Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 does not bar recovery of provident fund dues from a sick industrial company, as the dues were not included in a sanctioned scheme under SICA and were unlawfully retained by the employer.

PINAKI CHANDRA GHOSH, J.

( 1 ) THE Court : This is an application challenging the demand notices issued by the respondent authorities calling upon the petitioner No. 1 and its Director to make payment of a sum of Rs, 65,56,417/- on account of employer's contribution under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the said Act) and threatening to proceed against them under the provisions of section 8b to 8g of the said Act and further the thereat of attachment in respect of bank account of the petitioner No. 1.

( 2 ) THE petitioner has challenged the said notice inter alia on the ground that the petitioner No. 1 is a sick company within the meaning of section 3 (1) (o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as SICA Act) and further according to the petitioner, under section 2 (1) of the said SICA Act,1985 when an inquiry 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 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 like against any of the property of the industrial company or for the appointment of a Receiver in respect thereof shall lie or be proceeded with further except with the consent of the Board or, as the case may be the Appellate Authority. The petitioner is also bound to get direction under section 32 of the said SICA Act.

( 3 ) IT further contended that since the Employees' Provident Fund Act does not contain any non-obstante Clause and the SICA Act and the said Act are both special statutes and since SICA Act came into force later than that of the provident fund Act, in that case, it has been contended that the said Act must prevail over the same.

( 4 ) THE ground for challenging the said notice and the attachment that the respondent failed to consider the representation made by the petitioner company vide letter dated 15th November, 2000 and furthermore, the respondent did not consider that the petitioner has paid the entire employees' contribution and nothing was due and payable. Therefore, the respondents cannot have authority to take coercive measure against the petitioners including the issuance of the said notice attaching the back account. The entire business of the petitioner has come to standstill and further the scheme which has been placed by the petitioners before the Board for Industrial and Financial Reconstruction (hereinafter referred to as BIFR) and the same is still pending. Therefore, actions taken by the respondents against the petitioners are wrongful.

( 5 ) MR. Saha appearing on behalf of the petitioners drew my attention to the said section and further contended that in the case of "maharashtra Tubes Limited v. S. I. I. C. of Maharashtra" reported in (1993) 2 SCC 144 the Hon'ble Supreme Court has held that the meaning of the expression, "proceeding for distress or the like" in section 22 (1) has to be broadly construed so as not to confine it to "legal proceedings" and accordingly such proceedings are not restricted to proceedings before a Court or Tribunal and even a proceeding by a State Financial Corporation under section 29 of the State Financial Corporation Act is not permissible. In "m. V. Damodaran v Regr. of Co-op Societies" reported in (1999)95 Comp. Case 116, the company had deducted amounts from employees' wages for paying over to the Co-Op. Credit Society but failed to do so according to the understanding. It was held that section 22 (1) bars recovery of such money from the company.

( 6 ) HE also submitted that section 22 (1) has been judicially interpreted by Courts as impos

Click Here to Read the rest of this document