Calcutta High Court
Nuddea Mills Co. Ltd. And Ors. vs State Of West Bengal And Anr. on 13 April, 2007
Equivalent citations: I(2008)BC207, (2007)3CALLT89(HC), [2008]142COMPCAS394(CAL)
Author: Biswanath Somadder
Bench: Biswanath Somadder
JUDGMENT Biswanath Somadder, J.
1. All the aforementioned applications are taken up together since identical issues are involved and disposed of by this common Judgment.
2. These applications filed by the petitioners are directed against proceedings initiated by the Provident Fund authorities under the provisions of Section 406 of the Indian Penal Code. All the proceedings have been initiated by the said authorities, by filing of several F.I.Rs with the Naihati police station.
3. It is the case of the petitioners that the petitioner No. 1 is a company incorporated under the Companies Act, 1956. The company, due to uncertainties in the economic situation in the jute industry, became 'sick'. In such circumstances the company made a 'Reference' under Section 15(1) of The Sick Industrial Companies (Special Provisions) Act, 1985 (for short, 'SICA') before the Board of Industrial and Financial Reconstruction (for short, 'BIFR') and the same was registered as case No. 273/98. According to the learned senior advocate appearing on behalf of the petitioners, the matter is still pending before the BIFR, and till date, the company remains, 'sick'.
4. It appears from the documents annexed to the applications that a writ petition being W.P. No. 2136 of 1998 was filed by the petitioner company against the Regional Public Provident Fund authorities before the Hon'ble Writ Court inter alia for stay of legal proceedings initiated by the Regional Public Provident Fund authorities against the petitioner company, in view of the bar under Section 22 of SICA. The petitioner company took the ground that since proceedings were pending before the BIFR for adjudication, the bar under Section 22 of SICA will continue to operate. An order was passed on 23rd December, 1998 by the Hon'ble Writ Court in favour of the petitioner company and the directors of the said company. By the said order dated 23rd December, 1998, the Court directed that all proceedings under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, against the directors, were to remain stayed in view of the bar of legal proceedings in terms of Section 22 of SICA. This order was challenged in appeal by the Regional Provident Fund authorities before a Division Bench of this Hon'ble Court. By an order dated 24th February, 1999, as modified by the subsequent order dated 1st October, 1999, the Division Bench of this Hon'ble Court was inter alia pleased to uphold the order passed by the Hon'ble Writ Court, in relation to Nuddea Mills Company Limited, being the petitioner company herein.
5. It appears that subsequently a contempt application being C.C.No. 164 of 2000, was filed by the petitioner company against the Regional Provident Fund Commissioner and Anr. before the Division Bench, in view of the fact that one of the directors of the company was arrested, even though the Judgment and order dated 24th February, 1999 was subsisting. The Division Bench, sitting in its contempt jurisdiction, on 23rd June, 2000, inter alia, directed that so long the order dated 24th February, 1999 remained, no action could be taken against the petitioner and/or its directors in terms of the said order. The Court, however, observed that in the event the said order dated 24th February, 1999 was modified or recalled, it would be open to the Provident Fund authorities to proceed against the petitioner company.
6. It further appears that subsequently there had been another contempt application by the petitioner company, this time before the Hon'ble Writ Court. By an order dated 7th July, 2003, the Hon'ble Writ Court, in that contempt proceeding, inter alia, observed that since the matter was pending before the BIFR, the stay was still subsisting in the matter. It further held that since the matter had yet not been disposed of by the BIFR, the petitioner was to get benefit out of the order passed earlier on 23rd December, 1998 in W.P. No. 2136 of 1998.
7. It also appears from the supplementary affidavit used by the petitioners, that the Regional Provident Fund authorities approached the Division Bench of this Hon'ble Court, by filing an application for modification of the order dated 24th February, 1999, inter alia, on the ground that the 'Reference' made before the BIFR had been withdrawn. It was thus contended by the said authorities that the earlier order passed by the Division Bench could not survive. The Division Bench, by an order dated 5th April, 2004, inter alia observed that if the Reference has already been withdrawn from BIFR or it has been terminated, then it will have natural consequence automatically. In that view of the matter the application for modification was rejected.
8. From the supplementary affidavit filed by the petitioners it further appears from the summary record of proceedings of the hearing held on 21st November, 2005 before BIFR, that the Bench in its earlier order dated 10th August, 1999, inter alia, held that the 'Reference' by the company under Section 15(1) of SICA (i.e., case No. 273/98) could be considered as 'non-pressed' and the same could be held as 'non-maintainable'. However, the previous Reference, being case No. 297/88, was held to be subsisting by the Bench.
9. The learned senior advocate, appearing on behalf of the petitioners, submits that so long as the proceeding before BIFR subsists, the investigational proceeding initiated by the Regional Provident Fund authorities, by lodging criminal cases with the Naihati police station should remain stayed, in view of the order passed by the Division Bench of this Hon'ble Court dated 24th February, 1999.
