Calcutta High Court (Appellete Side)
As Rsi Private Ltd. & Anr vs Employees' Provident Fund ... on 23 March, 2011
Author: Tapen Sen
Bench: Tapen Sen
3.3.2011
W.P. 22782(W) of 2010
M/s. R. S. I. Limited, now presently known
As RSI Private Ltd. & Anr. ... Petitioners
-vs-
Employees' Provident Fund Organization & Ors.
... Respondents
For the Petitioners : Mr. Partha Sarathi Sengupta, Mr. Kishore Dutta, Mr. Ranabir Roy Chowdhury, Mr. D. Chakraborty.
For the P. F. Authorities : Mr. S. C. Prasad.
In this Writ Petition, the Petitioners pray for setting aside the Letter dated 4th November, 2010 issued under Memo No. WB/HWR/R/Recovery/ WB/2679/Cert. Case/832 by the Recovery Officer, Employees' Provident Fund Organisation, Howrah addressed to the Director of the Petitioner No. 1 informing him that he had not deposited Rs. 15,00,000/- in terms of the Order of this Court and therefore, he was advised to deposit the same within seven days failing which, coercive action relating to the recovery proceedings were threatened. The Petitioners further pray that the said Order be not given effect to. Other consequential prayers have been made in the Writ Petition itself.
The short facts are that the Petitioners faced 7A proceedings under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 in regard to the dues towards provident fund contribution for the period from December, 2003 to September, 2005. The dues were assessed at Rs. 32,43,896/- by an Order dated 12.1.2006.
Being aggrieved, the Petitioners filed W.P. No. 4815(W) of 2006 challenging the determination made under Section 7A of the said Act and the said Writ 2 Petition was disposed of by a Judgment dated 7.3.2006 directing inter alia as follows :
"(1) The petitioners will pay a sum of Rs. 10,00,000/- (Ten Lakhs) to the Provident Fund authority within a period of two weeks from date;
(2) The balance dues will be paid by the petitioners in six equal monthly instalments. First of such instalments for the month of '06 will be paid by the petitioners by 15th of April, 2006 and the subsequent instalments will be paid by the 15th of the next following month;
The impugned order of attachment of the Bank Account of the petitioners with the State Bank of India, Commercial Branch, Howrah appearing at page 20 of this writ petition will remain in force for a period of three weeks from date. In the event, the petitioners deposit Rupees Ten Lakhs within the period as mentioned above, the order of attachment will stand automatically lifted.
The Provident Fund authority is thus restrained from taking any coercive steps for realizing the balance dues from the petitioners provided the petitioners deposit the monthly instalments regularly in the manner as above.
In the event of default of any of the instalments as aforesaid, this restraint order will automatically stand lifted and the Provident Fund authority will be absolutely free to take any action for realization of its dues in accordance with law.
The petitioners are also restrained from transferring their fixed assets until payment of the entire dues by the petitioners is made". Thereafter, the Petitioners received a notice to show cause as to why damages under Section 14B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Provident Fund Act) be not levied. A Notice was received by the Petitioner No. 1 being Notice dated 10.8.2007 3 asking the Petitioners to be present on 4.9.2007. It is stated that no hearing took place on that day and subsequently, another day was fixed.
According to the Petitioners, they received an Order dated 5.11.2007 imposing damages to the extent of Rs. 29,60,230/- under the Provisions of Section 14B of the Provident Fund Act and interest was determined to the extent of Rs. 9,81,647/- under the Provisions of Section 7Q of the said Act.
Representations were made requesting the Respondents not to impose damages vide Annexure - P3.
Subsequently however, the Order dated 5.11.2007 referred to above, was challenged vide W.P. No. 15515(W) of 2009 but during the pendency thereof, the Respondents started recovery proceedings and a Notice to show cause dated 1.2.2010 was issued asking them to show cause as to why warrants of arrest be not issued against the Director of the Petitioner No. 1 vide Annexure - P4.
