Karnataka High Court
G. Mahadevappa And Sons And Others vs State Of Karnataka And Others on 2 July, 1996
Equivalent citations: AIR1997KANT294, ILR1996KAR2934, 1996(7)KARLJ402, AIR 1997 KARNATAKA 294
Author: P. Vishwanatha Shetty
Bench: P. Vishwanatha Shetty
ORDER
1. In this petition, the petitioners have sought for : (1) a direction to the 1st respondent to deposit a sum of Rs. 446.59 Lakhs (Rupees four hundred fortysix lakhs fiftynine thousand only) with interest at the rate of 21% per annum from the date of taking over of the Mill until such deposit is made with the Commissioner; (2) for a declaration that the notice of demand dated 31st May, 1990, issued by the Regional Provident Fund Commissioner, Bangalore (hereinafter referred to as the 'Provident Fund Commissioner), the copy of which has been produced as Annexure-G, as illegal and void; (3) for a direction restraining the 3rd respondent-Provident Fund Commissioner or his subordinates from demanding or enforcing recovery through the Revenue Department of the amount claimed under Annexure-G; (4) for a further direction to the 2nd respondent to adjudicate the claim and disburse the amounts as per the provisions of the Karnataka Co-operative Textile Mills (Acquisition and Transfer) Act, 1986 (hereinafter referred to as the 'Act'); (5) and also for a direction to the 3rd respondent Provident Fund Commissioner to withdraw the prosecution proceedings instituted against the petitioners or other Ex Partners of the 1st petitioner.
2. The facts of the case may be set-out in brief as hereunder :
The 1st petitioner is a partnership firm constituted as per the Deed of Partnership dated 23rd February, 1970, and the 2nd petitioner is one of the Partners of the 1st petitioner firm. The 1st petitioner took on lease by means of registered lease Deed dated 29th August, 1970, a Textile Mill belonging to M/s. Karnataka Co-operative Textile Mills Ltd., Dharwad. Subsequent to taking ovcrof the said Mill on lease, the name of the Mill was changed to M/s. Mahadeva Textile Mills, by which name it was being run by the 1st petitioner-Firm. It is the case of the petitioners that at the time of taking over the Mills on lease by the 1st petitioner, the same was not working as the machineries of the Mills were very old, out dated and the Mill had suffered huge loss; and after taking over the Mills, they had invested huge sumsof money amounting to Rs. 70 Lakhs (Rupees seventy lakhs only); and they had taken huge loan from the financial institutions and banks for modernisation of the said Mills by installing new machineries, errection of buildings etc. and after such modernisation, the Mill had gone into production; however, on account of Textile policy of the Government, fluctuating prices of cotton, yarn, frequent power cuts, insufficient funding, large workforce, frequent labour unrest and for various reasons beyond the control of the Mill, the same became sick again and it resulted in huge loss continuously year after year from the year 1975, and on account of that the petitioners had to close down the operation of the Mill in the year 1975; and since the Mill had become sick and the operation of it had been closed down, the Central Government in exercise of powers conferred on it under Section 18AA of the Industries (Development and Regulations) Act, 1956, by means of an order dated 30th March, 1979, the copy of which has been produced as Annexure-A to this petition, authorised the State Government to take over the management of the said Mill initially for a period of five years; and pursuant to the said order, the Government of Karnataka took over the management of the Mill on 4th April, 1979; and the Central Government by means of another order dated 31st March, 1979, issued in exercise of the powers conferred on it under Section 18FB (1)(b) of the Industries (Development & Regulations) Act, 1956, the copy of which has been produced as Annexure-B to this petition, declared that the operation of all contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force immediately before the date of issue of the said order (other than those relating to secured liabilities to banks and financial institutions) to which the said industrial undertaking was a party, or which may be applicable to such industrial undertaking and all obligations and liabilities accuring or arising thereunder before the said date shall remain suspended for a period of one year; and thereafter, the State of Karnataka promulgated an ordinance known as "The Karnataka Co-operative Textile Mills (Acquisition and Transfer) Ordinance, 1986' (Karnalaka Ordinance No. 11/86) and the said ordinance came into effect from 30th June, 1986, and from that dale M/s. Mahadeva Textile Mills Limited stood transferred and vested absolutely in the State Government; and the said ordinance was replaccd_by means of an act known as "The Karnataka Co-operative Textile Mills (Acquisition and Transfer) Act, 1986" and the same was published in the Karnataka Gazeue on the 1st day of October, 1986; and thereafter, by means of a Notification dated 29th December, 1987, the copy of which has been produced as per Annexure-C to this petition, the Government of Karnalaka directed that the said Mill would vest in the Karnalaka State Textile Private Limited, with effect from the 1st day of January, 1988.