10. The learned Advocate appearing on behalf of the Regional Provident Fund authorities, on the other hand, submits that the criminal proceedings initiated by the said authorities ought not to be stayed in view of the fact that by virtue of the 1988 amendment to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, the statute notices the position of a 'sick' industrial company, as defined under SICA. That being so, he submits that since the 1988 amendment does not provide for exemption of criminal proceeding, the bar under Section 22 of SICA cannot operate against the petitioners. He, therefore, submits that the blanket protection under Section 22 of SICA is not available to the petitioner company, even though it may be a 'sick' company under that Act.
11. I have considered the submissions made by the learned advocates appearing on behalf of the respective parties. In order to appreciate the contentions raised by the Learned Advocates and to come to a definitive conclusion, one has to look into the statute books as well as the law on the subject and the facts of the instant case, as it appears from the records.
12. For convenience, Section 22 of SICA is set out:
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.
(2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under Section 18, 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 to unless approved by the Board.
(3) Where an inquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or 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 contracts, 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 adoptions 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, however, 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 anything contained in the Companies Act, 1956 (1 of 1956), or any 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.
13. The provisions of Section 14 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 deals with penalties. Section 14A specifically deals with offences by companies. The same is set out hereinbelow:
Offences by companies.-(1) If the person committing an offence under this Act, the Scheme or the Pension Scheme or the Insurance Scheme is a company, every person, who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section, shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in Sub-section (1), where an offence under the Act, the Scheme or the Pension Scheme or the Insurance Scheme has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.-For the purposes of this section, -
(a) "company" means any body corporate and includes a firm and other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm.
14. Section 14AB of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 makes certain offences cognizable. The said provision is set out hereinbelow:
Certain offences to be congnizable.-Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898) an offence relating to default in payment of contribution by the employer punishable under this Act shall be cognizable.
15. The provisions of Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, as amended by the 1988 Amendment Act, is also set out hereinbelow:
Power to recover damages.-Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the 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 such damages, not exceedings the amount of arrears, as it may thinks fit to impose:
Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:
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 in respect 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 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme.
16. The second proviso to Section 14-B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, came to be inserted by virtue of the 1988 amendment to the said Act.
17. It may be seen from the above provisions of law that although Section 22 of SICA inter alia provides for suspension of legal proceedings and contracts in certain cases in relation to sick industrial companies, at the same time it may also be noticed that from a plain reading of the 1988 amendment to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, it is clear that the parliament in its wisdom, while conscious of SICA, it being a 1985 Act, did not extend the immunity or exemption beyond what was allowed in terms of the said 1988 amendment. In the 1988 Amendment Act there is no provision for exemption of the liability of the employer to pay the statutory dues under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the 1988 amendment, being a latter legislation, notices the existence of SICA. The 1988 amendment to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, instead provides that the Central Board was empowered to reduce or waive damages in relation to an establishment which was a 'sick' industrial company and in respect of which a scheme for rehabilitation had been sanctioned by BIFR under the provisions of SICA, subject to the terms and conditions of the scheme.
18. The question as to whether the bar under Section 22 of SICA would be applicable in so far as criminal proceedings initiated by the Provident Fund authorities under the provisions of Employees' Provident Funds and Miscellaneous Provisions Act, 1952 are concerned, came up for consideration before a learned single Judge of the Bombay High Court in the case of Ralliwolf Limited v. The Regional Provident Fund Commissioner-1 and Ors. reported in 2001(88) FLR 692. In the said Judgment, the Bombay High Court, inter alia, held that the provisions of Section 22(1) of SICA would not be of any assistance to the writ petitioner in the facts and circumstances of the case, having regard to the nature of the payments required to be made by way of provident fund and other contributions under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Incidentally, in the said Judgment, the learned single Judge of the Bombay High Court also took into consideration the Judgment of our Division Bench dated 24th February, 1999, rendered in favour of the petitioner company herein. The learned single Judge, however, distinguished the said Judgment dated 24th February, 1999 by holding that the amendment which was made to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 in the year 1988, was not placed before the Division Bench of our High Court. The Bombay High Court thereafter went on to hold that the entitlement of the workers to their wages and to their statutory dues had been considered by other learned single Judges of that Court and keeping those in mind and also the Judgments of the Apex Court, proceeded to dismiss the writ petition.
19. The aforementioned Judgment of the Bombay High Court has been considered and relied upon by a learned single Judge of our High Court in the case of Universal Paper Mills Limited and Ors. v. Regional Provident Fund Commissioner and Ors. reported in (2001)3 Cal LT 186(HC). Here also, the learned single Judge of our High Court took note of the Division Bench's order dated 24th February, 1999, passed in favour of the petitioner company herein. However, notwithstanding the observations made by the Division Bench in the said Judgment and order dated 24th February, 1999, the learned single Judge, in the facts of the Universal Paper Mill's case, inter alia, held as follows:
...I further cannot accept the contention raised before me by Mr. Saha that the SICA Act must prevail over the Provident Fund Act, 1952. It is a fact that the SICA Act came into operation in the year 1985, but it is also to be noted that the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 was amended by the Act 33 of 1988. Such amendment of 1988 expressly notices the position of the SICA Act of 1985 and therefore, it cannot be said that the said SICA Act must prevail over the Employees' Provident Fund Act. Section 14-B of the said Act was amended taking into consideration of an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the BIFR under the provisions of SICA Act, 1985 subject to the terms and conditions of the scheme. Therefore, the amendment of the said Employees' Provident Fund Act, 1952 was enacted by the Act 33 of 1998 and the legislators were conscious of the existence of the Sick Industrial Companies (Special Provisions) Act, 1985. Therefore, in no way it can be said as sought to be contended before me that the SICA Act, 1985 must prevail over the Provident Fund Act, 1952.
