Case: Voltas Ltd Vs. State of Andhra Pradesh

2. Briefly stated, the facts are as follows:In Andhra Pradesh, there was a company known as ‘Hyderabad Allwyn Ltd.In this company, the Government of Andhra Pradesh was a majorThe company suffered huge losses and became a sick company. Therefore the matter was taken up before the Board for Industrial and Financial Reconstruction (BIFR).3. While the matter was before the BIFR, negotiations took place with the appellants for the purpose of reviving at least the refrigeration department of that company. A Memorandum of Understanding was entered into on 28th of March, 1993, which, inter alia, provided ashas been incurring losses for the past few years and the Government of Andhra Pradesh has decided to disinvest its holding andprivatise HAL with a view to making it a viable unit and achieving the following objectives:(a) To secure the public interest by reviving HAL, balancing the drain on theexchequer and consequential denial of use offinances for other State and public purpose and objectives and obviating allocations of the State and public purposes and objectives and obviating allocations of the State budget to HAL, as contrasted with the consequences of continued retention of the shareholding and management of HAL as a Government Company.(b) To avoid bankruptcy of HAL and consequential loss of employment in the State of Andhra Pradesh and loss of capital of the State of Andhra Pradesh by initiating measures of privatisation.(c) To ensure the commitment on the part of the new owner to maintain and fully utilise the existing production capacities at reasonable level and to ensure the growth and stability of HAL in the long run.By this MOU, it was agreed that all the business interests and undertaking of Refrigeration Department would be transferred to and taken over by the appellants by virtue of an amalgamation on the terms and conditions set out in the MOU. The MOU clarified that it would take effect from 29th of March, 1993 provided the scheme of amalgamation was approved by the BIFR.5. Thereafter, a draft scheme was prepared and circulated to all the parties. The draft scheme inter alia provided for certain waivers and concessions. One of the concessions was a deferment of sales tax for a period of seven years from the date of final order passed by the BIFR approving the scheme.6. The scheme was placed before the BIFR. After giving notice to all interested parties and after hearing objections BIFR sanctioned the scheme on 4th April, 1994. The sanctioned scheme contained the following two clauses which are relevant for ourUnpaid statutory dues like sales tax to be funded and the amount so funded to have a moratorium of 2 years6) for repayment of such dues and payment of interest thereon. Thereafter, repayment to be made in 20 equal quarterly instalments with interest at 6% p.a.13(b)(4) Deferment of sales tax liabilities in respect of the products manufactured at Sanatnagar and Nandalur factories for a period of 7 years from the date of the final order from the BIFR approving this scheme.The Government issued a GO No. 66 dated 20th January, 1994, wherein it was provided assales tax deferral will be upto a maximum of 50% of the fresh monies which amounts to Rs. 18.50 crores to be brought in by M/s. Voltas for the rehabilitation of the Refrigerator Division as per the sanctioned scheme of the BIFR. Sales tax upto the above ceiling will be deferred for a period of 7 years.However, by another GO bearing No. 119 dated 18th August, 1995, the Government substituted the above mentioned clauses of the earlier GO by theSales Tax Deferral shall be limited to the maximum of 50% of the fresh monies to be brought in by M/s. Voltas Limited for rehabilitation of the Refrigeration Division as per the sanctioned scheme of Board for Industries Reconstruction of Rs. 18.50 crores whichever is less. The sales tax upto the above ceiling shall be deferred for a period of 7 years starting from 1.4.1993. The amount of Sales Tax so deferred shall carry an interest of 18% per annum. It shall be payable after 7 years in one lumpsum.After GO No. 119 was issued, the appellants made a reference to the Government. The Government by its letter dated 25th October, 1995 directed the appellants to move BIFR for obtaining a specific order to extend concession of sales tax deferral without charging any interest.10. BIFR by its order dated 5th December, 1995 refused to interfere on the ground that the sales tax deferral was granted by the Government based on its policy and if the policy guidelines did not provide for waiver of interest then that benefit could not be granted to the appellants.11. The appellants filed an appeal before the Appellate Board of Industrial and Financial Reconstruction, which by its order dated 25th July, 1996 dismissed the appeal, inter alia, on the ground that the liability to pay interest was a statutory liability. It was held that in the absence of any provision in the scheme the statutory liability could not be waived.12. The appellants then filed a writ petition in the Andhra Pradesh High Court, which has been dismissed by the impugned judgment. The Andhra Pradesh High Court has held that there was no exemption from sales tax. It held that all that had been granted was a deferral for payment of sales tax. It held that there was no provision in the Sales Tax Act to grant deferral but it would not go into the question whether such deferral could have been granted as it did not arise before it. It held that there was a statutory liability to pay interest and so long as there was no express waiver of the statutory liability in this sanctioned scheme interest had to be paid. It held that normally sales tax become due and payable on filing of the return and if there is deferred payment then interest has to be paid.

Reasoning:
In our view, this authority has no relevance, at all, to the question before us.Thus time for payment can be extended. But if such an extension is granted a statutory liability to pay interest at the rate of 18% arises. This is a statutory liability. If a statutory liability has to be waived then there must be an express waiver of the same. The fact that the scheme is silent about such waiver shows that there is no waiver. This becomes further clear from Clause 13(b)(3) of the scheme. That clause specifies that interests shall only be at the rate of 6%. Such a provision had to be made because otherwise the statutory liability would have been to pay interest at the rate of 18%. In Clause 13(B)(4) there is no express waiver of or reduction in the rate of interest and the paymentsee no infirmity in the reasoning of the High Court.Reliance was also placed by the respondents on the case of South Eastern Coalfields Ltd. v. State of M.P. and Ors., 2003 (8) Scale 600 , wherein it has been held that if under the provisions of the contract or statute interest is payable then such interest must be paid. However, in that case, the question whether the provision of a scheme sanctioned by BIFR would prevail over a statutory provision did not arise.23. Thus in our view there being no express waiver of interest, the statutory provision must prevail. We thus do not find any infirmity in the order of the High Court.