3. Sri S. G. Sundaraswamy, learned Senior Counsel, appearing along with Sri Pradeep S. Sawkar, for the petitioners, submitted that though the ordinance was promulgated with effect from 30th June, 1986 and the Act had come into force with effect from the 1st day of October, 1986, and the Mill had vested with the State Government with effect from the 30th June, 1986, and the Government was under a statutory obligation as provided under Section 9 of the Act towards the transfer and vesting in the Government under Section 4 of the Act, and the right, title and interest in relation to the Mills, to pay an amount of Rupees 446.59 lakhs (Rupees fourhundred fortysix lakhs fiftynine thousand only) by depositing the same wilh the Commissioner to enable him to disburse the amount to the lessor, lessee or other persons entitled thereto in the manner specified in Chapter V of the Act, till now the said amount has not been deposited in utter disregard of the mandate of Section 9 of the Act and the right to property guaranteed to the petitioners under Article 300A of the Constitution of India. He submitted that the petitioners having admittedly taken over the Mills in question on lease and also having made huge investments to make the Mills suitable for operation, cannot be deprived of the right to compensation by not depositing the amount as provided under Section 9 of the Act, which has been fixed for taking over the Mill by the Government; and on account of the default on the pan of the Government in not complying with the provisions of Section 9 of the Act, the 2nd respondent who has been appointed as Commissioner as provided under Section 15 of the Act is not in a position to disburse the amount in respect of the claims made by various persons and authorities/institutions and also having regard to the priorities provided under Section 19 read along with the schedule given to the Act; and if the amount were to be deposited as provided under Section 9 of the Act within the reasonable period, there would not have been any criminal proceedings initiated against the partners of the firm for not depositing the arrears in relation to the contribution to be made by the lessee to the Provident Fund, Employees Insurance Fund etc; and it is not permissible for the 3rd respondent-Provident Fund Commissioner to proceed against the petitioners for recovery of the Provident Fund amount due as an arrears of land revenue; and the notice Annexure-G is also liable to be quashed as without the authority of law. He submitted that under similar circumstances when proceedings were initiated to recover the sales tax due by the Mills from the petitioners, the same was challenged before this Court in Writ Petition No. 12215/1986 and this Court by its order dated 16th February, 1987, took the view that it was not permissible to the Department to issue demand notice for recovery of the tax due for the pre-take over period from the petitioners and it was open to the Government to take a claim before the Commissioner appointed under the Act and the said decision of this Court would apply in all force with regard to the contentions of the petitioners that the claim made for recovery of arrears of provident fund as per Annexure-G is without the authority of law. He also relied upon the decision of this Court dated l4th June, 1993, made in Writ Petition No. 12412/ 1985 and also the decision dated 8th January, 1990, made in Writ Appeal No. 740 to 759/1984 in support of his contention that Anncxure-G is without the authority of law.
4. Sri Sundaraswamy, learned Senior Counsel, further submitted that the State Government ought to have specified the date as provided under Section 16 of the Act within a reasonable period from the appointed date i.e. from 30th June, 1986, and within 30 days thereafter should have deposited the amount as provided underSection 9 of the Act, and since the respondent-State has failed to make such deposit, the petitioners are compelled to pay huge amount by way of interest in respect of the loans taken by them from the financial institutions and banks and also in respect of the huge investement of Rs. 70 Lakhs (Rupees Seventy lakhs) made by them; and therefore, it is just and equitable to direct the 1st respondent to deposit a sum of Rs. 446.59 l.akhs (Rupees four hundred forty six lakhs fiftynine thousand) with interest at 21% per annum as claimed in the petition. According to the learned Senior Counsel, the period of two years from the appointed day can be considered as highly reasonable period allowable to the State to specify the date and deposit the amount and therefore, the State must be made liable to pay the interest at higher rate as claimed by the petitioners after the expiry of two years from 30th June, 1986, or from 1st July, 1988. In support of his contention that the State should have specified the date and deposited the amount within areasonable period and on account of their failure to do so, the State should pay higher rate of interest, he relied upon the decisions of the Supreme Court in the cases of Ram Chand v. Union of India, 1994 (1) SCC 457 : (1993 AIR SCW 3479); Rudul Sah v. State of Bihar, ; Mansaram v. S. P. Pathak. : and The Government of India v. The Citedal Fine Pharmaceuticals, Madras, .