It is the case of the Petitioners that the entire payments towards interest levied under Section 7Q were paid and the Respondents issued a "No Dues"
Certificate on 18.7.2005 vide Annexure - P5.
The Petitioners have further stated that thereafter, W.P. No. 15515(W) of 2009 referred to above, was taken up by another Hon'ble Single Judge on 18.2.2010 and finally, on 21.4.2010, the same was disposed of with the following observations :4
"Having considered rival submissions, in my view since the order was passed ex parte, no prejudice would be caused if another opportunity is given to the petitioners to explain the reason for default. The main ground for imposing damages is no valid reasons have been given by the establishment. As the default relates to periods several decades back, and the employer has already made payment of Rs. 12,00,000/-, on condition that a further sum of Rs. 15,00,000/- is deposited within a period of eight weeks, the impugned order shall remain permanently stayed and a fresh hearing shall be given to the petitioners. The said payment shall be made without prejudice to the rights and contentions of the parties and shall be subject to the decision of the provident fund authorities to be taken in pursuance of the directions contained in this order. The order of prohibition imposed upon the bankers or other debtors of the petitioners, if any, shall stand revoked. In the event however, the said sum is not deposited within a period of eight weeks, the order impugned shall revived and it shall be open to the respondents to take such step as may be permissible under the law. For this interim period of eight weeks, the petitioners shall not alienate any of their immovable assets.
The present writ petition shall stand disposed of in the above terms.
There shall, however, be no order as to costs."
It is stated by the learned Counsel for the Respondents that from a perusal of the aforementioned Order of the Hon'ble Single Judge, it will appear that the Petitioners were given an opportunity to deposit Rs. 15,00,000/- which they did not, and instead, have chosen to file this Writ Petition without complying with the said Order.
However, in Paragraph 19, the Petitioners have stated that challenging the said Order of the Hon'ble Single Judge passed on 21.4.2010, the Petitioners filed an Appeal being M.A.T. 823 of 2010 which was taken up with C.A.N. 5913 of 2010 and by an Order dated 16.9.2010 (wrongly typed as 16.10.2010 in Paragraph 19), the said Appeal was dismissed.
5
A photocopy of the Order dated 16.9.2010 was produced by the learned Counsel for the Petitioners and the same was taken on record.
Some Paragraphs of the Appellate Court's Order have been emphasized by the learned Counsel for the Respondents and they are quoted below :
"In our view, in the absence of any valid reason of non-appearance, the writ-petitioners having moved the writ-application, the learned Single Judge was quite justified in imposing a condition that the writ-petitioners should given security to the extent of Rs. 15,00,000/- for the admitted delayed payment ranging for the period from 1982 to 1985 and 2000 to September, 2005.
We do not find any reason to interfere with the just discretion exercised by the learned Single Judge. The aforesaid exercise of the discretion can neither be said to be perverse nor can it be said to be unreasonable justifying interference in this appeal.
This mandamus appeal is devoid of any substance and is dismissed.
We, however, extend the period of deposit of security as passed by the learned Single Judge by one month from today. If the security is deposited within a month from today, the order passed by the learned Single Judge should be treated to have been complied with.
In view of dismissal of the appeal itself, the connected application being CAN 5913 of 2010 has become infructuous and the same is disposed of accordingly."
Mr. S. C. Prasad, learned Counsel appearing for the Respondents, states that thus, upon a perusal of the two Orders, it would be evident that the Petitioners have come to this Court with unclean hands and have not complied 6 with the Orders passed by this Court and therefore, this 3rd Writ Petition should not be taken into consideration at all.
This Court however, respectfully repudiates such a contention of Mr. Prasad inasmuch as upon a perusal of the Order of the Hon'ble Single Judge, it would be evident that his Lordship's Order contained a rider to the effect that in the event, the said sum was not deposited within a period of eight weeks, the impugned Order shall revive and it shall be open to the Respondents to take such steps as may be permissible under the law. In other words, the Respondents were given liberty to take steps as permissible under law.
