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2008 Supreme(Cal) 85
High Court of Judicature at Calcutta
ANIRUDDHA BOSE
Jenson Nicholson (I) Ltd.
Versus
Controlling Authority under The Payment of Gratuity Act 1972
W.P. Appeal No.4473(W) of 2006
Decided On : 21-01-2008
For the Appearing Parties:Sandip Ghosh, Sukla Kabir Sinha, Susanta Pal, Advocates.
The embargo contemplated under Section 22(1) of the 1985 Act cannot apply in cases where the dues of workmen or employees crystallize into "property" of the workmen and/or employees and special statutes, in this case being the Payment of Gratuity Act has prescribed specific procedure for recovery of such property of the employees.
Headnote:
SICK INDUSTRIAL COMPANY - RECOVERY OF GRATUITY DUES - APPLICABILITY OF SECTION 22 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 - Held, the protective cover of Section 22 of the 1985 Act cannot shelter a company from an action of recovery of the legitimate dues of its employees emanating from an employee welfare statute.
Fact of the Case:
The petitioners, an existing company under the Companies Act 1956, challenged three notices issued under the provisions of Section 7 of the Bengal Public Demand Recovery Act, 1913, requiring them to show cause why certificates should not be executed within 30 days from the date of issuance thereof. Also under challenge in this writ petition are three notices issued by the Certificate Officer, copies of which have been annexed and collectively marked "P11" to the writ petition requiring the petitioners to pay certificate demand including interest and cost. The petitioners have also applied for stay of all further proceeding in connection with the three certificate cases initiated against them.
Finding of the Court:
The Court held that the embargo contemplated under Section 22(1) of the 1985 Act cannot apply in cases where the dues of workmen or employees crystallize into "property" of the workmen and/or employees and special statutes, in this case being the Payment of Gratuity Act has prescribed specific procedure for recovery of such property of the employees.
Issues: Whether the protective cover of Section 22 of the 1985 Act can shelter a company from an action of recovery of the legitimate dues of its employees emanating from an employee welfare statute.
Ratio Decidendi: The Court held that the expressions “execution” and “distress” as used in Section 22(1) of the Act has to be read in relation to a winding-up proceeding or a suit for recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans and advances granted to the industrial company. The restricted immunity which is sought to be provided for a sick industrial unit under the provisions of Section 22(1) of the 1985 Act are claims against the Company mainly arising out of commercial transactions or contracts. This provision cannot protect such undertaking from a claim of legitimate dues of a workmen or employees which accrue in their favour under statutory provisions. Such dues of the workmen or employees crystallize into “property” of the workmen and/or employees. Since special statutes, in this case being the Payment of Gratuity Act has prescribed specific procedure for recovery of such property of the employees, the embargo contemplated under Section 22(1) of the 1985 Act cannot apply in such cases.
Final Decision: The writ petition was dismissed and all interim orders were vacated.
ANIRUDDHA BOSE, J.
1. The petitioners, an existing company within the meaning of Companies Act 1956 in this petition challenge three notices issued under the provisions of Section 7 of the Bengal Public Demand Recovery Act, 1913 requiring the petitioners to show cause as to why the certificates should not be executed within a period of 30 days from the date of issuance thereof. Also under challenge in this writ petition are three notices issued by the Certificate Officer, copies of which have been annexed and collectively marked "P11" to the writ petition requiring the petitioners to pay certificate demand including interest and cost. The petitioners have also applied for stay of all further proceeding in connection with the three certificate cases initiated against them. All the notices issued under Section 7 of the 1913 Act are dated 14th December 2005, and have been issued in pursuance of requisition made by the Controlling Authority (respondent no. 1 herein) under the Payment of Gratuity Act 1972 (the said Act in short). Three retired employees of the petitioners, being the respondent no. 4, 5 & 6 had represented to the Controlling Authority that their gratuity dues were not being released and on the basis of such complain at the initial stage the first respondent had issued independent notices under the relevant rules framed under the said act to the petitioners.
2. Thereafter, it appears that a tripartite settlement was arrived at on intervention of the respondent no. 1, in pursuance of which the petitioners had agreed to settle the dues of the three private respondents by paying 30% of the gratuity amount by 31st July 2004 and the rest of the amount in 10 equal installments commencing from the month of August 2004. The petitioners, however, failed to fulfill their commitment, which prompted the three superannuated persons to approach the Controlling Authority. The Controlling Authority thereafter by three separate orders, all dated 16th November 2004 allowed the applications of the private respondents, recording their individual entitlement and directed the petitioners to pay the said dues within one month.
3. In the meantime it appears that the petitioners had become a sick unit and had been registered with the Board for Industrial and Financial reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act 1985. I shall refer to this statute henceforth as the 1985 Act. The case of the petitioners was registered with the BIFR in the year 2003, and the same was numbered as Case No. 395 of 2003.
4. The petitioners had started their operation far back, in the year 1922 and thereafter continued with the manufacturing activities of paint at three units in Naihati in the Sate of West Bengal, Sikkanderabad in the State of Uttar Pradesh and Panvel in the State of Maharashtra. The immediate cause for their sickness, as pleaded in the writ petition, was that their unit at Naihati being the biggest manufacturing unit had to stop activities because of a severe flood sometime in the year 2000 and the factory had remained inundated by the floodwater which did not recede for a period of about 10 days. The company could not be revived thereafter due to paucity of funds and suspension of work was declared in respect of this factory with effect from 18th December 2004. It appears that the unit at Panvel was also closed in May 2002.
5. As regards clearing the gratuity dues of the private respondents, the petitioners had failed to comply with the directives issued by the respondent no. 1. On such default being made, three independent notices were issued by the respondent no. 1, requiring the petitioners to show cause as to why certificates shall not be issued against them to the Collectorate under Section 8 of the 1972 Act for recovery of the gratuity dues.
6. The ground on which the petitioners resist the attempt on the part of Respondent no. 1 in recovering the gratuity dues of the three private respondents i
