Karnataka High Court
Cement Corporation Of India Ltd. ... vs The Regional Labour Commissioner ... on 21 March, 2007
Equivalent citations: 2007(5)KARLJ387, (2008)ILLJ26KANT, 2007 LAB. I. C. (NOC) 551 (KAR.) = 2007 (4) AIR KAR R 188, 2007 (4) AIR KAR R 188
Author: Subhash B. Adi
Bench: Subhash B. Adi
ORDER Subhash B. Adi, J.
1. These writ petitions are directed against the order dated 31.8.2004 passed by the Appellate Authority under the Payment of Gratuity Act, 1972 (hereinafter referred to as 'Gratuity Act') directing the petitioner who was appellant before the Appellate Authority to deposit the amount of gratuity to prefer an appeal before the Appellate Authority.
2. The respondents made applications before the Controlling Authority under the Payment of Gratuity Act 1972 (hereinafter referred to as 'Controlling Authority') seeking payment of gratuity from the petitioner on the ground that they were employed by the petitioner through a contractor for the period from 1.11.1981 to 1.12.1988. The Controlling Authority by order dated 27.1.2004 directed for payment of gratuity as calculated on the basis of the wages of the respondents. The said order of the Controlling Authority was called in question by the petitioner in the appeal preferred before the Appellate Authority in Appeal Nos. 39-45/2004 B2 along with an application under Section 7 of the Act, to waive the pre requisite condition of deposit gratuity amount as determined by the Controlling Authority on 31.8.2004. The Appellate Authority rejected the said application inter alia directing the petitioner to deposit the requisite amount which is a condition precedent for preferring an appeal under the proviso to Section 7(7) of the Act.
3. The only contention that arises for consideration in this writ petition is:
as to whether in case of a sick industry declared by the BIFR and under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, the sick industry is exempted from depositing the amount in terms of the proviso to Section 7(7) of the Gratuity Act.
4. Sri Joshua, learned Counsel for the petitioner submitted that a scheme has been framed by the BIFR on 3.5.2006 inter alia declaring the petitioner industry as sick industry and suspended all claims against the petitioner industry. Referring to the scheme, he pointed out that payment of salary arrears, VSS for employees of 7 units, retrenchment compensation to contract/adhock workers of 7 units are suspended in view of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as 'SICA'). He referred to Section 22(3) and pointed out that it provided for suspension all or any of the right, privilege, application and liabilities accruing or arising therein before the said date, shall remain suspended or shall he enforceable with such adaptation and in such manner as may be specified by the BIFR. He submitted that in view of the scheme having been formulated all the claims against the sick industry got automatically suspended by virtue of operation of Section 22(3) of the SICA. He also pointed out that the SICA has an overriding effect on all other enactment. He referred to Section 22(4) of SICA.
Section 22(4) of SICA reads thus:
Any declaration made under Sub-section (3) with respect to a sick industrial company shall be 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...
5. By referring to Section 22(3) and Section 22(4) of the SICA learned Counsel for the petitioner submitted that the petitioner industry being a sick industry for which a scheme has been formulated under Section 22 of the SICA and all claims having been suspended, proviso to Section 7(7) of Act is also automatically gets suspended or will have no effect in law on the sick industry in terms of the provisions of SICA. He also submitted that the object of SICA is in public interest and in order to revive the industry, all claims against the sick industry gets automatically suspended. To adjudicate any dispute by the sick industry no deposit is required to be made in law and even the deposit under Section 7(7) of the Gratuity Act also gets suspended till the scheme is in force. He further submitted that if deposit is to be made by the sick industry in order to adjudicate any dispute, the purpose for which the industry is declared as sick and for the purpose of formulating the scheme would get defeated. He also further submitted that the requirement of the deposit would not arise as long as the claims against the petitioner are suspended under the provisions of SICA. In this regard he also relied on a judgment of the Apex Court, in the matter of Jay Engineering Works Ltd. v. Industry Facilitation Council and Anr. and submitted that the provisions of SICA mandates that no proceeding inter alia for execution, distress or the like against any of the properties of the industrial company and no suit for recovery of money or for the enforcement of any security, shall lie or be proceeded with further, except with the consent of the Board. The said statutory injunction will operate when an inquiry had been initiated under Section 16 or a scheme referred to under Section 17 is under preparation. He further submitted that SICA was enacted in the public interest. It contains special provision with a view to secure the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts for preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matter connected therewith or incidental thereto. By referring to this decision learned for the petitioner submitted that the object of SICA being to protect the sick industry from any claim or proceedings.