5. Respondents 1 and 2 have filed Statement of Objections and resisted the reliefs sought for by the petitioners. Inter alia, it is contended in the Statement of Objections that in view of the provisions contained in Sections 6 and 7 of the Act. the lessor and lessee are liable for all the liabilities upto the dale of taking over of the Mills by the Government including the arrears of salary and other loss and contributions to be paid towards the provident fund; and the Government has power to recover the same from the lessor and lessee as arrears of land revenue in case of default, and as per the provisions of the Act, the lessor and lessee are liable to discharge of the liabilities as on the daleof taking over of the Mills by the Government i.e. 30th June. 1986; and if the amount required to be deposited under Section 9 of the Act is not available for such payment, the Provident Fund Commissioner is entitled to recover the amount from the petitioners. The respondents have also disputed the claim of the petitioners that the petitioners have modernised the undertaking by investing huge amounts as claimed by them.
6. Sri Udayashankar, learned Additional Government Advocate, submitted that under Section 16 of the Act discretion is conferred on the Government to specify the date for depositing the amount as provided under Section 9 of the Act and it is only after the specification of the date, the statutory obligation would arise to deposit the amount and not till then; and therefore, it is not permissible for this Court to give a direction to deposit the amount in the absence of any direction to the State to specify the date for deposit of the amount. He also submitted that since Section 10 of the Act provides for payment of interest at the rale of four per cent per annum for the period commencing on the appointed day till the date of deposit by the Government with the Commissioner, it is not permissible for the petitioners to seek higher rale of interest than four per cent specified under Section 10 of the Aet in view of specific provisions made in the Act fixing the rate of interest.
7. Sri Shailendra Kumar, learned Senior Central Government Standing Counsel, submitted that the petitioners are not entitled to seek withdrawal of the prosecution initiated against them and other Ex-partners of the 1st petitioner-firm as admittedly, they had committed default in depositing the provident fund contribution which the 1st petitioner-firm was required to deposit as provided under the provisions of the Provident Fund Act; and the authorities under the Provident Fund Act are entitled to take steps to recover the amount which had fallen due as the liability in question related to the period prior to taking over of the Mill i.e. 30th June, 1986.
8. Before I proceed to consider the contentions advanced, it may be useful to refer to some of the provisions of the Act. Clause (a) and (j) of Section 2 of the Act defines "Appointed day" and "specified date" which reads as follows :
2(a) "appointed day" means the date of coming into force of this Act or any provision thereof;
2(j) "specified date" means such date as the Government may for the purposesof any provision of Ihis Act, by notification, specify.
9. Section 4 of the Act provides that with effect from the appointed day, the Karnataka Cooperative Textile Mills and the rights, title and interest of the lessor and lessee in relation to the Mills shall by virtue of the Act stand transferred to and shall vest absolutely in the Government. Sub-section (2) of Section 5 of the Act provides that all properties of the Mills which is vested in the Government under Section 4 shall by virtue of such vesting, be freed and discharged from any such trust, obligation, mortgage, lease, charge. lien and all other encumbrance affecting them and any attachment, injunction or decree or order of any Court restricting the use of such property, in any manner shall be deemed to have been withdrawn. Sub-section (3) of Section 5 provides that every mortgagee of any property which has vested under the Act in the Government and every person holding any charge, lease, lien or other interest, in or in relation to, any such property shall give, within such time and in such manner as may be prescribed, an intimation to the Commissioner of such mortgage, lease, charge, lien or other interest. Sub-section (4) of Section 5 enables such Mortgagee or any other person holding any charge, lease, lien or other interest in or in relation to any such properly shall be entitled to make a claim in accordance with the rights and interest.
10. Section 6 of the Act provides for a liability either of the lessor or the lessee in respect of prior liabilities incurred by them. Sections 9 and 10 of the Act, which are relevant for the purpose of the contentions raised in this petition read as follows :
"9. Amount to be given to lessor, lessee and other interested persons.-- For the transfer to and vesting in, the Government, of the Mills under Section 4 and the right, title and interest in relation to the Mills the Government shall pay an amount of Rupees 446.59 lakhs by depositing the same with the Commissioner and the said amount shall be paid to the lessor, lessee or such other persons entitled thereto in the manner specified in Chapter V.
10. Payment of further amounts.-- (1) The amount specified in Section 9 shall carry simple interest at the rale of four per cent per annum for the period commencing on the appointed day and ending on the date on which payment of such amount is made by the Government to the Commissioner.
(2) The amount determined in accordance wilh the provisions of sub-section (1) shall be given by the Government to the lessor, lessee or such other persons entitled thereto, as the case.
may be, in addition to the amount specified in Section 9.
(3) For the removal of doubts, it is hereby declared that the liability of the lessor or lessee in relation to the mills which has vested in the Government under Section 4 shall be discharged from the amount referred to in Section 9 and also from the amounts determined under sub-Section (1) in accordance with the rights and interest of the creditors of the lessor or lessee, as the case may be."
