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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE R. SUDHAKAR
M/s. G.R. Thangamaligai Jewellers Private Limited rep.by its Director Mr.G.R.Anantha Padmanabhan
Versus
M/s. Employees State Insurance Corporation & Another
WRIT PETITION NO.23927 of 2009 & MP.NOS.1 OF 2009 & 1 OF 2010
Decided On : 05-10-2010
Mandamus - Recovery of Amount - Employees State Insurance Act, 1948 - Section 45-A, 45-C to 45-I - Second Schedule to the Income Tax Act - Violation of Recovery Procedure
Fact of the Case:
The respondent Corporation initiated proceedings against the petitioner under the Employees State Insurance Act, 1948. The Corporation issued recovery notices and proceeded to recover the amount from the petitioner's bank. The petitioner filed a writ petition seeking to restrain the respondents from recovering the money. The court granted an interim injunction, but the respondent Corporation had already recovered the money from the bank. The petitioner sought a refund through an interim direction.
Finding of the Court:
The court found that the recovery notices were issued in violation of the prescribed recovery procedure, as the time period for payment specified in the notices was shorter than the statutory requirement. The court held that the recovery was arbitrary and in haste, and the respondents were not entitled to retain the amount collected without following the due process of law. The court directed the respondent Corporation to retain a portion of the amount as pre-deposit pending the appeals to be filed and to refund the balance amount to the petitioner.
Issues: Violation of recovery procedure under the Employees State Insurance Act, 1948 and Second Schedule to the Income Tax Act
Ratio Decidendi: The recovery notices were issued in violation of the prescribed recovery procedure, and the recovery was found to be arbitrary and in haste. The court held that when a statute prescribes a particular manner for an act to be done, it should be done in that manner and not otherwise.
Final Decision: The writ petition was allowed, and the respondent Corporation was directed to retain a portion of the amount as pre-deposit pending the appeals to be filed and to refund the balance amount to the petitioner. No costs were awarded, and the related motions were closed.
1. The writ petition is filed for the issuance of a Writ of Mandamus forbearing the respondents or their men or agents or subordinates or any persons acting on their behalf, from taking any action to recover any money from the petitioner M/s.G.R.Thangamaligai Jewellers Private Limited pursuant to the order Nos.TN/Ins-VI/51-19746-102, TN/Ins-VI/51-51465-102 and TN/Ins-VI/51-36983-102 dated 22.10.2009.
2. The brief facts of the case are as follows :
The respondent Corporation initiated proceedings against M/s.G.R.Thangamaligai Silver Artwares, M/s.G.R.Thangamaligai (P) Ltd., and M/s.G.R.Thangamaligai. On 21.5.2008, a notice was issued to M/s.G.R.Thangamaligai Silver Artware to appear for a personal hearing on 18.6.2008 in Ref.No.TN/Ins-VI/51-36983-102. In the same manner, on 2.7.2008, a notice was issued to M/s.G.R.Thangamaligai (P) Limited to appear for the personal hearing on 7.8.2008 in Ref.No. TN/Ins-VI/51-51465-102. Similarly, on 18.9.2008, a notice was issued to M/s.G.R.Thangamaligai for the hearing fixed on 10.11.2008 in Ref.No.TN/Ins-VI/51-19746-102.
3. The Competent Authority of the respondent Corporation, thereafter, proceeded to hear the respective parties and three final orders were passed under Section 45-A of the Employees State Insurance Act, 1948 (hereinafter referred to as the ESI Act) on 22.10.2009 against one entity namely M/s.G.R.Thangamaligai (P) Limited, though the determination was made under three file numbers separately.
4. Consequent to the Section 45-A order, the respondent Corporation issued a notice of demand to the defaulter in terms of Rule (2) of Second Schedule to the Income Tax Act, 1961 read with Sections 45-C to 45-I of the ESI Act. This demand notice was issued on 10.11.2009 in respect of the three orders passed under Section 45-A of the ESI Act. By the notice, M/s.G.R. Thangamaligai Private Limited was called upon to pay the amount within seven days from the date of receipt of the notice, failing which, it was specified that recovery will be made in accordance with the provisions of Sections 45-C to 45-I of the ESI Act.
5. The petitioner herein, on 13.11.2009, replied to the recovery notice by a common letter stating that the management has decided to contest the matter before the Competent Court and therefore, the amount is not paid and prayed the Authority not to initiate any action for recovery of the amount. In such circumstances, on 18.11.2009, the respondent Corporation issued another notice under Section 45-G of the ESI Act calling upon the bank of the petitioner to pay the amount due in terms of the order passed under Section 45-A of the ESI Act. This notice issued under Section 45-G of the ESI Act was honoured by the bank.
6. The petitioner, realising that the respondent Corporation is intending to recover the amount lying in bank as deposit, invoking the power under Section 45-G of the Act, by the second proceedings as above, rushed to this Court and filed this writ petition. The petitioner sought for an order of interim injunction restraining the respondents from recovering the money. This Court, by order dated 19.11.2009, while ordering notice of motion, granted an order of interim injunction for a period of four weeks. Even before the interim order of this Court could be served on the respondents, the respondent Corporation had already recovered the money from the bank. Thereafter, the petitioner filed MP.NO.1 of 2010 for an order in the nature of interim direction to direct the respondents to refund the amount already recovered.
7. On notice, the respondents are represented by counsel. A counter affidavit has been filed. By consent, the writ petition itself is taken up for disposal.
8. Rules 2 and 3 of Second Schedule to the Income Tax Act read as follows :
2. When a certificate has been drawn up by the Tax Recovery Officer for the recovery of arrears under this Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring th
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