S.B. Sinha, C.J.
1. This writ appeal is directed against the order of the learned single Judge declining to interfere with the order of attachment dated 5-7-2001 passed by the 3rd respondent under Sections 8-B and 8-G of the Employees Provident Fund Miscellaneous Provisions Act, 1952 (for short 'the EPF Act') as also the order appointing a receiver in respect of the appellant's business concern for proper management/running of the business in accordance with the rules.
2. The appellant-petitioner is a sick Company within the meaning of Section 3(1)(o) of the Sick industrial Companies (Special Provisions) Act, 1985 (for short 'SICA').
FACTS:
3. The admitted fact is that the appellant had committed default in remitting the amounts due under the Employees Provided Fund Scheme, 1952 to the tune of Rs. 1,63,775-55 during the period from November, 1992 to November, 2000 to the PF Account. Out of the said amount an amount of Rs. 72,96,915/- represents the employees' share of the Provident Fund contributions deducted from the wages ofthe employees. Therefore, the 3rd respondent who was the recovery officer under the EPF Act issued an order of attachment dated 5-7-2001 prohibiting and restraining the appellant from transferring or charging the business in any way without the prior consent of the authority concerned. On the same day, an order was passed appointing the factory manager of the appellant-company as receiver.
4. It also appears that the Board for Industrial and Financial Reconstruction (BIFR) issued directions directing the appellant company to pay the employees share of EPF dues in three equal monthly instalements together with interest at applicable rates apart from issuing other directions. Aggrieved by the said directions, the appellant preferred an appeal before the Appellate Authority for Industrial and Financial Reconstruction, New Delhi and the same was pending.
Question:
5. The question, which arose for consideration before the learned single Judge is as to whether having regard to the provisions of Section 22(1) of the SICA, the recovery proceedings could be stayed in view of the decisions of the Apex Court in Maharashtra Tubes v. SIIC of Maharashtra, 1993 (78) Company Cases 803, and Gram Panchayat v. Shree Vallabh Glass Works Limited, : [1990]1SCR966 . The learned single Judge dismissed the writ petition holding that Section 22(1) of SICA has no application and the provisions of EPF Act would not come within the purview thereof.
Submissions:
6. Sri C. Kodanada, Ram, learned Counsel appearing on behalf of the appellant would submit that Section 22 of SICA begins with a non obstante clause and as such recovery of any dues irrespective of its naturehas to be stayed. Strong reliance in this connection has been placed on Maharashtra Tubes v. SIIC of Maharashtra (supra) and Gram Panchayat v. Shree Vallabh Glass Works Limited (supra), Organo Chemical Industries v. Union of India, AIR 1979 SC 1803, and a Full Bench decision of this Court in VSR Murthy v. Engineer-in-Chief, 1997 (5) ALT 69 (FB). The learned Counsel would contend that about six thousand employees have been working in the factory and the order of the Board for Industrial and Financial Reconstruction (BIFR) was under appeal. The learned Counsel would contended that the appellant is agreeable to handover the management of the company to the Provided Fund authorities, but, it must be ready to face the consequences thereof. In any event, contends the learned Counsel, that prior to appointment of receiver, the provisions of the second schedule appended to the Income Tax Act had not been followed.
7. Mr. R.N. Reddy, the learned Counsel appearing on behalf of the respondent, on the other hand, would urge that the amounts sought to be recovered are only in relation to the employees' own contribution to the Provided Fund. Our attention in this connection has been drawn to Paragraphs 32 and 38 of the Employees' Provided Funds Scheme 1952. According to the learned Counsel, the appellant cannot be said to be aggrieved as it's factory manager has been appointed as a receiver. It was submitted that Section 14-B of the EPF Act is a special provision which empowers the Central Provided 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 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 employer.
