Cmm Limited vs Municipal Corporation Of Greater ...
2004 Latest Caselaw 734 Bom

JUDGMENT

S.J. Vazifdar, J.

1. The petitioner impugns the execution proceedings sought to be initiated by an auction notice dated 16th October, 2002 issued by the respondent-Corporation for arrears of property tax.

2. It is not necessary to set out in detail the disputes between the parties regarding the liability of the petitioner to pay the property tax and the quantum thereof. Suffice it to say that the respondent claims that there are arrears of property taxes which ought to have been paid in respect of the property that is the subject matter of the present petition viz. 4th Floor of "B" Wing and "C" Wing of a building named "Paragon Condominium".

3. For the purpose of this order, I shall proceed on the basis that the property tax is due in respect of the said premises from the petitioner.

4. On 28th February, 2001, the petitioner made a reference under Section 15(1) of the Sick Industrial Companies, (Special Provisions) Act, 1985 (hereinafter the "S.I.C. Act"). By a letter dated 28th February, 2001, the Registrar confirmed that the reference made by the petitioner and received on 14th February, 2001 was registered as Case No. 97 of 2001.

5. Correspondence ensued between the parties in regard to the property taxes. By a letter dated 15th March, 2001, the petitioner informed the Corporation regarding registration of the reference under the S.I.C. Act and contended that in view of the provisions of Section 22 thereof, the respondent was not entitled to take any steps for recovery of the said amount. The petitioner's advocates notice dated 23rd March, 2001 was to the same effect.

6. It would be convenient at this stage to set out the provisions of Section 22 of the S.I.C. Act, which reads as under :-

"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 (1 of 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 (and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company) shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority."

7. The respondent issued a warrant of attachment dated 5th August, 2002 in respect of the said premises for non-payment of property taxes in the sum of Rs. 42,00,000/-. The petitioner once again by its letter dated 16th August, 2002 contended that in view of pendency of the registration of the said reference, the respondent was not entitled to execute the warrant of attachment.

8. The respondent however issued the impugned notice dated 16th October, 2002, stating that in view of the petitioner's failure to pay the said amount, the respondent would advertise the property for sale by public auction without further reference to the petitioner.

9. In these circumstances, the petitioner was constrained to file Writ Petition No. 2821 of 2002 challenging the said notice dated 16th October, 2002. By an interim order dated 29th October, 2002, the operation of the said notice dated 16th October, 2002 was stayed.

10. It appears that thereafter the B.I.F.R. by an order dated 27th November, 2002 rejected the reference. In view thereof on 27th January, 2003, the petitioner withdrew the aforesaid Writ Petition No. 2821 of 2002.

11. The petitioner, on 3rd February, 2003 filed an Appeal under Section 25 of the S.I.C. Act before the Appellate Authority for Industrial & Financial Reconstruction (A.A.I.F.R.). The Appeal was admitted and is pending.

12. Despite the same, the respondent issued a fresh warrant of attachment on 7th February, 2003 and a fresh auction notice dated 11th March, 2003 presumably in view of rejection of the reference by the B.I.F.R. on 27th November, 2002. The petitioner therefore, filed the petition to impugn the aforesaid notices dated 7th February, 2003 and 11th March, 2003.

13. From the aforesaid facts, it is clear that during the pendency of the reference before the B.I.F.R., the warrant of attachment was sought to be implemented by auctioning the said property. It is also clear that the impugned notices dated 7th February, 2003 and 11th March, 2003 viz. warrant of attachment and auction notice were also issued during the pendency of the appeal before the A.A.I.F.R.

14. That the proceeding by the respondent for recovery of its dues is prohibited by Section 22 of the S.I.C. Act is clear from the plain language of the section itself. Moreover, a Division Bench of this Court in Shree Vallabh Glass Works Ltd. and Anr. v. State of Maharashtra, , considered similar proceedings for attachment by the Gram Panchayat. The Gram Panchayat sought to recover its dues which, it was contended, was not permissible in view of Section 22 of the S.I.C. Act. It was contended that the same amounted to a coercive procedure for recovering the amounts due. It was contended that it would amount to distress against the property of the company for recovery of the amounts due. The Division Bench observed thus :

"4. In view of these developments, the petitioners contend that no proceedings for execution, distress or the like against any of the properties of the company's undertaking shall lie or be proceeded with further, except with the consent of the Board. Section 22 of the Act mentions, insofar as it is relevant for the purpose of this petition, that where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or consideration or a sanctioned scheme is under implementation relating to an industrial company, then, notwithstanding anything contained in the Companies Act or any other law or instrument, no proceedings for execution, distress or the like against any of the properties of the industrial company shall lie or be proceeded with further, except with the consent of the Board- If the Gram Panchayat sets in motion the coercive machinery for the recovery of the amount due to it as an arrear of land revenue, the properties of the company will necessarily be attached and sold. This is obviously recovery of amount due by the process of distress. If the provisions of Section 22 apply, then it will have to be held that this mode of recovery cannot be restored to.

12. It is not disputed, and indeed it cannot be disputed, that the present Act has been passed by the Parliament in exercise of its legislative power contained in List I of the Seventh Schedule. If this is so, naturally the provisions in the Act cannot be controlled by any other Act that might have been passed by the State Legislature in exercise of its legislative power under List II of the Seventh Schedule of the Constitution. We have already held that the Act does not touch upon the powers of the Gram Panchayat to levy property tux. It only puts a restriction on the recovery proceedings that may be adopted for recovering the taxes which the Gram Panchayat may legally levy. Such a provision must be regarded as incidental to the main provision contained in the Act, namely the provision to nurse and bring back to health the sick industrial units. Even if it is held that such a provision interferes to some extent with the power of the Gram Panchayat as conferred by a valid piece of legislation enacted by the State, it must override the provisions of the State Act."

15. The judgment of the Division Bench was confirmed by the Supreme Court in The Gram Panchayat and Anr. v. Shree Vallabh Glass Works Ltd. and Ors., . The Supreme Court held in paragraph 10 as follows :-

"In the light of the steps taken by the Board under Sections 16 and 17 of the Act, no proceedings for execution, distress or the like proceedings against any of the properties of the company shall lie or be proceeded further except with the consent of the Board. Indeed, there would be automatic suspension of such proceedings against the company's properties. As soon as the inquiry under Section 16 is ordered by the Board, the various proceedings set out under sub-section (1) of Section 22 would be deemed to have been suspended."

16. The ratio would also apply once an appeal is filed and is pending under the S.I.C. Act. This is clear from Section 22 which places an appeal under Section 25, in this regard, on the same footing as an inquiry under Section 16 or a Scheme under Section 17. Indeed they all find place in the same reference in Section 22 protecting the industrial company from the contingencies mentioned therein.

17. In view of above, rule is made absolute in terms of prayer (a) as amended. Liberty to the respondent to issue fresh notices after the decision of the A.A.I.F.R. It is clarified that the contentions of the petitioner on merits are kept open.

No order as to costs.

Parties to act on an ordinary copy of this order duly authenticated by the Associate/Court Stenographer of this Court.