TMI Blog2006 (3) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in any manner dealing with the Security Deposit lying with the petitioner given at the instance of the 2nd respondent, as its trading member according to bye-laws, rules and regulations of the Stock Exchange. 2. The petitioner is a recognised stock exchange in India having his own rules, bye-laws and regulations. The second respondent became a trading member in the petitioner stock exchange and as per the requirements of the bye-laws and rules, the 2nd respondent deposited a sum of ₹ 56 lakhs for their admission to membership of capital market segment. Out of this amount of ₹ 56 lakhs, ₹ 45 lakhs was received by the petitioner-stock exchange as security deposit against clearing and settlement of dues that may be accrued at the instance of the 2nd respondent trading member. ₹ 5 lakhs was received against equipment given to the 2nd respondent and the balance of ₹ 1 lakh was received for supply of U.P.S. by the petitioner stock exchange. Out of ₹ 45 lakhs received as security deposit, ₹ 9 lakhs had already been given to National Securities Clearing Corporation for the purpose of appropriation of member dues and the balance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e writ petition granted stay of the impugned order subject to the condition that the petitioner shall keep the amount of ₹ 30 lakhs lying with the petitioner intact without any transactions for a period of eight weeks. By order dated 6.3.2002, this court continued the interim stay subject to the petitioner keeping ₹ 27,89,611.89 intact without any transaction, as it was represented by the learned counsel for the petitioner that the amount lying with the petitioner was only ₹ 27,89,611.89. 6. The 1st respondent filed counter affidavit. According to the 1 st respondent, M/s.Premier Housing and Industrial Enterprises Ltd. is an establishment covered under the Act bearing P.F.Code No. TN-39526. The said establishment failed to pay the statutory Provident Fund dues for the period from April 1998 to March 2000. As such an enquiry under Section 7A of the Act was initiated on 14.6.2000 and the dues were assessed to the extent of ₹ 17,97,510/- and necessary proceedings were issued to the establishment directing them to pay the P.F. dues and action under Section 8F of the Act was invoked for attachment of ₹ 2 0,42,057/- which includes dues of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent towards the outstanding arrears payable by these two companies, namely, M/s.Integrated Finance Co. Ltd., and M/s.Premier Securities Ltd., the 2nd respondent herein. The major portion of the shares held by the 2nd respondent company have been acquired by M/s. Integrated Finance Company Ltd. 12. Section 8F(3)((i) and ii) of the Act reads as follows:- 8F(1) ... (2) ... (3)(i) The Central Provident Fund Commissioner or any other officer authorised by the Central Board in this behalf may, at anytime or from time to time, by notice in writing, require any person from whom money is due or may become due to the employer or, as the case may be, the establishment or any person who holds or may subsequently hold money for or on account of the employer or as the case may be, the establishment, to pay to the Central Provident Fund Commissioner either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due from the employer in respect of arrears or the whole of the mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch person is personally liable to the Commissioner and the person to whom the notice is sent fails to make the payment, he shall be deemed to be an employer in default in respect of the amount specified in the notice and further proceedings may be taken against him as if it were an arrear due from him. 14. The impugned proceedings have been issued following the provisions contained in Section 8F of the Act. But the learned Senior Counsel appearing for the petitioner submitted that as per the rules, byelaws and regulations framed by the petitioner stock exchange, the amount received as security deposit from the 2nd respondent shall vest with the defaulter's committee, who is entitled to take such other acts as contemplated under the bye-laws. In the case of the petitioner that so far 11 arbitration awards have been passed against the 2nd respondent and the total amount of award comes to ₹ 25,15,552.33 and the defaulting committee is liable to fulfil the obligations of the 2nd respondent from the security deposit available with the petitioner who has got exclusive lien and charge over the same. Therefore, it cannot be attached under Section 8F of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of the assessee, then nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Income Tax Officer to the extent of his own liability to the assessee on the date of the notice, or to the extent of assessee's liability for any sum due under this Act, whichever is less. 18. In [2001]248ITR209(SC) (supra), the Hon'ble Supreme Court has held in para 9 as under:- 9. The Stock Exchange Rules, Bye-laws and Regulations have been approved by the Government of India under the Securities Contracts (Regulation) Act, 1956. There is no challenge to these Rules. The question whether right of membership confers upon the member any right of property is, therefore, to be examined within the framework of the Rules, Bye-laws and Regulations of the Exchange. On a plain and combined reading of the Rules, it is clear that right of membership is merely a personal privilege granted to a member, it is nontransferable and incapable of alienation by the member or his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus amount lying with the Defaulters' Committee is, in the wider sense, a debt due by the Exchange to the defaulter member and has been justifiably attached to the extent of the decretal amount payable by the defaulter member to the claimant by serving the garnishee notice upon the Exchange. 