Findings:
8. SICA has been enacted to make in the public interest, special provision with a view to securing the timely detection of sick and potentially sick industrial companies owning industrial undertakings, speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith and incidental thereto. The objectives are to fully utilise the productive industrial assets; afford maximum protection of employment and optimise the use of the funds of the banks and financial institutions. The salient features of the Act are to indentify the sick industrial units, registered for not less than seven years, on the basis of symptomatic indices of cash losses for two consecutive years and accumulated losses equalling or exceeding the net worth of the company as at the end of the second financial year. The Act envisages for establishment of a Board consisting of experts in various relevant fields with powers to enquire into and determine the incident of sickness in industrial companies and devise suitable remedial measures through appropriate schemes or other proposals and for proper implementation thereof. The onus of reporting sickness and impending sickness at the stage of erosion of fifty per cent, or more of the net worth of an industrial company was on the Board. Where the Central Government or the Reserve Bank of India is satisfied that an industrial company has become sick, it may make a reference to the Board. It also envisages for constitution of an appellate Authority consisting of persons who are or have been Supreme Court Judges, Senior High Court Judges and Secretaries to the Government of India for hearing appeals against the orders of the Board.
9. Under Section 15(1) of SICA, where an industrial company has becomesick, its Board of Directors shall within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the BIFR for determination of the measures which shall be adopted with respect to the company. Under Section 16(1) of the SICA, the BIFR is empowered to make an enquiry whether any industrial company become a sick industrial company. Section 17 provides that after making an enquiry under Section 16, if the Board is satisfied that a company has become a sick industrial company, it would decide whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. Where the Board decides that it is not practicable for the sick company to make its net worth exceeding its accumulated losses within a reasonable time, it may, under Section 17(3) direct the operating agency appointed under Section 16(2) of SICA to frame a scheme as contemplated under Section 18 of the SICA. The Board is empowered to make such modifications of the scheme as it may deem fit after considering the suggestions and objections received thereto. The scheme is thereafter sanctioned under Section 18(4). Once the scheme come into operation, it binds the company, its shareholders, creditors, guarantors and the employees amongst others,
10. Section 22 of the Act provides for suspension of legal proceedings, contracts etc., in respect of the cases mentioned therein. Section 22 as amended in 1993 reads thus:
22. Suspension of legal proceedings, contracts etc :--(1) Where in respect of an industrial company, an enquiry 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 industrialcompany 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 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 case may be, the Appellate Authority.
11. Section 22 of SICA comes into operation where an enquiry under Section 16 is pending or a 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. In such circumstances, not withstanding the provisions of the Companies Act, 1956 or any other law or the Memorandum and Articles of Association of the Company or any other instrument having the 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 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 company shall be instituted or be proceeded with further except with the consent of the Board, or, as the case may be, the appellate authority. It is not in dispute that in terms of Section 32 of SICA, the provisions of the Act and of any rules or schemes made thereunder shall have a overriding effect.
12. The EPF Act has been enacted to provide for the 'institution of provident funds, pension funds, and deposit linked insurance funds for employees in factories and other establishments'. Therefore, it is a welfare legislation intended to provide as a measure of social security. Under the provisions of the EPF Act, a scheme known as Employees' Provident Funds Scheme, 1952 has been framed. After framing of the scheme, a Fund is established which is vested in and administered by the Central Board constituted under Section 5-A of EPF Act. Section 6 of EPF Act provides that 8 1/3% of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees shall be deducted as contribution from the employees and a sum equal to thereof shall be contributed by the employer. Section 8 provides for mode of recovery of moneys due from employers. Section 8A provides for recovery of moneys by employers and contractors. Section 8-B provides that where any amount is in arrear under Section 8, the authorised officer may issue to the Recovery Officer, a certificate specifying the amount of arrears and the Recovery Officer on receipt of such certificate shall proceed to recover the amount specified therein from the establishment or employer by one or more of the modes i.e., (1) attachment and sale of the movable or immovable property of the establishment of the employer, (2) arrest of the employer and his detention in prison and (3) appointing a receiver for the management of the movable or immovable properties of the establishment or the employer. Section 8-G provides that the provisions of the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount mentioned in Section 8 of the Act instead of to the income tax.
14B
5-A
14-B
14-B
Power to recover damages :--Where an employer makes default in the payment of any contribution to the Fund (the Family Fund or the Insurance Fund) or in 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 Government, by notification in the Official Gazette in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme :
Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being beard;
Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and inrespect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (I of 1986), subject to such terms and conditions as may be specified in the scheme.
