2001 (8) TMI 1242 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the attachment order under Section 8B read with Section 8G of the EPF Act.
2. Applicability of Section 22 of SICA to recovery proceedings under the EPF Act.
3. Employer's obligation to pay employee contributions to the provident fund.

Issue-wise Detailed Analysis:

1. Legality of the attachment order under Section 8B read with Section 8G of the EPF Act:
The petitioner, a public limited company, challenged the attachment order and the appointment of a receiver for its business issued under Section 8B read with Section 8G of the Employees Provident Fund Miscellaneous Provisions Act, 1952 (EPF Act). The petitioner argued that these orders were illegal and arbitrary.

2. Applicability of Section 22 of SICA to recovery proceedings under the EPF Act:
The petitioner contended that being declared a sick industrial company under Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), it was not liable to pay the amounts included in the scheme, invoking a blanket bar under Section 22 of SICA against any recovery proceedings. The respondent countered that recovery of provident fund dues does not fall within the purview of Section 22(1) of SICA, emphasizing that the dues in question pertain to the employees' share deducted from their salaries.

The court examined the object of SICA, which aims at the timely detection and revival of sick companies. Section 22(1) of SICA provides for the suspension of legal proceedings concerning the recovery of money against a sick industrial company. However, the court noted that the EPF Act, a social security measure, mandates the employer to deduct and pay the employees' contributions to the provident fund, and this obligation continues even if the company is sick.

The court referred to several judgments, including Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd. and Gram Panchayat v. Shree Vallabh Glass Works Ltd., which held that Section 22(1) of SICA does not bar the recovery of statutory dues like provident fund contributions, as these are necessary for the day-to-day operation of the company and constitute an intrinsic part of the employees' right to life under Article 21 of the Constitution.

3. Employer's obligation to pay employee contributions to the provident fund:
The court emphasized that the EPF Act requires the employer to deduct the employees' share from their wages and deposit it into the provident fund. This obligation is not excused or exempted even for sick industrial companies. The court highlighted that the employees' contributions belong to the employees and constitute an important measure of social security, which cannot be withheld by the employer.

The court cited the Apex Court's judgment in Organo Chemical Industries v. Union of India, which underscored the EPF Act's role in effectuating the Directive Principles of State Policy and ensuring social security for workers. The court also referred to Corromandal Pharmaceuticals' case, reiterating that Section 22(1) of SICA does not apply to dues that are necessary for the day-to-day running of the company, such as provident fund contributions.

Conclusion:
The court concluded that the provisions of Section 22(1) of SICA do not confer any immunity to the petitioner regarding the recovery of provident fund dues. The attachment order and the appointment of a receiver were upheld as the petitioner failed to fulfill its statutory obligation to pay the employees' contributions to the provident fund. The writ petition was dismissed as devoid of merits, with no costs awarded.