6. The provisions of Section 7(7) of the Gratuity Act cannot be enforced against a sick industry for deposit to prefer an appeal under the Act as the same is deemed to have been suspended by virtue of operation of Section 22(3) of SICA. In this regard he also referred to another decision of the Apex Court in the case of Sangfroid Remedies Ltd., v. Union of India and Ors. and submitted that in the said case, for recovery of central excise duty where an appeal was required to be filed by the sick industry under Section 35F of the Central Excise Act and, where appellant was required to deposit the amount. In the said context the Apex Court has observed that the appellant has since been declared as a sick industry by the BIFR insisting upon deposit to file appeal is not upheld. Referring to this decision learned Counsel for the petitioner submitted that if in case where there is statutory requirement for deposit of amount to prefer an appeal the Apex Court has held that in case of sick industry such provision should not be enforced. He further submitted that the order of the Controlling Authority being illegal and contrary to the provision of Gratuity Act and being in violation of principles of natural justice and it is required to be adjudicated by the Appellate Authority, the Appellate Authority ought not have insisted on deposit of the amount particularly when the petitioner being a sick industry. He further submitted that the order at Annexure D passed by the Appellate Authority is one not sustainable in law and sought for a direction to the Appellate Authority to entertain the appeal without insisting upon the deposit.
7. Sri K.B. Narayanaswamy, learned Counsel for the respondents submitted that Section 7(7) of the Gratuity Act mandates, that in case of an appeal is preferred against the order of Controlling Authority the appellant is required to deposit the amount so determined by the Controlling Authority and without complying the mandatory requirement, no appeal could be entertained in law. He further submitted that the provisions of SICA would not suspend the operation of the provisions of the Payment of Gratuity Act. What is suspended under the provision of Section 22(3) of STCA is only the claims or enforcement of claim against sick industries. He also further submitted that the operation of Section 7(7) of the Act cannot be treated as suspended by virtue of Section 22(3) of SICA. He further submitted that, only enforcement of the award or the claims are suspended, by virtue of Section 22(3) of the SICA, in this regard he pointed out from the very judgment in Jay Engineering Works Ltd., particularly para 18 and submitted that, the adjudicatory process of making an award or determining the claims are not within the purview of SICA. If that is so, question of suspending the proviso to prefer an appeal does not arise.
8. The point that arises for consideration in this writ petition is Whether in case of a sick industry, a deposit demanded under the proviso to Section 7(7) of the Gratuity Act for filing an appeal could be suspended in respect of sick industry?
Section 22(3) of SICA no doubt provided for suspension of all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board. What is suspended under Section 22(3) is the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, and Sub-section 4 of Section 22 also declares that 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 or any other law, 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.
9. Reading of Section 22(3) and 22(4) of SICA makes it clear that, with respect to the sick industrial company, the award, claims or settlement etc. cannot be enforced. But these provisions do not indicate that, the operation of the provision of any other law will also get suspended. This argument is unacceptable. In Jay Engineering Works Ltd's case, the Apex Court has held 'that no proceeding inter alia for execution, distress or the like against any of the properties of the industrial company and no suit for recovery of money or for the enforcement of any security, shall lie or be proceeded with further, except with the consent of the Board.
It only means that, the enforcement of a claim or execution of a decree or distress sale are suspended to make the potential sick industry viable and operational, by giving effect to the scheme framed under the provisions of SICA. But the provisions of SICA will not bar the adjudication of claims. The judgment relied on by the learned Counsel for the petitioner in the matter of Sangfroid Remedies Ltd., is not applicable to the facts of this case, as under Section 35F of Central Excise and Salt power is conferred on the Appellate Tribunal to dispense with the deposit of the amount to entertain the appeal. But there is no similar provision under the Gratuity Act.
10. Section 7(7) being mandatory in nature and the provisions of Section 22(3) or 22(4) of SICA will not have any effect on the same. Both are independent Act and operates in a different, fields, to entertain an appeal under Section 7(7) of the Gratuity Act the appellant is required to deposit the amount and the Appellate Authority has rightly issued the endorsement directing the appellant who is petitioner before this Court to deposit the amount.
11. The object of the SICA is to protect the potential sick industry and to rehabilitate the same and it is in this regard the statutory injunction is granted under Section 22(3) and (4) of the SICA and not for any other reasons. I find no reason to interfere with the order of the Appellant Authority. Accordingly writ petitions fail and the same are dismissed.
12. Learned Counsel for the petitioner submitted one other point that the SICA being a later Act, and prevails over the Payment of Gratuity Act. I find no justification in the said contention, object of Section 22(3)(4) of SICA and Section 7(7) of Gratuity Act are totally different. One is for preventing the recovery and the other is for preferring the appeal. Hence the contention of learned Counsel for the petitioner is not acceptable.
In the result, writ, petitions fail and the same are dismissed.