeals being Nos. A1002, 1003 and 1004 filed by the applicants before the Assistant Commissioner relating to the ex parte orders of assessment of interest were dismissed on June 23, 1993, on the ground that the applicants did not pay the admitted amount of interest. Then the applicants preferred three revision cases before the West Bengal Commercial Taxes Tribunal (since re-designated as the West Bengal Commercial Taxes Appellate and Revisional Board). Those revision cases are still pending. The appeals preferred against assessment of tax are also pending. Respondent No. 4, Commissioner of Commercial Taxes was informed of the fact that applicant No. 1 is a sick company and as per the scheme sanctioned by the BIFR under the Act of 1985, a substantial sum is payable by the State Government on account of sales tax loan which had not been disbursed. In or about May, 1996, the applicants received a certificate of demand from the office of respondent No. 1. It appears therefrom that Certificate Case No. 9ST/AW/1996-97 has been initiated for non-payment of tax and interest for the period of four quarters ending March 31, 1988, under the Act of 1941. The applicants informed respondent No. 1 of the fact that it is a sick company under the Act of 1985 and the certificate cases should be stayed. On or about December 7, 1996, the applicants came to know that a notice had been issued by respondent No. 1 prohibiting operation of bank account with UCO Bank, Hastings Branch, Calcutta, under Certificate Cases Nos. 9 and 10 ST/AW/1996-97. As a result of the notice, the applicants are unable to operate the said bank account. Under Section 22(1) of the Act of 1985, no such action can be taken against the applicants. They apprehend that similar certificate case will be initiated for recovery of tax under the West Bengal Sales Tax Act, 1954. Because of Certificate Case No. 9 ST/AW/1996-97 and attachment of the bank account, allegedly the applicants’ right to carry on trade and business guaranteed under Article 19(l)(g) of the Constitution has been seriously affected.
3. The applicants had moved a writ application against certificate cases being Nos. 9 and 10 ST/AW/1996-97 and the letter dated November 28, 1996, in the High Court at Calcutta, on December 16, 1996. The High Court refused to pass any order with regard to Certificate Case No. 9 ST/ AW/1996-97, relating to tax under’the Act of 1941. That court also dealt with the notice dated November 28, 1996, in so far as it related to tax under the Central Sales Tax Act, 1956. The High Court gave liberty to the applicants to move an application before this Tribunal in respect of tax under the Act of 1941, The applicants preferred an appeal before a Division Bench of the High Court against the said order dated December 16, 1996, passed by the learned single judge, but the Division Bench refused to interfere with that order.
4. The applicants have prayed for a declaration that Certificate Case No. 9 ST/AW/1996-97 and the impugned notice dated November 28, 1996, issued by respondent No. 1 prohibiting operation of the bank account with UCO Bank, Hastings Branch, may be declared to be invalid and void and for a direction to forthwith rescind the said certificate case and the said notice. A prohibitory order in the same terms is also prayed for.
5. The subject-matter of this application is Certificate Case No. 9 ST/AW/ 1996-97, relating to realisation of assessed tax and interest under the Act of 1941 in respect of the period of four quarters ending March 31, 1988 (see paragraph 29 of the application). There is also a prayer for an order of restraint relating to realisation of tax and interest under the West Bengal Sales Tax Act, 1954, though no certificate proceeding has yet been initiated therefor [see prayer (d)]. It may be observed at this stage that this Tribunal exercises the jurisdiction as a substitute of the High Court in relation to matters falling under the Act of 1941, and the West Bengal Sales Tax Act, 1954 ; but it does not exercise jurisdiction in relation to assessment of tax or interest on such tax under the Central Sales Tax Act, 1956.
6. The only contention of learned counsel for the applicants is that the certificate case could not be initiated and the order dated November 28, 1996 could not be validly issued on UCO Bank prohibiting operation of the bank account in view of the fact that the applicants are entitled to protection under Section 22 of Act of 1985, with reference to the scheme sanctioned by the “BIFR. The question, therefore, is whether in the facts of the case the applicants are entitled to the protection of Section 22.