14. Under Para 32-B which provides for terms and conditions for reduction or waiver of damages reads thus:
Terms and conditions for reduction or waiver of damages :--The Central Board may reduce or waive the damages levied under Section 14-B of the Act in relation to an establishment specified in the second proviso to Section 14-B, subject to the following terms and conditions:
(a) in case of change of management including transfer of the undertaking to workers' co-operative and in case of merger or amalgamation of the sick' industrial company with any other industrial company, complete waiver of damages may be allowed;
(b) in cases, where the Board for Industrial and Financial Reconstruction, 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.
15. Para 38 provides that the employer before paying the member his wages in respect of any period or part of period for which contributions are payable, was under obligation to deduct the employee's contribution from his wages together with his own contribution and he shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contributions and administrative charge.
16. Both the statutes are special statutes. Whereas the object for enactmentof SICA was to provide for the revival and rehabilitation of sick industrial companies, the object of the EPF Act, as indicated hereinbefore, was as a measure to provide social security to the employees. The contribution of the employees towards PF is not a tax due. It is not also an amount recoverable under a contract.
17. The provisions of EPF Act, in particular, the contributions of the employees towards PF, in our opinion, would not come within the purview of Section 22(1) of SICA. The provident fund and other dues payable under EPF Act, 1952, are part of the legitimate statutory settlements of the workers. The employer is obligated to pay the contribution of the employees as well as its own contribution to the Fund, which is set up under the Act and the scheme framed thereunder. The employer is under a statutory obligation to deduct the amounts specified under the scheme from the salary of employees and in terms of the said scheme is required to deposit the said amount within 15 days. The deductions made by the employer are the earnings of the employees. Under the Employees' Provident Fund Scheme, 1952, the employer is required to file monthly returns. Can the petitioner, in the aforementioned situation, refuse to comply with the statutory mandate to pay the contribution made by the employees as also its share, which was by way of social security scheme? The answer to the said question must be rendered in negative. Although the object of SICA is laudable but, in our view, the same should not deprive the hard earnings of the employees. It does not and cannot stay recovery proceedings to which the employees are entitled to by way of social security scheme. The money does not belong to the company. It belongs to the employees. Such amounts having been collected from the wages of the employees, the appellant was required to remit the same to the Fund together with its contribution in accordance with the scheme and the failureto deposit the same would attract payment of damages and other penal consequences as provided under Section 14-B of the Act. Initiation of proceedings for damages in terms of Section 14-B are quasi criminal in nature.
18. The interpretation of Section 22 of SICA vis-a-vis other Acts came up for consideration in various decisions of the Apex Court. In Maharashtra Tubes (supra), the provisions Section 29 of the State Financial Corporation Act, 1951 and Section 22(1) of SICA came up for consideration. The Apex Court held that the provisions of Section 22(1) are of wide amplitude and thus will prevail over the provisions of Section 29 of the State Financial Corporation Act, which provides for coercive steps against the defaulting industrial concerns in repayment of loans taken by the industrial concerns. It was also held that the word 'proceeding' in Section 22(1) cannot be given a narrow or restricted interpretation so as to confine it only to legal proceedings and a proceeding under Section 29(1) of the State Financial Corporation Act was held to be within the purview of Section 22(1) of SICA.
19. Gram Panchayat v. Shree Vallabh Glass Works Limited is a case where Gram Panchayat initiated coercive proceedings under Section 129 of the Bombay Village Panchayats Act to recover the amount due towards property tax against a sick company. The Apex Court held that coercive steps to recover dues for the payment of property tax would fall within the purview of Section 22(1) of SICA and that no coercive steps should be taken without the permission of BIFR. It was held:
In the light of the steps taken by the Board under Sections 16 and 17 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 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.
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/over dues or arrears by whatever name they are called. The Board, at its discretion, may accord its approval for proceeding against the company.
20. In Deputy Commercial Tax Officer v. Coromandal Pharmaceuticals, : [1997]2SCR1026 , the Apex Court had dealt with the question as to whether dues on account of sales tax, which had occurred after the date of sanctioned scheme, would fall within the purview of Section 22(1) of SICA. The Supreme Court held that where a sick industrial company had after the date of their sanctioned scheme collected the amount of sales tax, but had failed to pay it over to the revenue, it would not be open to the company to seek shelter under the provision for Section 22(1). It was also held that as the language of Section 22 was wide, it would have to be construed reasonably to apply only to those dues, which were reckoned or included in the sanctioned scheme. It was held:
The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the 'impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by Section 22 of the Act. So, we are of the view that though the language of Section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after theimplementation of the scheme or the disposal of an appeal under Section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in Section 22(1) of the Act can apply only to such of those dues reckoned or included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and withhold it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against spirit of the statute in a business sense, should be avoided.