11. Section 15 of the Act provides for the appointment of a Commissioner for the purpose of disbursing the amounts payable under Sections 9 and 10 of the Act. Section 16 of the Act provides that the Government should within 30 days from the specified date deposit in cash with the Commissioner for payment to the lessor, lessee and other interested persons - (a) an amount equal to the amount specified in Section 9; and (b) an amount equal to the amount payable under Section 10. It may be useful to quote Section 16 of the Act, which reads as follows :
"16. Payment by the Government to the Commissioner--(1) The Government shall within thirty days from the specified date deposit in cash with the Commissioner for payment to the lessor, lessee and other interested persons,--
(a) an amount equal to the amount specified in Section 9; and
(b) an amount equal to the amount payable under Section 10.
(2) A deposit account shall be opened by the Government in favourof the Commissioner in the public account of the State and every amount paid under this Act to the Commissioner shall be deposited by him to the credit of the said deposit account and the said deposit account shall be operated by the Commissioner.
(3) Records shall be maintained by the Commissioner in respect of the mill in relation to which payments have been made to him under this Act.
(4) The interest accruing on the amount standing to the credit of the deposit account referred to in sub-section (2) shall enure to the benefit of the lessor, lessee and other interested persons."
12. Section 18 of the Act provides that every person having a claim with regard to any of the matters specified in the schedule in relation to the mills before the appointed day, shall prefer such claim before the Commissioner within thirty days from the specified date. Section 19 of the Act provides for priority of claims made under Section 18 of the Act. Section 20 of the Act provides for examination of claims by the Commissioner made before him andempowers the Commissioner either to reject or accept the claim after making necessary investigation. Section 22 of the Act empowers the Commissioner to disburse the amount to the claimants whose claims have been admitted. The schedulegiven to the Act provides for the orderof priorities for the discharge of liabilities in relation to the Mills.
13. In the light of the submissions made by the learned Counsel for the petitioners and the learned Counsel for the respondents, the question that would fall for my consideration are :
(i) Whether the petitioners are entitled to seek for a direction to the State Government to deposit a sum of Rs. 446.59 lakhs (Rupees four hundred fortysix lakhs fiftynine thousand) as claimed by them?
(ii) Whether the petitioners are entitled for interest at the rate higher than four per cent per annum from the appointed day on Rs. 446.59 Lakhs till the date of deposit in view of Section 10 of the Act, and if so, what should be the rate of interest?
(iii) Whether it is not permissible for the 3rd respondent-Provident Fund Commissioner to proceed against the petitioners to recover the amount claimed in Annexure-G as arrears of land revenue?
(iv) Whether the petitioners are entitled for a direction to the 3rd respondent-Provident Fund Commissioner for withdrawal of the prosecution initiated against the petitioners for their default in depositing the Provident Fund contribution?
14. With regard to the direction sought for by the petitioners to the State Government to deposit a sum of Rs. 446.59 lakhs (Rupees Fourhundred fortysix lakhs fiftynine thousand) is concerned, I am of the view that the petitioners are entitled for the said relief. Admittedly, the Mills stood vested with the State on 30th June, 1986, i.e. the appointed day. Section 9 of the Act mandates the State Government to pay an amount of Rs. 446.59 lakhs (Rupees fourhundred fortysix lakhs fifiynine thousand) by depositing the same with the Commissioner for transfer to and vesting of the Mills and right, title and interest in relation to the Mills under Section 4 of the Act and the Commissioner is required to pay the said amount to the lessor, lessee or such other persons entitled thereto in the manner specified in Chapter V. Admittedly, 2nd respondent has been appointed as a Commissioner as provided under Section 15 of the Act. As it can be seen, the Commissioner is also entrusted with the responsibility of disbursing the amounts payable under Sections 9 and 10 of the Act. Sub-section (1) of Section 16 mandates the Government to deposit in cash with the Commissioner within thirty days from the specified date for the purpose of payment to the lessor, lessee or other interested persons the necessary amount orequal to the amount specified in Sections 9 and 10 of the Act. Therefore, the amount required to be deposited by the State for the purpose of transfer and vesting of the Mills with the Government has been quantified. It is not permissible for the State to take over Mills without providing for payment of compensation. Admittedly, the same has been determined at Rs. 446.59 lakhs (Rupees fourhundred fortysix lakhs fifiynine thousand). In these circumstances, it is not permissible for the State to delay the date to be specified for the purpose of deposit of the amount as contemplated under Section 16 of the Act and to contend before this Court that unless the date is specified by the State, it is not permissible for this Court to direct the State to deposit the amount. Though there is no provision in the Act which specifies the time by which the date is required to be specified by the State, it is well accepted that any power or discretion conferred on the authority must be exercised in a fair and reasonable manner. Sub-section (1) of Section 16 of the Act provides that within thirty days from the date specified, the State must deposit the amount. The said provision gives sufficient guidance to the State to specify the date.
