TMI Blog2006 (10) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... SICA ). The facts leading to these Appeals are undisputed and need to be noted in brief : Writ Appeal No. 230 of 2006 : The admitted facts are that the appellant-company had committed defaults in remitting the amounts due to the Employees Provident Fund Scheme to the tune of Rs. 10,96,676 during the period from September 2000 to December 2000. Therefore, notice dated 10-11-2005 has been issued by the Regional Provident Fund Commissioner (C R), Madurai calling upon the appellant to remit the amount of Rs. 10,96,676 within 10 days of receipt of the notice, failing which action will be taken under sections 8B to 8G of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short the EPF Act ) to recover the dues. In the meanwhile the appellant made a reference before the Board for Industrial and Financial Reconstruction (BIFR) under section 15(1) of the SICA. The said Application of the appellant is registered as Case No. 401/2001. The Application was rejected by the BIFR by order dated 1-5-2002 against which an Appeal was preferred to the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The Appeal was allowed by the AAIFR vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 16 is pending before BIFR, then notwithstanding anything contained in the Companies Act, 1956, or any other law, no proceedings for execution, distress or the like against any of the properties of the industrial company would lie or be proceeded with further except with the consent of the BIFR. It is further contended that since the EPF Act does not contain any non obstante clause and the SICA and the EPF Act both special statutes, and since the SICA came into force later than the EPF Act, in that case, the provisions of the SICA must prevail over the EPF Act. Reliance is placed on an unreported decision of a Division Bench of this Court dated 2-11-2001 rendered in ESSORPE Mills United v. Central Provident Fund Commissioner [W.A. No. 1831 of 2001]. The Division Bench in the aforesaid case has held that in view of the provisions of section 22 of the SICA no action for realization against a sick company relating to the amounts payable under the EPF Act is permissible without prior consent from the BIFR. The Writ Appeals were posted for hearing before the Division Bench to which one of us (A.P. Shah, C.J.) was a party. The Division Bench recording its disagreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n recovering the dues of the provident fund. A reference was made to the amended section 14B of the EPF Act which empowers the Central Provident Fund Commissioner to recover damages where default had been committed in the payment of any contribution to the Fund and such damages can be reduced or waived in respect of a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the BIFR, but no protection has been provided thereunder as regards the contribution of the employees and/or the employer. 7. In order to appreciate the rival contentions which have been urged at the Bar, reference may be made to some of the fundamental provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. The EPF Act has been enacted to provide for the "institution of provident funds, pension funds and deposit linked insurance funds for the employees in factories and other establishments". Therefore, it is a welfare legislation intended as a measure to provide social security. Under the provisions of the EPF Act a Scheme known as "Employees Provident Fund Scheme, 1952" has been framed. After the framing of the Scheme a Fund is establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the EPF Act, are contained in a group of sections beginning with section 14. Section 14B of the Act empowers the Central Provident Fund Commissioner to recover damages from an employer who makes a default in the payment of contribution to the fund by the employer and the proviso appended thereto empowers the Central Board to reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the BIFR, subject to such terms and conditions as may be specified in the scheme. Section 14B reads thus : " Power to recover damages. Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under section 17, the Central Provident Fund Commissioner or such other officer, as may be authorised by the Central Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck industrial company with any other industrial company, complete waiver of damages may be allowed; ( b )in cases, where the Board for Industrial and Financial Recons-truction, reasons to be recorded in its scheme, in this behalf recommends, waiver of damages up to 100 per cent may be allowed; ( c )in other cases, depending on merits, reduction of damages up to 50 per cent may be allowed." 10. Paragraph 38 of the Scheme provides that the employer before paying the member his wages in respect of any period or part of a period for which contributions are payable, was under an obligation to deduct the employee s contribution from his wages together with his own contribution, and administrative charges, and he shall within 15 days of the close of every month pay the same to the Fund by separate bank drafts or cheques. 11. It will be useful to refer to the relevant provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. The Preamble of the Act states as follows : "An Act to make, in the public interest, special provision with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is thereafter the scheme is sanctioned by the Board and it shall come into force on such date as the Board may specify, in that behalf. Section 19 of the Act provides for rehabilitation by giving financial assistance. 