Now in this Writ Petition, the Petitioners have challenged such steps having been taken by the Respondents being the communication dated 4.11.2010 and have submitted that the Respondents are not entitled to take recourse to any coercive step inasmuch as they are prevented from doing so under the Provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. Learned Counsel for the Petitioners submits that this point was not dealt with either by the Hon'ble Single Judge nor by the Hon'ble Division Bench and therefore, they are not estopped from filing this Writ Petition challenging their action in the background of the aforementioned Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as SICA). This Court is inclined to accept such a submission of the learned Counsel. The grounds of challenge to the initiation of coercive steps, as have been submitted by the learned Counsel for the Petitioners, are stated in the Paragraphs following hereafter. 7
Under the Provisions of Section 22 of SICA, when an inquiry under Section 16 in respect of an industrial company is pending or any Scheme referred to under Section 17 is under preparation or consideration or, a sanctioned Scheme is under implementation or, when an appeal under Section 25 relating to such 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 ............... ......... shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. The relevant portion of Section 22 of the SICA reads as follows :
"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 (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."
(emphasis by underlining is by Court) 8 Now in order to see as to whether this Company comes within the purview of Section 22 it has to be seen as to whether the Company is either facing an enquiry under Section 16 or whether a Scheme under Section 17 is under preparation or consideration or whether such a Scheme has already been sanctioned ?
Upon a perusal of Annexure - P7 between Pages 59 to 77, this Court notices that the Statutory Form being Form 'A' under Regulation 19 of the Board for Industrial and Financial Reconstruction Regulations, 1987, was duly filled up by the Petitioners and forwarded to the appropriate Authorities and at Page 63, this Court notices that one of the liabilities which were enumerated and disclosed therein was the Provident Fund interest and damages amounting to Rs. 39,89,398/-.
Thereafter, by an Order dated 6.8.2010, the Registrar of the aforesaid Board informed the Director of the Petitioner No. 1 that their Application (referred to above) was duly considered under Section 15(1) of SICA and the matter had been registered before the Board as Case No. 42 of 2010.
Section 15 of SICA is a Provision relating to the reference of a sick Company to the aforesaid Board for industrial and financial reconstruction. Once the reference is made to a Board under Section 15, the next step that is to be taken is under the provisions of Section 16 and which is the enquiry referred to therein. Subsequently, under the provisions of Section 18, a Scheme has to be prepared and sanctioned. It is thereafter that the provisions of Section 22 play an 9 important role extending relief to such sick industrial undertakings and also making a provision for aggrieved persons to approach the Board and proceed in relation to any claim which they may be having against such a Company and take the consent of the Board or the Appellate Authority, as the case may be.
Section 32 of SICA gives an overriding effect to the said statute. In the background of the aforementioned facts and circumstances, this Court cannot lose sight of a judgment of the Supreme Court passed in the case of Maharashtra Tubes Ltd -vs- State Industrial & Investment Corporation of Maharashtra Ltd. & Anr. reported in (1993)2 SCC 144. Paragraph - 10 of the said Judgment deals with the provisions of Section 22(1) of SICA quoted above and the observations and ratio decided therein are of such nature that they cannot be brushed aside likely nor can they be just referred to and then, not dealt with.
Learned Counsel for the Petitioners have referred to this Judgment and reading the contents of Paragraph - 10, this Court has a moral obligation to deal with what their Lordships had said in the context of Section 22 of SICA failing which, this Court would also be failing in its duties to appreciate the law which has been laid down by the Apex Court. Mere reference to a judgment by citing it and not dealing with, cannot be said to be appreciating or dealing with the law laid down by the Apex Court.