15. Further, Section 9 of the Act provides that the Government shall pay an amount of Rs. 446.59 lakhs (Rupees four hundred fortysix lakhs fiftynine thousand) by depositing the same with the Commissioner. The words "shall pay" having regard to the context of taking over the Mills by the State must be understood and interpreted as mandatory in nature. Therefore, if the 'Mills statutorily stood vested with the State with effect from 30th June, 1986, though there is no time limit prescribed as to by which date the Government is required to specify the dale for the purpose of deposit, it cannot be unreasonably long period from the date of vesting of the Mills with the State. Further, the rate of interest to be paid from the appointed day till the date of deposit is only four per cent per annum. In that situation also, the Government cannot be permitted to delay the date to be specified for the purpose of deposit for unreasonably long time. Under these circumstances, having regard to the facts that the Government is required to deposit huge amount of Rs. 446.59 lakhs (Rupees fourhundred fortysix lakhs fiftynine thousand), I am of the view that it is reasonable to hold that it is not permissible for the Government to delay the date to be specified beyond six months from the date of vesting of the Mills with the State. Therefore, (hough there is no specific time prescribed under the Act, the Government is required to specify the date within six months from the date of vesting and within thirty days from the date spccified the Government is required to make the deposit as provided under Section 16 of the Act. The view I have taken is fully supported by the decision relied upon by the learned Counsel for the petitioners -- Sri S. G. Sundara Swamy, in the case of The Government of India v. The Citedal Fine Pharmaceuticals Madras, . At paragraph 6 of the judgment, while considering the contention advanced regarding the validity of Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Act 1955, which conferred on the authorities to recover the escaped duty, on the ground that Rule 12 is unreasonable and violative of Article 14 of the Constitution, as it does not mandate for any period of limitation for the recovery of dues, the Supreme Court has observed as follows :
"While it is true that Rule 12 docs not prescribe any period within which recovery of any duty as contemplated by the Rule is to be made, but that by itself does not render the Rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice or demand for recovery was made within reasonable period. No hard and fast ndes can be laid down in this regard as to the determination of the question will depend upon the facts of each case.
(Emphasis supplied) Similar is the view taken by the Supreme Court in the case of Mansaram v. S.P.Pathak, . In paragraph 12 of the said judgment, it is observed thus :
"But when the power is conferred to effectuate a purpose, it has to be exercised in a reasonable manner. Exercise of power in a reasonable manner inheres the concept of its exercise within a reasonable time. Undoubtedly, no limitation is prescribed in this behalf but one would stand aghast that a landlord to some extent in pari delicto Could turn the tables against the person who was in possession for 22 years as a tenant. In such a situation, even though the House Allotment Officer was to reach an affirmative conclusion that the initial entry 22 years back was an unauthorised entry and that failure to vacate premises till 9 years after retirement was not proper, yet it was not obligatory upon him to pass a pre-emptory order of eviction in the manner in which he has done. In such a situation, it would be open to him not to evict the appellant."
(Emphasis supplied) In the case of Ram Chand v. Union of India, reported in 1994(1) SCC 45 : (1993 AIR SCW 3479) the Supreme Court at paragraph 14 has observed as follows :
"It is settled that in a statute where forexercise of power no time limit is fixed, it has to be exercised within a time which can be held to be reasonable."
16. Therefore, I am of the view that since the 1st respondent has failed todischargc its statutory obligation by specifying the date for the purpose of deposit of the amount of Rs. 446.59 lakhs (Rupees four hundred fortysix lakhs fiftynine thousand only), adirection is required to be issued to the 1st respondent to specify the date to deposit the amount with a further direction to deposit the amount within thirty days from the date so specified. Having regard to the facts and circumstances of the case, that the Government has to deposit the amount of Rs. 446.59 lakhs (Rupees four hundred fortysix lakhs fiftynine thousand) and also the higher rate of interest which I am inclined to award. It think it is fair and reasonable to direct the 1st respondent to specify the date for deposit within two months from the dale of receipt of this order and to deposit the amount required to be deposited by the 1st respondent within thirty days from the date specified as contemplated under Section 16 of the Act.