7. It is undisputed that the applicants obtained an interim order dated September 28, 1994, from the High Court, Calcutta, by which the operation of the. directions given by the BIFR in its order dated September 21, 1994, was stayed. That order is annexure “C”. In paragraph 16 of the said order dated September 21, 1994, the BIFR observed: “There is no agreed viable scheme for rehabilitation of the company”. The BIFR also gave, inter alia, a direction to the effect that within six weeks the State Government would submit an agreed rehabilitation scheme through the O.A. after holding discussions and consultations with representatives of the workers, banks and financial’ institutions. This order was stayed by the High Court. On a perusal of annexure “A” and paragraph 4 of the application there is no doubt that a scheme was sanctioned for rehabilitation of applicant No. 1-company by the BIFR in February, 1991. The IFCI was required to confirm to the BIFR within six weeks that the scheme had been fully implemented. It also appears from annexure “B”, the order of the BIFR dated March 17, 1993 (see paragraph 8 of the application), that the BIFR was dissatisfied over non-implementation of the scheme during the period of two years. It was submitted before the BIFR that the IFCI (O.A.) would undertake a fresh techno-economic viability study of the company and work out a revised rehabilitation scheme keeping in view the measures listed in Sections 18 and 19 of the Act of 1985, and “currently applicable parameters as regards the rate of interest and promoter’s contribution, etc., within 10 weeks”. The BIFR also said that the cut-off date for revised scheme should be March 31, 1993. The present applicant No. 2 was directed by the BIFR to give provisional accounts of the company for the year ending March 31, 1993, to the IFCI by April 15, 1993. Thereafter, in September, 1994, the order at annexure “C” was passed by the BIFR which was stayed by the High Court.
8. The order at annexure “B”, dated March 17, 1993, was not a subject-matter of the writ application before the High Court, and hence it was not stayed. It is clear from the order of the BIFR dated March 17, 1993, that the rehabilitation scheme which was approved by the BIFR by its order at annexure “A”, had lapsed and fallen through and was not in existence on March 17, 1993. For that reason, the BIFR had to give a direction for submission of a revised scheme for rehabilitation by March 31, 1993. It is nobody’s case that any revised scheme was submitted after March 17, 1993.
9. Mr. Bhaskar Sen, learned counsel for the applicants, submitted that the scheme which was approved by the BIFR by annexure “A” was in operation and hence Section 22 of the Act of 1985 is attracted to the instant case. That being so, the certificate case and the consequential order on the bank could not be validly initiated or issued. Mr. K. K. Saha, learned counsel for the respondents, on the contrary, submitted that it is clear from annexure “B” (order of the BIFR dated March 17, 1993) and the averments in the present application that the scheme which was approved by the BIFR had failed and had not been implemented. Therefore, according to him, the position was that as on March 17, 1993, and thereafter, there was no approved scheme in operation regarding rehabilitation of the company. Mr. Sen, counsel for the applicants, submitted that Section 22(1) will be attracted because in this case a sanctioned scheme is under implementation. We have already seen that the sanctioned scheme had failed due to non-implementation and hence on March 17, l”993, a direction was given by the BIFR for submission of a revised scheme by March 31, 1993. It is not in dispute that no such revised scheme was submitted. It has not been contended before us by the applicants that the order dated March 17, 1993 was in any way modified or extended. Therefore, no scheme was under preparation after March 31, 1993, in terms of Section 17 and there is no doubt that no scheme was also under consideration after March 31, 1993. Section 22(1) envisages protection from proceedings for execution, distress or the like against properties of an industrial company under certain specified circumstances. It is not a case where an enquiry under Section 16 is pending, nor is it so claimed. The other preconditions for application of Section 22(1) are that a scheme under Section 17 should be under preparation or consideration, or a sanctioned scheme should be under implementation or an appeal under Section 25 should be pending. It is not claimed that any appeal under Section 25 is pending in this case. We have seen that no scheme was under preparation or consideration under Section 17 after March 31, 1993. Mr. Bhaskar Sen did not even claim in the course of his arguments that there was any scheme under preparation or consideration under Section 17 after March 31, 1993. We may keep in mind that the order of the BIFR at annexure “C” was stayed by the High Court. The fact that the BIFR wanted a revised scheme, clearly indicates that the earlier sanctioned scheme had failed and there was no question of its implementation any more. In paragraph 8 of the application it is admitted that the financial institutions and Bank of India prevented implementation of the sanctioned scheme by failing to release the envisaged funds or to grant credit facilities.
10. Thus, in our opinion, none of the pre-requisites of Section 22(1) of Act of 1985, exists in the instant case so that it can be held by us that respondent No. 1 was prevented by Section 22(1) from initiating the Certificate Case No. 9ST/AW/1996-97 or from issuing the impugned letter dated November 28, 1996, prohibiting operation of the bank account with UCO Bank, Hastings Branch, That being the position, the applicants are not entitled to the protection of Section 22 of Act of 1985, and no declaration, direction or prohibitory order can be passed by us, as prayed for.
11. In the result, the application is dismissed without any order for costs.
J. Gupta, Judicial Member
12. I agree.
M. K. Kar Gupta, Technical Member
13. I agree.