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State restrained from recovering dues from sick company

Staff Reporter

MADURAI: The Madras High Court Bench here on Friday restrained the Public Works Department as well as the Commercial Taxes Department from recovering dues from a sick company without obtaining prior consent from the Board for Industrial and Financial Reconstruction (BIFR).

Allowing a couple of writ petitions filed by a public limited company based in Coimbatore, Justice P. Jyothimani said that it was a well settled law that the operation of all legal proceedings or contracts entered with such companies shall be suspended until the completion of the proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985.

In its first writ petition, the company had challenged a distraint order passed by a Commercial Tax Officer at Palani in Dindigul district for recovering sales tax due to the extent of Rs.5, 05, 30, 050. The other petition sought to restrain the Public Works Department from recovering Rs. 2, 05,75,308 for having permitted the company to draw water from the Amaravathi river in Karur district.

Quashing both the impugned orders, the Judge said that a reading of the Supreme Court judgements in the Vallabh Glass Works case (1990) and Tata Davy Limited vs. State of Orissa (1997) would make it clear that the parties concerned could recover the dues only by including themselves as a party before the BIFR which shall frame necessary guidelines to take back the money from company assets.

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