Having said so, this Court would now like to refer to what their Lordships had said in Paragraph - 10. It has been stated that the purpose and object of the 10 said provision is to clearly await the outcome of a reference made to the BIFR for the revival and rehabilitation of the sick industrial company. The words "or the like" which have been used in the said provision have also been dealt with by the Apex Court and their Lordships had said that this would clearly intend to convey that the properties of the sick industrial company shall not be made a subject matter of coercive action of similar quality and characteristic till the BIFR finally disposes of the reference made under Section 15 of the said enactment.
There is no dispute that reference has been made in this case and the matter is still pending before the BIFR. Their Lordships had also said that the legislature has advisedly used an omnibus expression "the like" as it could not have conceived of all possible coercive measures that may be taken against a sick undertaking. The content of the impugned communication in this case is an indication of a coercive measure that will certainly follow as against the Petitioners.
For the convenience of all, Section 10 of the Judgment passed in the case of Maharashtra Tubes Ltd. is quoted below and it reads as under :
"10. It was next contended that the right conferred on the Financial Corporation by Section 29 of the 1951 Act is not a 'legal proceeding' but merely an action permitted by stature and, therefore, Section 122(1) will have no application as it only bars legal proceedings for the winding up of any industrial company or for execution, distress or the like against any of its properties or for the appointment of a Receiver in respect thereof. Now Section 22(1) uses the expression 'proceedings' and not 'legal proceedings' which expression is albeit used in the marginal note to the said provision. Mr. Rao contended that Section 22 must be read in the light of the marginal note and when so read it becomes obvious that only legal proceedings of the 11 type mentioned in sub-section (1) thereof are barred and not the exercise of a right such as the one conferred by Section 29 of the 1951 Act. In support of his contention that the marginal note can be used as an aid to interpretation he invited our attention to a seven-Judge Bench decision of this Court in Bengal Immunity Company Ltd. v. State of Bihar. In that case the marginal note to Article 286 of the Constitution was referred to and it was said that it furnished some clue as to the meaning and purpose of the Article. But at the same time the Court pointed out that unlike the marginal notes in the statutes of the British Parliament, the various Articles of the Constitution were passed by the Constituent Assembly with the marginal notes and, therefore, the Court considered it permissible to use the marginal note to understand the meaning and purport of the Article. But so far as statutes are concerned this Court in the case of Board of Muslim Wakfs, Rajasthan v. Radha Kishan held in no uncertain terms that the weight of the authority was in favour of the view that the marginal note appended to a section cannot be used for construing the section (see paragraph 24 at p. 479). Section 22(1) shorn of the irrelevant part provides that where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in any 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 appointment of a Receiver in respect thereof shall lie or be proceeded with further, except with the consent of the BIFR or, as the case may be, the appellate authority. The purpose and object of this provision is clearly to await the outcome of the reference made to the BIFR for the revival and rehabilitation of the sick industrial company. The words 'of the like' which follow the words 'execution' and 'distress' are clearly intended to convey that the properties of the sick industrial company shall not be made the subject-matter of coercive action of similar quality and characteristic till the BIFR finally disposes of the reference made under Section 15 of the said enactment. The legislature has advisedly used an omnibus expression 'the like' as it could not have conceived of all possible coercive measures that may be taken against a sick undertaking. The action contemplated by Section 29 of the 1951 Act is undoubtedly a coercive measure directed at the take over of the management and property of the industrial concern and confers a further right on the Financial Corporation to transfer by way of lease or sale the properties of the said concern and any such transfer effected by the Financial Corporation would vest in the transferee all rights in or to the transferred property as if 12 the transfer was made by the owner of the property. So also under the said provision the Financial Corporation will have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. It is, therefore, obvious on a plain reading of Section 29 of the 1951 Act that it permits coercive action against the defaulting industrial concerned of the type which would be taken in execution or distress proceedings; the only difference being that in the latter case the concerned party would have to use the forum prescribed by law for the purpose of securing attachment and sale of property of the defaulting industrial concern whereas in the case of a Financial Corporation that right is conferred on the creditor corporation itself which is permitted to take over the management and possession of the properties and deal with them as if it were the owner of the properties. If the Corporation is permitted to resort to the provision of Section 29 of the 1951 Act while proceedings under Sections 15 to 19 of the 1985 Act are pending it will render the entire process nugatory. In such a situation the law merely expects the corporation and for that matter any other creditor to obtain the consent of the BIFR or, as the same may be, the appellate authority to proceed against the industrial concern. The law has not left them without a remedy. We are, therefore, of the opinion that the word 'proceedings' in Section 22(1) cannot be given a narrow or restricted meaning to limit the same to legal proceedings. Such a narrow meaning would run counter to the scheme of the law and frustrate the very object and purpose of Section 22(1) of the 1985 Act."