13. Section 22 of the Act provides for suspension of legal proceedings, contracts, etc., in respect of the cases mentioned therein. Sub-section (1) of section 22, as amended in 1993, reads thus : " 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 receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which belong to the employee. An account which is required to be maintained in the name of each member of the provident fund, contains contribution of the employee, the employer as well as the interest which has been credited. Provident Fund is the foundation of an important measure of social security provided to employees of those establishments to whom the Act applies. In the aforesaid situation, an employer cannot refuse to comply with the statutory mandate to pay the contribution made by the employees as also his share, which was by way of social security scheme. Although the object of the SICA is laudable, but, in our view, the same should not deprive the hard earnings of the employees. It does not and cannot stay the recovery proceedings for recovery of money to which employees are entitled by way of social security scheme. The money does not belong to the company it belongs to the employees. These moneys can be withdrawn by the employees in certain eventualities even prior to the attainment of age of superannuation. The Scheme makes provision for withdrawal from the Fund and for the grant of advances from the Fund in special cases. 16. The interpretation of section 22 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uspension 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. 11. 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/outstanding/over-dues or arrears by whatever name it is 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. Sub-section (5) of section 22 provides for exclusion of the period during which the remedy is suspended while computing the period of limitation for recovering the dues." (p. 1020) 18. In the case of Tata Davy Ltd. v. State of Orissa [1997] 14 SCL 81, again the Supreme Court was considering the provisions in relation to recovery of arrears of sales tax. The Supreme Court relied on the earlier judgment in the case of Shree Vallabh Glass Works Ltd. ( supra ) and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h [2000] 25 SCL 369, the Supreme Court had an occasion to consider the question as to whether the Application for eviction under the Karnataka Rent Control Act was maintainable notwithstanding the provisions of section 22 of the SICA. Relying on the decision in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association AIR 1992 SC 1439, the Supreme Court held that the Rent Control Act gave protection to a statutory tenant to continue to occupy the premises but such right may not be regarded as property of the company under section 22(1) of the SICA, and, therefore, the provisions of section 22(1) of the SICA were not applicable to the eviction proceedings instituted by the landlord against the sick company. 21. In NTC Ltd. v. NTC Ltd. Emp. Union 2004 (1) LLN 32, the Supreme Court held that pendency of rehabilitation scheme before the BIFR is not a ground to deny relief as under section 5(2)( c ) of Nationalisation Act of 1974. Paragraph 14 of the Judgment, which is material for our purpose, reads as follows : "So far as the argument regarding no relief being admissible to the workers in the milk in view of rehabilitation schemes being worked out before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the undertaking of the employer is a sick industrial undertaking and the scheme for its rehabilitation has been sanctioned. There again, it must be noticed that the eligibility to grant waiver under section 14B is subject to those conditions which have been prescribed therein. Parliament having thus amended the EPF Act had taken within its purview the position of a sick industrial undertaking, the extent of the immunity which have been conferred upon such undertaking with reference to provident fund dues under the Act, must be confined to what has been legitimized by Parliament. The extent of the immunity or exemption cannot be extended beyond what was allowed in terms of the amendment to the EPF Act. 23. Paragraph 32-B of the Provident Fund Scheme expounds upon the Second Proviso to section 14B. Clause B of Paragraph 32B provides that the Central Board may allow waiver of damages up to 100 per cent in cases where the BIFR for the reasons to be recorded in the scheme recommends such waiver. For the purpose of applicability of the second proviso, the pre-conditions, therefore, are : (1) the establishment must be sick industrial undertaking; and (2) in respect of such sick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al welfare scheme suffers mayhem on account of the injury. Law expands concepts to embrace social needs so as to become functionally effectual. ****** 40. The measure was enacted for the support of a weaker sector viz., the working class during the superannuated winter of their life. The financial reservoir for the distribution of the benefits is filled up by the employer collectings by deducting from the workers wages, completing it with his own equal share and duly making over the gross sums to the Fund. If the employer neglects to remit or diverts the moneys for alien purpose the Fund gets dry and the retirees are denied the meagre support when they most need it. This prospect of destitution demoralises the working class and frustrates the hopes of the community itself...." (pp. 587-591) 25. In Sarvaraya Textiles Ltd. v. Commissioner, E.P.F . C. [2002] 36 SCL 165, the Division Bench of the Andhra Pradesh High Court has considered the provisions of the EPF Act vis-a-vis section 22(1) of the SICA and held that the rights of the employees under the provident fund scheme are protected and the proceedings under the EPF Act do not come within the purview of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocial security. The circumstances in which withdrawals and even advances can be given to an employee in service are specified in the scheme. No industrial undertaking can work or operate without the work which is rendered by the employees. No work can be demanded save and except for payment of wages and other statutory benefits. The payment of provident fund dues to the Fund, therefore, stands on the same footing as the payment of wages which is due to the employees. This is an entitlement to which the employees are entitled to dint of the work which they have put in. These are dues which are payable whether or not an undertaking is employees right to life under Article 21 of the Constitution." (p. 1435) Against the aforesaid judgment, an Appeal was preferred and the Supreme Court was pleased to reject the Special Leave Petition. 