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1963 Supreme(Kar) 103
Karnataka High Court
Judges : A.Narayana Pai
REGIONAL PROVIDENT FUND COMMISSIONER K.S.NAIK - Appellant
Versus
OFFICIAL LIQUIDATOR - Respondent
Application 79 Of 1963
Decided On : 11/12/1963
Advocates Appeared :
K.Jagannatha Shetty`
The main legal point established in the judgment is the entitlement of the appellant to preferential payment under S. 530 of the Companies Act of 1956 for the items claimed, except legal charges, under the Employees' Provident Funds Act.
Headnote:
Employees' Provident Funds Act - Preferential Payment - S. 11, S. 530 of the Companies Act of 1956 - The court discussed the applicability of the Employees' Provident Funds Act and the scheme thereunder to the company in liquidation and its entitlement to preferential payment under S. 530 of the Companies Act of 1956. The court held that the items claimed by the appellant, except legal charges, were entitled to preferential payment under S. 530 of the 1956 Act.
Fact of the Case:
The appeal was filed against the order of the official liquidator rejecting the appellant's claim for preferential payment in respect of a sum under the Employees' Provident Funds Act, 1952.
Finding of the Court:
The court condoned the delay in filing the appeal and entertained it. The court found that the items claimed by the appellant, except legal charges, were entitled to preferential payment under S. 530 of the 1956 Act.
Issues: The issues involved the applicability of the Employees' Provident Funds Act and the scheme thereunder to the company in liquidation and its entitlement to preferential payment under S. 530 of the Companies Act of 1956.
Ratio Decidendi: The court held that the items claimed by the appellant, except legal charges, were entitled to preferential payment under S. 530 of the 1956 Act.
Final Decision: The court allowed the appeal in part and directed that, excepting the legal charges, the rest of the claim of the appellant be paid out in priority as a debt included in S. 530 of the 1956 Act.
( 1 ) THIS is an appeal under rule 164 of the Companies (Court) Rules, 1959, read with S. 457 (3) of the Companies Act of 1956 by the Regional Provident Fund Commissioner of Mysore at bangalore against the order of the official liquidator dated 29 August, 1963 to the extent it rejected the appellant's claim for preferential payment in respect of a sum of Rs. 2,414. 22 out of his total claim of Rs. 79,386. 74 being the contribution and charges payable by the company in liquidation under the Employees' Provident Funds Act, 1952, and the scheme thereunder made applicable to the company.
( 2 ) NOTICE of admission of proof in form 70 prescribed under the rules dates 29 August, 1963 was served on the appellant on 31 August, 1963. The appeal was filed on 4 October, 1963, thirteen days beyond the time prescribed under rule 164. The appellant prays for condonation of this delay for the reasons set out in Para. 9 of his affidavit.
( 3 ) TWO reasons are stated therein. The first is that the liquidator did not in form 70 indicate the period of limitation prescribed for appeal, and the second is that some time was taken up by the appellant in seeking instruction of the Central Provident Fund Commissioner at New Delhi. I may at once say that the first reason is wholly unacceptable. The form prescribed under the rules does not provided that the period of limitation for an appeal should be mentioned therein. Secondly, it is not open to anybody much less a statutory functionary to claim ignorance of law or to fail to inform himself about the provisions of law relating to the claim which he proposes to enforce through an order of Court. But, the second reason appears to be, in the circumstances, acceptable, especially because the delay is not very long. I therefore condone the delay and entertain this appeal.
( 4 ) THE claim of the appellant before the liquidator related to a period up to June 1958 and was made up of the following items : item Rs. Np. (1) Provident fund contribution. . . 69,526 25 (2) Penal interest thereon. . . 7,446 27 (3) Administrative Charges. . . 2,088 03 (4) Penal damages thereon. . . 223 69 (5) Legal charges. . . 102 50------Total. . . 79,386 74------------There is no doubt about the accuracy of these figures. The liquidator has accepted them to be correct. He admitted the claim for preferential payment only in respect of items (1) and (2) but rejected the same in respect of items (3) to (5) on the ground that a claim for preferential payment must be made out on one or the other of the clauses of S. 530 of the Companies Act of 1956 and that such claim in this case may be said to have been made out only in respect of items (1) and (2) under Clause (f) of Sub-section (1) of S. 530.
( 5 ) THE appellant claims that all the items mentioned above are entitled to preferential payment by virtue of S. 11 of the Employees' Provident Funds Act of 1952, by force of which all the items claimed by him should be deemed to be included among the debts entitled to preferential payment under the Companies Act. The relevant portion of that section reads as follows :
"where any employer. . . being a company, an order winding up is made, the amount due (a) from the employer in relation to an establishment to which any scheme applies in respect of any contribution payable to the fund. , damages recoverable under S. 14b, accumulations required to be transferred under Sub-section (2) of S. 15 or any charges payable by him under any other provision of this Act or of any provision of the scheme; or (b) * * * shall, where the liability therefor has accrued before the order of. . . winding up is made, be deemed to be included among the debts which. . . under S. 230 of the Indian Companies Act, 1913 (7of 1913), are to be paid in priority to all other debts in the distribution of. . . the assets of the company being wound up. . . . "
( 6 ) IT is, therefor, clear that if the con
