JUDGMENT [ENTITY], J.
1. In this case a show-cause notice was issued and in response a reply has been filed on behalf of the respondents. Rejoinder to the reply has also been filed on behalf of the petitioner. The only short point is involved in the case and, therefore, with the consent of the parties the case was heard finally. The point is whether [SECTION] of the [ACT] (for short "the Act"), bars the impugned action of recovery of arrears of sales tax from petitioner No. 1-company. It is not in dispute that a reference under [SECTION] of the Act was made to the Board for Industrial and Financial Reconstruction in respect of petitioner No.1-Company and a [CASE NUMBER] was registered by the Board for Industrial and Financial Reconstruction. It is also not in dispute that on July 13, 1992, the Board for Industrial and Financial Reconstruction disposed of the case by passing an order declaring the petitioner company to be a sick industrial company within the meaning of [SECTION] of the Act. It is also not in dispute that pursuant to the order passed by the Board for Industrial and Financial Reconstruction, the Industrial Credit and Investment Corporation of India Ltd. has been appointed as the operating agency for examining the viability and to prepare the scheme for revival/rehabilitation of the company, if possible.
2. In the aforesaid circumstances the petitioner contends that distress sale of the properties of the company for realising sales tax dues cannot be ordered in view of [SECTION] of the Act. The respondents, however, contend that the said section is not attracted as what the respondents have done is to demand legitimate dues of arrears of sales tax. It is also contended that the petitioners cannot be allowed to go on collecting sales tax from the parties to whom they sell the goods and keep it with themselves. It is also complained that the petitioners never told the authorities assessing the sales tax that they have gone to the Board for Industrial and Financial Reconstruction.
3. We have heard Shri [ENTITY], learned counsel for the petitioners and Shri [ENTITY], learned Deputy Advocate-General for the State and have perused the record. [SECTION] of the Act reads as under :
"22. Suspension of legal proceedings, contracts, etc. (1) Where in respect of an industrial company, an inquiry under [SECTION] is pending or any scheme referred to under [SECTION] is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under [SECTION] relating to an industrial company is pending, then, notwithstanding anything contained in the [ACT], 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 shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority."
4. The petitioners have filed as annexure P-2 a scheme prepared for rehabilitation or revival of the petitioner company. It is, therefore, clear that in compliance with the order of the Board for Industrial and Financial Reconstruction dated July 12, 1992 (annexure P-3 to the petition, para 12 of the order), the Industrial Credit and Investment Corporation of India Ltd. submitted its report to the Board for Industrial and Financial Reconstruction which shows that a scheme under [SECTION] of the Act is under preparation or consideration in respect of petitioner No. 1-company. This is sufficient to attract the bar under [SECTION] of the Act.
5. The next question is whether the impugned action is barred by [SECTION] of the Act. It was contended that only a demand of tax has been made and there is no proceeding for execution, distress or the like undertaken against petitioner No. 1-company. A perusal of the demand notice, annexures P-4, 5, 6 and 7, issued under [SECTION] of the [ACT], as also notices, annexures P-8, 9, 10 and 11, issued under [SECTION] of the [ACT], would show that not only a demand has been made in the said notices, annexures P-4 to 7, but also a warning that in default of payment coercive process will be adopted for recovery of the amount and in notices, annexures P-8 to 11, issued to various banks actually the banks are prohibited from making payment of any money in their hands to petitioner No. 1-company. No doubt, [SECTION] of the Act does not prohibit demanding of an amount due from a sick industrial company but creates an embargo against distress action. Learned counsel for the petitioner has invited our attention to the decision of the Calcutta High Court in [PRECEDENT]. The learned single judge of the High Court relying on the definition of "distress"in Bradby Law of Distress and the meaning of "execution" in Halsbury's Laws of England came to the conclusion that both distress and execution relate to methods of recovery of moneys due from the industrial company. The learned single judge held that refusing to supply declaration forms was also a distress in a sense. Relying on a decision of the Supreme Court in [PRECEDENT], the learned single judge also held that as the arrears of sales tax are recovered as arrears of land revenue by attachment and sale of the defaulter's property, this mode of recovery is also covered under [SECTION] of the Act.
6. Learned counsel for the petitioner has invited our attention to the Supreme Court decision in Gram Panchayat's case [PRECEDENT], and particularly to paras 10 and 11 of that judgment in answer to the argument that the State cannot be a dumb spectator when the petitioner company would recover amounts towards sales tax from the persons to whom the company sells goods and keeps the sales tax with itself under the cover of being a sick industry. Paras 10 and 11 of the judgment of the Supreme Court are reproduced hereunder as they are a complete answer to the arguments advanced by the learned Deputy Advocate-General (at page [SECTION]3) :
"In the light of the steps taken by the Board under [SECTION] and [SECTION] 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] is ordered by the Board, the various proceedings set out under [SECTION] would be deemed to have been suspended.
"It may be against the principles of equity if the creditors are not allowed to recover their dues from the company, but such creditors may approach the Board for permission to proceed against the company for the recovery of their dues/outstandings/overdues or arrears by whatever name they are called."
The Board at its discretion may accord its approval for proceeding against the company. If the approval is not granted, the remedy is not extinguished. It is only postponed. [SECTION] provides for exclusion of the period during which the remedy is suspended while computing the period of limitation for recovering the dues."
7. In the case before us the notices, annexures P-4 to P-7, are under the [ACT] containing a threat of employing coercive processes of recovery in default of payment and notices, annexures P-8 to P-11, are in fact garnishee orders issued to the Manager, State Bank of Indore Branch, Amona, A. B. Road, Dewas ; Manager, State Bank of Indore Branch, Palsikar Colony, Indore ; Manager, Punjab National Bank, Dadar, Bombay ; and Manager, State Bank of Indore, Ahmedabad, not to pay the amount stated in the notices to petitioner No. 1-company but to credit it towards sales tax dues with the Sales Tax Officer. These actions are clearly covered under the term "proceedings" for "execution, distress or the like" against any of the properties of the industrial company used in [SECTION] of Act.
8. For the aforesaid reasons, this petition deserves to be allowed and notices, annexures P-4 to P-7, and garnishee orders, P-8 to P-ll, deserve to be quashed. We, therefore, allow the petition and quash the garnishee orders, P-8 to P-11, and prohibit the respondents from employing coercive processes of recovery pursuant to demand notices, annexures P-4 to P-7. It is, however, clarified that the respondents shall be free to approach the Board for Industrial and Financial Reconstruction for permission to proceed with the recovery as under [SECTION] of the Act itself such execution, distress, etc., can be proceeded with further with the consent of the Board. There shall be no order as to costs.