Mr. S. C. Prasad, learned Counsel appearing for the Respondents has laid much emphasis on a Calcutta High Court Judgment as against the Supreme Court Judgment referred to by the learned Counsel for the Petitioners and which is reported in (2001)3 Calcutta Law Times, 186. He refers to Paragraph - 5 of the said Judgment and submits that an Hon'ble Single Judge of this Court, having considered the Judgment of the Supreme Court passed in the case of Maharashtra Tubes Ltd. came to the conclusion that the Company had no right to take shelter under Section 22 in respect of the statutory liabilities and that the 13 employees are entitled to have their statutory benefits under the Provident Funds Act, 1952.
This Court has carefully considered the judgment of the Hon'ble Single Judge and notices that the only Paragraph where his Lordship had noticed the judgment of Supreme Court passed in Maharashtra Tubes Ltd. case is in Paragraph - 5 but in Paragraph - 5, only the submission of one Mr. Saha who was appearing for one of the Parties has been recorded. What their Lordships of the Supreme Court had said in Paragraph - 10 quoted above, has not been dealt with and under such circumstances, the judgment referred to by Mr. Prasad being the Judgment passed in the case of Universal Paper Mills Limited and Ors. -vs- Regional Provident Found Commissioner & Ors. reported in (2001) Calcutta Law Times 186 is held not to apply in the facts and circumstances of the case. What actually applies in the facts and circumstances of this case, is the Judgment of the Supreme Court which cannot be brushed aside.
The other aspect which cannot also be overlooked is the other observations made by the Apex Court in the same Paragraph and which clearly lays down that the law has not left the creditors without a remedy and that they can always approach the Board or the Appellate Authority as the same may be and seek their consent before resorting to any action.
Mr. Prasad has cited yet another Judgment of the Supreme Court passed in the case of Deputy Commercial Tax Officer and Ors. -vs- Corromandal Pharmaceuticals & Ors. reported in AIR 1997 Supreme Court 2027. He has cited Paragraphs 10, 11 and 13 in support of his contention that Section 22 was 14 not meant to breed dishonesty. He submits that taking into consideration the conduct of the Petitioners, they should not be given the benefit of Section 22 in view of the observations of the Supreme Court.
This Court is not inclined to accept the submissions of Mr. Prasad inasmuch as that Judgment was passed in the background of sales tax etc. which the sick industrial Company was liable to collect after the date of sanction of the Scheme and which belonged to the revenue. Such collection of sales tax, in their Lordships view, was not intended to be covered by Section 22 of SICA.
Under such circumstances therefore, the said Judgment cannot be made applicable, in the facts and circumstances of this case.
For the reasons stated above, this Writ Petition must succeed. It is accordingly allowed to do so. The impugned Order dated 4.11.2010 as contained in Annexure - P10 is set aside giving liberty to the Respondents to initiate action against the Petitioners strictly in accordance with law after they come out of the BIFR or take action against them after approaching the Board and taking their consent.
With the aforesaid observations and directions, this Writ Petition is allowed.
There will be no Order as to costs.
( Tapen Sen, J. ) 15 AKD