21. In Tata Davy Limited v. State of Orissa, (1998) 111 STC 462, the recovery of arrears due towards sale tax were sought to be recovered by the provisions of Orissa Sales Tax Act, 1947. The Apex Court held that arrears of taxes and the like due from sick companies that satisfy the conditions set out in Section 22(1) of SICA cannot be recovered by coercive process unless consent is obtained from the BIFR to recover such arrears.
22. In Gujarat Steel Tube Company Limited v. Virchandbhai B. Shah, : AIR1999SC3839 , the Apex Court had occasion to consider the question as to whether an 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, : [1992]2SCR999 , the Apex Court held that the Rent Control Act gave protection to a statutory tenant to continue to occupy the premises but such right could not be regarded as property of the company under Section 22(1) of SICA and therefore the provisions of Section 22(1) were not applicable to theeviction proceedings instituted by the landlord against the sick company.
23. In CApex Court was considering the question whether Section 22(1) of SICA covers a suit against the guarantor of a loan or advance that has been granted to a company declared as sick. On a plain and literal construction of the said provisions, the Apex Court held that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the company will He or can be proceeded with without the consent of the Board or the appellate authority.
24. From a conspectus of the aforementioned decisions, it is evident that the impediment contained in Section 22 of the Act was as regards the safeguards provided for implementation of a sanctioned scheme by the BIFR. The Apex Court in Deputy Commercial Tax Officer's case (supra) held that where a sick company after the date of sanctioned scheme collected the amount of sales tax but had failed to pay it over to the revenue, then it would not come within the purview of Section 22(1) of the Act. However, in Tata Davy Limited's case, it was held that arrears of taxes due from sick company that satisfy the conditions in Section 22(1) of SICA cannot be recovered by coercive process without the consent of the BIFR.
25. In the light of the provisions of EPF Act and the scheme framed thereunder, we are of the view that the rights of the employees under the Provident Scheme are protected and the proceedings under the EPF Act do not come within the purview of the provisions of Section 22(1) of SICA. An amendment to the EFP Act was made by Act 33 of 1988 in terms whereof Section 14-B has been introduced. Under Section 14-B, where an employer makes default in the payment of any contributionto the Fund, the Central Provident Fund Commissioner has been authoritsed to recover damages by way of penalty not exceeding the amount of arrears. However, under the proviso appended thereto, the Central Board has been empowered to reduce the quantum of damages that may be required to be paid by a company 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. When the provisions of Section 14-B were inserted, the Parliament took cognizance of the provisions of the EPF Act and in its wisdom only the recovery of damages was permitted to be reduced or waived subject to the conditions provided thereunder. Even the conditions specified in Para 32-B of the Scheme does not provide for any provision exempting a sick company from withholding the PF contributions collected from the wages of the employees or prohibiting the authority under the EPF Act from proceeding against such employers who defaulted to remit the contributions collected from the wages of the employees to the PF Fund, in accordance with the provisions of the EPF Act.
26. In this case, the default in admitted. Section 14-B clearly provides that the Central Board can reduce or waive the damages levied under the said provision but no provisions has been made in relation to the employees provident fund and, in our view, having regard to the directive principles of state policy as contained in Part IV of the Constitution of India no such provision could be made. For the purpose of applicability of the second proviso, the pre-conditions therefor are (1) the establishment must be a sick industrial company and (2) in respect of such sick company a scheme has been sanctioned by the BIFR for its rehabilitation. Such reduction or waiver of the damages would be subject to the terms and conditions as may be specified thereunder.
27. Para 32 of the EPF scheme, as noticed hereinbefore, has a direct bearing on Section 14-B of EPF Act. Under Para 32-B of EPF Act, the Central Board may allow waiver of damages up to 100 per cent but such waiver can be allowed only upon recommendations made by the BIFR in their scheme wherefor the BIFR was required to record reasons for the same.
28. The extent of immunity or exemption thus is limited. The same cannot be extended in relation to the employee's own share of contribution.