17. So far as the claim made by the petitioners for payment of higher rate of interest is concerned, Sri S. G. Sundaraswamy strenuously contended that on account of the delay in depositing the amount by the 1st respondent, the Banks have been charging interest including penal interest not less than 21 per cent per annum in respect of the amount due to them. He also submitted that the petitioners have invested more than Rs. 70 lakhs (Rupees seventy lakhsonly) for modernising the Mills and they are entitled for payment of interest on the said amount on the basis of the claim to be determined by the Commissioner as the amount due to them is unlawfully withheld by the 1st respondent in disregard of its statutory obligations cast on it under the provisions of the Act. I have taken the view that it was imperative on the part of the 1st respondent to specify the date for depositing the amount within a period of about six months from the appointed day i.e. 30th June, 1986. Sub-section (1) of Section 10 of the Act contemplates payment of interest at four per cent per annum from the appointed day till the date of deposit. The deposit is required to be made by the State after specifying the date for deposit within thirty days from the date specified. Therefore, the provision made under Section 10 for payment of interest at four per cent per annum from the deposited day till the date of deposit cannot be applied to the facts of the present case or to a situation where the State commits gross default in discharge of its statutory obligations by depositing the amount within a reasonable period. The default committed by the State or failure to discharge its statutory obligation under Sections 9 and 10 of the Act cannot be taken advantage of by the State to cause financial loss to various persons when the amount is required to be disbursed by the Commissioner as provided under the Act. The interest required to be paid by the State will enure not only to the benefit of the petitioners, if the Commissioner ultimately holds that they are entitled for payment of certain amount, but it will also enure to the benefit of several other claimants including the workmen and other persons set out in the schedule given to the Act. Therefore, there is no justification to deny the relief for payment of higher rate of interest on a sum of Rs. 446.59 lakhs (Rupees four hundred fortysix lakhs fiftynine thousand) required to be deposited by the Government.
18. The Supreme Court in the case of Ram Chand v. Union of India, reported in 1994 (1) SCC 45 : (1993 AIR SCW 3479) while refusing to quash the acquisition of lurid on the ground of delay in approaching the Court challenging the acquisition proceedings had directed for payment of additional amount by way of compensation to be calculated at the rate of 12 percent interest per annum. The Supreme Court at paragraph 25 has observed thus :
"There appears to be some force in the contention of the petitioners that the object of respondents was to peg the price of the lands acquired from the different cultivators to a distant past and not to proceed Anther because if the awards had been made soon after the declarations under Section 6, respondents had to pay or lender the compensation to the claimants, which for some compulsion, respondents were not in a position to pay or tender them. But. nonetheless, the exercise of power in the facts and circumstances of the eases by the respondents has to be held to be against the spirit of the provisions of the Act, tending towards arbitrariness. In such a situation this Court in exercise of power under Article 32 and the High Court under Article 226, could have quashed the proceeding. But, taking into consideration that in most of the cases, the Delhi Administration and Delhi Development Authority have taken possession of the lands and even developments have been made, it shall not be proper exercise of discretion on the part of this public interest. Moreover, third party interests created in the meantime are also likely to be affected and such third parties are not impleaded.
The relief of quashing the acquisition proceedings having become inappropriate due to the subsequent events, the grant of a modified relief, considered, appropriate in the circumstances, would be the proper course to adopt. The High Court or this Court, can grant a modified relief taking into consideration the injury caused to the claimant by the inaction on the part of respondents and direct payment of any additional amount, in exercise of power under Article 226 or Article 32 of the] Constitution."
19. Under these circumstances, I am of the view that the statutory provision made under, Section 10 of the Act prescribing the rate of interest will not come in fhe way of my awarding higher rate of interest as contended by the learned Additional Government Advocate. Having regard to the variation in the rate of interest in the market and also on the deposits made in the Bank and the lending rate of interest by the Bank for the last about 10 years, I think it is just and reasonable to fix the interest rate to be paid in respect of the amount to be deposited by the State at the rate of 12 per cent till the date of deposit. Though I have taken the view that the reasonable period required to be specified tor deposit is six months, since Sri Sundaraswamy, learned Senior Advocate appearing forme petitioners, fairly submitted that for the purpose of rate of interest two years period could be fixed as according to him, two years time from the appointed date by which the Government should have specified the date for deposit of the amount specified is a reasonable period, I direct the 1st respondent to pay interest on a sum of Rs. 446.59 lakhs (Rupees four hundred foriysix lakhs fifty nine thousand) with effect from 1st July, 1988 i.e. after the expiry of two years from the appointed day, as stated above. I am also unable to accept the contention of Sri Udaya Shankar that the petitioners should be denied of their claim for interest for the period prior to their approaching this Court, as I am of the v;cw that there was a statutory obligation on the part of the State to deposit the amount within a reasonable time. Merely because the petitioners or other claimants have not approached this Court immediately, it cannot deprive them of their legitimate right to he compensated for the delay or laches on the part of the State in complying with the requirements of law by depositing the amount as provided under Section 9 of the Act.
