TMI Blog2014 (3) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... n orders from concerned High Court before utilizing the sale proceeds - Section 22(1) deals with a situation when enquiry under Section 16 or scheme referred to in Section 17 is under preparation and prior to orders of BIFR recommending for winding up of the sick industrial company were passed. It seeks to freeze the assets and liabilities during the interregnum period. In Employees Provident Fund Commissioner, the defaulting company was wound up. The company was in default towards EPF contributions. The EPF organization approached the official liquidator for payment of amount determined under Section 7(A) of EPF Act. Since there was no response, EPF filed company application for issuance of directions to the official liquidator to pay the amount payable by the employer under the EPF Act and the same was dismissed. The dues payable by the petitioner to the EPF acquires first charge compared to any other dues - In the instant case, EPF sold the properties of petitioner company after BIFR recommended for winding up the petitioner company. The EPF Act, 1952 is a social welfare legislation and is intended to safeguard the interest of employees. Provident fund contribution is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Account for a long time. By order dated 28-03-2007 property of petitioner to an extent of 12.31 acres was attached. In exercise of powers vested by Act, 1952, the competent authority determined arrears of contribution, levied interest and damages for the delay in making the contributions. The total amount of dues determined was ₹ 60,21,000/-. Since petitioner company did not pay the amount quantified, after observing due formalities proclamation of sale order was issued on 14.09.2010 by the Recovery Officer on land to an extent of Ac.4.89 cents in Sy.Nos.162/2 (3.11 acres), 162/1 (Part 1.78 acres) at Chennai Road, Melapattu Group, Natham Revenue Village, Nagari Municipality, Chittoor District out of 12.31 acres attached. Accordingly, open auction was conducted, wherein sixth respondent stood as highest bidder at ₹ 64,50,000/- and the sale was confirmed in th his favour. Sale certificate dated 22.11.2010 was issued to the 6 respondent. The sale certificate was registered by the fifth respondent on 05.09.2011. After the registration of sale certificate this writ petition was instituted. 2. Petitioner company went into losses, resulting in initiating proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illegal and void. Thus, merely because petitioner did not respond to the notices issued and amounts determined are statutory liability, doctrine of estoppel cannot be invoked to non-suit the petitioner. 7. In support of his contention, learned senior counsel placed reliance on the decision of Supreme Court in the case of NGEF Ltd. V Chandra Developers (P) Ltd. and another (2005) 8 Supreme Court Cases 219. 8. It is the contention of the standing counsel for Provident Fund Organization that the Act, 1952 is a special enactment intended to safeguard the interests of employees working in a company and it is the primary responsibility of the organization to ensure payment of contributions by the employer. In order to ensure proper enforcement of the provisions, sufficient safeguards are provided in the Act and power vested in the organization for enforcement of its orders. In the said manner, section 8(f) of the Act empowers to resort to all modes to recover the amounts due to the organization. Learned standing counsel further contended that on 22.10.2010, petitioner was given one month time to clear the dues and was also informed that sale would not be confirmed, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the provisions of section 529A, and other provisions of the Companies Act, 1956. Section 22. 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, 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 [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the debts which under section 49 of the Presidency Towns Insolvency Act, 1909, or under section 61 of the Provincial Insolvency Act, 1920, or under [section 530 of the Companies Act, 1956], are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up, as the case may be. (2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer, [whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution], the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts. 14. Power is vested in the BIFR under Section 16 to cause enquiry to determine whether any industrial company has become a sick industrial company and incidental thereto. If in such enquiry it is established that a company has become a sick industrial company, in exercise of power vested by Sections 17 to19, the BIFR can take all possible steps to revive the sick i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the welfare of the employees maintained by the company are payable in priority to all other debts. 20. Thus, the dues payable by the petitioner to the EPF acquires first charge compared to any other dues. 21. In the instant case, EPF sold the properties of petitioner company after BIFR recommended for winding up the petitioner company. 22. In NGEF Ltd., after exhaustively considering the provisions of Companies Act and SICA, Supreme Court held as under: 49. It is difficult to accept the submission of the learned counsel appearing on behalf of the respondents that both the Company Court and BIFR exercise concurrent jurisdiction. If such a construction is upheld, there shall be chaos and confusion. A company declared to be sick in terms of the provisions of SICA, continues to be sick unless it is directed to be wound up. Till the company remains a sick company having regard to the provisions of sub-section (4) of Section 20, BIFR alone shall have jurisdiction as regards sale of its assets till an order of winding up is passed by a Company Court. 50. but there cannot be any doubt whatsoever that having regard to the phraseology ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead with Section 530(1) of Companies Act, it is but imperative to assume that Section 11 of Act, 1952 read with Section 530(1) of Companies Act assign first charge to the dues to EPF but those provisions operate only after the company is wound up. These provisions also do not vest power in EPFO to recover the dues from the assets of a sick company directly. On the contrary. provision in Section 20(4) of SICA is explicit. BIFR alone is competent to sell the properties of a sick company pending winding up proceedings. Thus, EPFO ought to have approached BIFR to recover PF dues from the sick company. Such recovery can be only through the medium of BIFR. In the instant case, procedure envisaged in Section 20(4) of SICA was not followed. 26. The admitted position is EPF has assessed ₹ 60,21,000/- as arrears of amounts of contribution by the petitioner to the PF, the penal interest and damages thereon. Petitioner was given ample opportunity to repay the amounts due, but the petitioner did not respond to the opportunity afforded by the EPF. Even after conducting sale, petitioner was given one month time to clear the dues informing the petitioner that if the amounts are pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.P. (2010) 10 SCC 677), Supreme Court held as under: 26. The power under Article 226 of the Constitution is discretionary and supervisory in nature. It is not issued merely because it is lawful to do so. The extraordinary power in the writ jurisdiction does not exist to set right mere errors of law which do not occasion any substantial injustice. A writ can be issued only in case of a grave miscarriage of justice or where there has been a flagrant violation of law. The writ court has not only to protect a person from being subjected to a violation of law but also to advance justice and not to thwart it. The Constitution does not place any fetter on the power of the extraordinary jurisdiction but leaves it to the discretion of the court. However, being that the power is discretionary; the court has to balance competing interests, keeping in mind that the interests of justice and public interest coalesce generally. A court of equity, when exercising its equitable jurisdiction must act so as to prevent perpetration of a legal fraud and promote good faith and equity. An order in equity is one which is equitable to all the parties concerned. The petition can be entertained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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