29. In Organo Chemical Industries v. Union of India, AIR 1979 SC 1803, the Apex Court was dealing with the power of the Provident Fund Commissioner under Section 14-B of EFP Act to impose damages on an employer defaulting in payment of contributions to the Provident Fund. Though in this case, the Apex Court has not considered the effect of the provisions of Section 22(1) of SICA with reference to provisions of EPF Act, however, the Apex Court considered the object of EPF Act threadbare. It was held:
The scheme of the Act is that each employer and employee in every 'establishment' falling within the Act do contribute into a statutory fund a little viz., 6 1/4% of the wages to sell into a large fund wherewith the workers who toil to produce the nation's wealth during their physically fit span of life may be provided some retrial benefit which will 'keep the pot boiling' and some source wherefrom loans to face unforeseen needs may be obtained. This social security measure is a human homage the State pays to Article, 39 and 41 of the Contribution. The viability of the project depends on the employer duly deducting the workers' contribution from their wages, adding his own little and promptly depositing the mickle into the chest constituted by the Act. The mechanics of the system will suffer paralysis if the employer fails to perform his function. The dynamics of this beneficial statute derives its locomotive power from the funds regularly flowing into the statutory till.
30. The Apex Court categorically held that 1952 Act has been enacted with a view to provide social security measure and with a view to effectuate the directive principles of State policy contained in Articles 39 and 41 of the Contribution of India. The following observations of the Apex Court may also be noticed:
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 benefits is filled by the employer collecting, 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 purposes 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. The whole project gets stultified if employers thwart contributory responsibility and this wider fall out must colour, the concept of 'damages' when the Court seeks to define its content in the special setting of the Act. For, judicial interpretation must further the purpose of a statute. In a different context and considering a fundamental treaty, the European Court of Human Rights, in the Sunday Times Case, observed: The Court must interpret them in a way that reconciles them as far as possible and is most appropriate in order to realise the aim and achieve the object of the treaty.
31. The Scheme framed under the EPF Act of the welfare of the workmen is in consonance with the directive principles of the state policy contained in Part IV of the Constitution and such scheme, in our opinion, cannot be allowed to be defeated by the operation of the provisions of Section 22(1) of SICA. A plain reading of the provisions of Section 22(1) of SICA would make it clear that the proceedings under the EPF Act would not come within the purviewthereof. Section 14-B of EPF Act has, however, granted limited protection in relation to reduction of waiver of damages in respect of a sick industrial unit in relation to which a scheme for rehabilitation has been sanctioned by the BIFR. We are, therefore, of the view that the decisions in Maharashtra Tubes Case and Gram Panchayat's case (supra) have no application to the facts of the present case. The decision of the Apex Court in Organo Chemical Industries is also of no assistance to the case of the appellant,
32. The Full Bench decision of this Court in VSR Murthy v. Engineer-in-Chief was rendered in a different context. In the said case, some of the surplus employees in Hyderabad Allwyn Limited, declared as sick company, were absorbed in supernumerary posts created in Government Departments but such posts were abolished under G.O.Ms. No. 192 dated 1-10-1996. This was followed by an enactment called A.P. prohibition of Absorption of Employees of State Government Public Sector Undertakings into Public Service Act, 1997 (Act No. 14 of 1997). This Court set aside the order of the Government in G.O. Ms. No. 192 holding that Act No. 14 of 1997 is only prospective and the scheme approved by the BIFR has become part of the statute binding on all parties including the State Government. The said decision, therefore, has no application to the facts of the present case.
33. In Ralliwolf Limited v. RPF Commissioner, 2001-1 LLJ 1423, the High Court of Bombay held that the recovery of Provident Fund and other dues under EPF Act do not come within purview of Section 22(1) of SICA. It was held :
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. That is anentitlement to which the employees are entitled by dint of the work, which they have put in. These are due which are payable whether or not an undertaking is sick. They constitute an intrinsic part of the employees right to life under Article 21 of the Constitution.
34. In BSL Limited v. Gift Holdings Private Limited, , the Apex Court was considering the applicability of the provisions of Section 138 of the Negotiable Instruments Act in relation to a sick company. It was held that once offence committed by the company under Section 138 of the Negotiable Instruments Act is complete by reason of non-payment of the amount covered by the cheque issued by it, even if thereafter, BIFR passes an order declaring the company as sick, Section 22(1) of SICA would not bar institution of criminal proceedings against the company and its directors under the Negotiable Instruments Act.