20. Now the next question that would fall for my consideration is with regard to the challenge made by the petitioners in respect of Annexurc-G dated 31 st May, 1990, issued by the 3rd respondent Provident Fund Commissioner directing the Deputy Commissionerof Provided Fund tocollect the Provident Fund amount due from M/s. Mattadeva Textile Mills Ltd., as arrears of Land Revenue from the ex-paitners of the Mills. I am of the opinion that it is not permissible for the 3rd respondent-Provident Fund Commissioner to proceed against the petitioners to recover the amount mentioned in Annexure-G as arrears of land revenue at this stage. This is because subsection (1) of Section 9 of the Act fixed the liability of the Government for the transfer to and vesting of the Mills under Scction 4 of the Act and the right, title and interest in relation to the Mills at Rs. 446.39 lakhs (Rupees four hundred fortysix lakhs fifty nine thousand) and the said amount was required to be deposited by the Government before the Commissioner. Sub-section (3) of Seeiion 10 of the Act provides that the liability of the lessor or Lessee in relations to the Mills which has vested in the Government under Section 4 shall be discharged from the amount referred to in Section 9 and also from the amounts determined under sub-section (1) of Section 10 in accordance with the rights and interest of the creditors of the lessor or lessee, as the case may be Section 18 of the Act further provides that every person having a claim with regard to any of the matters specified in the schedule in relation to the Mills before the appointed day shall prefer such claim before the Commissioner within thirty days from the specified date. Section 19 of the Act provides for the priorities of the claims. The contribution of the lessee to the Provident Fund and also the deductions made from the salaries and wages of the employees of Provident Fund has priorities over under claims. No doubt unless the date is specified, it is not open to the Provident Fund Commissioner to make a claim before the Commissioner to settle the claims in respect of the arrears of Provident Fund contribution. However, the learned Central Government Standing Counsel bmitted rely ing upon sub-section (3) of Section 17 of the Act. wherein it is provided that same as otherwise provided in the Act, the 1iability of the lessor or lessee in relation to me mills in respect of any transaction prior to the appointed day, which have not been discharged on or before the specified date shall be the liabilities of the lessor or lessee, as the case may be, that since the date has not been specified by the State and the liability in respect of Provident Fund contribution has not been discharged, the 3rd respondent Provident Fund Commissioner was fully justified in taking steps to recover the amount due towards the Provident Fund contribution as arrears of land revenue as per Annexure-G.
21. It is no doubt true that there is no impediment for the Provident Fund Commissioner to proceed to recover the amount due towards the Provident Fund contribution, which had accrued prior to the appointed day and which have not been discharged on or before the specified date, if sub-section (3) of Section 17 is to be read in isolation. However, sub-section (3) of Section 17 has to be read along with sub-section (3) of Section 10 and also Section 18 of the Act. As stated earlier, sub-section (3) of Section 10 deelares that the liability of the lessor or lessee in relation to the Mills which have been vested in the Government shall be discharged from the amount required to be deposited as provided under Section 9 of the Act i.c. out of a sum of Rs. 446.59 lakhs to be deposited by the Government and also from the amounts determined under sub-section (1) of Section 10 of the Act i.e. the interest to be paid on a sum of Rs.446.59 lakhs. Section 18 of ths Act as stated earlier provides for the claim to be made by the person before the Commissioncr to settle his claims. Theerfore, if a date were to be specified by the State Government for the purpose of deposit of the amount determined under Section 9 of the Act as requited under Section 16(1) of the Act the Provident Fund Commissioner would be required to make a claim before the Commissioner; and in that event he will not be entitled to proceed against the petitioners and other partners of the Mills till the Commissioner determines the claim of the Provident Fund Commissioner as provided under the Act. Under these circumstances, the default committed by the State in not specifying the date for deposit of the amount within a reasonable time from the appointed day should not be put against the petitioners, and on that account coercive steps should not be permitted to be taken against the petitioners to recover the amount from them or other partners of the Mills as arrears of land revenue. The entire scheme of the Act has to be understood in a reasonable manner. If the amount available with the Commissioner is not sufficient to discharge the claim made by the Provident Fund Commissioner, in that event, the Commissioner will be entitled to proceed to recover the amounts from the petitioners and other Ex-partners of the Mills as arrears of land revenue. Sub-section (3) of Section 17 of the Act imposes the liability on the lessor or lessee in relation to Mills in respect of any transaction prior to the appointed day, in the event of the amount with the Commissioner is not sufficient to settle the claim. This is clear from the words and language employed in subsection (3) of Section 17 of the Act which provides save or as otherwise provided under the Act. Since sub-section (3) of Section 10 provides that the liability of the lessor and lessee in relation to the Mills which have vested in the Government shall be discharged from the amount deposited as provided under Sections 9 and 10(1) of the Act, the liability of the lessor or lessee in respect of transaction prior to the appointed day wold arise only after me final determination of the claim made by the various claimants, by the Commissioner. The 3rd respondent is an authority created under the provisions of the Act. The petitioners are deprived of their leasehold interest in the Mills and investment stated to have been made by them to bring the Mill to a working condition. Under these circumstance:, if coereive steps are permitted to be taken against the petitioners by permitting the 3rd respondent to proceed against the petitioners by way of recovery as arrears of land revenue, it would result in irreparable injury and hardship to them. Under these circumstances, it is fair and reasonable to hold that the 3rd respondent is not entitled to recover the amount claimed under Annexure-G or any other amount towards the Provident Fund dues from the petitioners or me ex-partners of the Mill fill the Commissioner adjudicates the claim as provided under Sections 20 and 21 of the Act. The view I have taken is also supported by the decision of this Court rendered in the case of G. M. Sharanappa y. The Asst. Commissioner of Conimercial Taxes and another, W. P. No. 12215 of 1986 disposed of on 16-2-1987 wherein this Court while considering the claim made against the petitioners for payment of sales tax due by the company prior to the appointed day, held as follows :
"Having regard to the ordinance under which the textile-mills have been taken over by the Government, it was open to the Department to make their claims before the Commissioner for payments in accordance with the provisions of the Ordinance. Therefore, the action tor recovery against the petitioner is liable to be quashed."