20. In (2000)5 SCC 694 (supra), the Hon'ble Supreme Court held in para 8 as follows: 8.The principle of priority of government debts is founded on the rule of necessity and of public policy. The basic justification for the claim for priority of State debts rests on the well-recognised principle that the State is entitled to raise money by taxation because unless adequate revenue is received by the State, it would not be able to function as a sovereign Government at all. It is essential that as a sovereign, the State should be able to discharge its primary governmental functions and in order to be able to discharge such functions efficiently, it must be in possession of necessary funds and this consideration emphasises the necessity and the wisdom of conceding to the State, the right to claim priority in respect of its tax dues ( see Builders Supply Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l-fledged member of a stock exchange who can be called upon to be registered under Section 12(2) of the Act and not any other member of the stock exchange. They contend that the National Stock Exchange has only institutional members who are treated as full-fledged members and all others are only trading members who do not have any rights and obligations expected of a member of the stock exchange. It is also contended that under the Rules and Regulations, a stockbroker, to be registered as such under the Act, has to be a regular member of the stock exchange and since the said Rules and Regulations of the Board do not recognise a trading member as a member of the stock exchange, they cannot be brought within the net of the levy. They rely on the definition of stock exchange under Rule 2(d) of the Rules which states that stock exchange means a stock exchange which is for the time being recognised by the Central Government under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and a stock broker is defined as a member of a stock exchange. Since the stockbrokers of NSE being a company of which under Section 2(e) of the Act and NSE being a company of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that dues to the Ex-change or to the Clearing House have first to be met before the balance amount can be utilised for payment of debts, liabilities, obligations etc. arising out of any contract made by the former member. If the amount available is insufficient to pay all such debts, liabilities etc. then the payment is to be made pro rata. If, however, any surplus still remains the same is to be disposed of or applied in such manner as the Exchange in general meeting may decide. The High Court, in our opinion, was, therefore, right in coming to the conclusion that on a default being committed the share broker ceases to become a member of the Exchange and all his rights, privileges etc. as a member come to an end. If he does not clear the dues within six months the Governing Body then has a right of nomination in respect of such membership. It will be incorrect to state that on the stock broker ceasing to be a member, he still retains any right or interest in the permission which has been granted to him by the Exchange to carry on business as a member. The membership card of a share broker is not his personal property which, on default being committed by him and his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in the Acts which were under the scrutiny of the Hon'ble Supreme Court without reference to the clauses contained in the E.P.F. Act 1952. 24. In 1993CriLJ2086 , the Hon'ble Supreme Court has held in para 13 as follows:- 13. That depends, obviously, on the scheme of the Act, the liability it fastens on the Director of the Company and applicability of the penal provisions to the statutory violation or breach of the Scheme framed under it. But before doing so it may not be out of place to mention that the Act is a welfare legislation enacted for the benefit of the employees engaged in the factories and establishments. The entire Act is directed towards achieving this objective by enacting provisions requiring the employer to contribute towards Provident Fund, Family Pension and Insurance and keep the Commissioner informed of it by filing regular returns and submitting details in forms prescribed for that purpose. Paragraph 36-A of the Provident Funds Scheme framed by Central Government under Section 5 of the Act requires the employer in relation to a factory or other establishment to furnish Form 5-A mentioning details of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution which the employer is obligated to make under the provisions of the Act could not be fastened on anyone else except as directed by the Act itself. In other words, in enforcing the liability of the employer to pay provident fund contributions, against third parties, it becomes imperative for the Court to interpret the statute strictly, if it is so interpreted, it will not leave any doubt in anybody's mind that the Commissioner could raise the demand under sub-sections (3)(i) against a third party only when he finds the money of the employer in the hands of such third party to whom the notice is sent or in course of time, required money will become due to the employer. It is an established fact that on the date the Appellant Bank received the money from the Insurance Company or the date on which it received the notice issued by the Commissioner under Section 8-F(3)(i) of the Act, there was no money in the hands of the Bank which was due to employer. Therefore, in issuing the impugned notice dated March 2, 1995, the Commissioner acted ultra vires of the Act. 27. In the above case, the Division Bench of the Karnataka High Court has held that in enforcing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 8F(3) and Section 11(2) of the Act, I am of the opinion that the bye-laws of the petitioner-exchange will have to give way for the 1st respondent for enforcing their statutory rights. Therefore, I uphold the impugned proceedings wherein it is clearly stated that the provisions of the E.P.F. Act 1952 will supersede any bye-laws, rules and regulations of any establishment. Moreover, E.P.F. Act is a welfare legislation enacted for the benefit of the employees engaged in the factories and establishments. The anxiety of the legislature to ensure that the employees are not put to any hardship in respect of any P.F.contribution is manifest from Sections 10 and 11 of the Act. Section 11 of the Act provides for priority of P.F. contributions over other debts and such being the nature of Provident Fund, any violation or breach in this regard, has to be strictly construed. 33. In the light of the above discussions, I am unable to oust the case of the petitioner. Consequently, W.P.No.24857/2001 is dismissed. No costs. The other connected W.P.M.Ps. are also dismissed. 34. (II) Writ Petition No. 25609/2001 has been filed for issue of a writ of certiorari to call ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