Apart from that the further question arose whether a sick industrial company can claim the benefit of the provisions of Section 22 in respect of the dues payable towards provident fund under the Employees' Provident Fund Act, 1952. It further appears from the records that the matter was placed before BIFR in the year 1990. The amount was to be paid by the petitioner company being the contributions of the employer which have not been paid by the employer and the same have been unlawfully retained by the employer.
The Hon'ble Supreme Court has held in "Deputy Commercial Tax Officer v. Corromondal Pharmaceuticals" that Section 22(1) of the Act can apply only to such dues recognised or included in the sanctioned scheme and the amounts which have been collected by the Sick Industrial Company on account of sales tax etc. after the date of the sanctioned scheme legitimately belonging to the revenue, cannot be and could not have been intended to be convered within Section 22 of the Act. The Hon'ble Supreme Court has specifically held that 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.
After considering the Judgments cited before me I do not have any hesitation to hold that the company has no right to take shelter under Section 22 in respect of statutory liabilities and the employees are entitled to have their statutory benefits under the Employees' Provident Fund Act and thereby any default on the part of the employer under the said Act cannot attract the said section or can get away taking an advantage out of the said section and accordingly, in my opinion the purpose and object of Section 22 cannot be interpreted in a manner to give a shelter to the petitioners against the orders passed by the respondent authorities.
Accordingly, I am of the view that Section 22(1) of the SICA Act, 1985 would not be any assistance to the petitioner in the facts and circumstances of this case having regard to the nature of the payments required by way of Provident Fund and other contributions under the said Act and I do not find any substance in this application and the same is rejected. However, there will be no order as to costs.
20. Having regard to the two abovementioned Judgments, the issue that has to be now decided is whether the criminal proceedings initiated by the Provident Fund authorities against the petitioners can be stayed or not, in the facts of the present case.
21. I am of the view that although the above two Judgments have categorically held that the bar under Section 22(1) of SICA would not be of any assistance to the petitioners in the facts and circumstances of those cases, in the present case the factual position is a bit different. The principal litigating parties in the present case, being, the petitioner company and the Regional Provident Fund authorities were the same parties in the writ and contempt proceedings and are, therefore, bound by the order of the Division Bench dated 24th October, 1999, as modified by the subsequent order dated 1st February, 1999, read with the order dated 23rd June, 2000, passed by the Division Bench sitting in contempt jurisdiction. It is very clear from the said order dated 23rd June, 2000, passed in contempt jurisdiction, that so long as the order dated 24th February, 1999 remained, no action could be taken against the petitioner and/or its directors in terms of the said order dated 24th February, 1999. In the order dated 23rd June, 2000, the Division Bench has further held that in the event the said order dated 24th February, 1999 was modified and/or recalled, it, was open to the Provident Fund authorities to proceed against the petitioner company. Admittedly, the said order of the Division Bench dated 24th February, 1999, is still subsisting and has not been modified or recalled.
22. However, having said that, one has also to take note of the order of the Division Bench of this Hon'ble Court, on an application made by the Regional Provident Fund authorities, for modification of the order dated 24th February, 1999. As stated earlier, the Division Bench by an order dated 5th April, 2004, inter alia, observed that if the Reference has already been withdrawn from BIFR or it has been terminated, then it will have natural consequence automatically. In that view of the matter, the application for modification file<4 by the Regional Provident Fund authorities was rejected.
23. For the reasons stated above, it is clear that the order of the Division Bench dated 24th February, 1999 (as modified by the subsequent order dated 1st October, 1999) binds the parties herein, This order dated 24th February, 1999 has to be read along with the order dated 23rd June, 2000, as well as the order of the learned single Judge dated 7th July, 2003. However, the subsequent order dated 5th April, 2004, passed by the Division Bench makes it clear that if the Reference has already been withdrawn from BIFR or has been terminated, then it will have natural consequence automatically.
24. In view of the matter, I am of the opinion that so long as the proceedings before the BIFR subsist, the criminal proceedings initiated by the Provident Fund authorities under Section 406 of the Indian Penal Code, cannot, but remain stayed. However, keeping in view the order dated 5th April, 2004, passed by the Division Bench of this Hon'ble Court in the application made by the Regional Provident Fund Authorities, the order of stay of the criminal proceedings shall stand automatically vacated the moment the proceedings before the BIFR against the petitioner company ceases.
With these observations, the applications stand disposed of.
Criminal section is directed to supply xerox certified copy of this Judgment, if applied for, after usual undertakings.