VIJAY MILLS CO LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) Petitioner No. 1 is an existing Company registered under the Companies Act 1956 and petitioners Nos. 2 to 4 were Mang- ing Directors of petitioner No. 1 Company. The petitioner-Company runs a Textile Mill. In respect of sales of petitioner Company Sales Tax liability for the period commencing from December 198 6/06/1987 had arisen and an amount of Rs. 1 84 220 had fallen due and payable by the Company. Quarterly returns were filled in by the Company but the amount has not been paid by it. Therefore under the provisions Of Rule 78 of the Gujarat Sales Tax Rules 1970 the petitioner is sought to be prosecuted for offence of not complying with the provisions of Rule 31 of the aforesaid Rules (in the petition wrongly translated as section of the Rules). Therefore the Commissioner of Sales Tax exercising the power converted upon him under the provisions of Sec. 27 of the Gujarat Sales Tax Act 1969 read with Rule 79 of the aforesaid Rules sanctioned the prosecution against the petitioner Company. The order of sanction of prosecution dated 12/07/1988 is produced at Annexure C to the petition.

(2.) The petitioners pray that the aforesaid order produced at Annexure C to the petition be quashed and set aside. Reliance is placed on Sec. 22 of the Sick Industrial Companies (Special Provisions) Act 1985 The relevant part of the Section is reproduced in para 2.8 of the petition. The Section provides for suspension of legal proceedings cont- racts etc. in case of industrial company in respect of which enquiry under Sec. 16 and under Sec. 17 is pending or appeal under Sec. 25 of the said Act is pending. In the instant case there is no dispute with regard to the fact that an appeal being Appeal No. 16/89 against the order of refusal to sanction scheme passed by the Board is pending before the appellate authority. (These facts are given at the bar and sro not referred to in the petition. However the facts are not controverted by the other side.) The relevant part of the Section which are required to be considered reads as follows:

(3.) It may also be noted that the criminal prosecution is not against the property of the Company. It is against the Company. What is prohibited under Sec. 22 of the Act is the proceedings of winding up of the Company or for execution distress or the like against any of the properties of the industrial company. These are not proceedings for winding up or any proceeding against the property of the Company. It may be that after the prosecution is over and ultimately if fine is imposed upon the Company the question may arise as to whether and how the amount of fire imposed is to be recovered from the Company. At that stage if fine is sought to be recovered from the property of the Company the aforesaid provisions may become relevant and may be invoked. However we do not express any firm opinion on this point.