Further, in the case of G. Mahadevappa and Sons and another v. The_Regional Director. Employees' State Insurance Corporation, W.P. No. 12412/1985 disposed of on 14-6-1993, while considering the demand notice issued by the E.S.I, towards the E.S.I, contribution, this Court at paragraph 5 of the judgment has observed as follows :
"Having regard to the scheme of the Act. after taking over of the Mill, the authority has to work out by lodging a claim before the Commissioner of claims, if the claim relates to pre-take over period."
22. The view I am taking will also not prejudice the interest of the 3rd respondent-Provident Fund Commissioner as I have held that the petitioners arc entitled for a direction to specify the date for deposit of the amount within two months from the date of receipt of this order and for a direction to deposit the amounts within thirty days thereafter. Otherwise, if coercive steps are taken against the petitioners and thereafter if it is held that the amount available with the Commissioner is sufficient to discharge the claim of the 3rd respondent Provident Fund Commissioner, it will result in irreparable injury to the petitioners which cannot be reversed at a later stage. In view of my above conclusion, Anncxurc-G is liable to be quashed reserving liberty to the 3rd respondent to proceed against the petitioners after determination of the claim of the 3rd respondent to be made under Sccti on 18 of the Act as provided under Sections 21 and 22 of the Act.
23. So far as the last question regarding the prayer of the petitioners to withdraw the prosecution instituted against them is concerned, I am of the view that the petitioners are not entitled for the said relief. Admittedly, the proceedings were initiated for prosecution of the petitioners with regard to the default committed by the petitioners in payment of Provident Fund contribution prior to the appointed day. Under these circumstances, it is not possible to take the view that the proceedings initiated on the file of the learned Judicial Magistrate First Class at Hubli, are without the authority of law or without jurisdiction. If the petitioners have any defence on the merits of the prosecutions institutedagainst them, it is open to them to raise such defence before the learned Magistrate. However, I do not find any justification either to quash the proceedings or to direct the 3rd respondent to withdraw the proceedings in exercise of my jurisdiction either under Article 226 or 227 of the Constitution of India.
24. In view of my above conclusions, I make the following order :
(1) The 1st respondent State is directed to specify the date for the deposit of a sum of Rs. 446.59 lakhs (rupees four hundred fortysix lakhs fiftynine thousands) within two months from the date of receipt of this order and shall deposit a sum of Rs. 446.59 lakhs (Rupees four hundred fortysix lakhs fiftynine thousand) along with interest to be paid as provided under Section 10(1) of the Act and also as directed by me in this order, within thirty days from the date to be specified.
(2) The 1st respondent is directed to deposit the interest at the rate of Twelve per cent per annum from 1st July, 1988 till the date of deposit.
(3) The order Annexure-G dated 31st May, 1990, passed by the 3rd respondent is quashed and the 3rd respondent is restrained from proceedings against the petitioners or any of the Ex-partners of the first petitioner firm till the Commissioner appointed under Section 15 of the Act determines the claims made under Section 18 of the Act and settles the claim as provided under Sec-lions 21 and 22 of the Act.
25. In terms slated above. Writ Petition stands allowed. Rule issued is made absolute. The 1st respondent shall pay a sum of Rs. 2,500/- being the costs of this petition to the petitioners.
26. Sri Udayashankar, learned Government Pleader, is given four weeks' time to file memo of appearance.
27. Petition allowed.