Judgment:
N.N. Mathur, J.
1. This petition under Article 226 of the Constitution of India is directed against the notice dated July 28, 1995 issued by the Regional Provident Fund Commissioner and also further apprehended prospective action in purported exercise of power under the provisions of Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act of 1952') for recovery of arrears of Provident Fund and allied dues of the petitioner-Company. The petitioner-Company is a sick industrial undertaking within the meaning of Section 3(i)(b) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as 'the Act of 1985 '). The say of the petitioner-Company is that the Board for Industrial and Financial Reconstruction (hereinafter referred to as 'BIFR') by an order dated July 26, 1991 under the provisions of Section 28(3) of the Act of 1985 has declared that the operation of the contract, awards, standing orders or other instructions in force to which the petitioner company is a party immediately before the issue of such order and that of the rights, privileges, obligations and liabilities occurring or arising thereunder shall stand suspended and proceedings thereto pending before any Court, Tribunal, Officer or other Authorities remain stand stayed. The validity of the said order has been extended from time to time and is in existence till date. It is further stated that by order dated February 28, 1995, the BIFR has sanctioned the scheme for revival and rehabilitation in exercise of powers conferred by Section 18(4) read with Section 19(3) of the Act. It is also stated that the scheme is in operation and is being acted upon by the Government of Gujarat.
2. Respondent-Regional Provident Fund Commissioner, by notice dated November 21, 1994 called upon the Bank of Baroda to pay them forthwith any amount due from the said Bank or held by it for an account of the petitioner-Company upto the amount of Rs. 81,69,679. 00 as the said amount is required to be taken as the amount due by the petitioner in respect of the arrears of Provident Fund and allied dues inclusive of penalty under Section 14(B) of the Act of 1952. The Bank informed the petitioner that pursuant to the said notice of the Regional Provident Fund Commissioner, the Bank would remit the amount outstanding on the credit of the petitioner's bank account No. 4338 of Navrangpura Branch of Bank of Baroda to the Regional Provident Fund Commissioner. The petitioner, therefore, by letter dated November 26, 1994, informed the bank not to remit the amount to the Regional Provident Fund Commissioner's office in view of the fact that the proceedings under the provisions of the Act of 1985 are pending before the BIFR. It was further pointed out that a suit was filed by the ICICI for recovery of dues against the petitioner wherein other financial institutions like Bank of Baroda, Bank of India were joined as party defendants. Bombay High Court, by order dated January 22, 1991 had passed order appointing Receiver for all the properties of the petitioner-Company situated at Vatva and Vinzol without power of sale. The said order was modified by the Division Bench of the Bombay High Court and the Receiver was appointed as Commissioner for the purpose of inventory of all the properties, securities which were mortgaged, charged in favour of ICICI and other financial institutions. It has also been pointed out that on July 5, 1991 when the notice of motion taken out by the ICICI, was called out for hearing the petitioner had pointed out the fact that the matter was referred to the BIFR and the BIFR. had appointed one Mr. R. K. Aggrawal as Special Director and had also appointed Bank of Baroda as the operating agent. In view of this, the Bombay High Court, by order dated July 9, 1991, stayed the proceedings before the Court of Receiver appointed earlier. In spite of these, the Respondent was bent upon to recover the amount standing to the credit of the petitioner in account No. 4338 with Navrangpura Branch of Bank of Baroda for being appropriated towards the arrears of Provident Fund and allied dues of the petitioner company under the Act of 1952. In this circumstance, the petitioner approached this Court by way of filing Special Civil Application which has been registered as SCA No. 12933/94. This Court, by order dated December 9, 1994 stayed operation of the notice dated November 21, 1994. During the pendency of the said Special Civil Application, the respondent-Regional Provident Fund Commissioner again issued the impugned notice dated July 28, 1995 directing compliance of the order. The petitioner gave all the necessary informations including the fact is that the declaration under Section 22(3) of the Act of 1985 has been extended, in spite of this fact, the Respondent has issued the order of attachment. In view of this fact, the petitioner has filed the present Special Civil Application challenging the impugned notice dated July 28, 1995.
3. It is contended by the learned Advocate for the petitioner that in view of the provisions of Section 22 of the Act of 1985, the impugned notice is ex facie illegal. He further submits that the proceedings referred under Section 22 includes any proceedings initiated under the provisions of the Act of 1952.
4. The question is 'whether the respondent-Regional Provident Fund Commissioner could recover the arrears of provident fund and allied dues by the petitioner-Company which is admittedly a sick industrial unit without the consent of the BIFR.'? Section 22 reads as under :
'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 of 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 Companies Act, 1956 (1 of 1956) or any other law of 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 shall lie or be proceeded further, except with the consent of the Board or, as the case may be, the Appellate Authority.
(2) Where the management of the sick industrial company is taken over or changed, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or in the Memorandum and Articles of Association of such company or any instrument having effect under the said Act or other law -
(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a Director of the company;
(b) no resolution passed at any meeting of the shareholders of such company shall be given effect unless approved by the Board.
(3) During the period of consideration of any scheme under Section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contract, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board :
Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so that the total period shall not exceed seven years in the aggregate.
(4) Any declaration made under sub-section(3) with respect to a sick industrial company shall have effect notwithstanding other law, the Memorandum and Articles of Association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a Court, Tribunal, Officer or other Authority or of any submission, settlement or standing order and accordingly,
(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any Court, Tribunal, officer or other authority shall remain stayed or be continued subject to such declaration, and
(b) on the declaration ceasing to have effect
(i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made, and
(ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed.
(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this Section shall be excluded.'
Section 22(1) provides that in case an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration by the Board or any appeal under Section 25 is pending, then certain proceedings against the sick industrial company has to be suspended or presumed to be suspended. Thus, following proceedings are to be automatically suspended under Section 22(1) of the Act;
- Proceedings for winding up of the industrial company,
- proceedings for execution, distress or the like against any of the properties of sick industrial company,
- proceedings for the appointment of Receiver.
The second category contemplates proceedings for execution, distress or the like against any properties of the industrial company. The Apex Court in the case of Chamundi Mopeds v. Church of South India Trust, reported in 1991 (75) Comp. Case 440 construed the words 'or the like' with reference to the words preceding namely, 'for execution, distress' whereby recovery of dues is sought to be made by way of execution, distress or similar process against the property of the company. Though on the fact of that case, the Court held that the proceedings for eviction instituted by the landlord against a tenant who happens to be a sick industrial company cannot be regarded as falling in that category, so far as the present case is concerned, the proceedings under the Act of 1952 are proceedings whereby recovery of the dues were sought to be made by way of execution, distress or similar process against the property of the company and as such it squarely falls within the nature of proceedings which are automatically suspended under the provisions of Section 22 of the Act of 1985.
5. 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 petitioner-Company shall lie or to be proceeded further including the proceedings under the Act of 1952 except with the consent of the Board. The provisions are also in consonance with the principles of equity, inasmuch as that the Board has been given discretion to accord its approval for proceeding against the company by creditors, for the recovery of their dues, outstanding over-dues or arrears. Since the enquiry under Section 16 is ordered by the Board, the various proceedings set out under sub-section (1) of Section 22 are deemed to have been suspended under the provision does not extinguish the recovery but it only postpones, 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.
6. In view of the aforesaid, the impugned notice dated July 28, 1995 for recovery of the arrears of Provident Fund and allied dues is ex facie illegal and is accordingly quashed and set aside. It is, however, open to the Respondent to approach the Board for appropriate directions under the provisions of the Act of 1985.
7. Rule made absolute to the aforesaid extent with no order as to costs.