27. In an unreported decision of the Division Bench of the Calcutta High Court in Kusum Engg. Co. Ltd. v. Regional Provident Fund Commissioner [Appeal No. 591 of 1990 and Matter No. 2254 of 1990], it was held that the provident fund dues are statutory liability and the Provident Fund Act is a piece of social welfare legislation enacted for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garb of sickness or for any like difficulty may be allowed to shirk its liability to pay the wages to its workers for the work they have done." 29. In Baburao P. Tawade v. HES Ltd. 1997-III-LLJ (Suppl.) 265 (Bom.), Justice B.N. Srikrishna (as he then was) held that the payment of earned wages could not have been within the purview of section 22(1) of the SICA and the provisions of the SICA must be held to apply only to such proceedings which are not required for the day-to-day running of the sick industrial company. The learned Judge noticed that section 22(1) of the SICA had been amended by Parliament in 1993 to expand its width. The object of section 22, according to the judgment of the learned Judge, was to ensure that "the attempts at revival of a sick industrial company are not rendered nugatory by predatory creditors nibbling away at the capital and other assets of the industrial company which is being revived". The learned Judge referred to the judgments of the Supreme Court in Gram Panchayat v. Shree Vallabh Glass Works Ltd. AIR 1990 SC 1017 and Maharashtra Tubes Ltd. v. State Industrial Investment Corpn. of Maharashtra Ltd. [1993] 2 SCC 144, as well as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case ( supra ) was approved in the case of Girni Kamgar Sanghatana Samiti v. Khatau Mackanji Spg. Wvg. Co. Ltd. 1998-II-LLJ 264 (Bom.) and that a Special Leave Petition filed against the said judgment was rejected by the Supreme Court. The position of law summed up in the said judgment is as follows : "9. Thus it is a settled law that it is not open for the company to take shelter of section 22 in respect of the workers wages and other dues. A feeble attempt was made by Mr. Vasudeo to distinguish the above judgment by contending that the present case relates to the payment of gratuity to the workmen and since such claim is in the nature of arrears, the case would be governed by the decision of the Apex Court in Tata Davy Ltd. v. State of Orissa 1997-II-LLJ 989. I am unable to accept the submission made by the learned counsel for the petitioners. By no stretch of imagination gratuity can be called arrears of wages. The basic minimum which the workman is entitled to get is the wages and the gratuity and other statutory benefits." (p. 1044) 31. In Poysha Inds. Co. Ltd. v. Collector 1988 (79) FLR 167, a learned Single Judge of the Allahabad High Court held as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us (A.P. Shah, C.J.) was a party, it has been held that, section 22(1) of the SICA could have no application to the recovery under recovery certificate issued by the Industrial Court. A learned Single Judge of the Bombay High Court in Carona Ltd. v. Sitaram Atmaram Ghag 2000 (3) LLN 167 considered the provisions of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 vis-a-vis section 22(1) of the SICA and rejected the argument that wages and terminal benefits to which workers are entitled are not payable until permission is obtained from the BIFR. The learned Judge observed that it is impossible to conceive a situation where Parliament, duly knowing the true import of Article 21 of the Constitution would be deemed and presumed to have taken a view that the wages and terminal benefits to which the workers are entitled to are not payable until permission is obtained from the Board. Wages and terminal benefits to which the workers are entitled, must constitute and deemed to be part of their right to life. They are the minimum required for their sustenance and of their families. It is impossible in this situation to consider that for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SICA was no bar to initiate proceedings for the amount payable to the workmen. The next decision cited by the appellants/ interveners is of the Calcutta High Court in Tushar Kanti Samaddar v. Tyre Corporation of India Ltd. 2000 Lab IC 3040. The only question canvassed before the Division Bench was as to whether the respondent/ Corporation was justified in withholding any of the money payable to the appellant who had resigned from service. That question was answered against the Corporation. It was, however, argued on behalf of the Corporation that the Court cannot direct payment of any money to the appellant by virtue of provisions of section 22 of the SICA. According to the Corporation, reference was made to the BIFR and a scheme was in course of preparation under section 18 of the SICA. It was submitted that section 22 of the Act specifically forbid "any suit for recovery of money". The Division Bench without going into the question as to whether the provisions of section 22 of the SICA will apply to the proceedings under Article 226 of the Constitution of India has merely clarified that any proceedings for recovery of money due to him may be taken by the appellant subject t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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