35. In Kusum Ingots and Alloys Limited v. Pennar Peterson Securities Limited, : 2000CriLJ1464 , was again a case dealing with the provisions of Section 138 of Negotiable Instruments Act. In this case a cheque drawn by a company is dishonoured but before offence under Section 138 is complete, the drawer company was declared as sick. It was held, if the ingredients of Section 138 are satisfied thereafter, Section 22 of SICA would not bar criminal proceedings against the company. However, it was held that if a direction was issued by the BIFR against the company not to dispose of assets under Section 22-A before drawal of the cheque by the company or before expiry of notice period of 15 days prescribed under Clause (b) of proviso to Section 138, criminal proceedings would not be maintainable.
36. In Allahabad Bank v. Canara Bank, : [2000]2SCR1102 , it has been held:
Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as speciallaws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tabes Limited v. State Industrial and Investment Corporation of India : [1993]1SCR340 ] where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained Section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi, J. that both special statutes contained non-obstante clauses but that the '1985 Act being a subsequent enactment, the non-obstante clause therein would ordinarily prevail over the non-obstante clause in Section 46B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 statute is a special one'. Therefore, in view of Section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts. Other rulings of Supreme Court and High Courts cited by Counsel:
37. We, are therefore, of the opinion that the provisions of Section 22(1) of SICA have no application to the Provident Fund Scheme framed under the provisions of EPF Act and the dues under the EPF Act does not fall within the purview of Section 22(1) SICA. The respondents are, therefore, entitled to take recourse to coercive steps for recovery of the dues towards the employees' share of contribution.
38. At this stage, we may record that on 9-10-2001, the learned Counsel appearing for the appellant has filed a petition bringing to the notice of this Court that the appeal filed against the order passed by the BIFR had since been disposed of by the Appellate Authority and the same be taken into consideration while disposing of the present appeal.
39. It appears that the Appellate Authority for Industrial and Financial Reconstruction, New Delhi in Appeal No. 243 of 2001 by order dated 27-9-2001 disposed of the appeal in the following terms:
The appellant's case is that is not having sufficient cash flow and has been irregular in payment of salaries and wages of employees and workers as well as in depositing the amounts deducted therefrom towards EPF and ESIC contribution. We realise the hardship faced by the workers due to delay in payment of their wages. We also feel concerned about the fate of workers who have died or retired and have not received their legal dues. We are also aware that EPF and ESIC organisations have their polices for recovery of arrears of EPF and ESIC dues over a period in case rehabilitation schemes are sanctioned by BIFR/AAIFR. Keeping in view of the essential need of fairness to workers, without jeopardising the preparation of a workable rehabilitation scheme for the appellant company, we are modifying para 11(i) of the impugned order as follows, with the consent of Mr. Krishna Mohan, Managing Director of the appellant company, who is present:
(a) The PF dues (including the contribution of the employees/workers and the employer) of the expired workers shall be paid within one month.
(b) The EPF dues (including the contribution of the employees/workers and the employer) of the superannuated employees/workers shall be paid within three months.
(c) The EPF dues (including the contribution of the employees/workers and the employer) of employees/workers superannuating hereinafter or expiring before superannuation, shall be paid within one month of superannuation/ expiry.
(d) The arrears of current ESIC/EPF dues with effect from 1-4-2001 shall be paid within three months. Payments made by the appellant company after 1-4-2001shall be adjusted by EPF/ESIC organisations towards current dues, except in case of superannuated/expired employees/workers whose dues shall be paid in accordance with the Clauses (a) and (b) above.
(e) Other arrears of EPF and ESIC dues up to 31-3-2001 shall be paid under the scheme as may be sanctioned by BIFR and provisions for payment of such arrears be made keeping in view the policies followed by EPF/ESIC organisations for the recovery of the dues from sick industrial companies under the schemes sanctioned by BIFR/ AAIR.
40. The respondents may keep in view the aforesaid directions of the Appellate Authority for Industrial and Financial Reconstruction, New Delhi before proceeding Further in the matter.
41. For the reasons aforesaid, we find no merit in the appeal and it is accordingly dismissed. No order as to costs.