2004 (1) TMI 388 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Personal liability of petitioner Nos. 2 to 7 for deductions made by petitioner No. 1 from the wages of employees and not remitted to respondent No. 5.
3. Validity of service of notice and the consequent orders of respondent Nos. 2 and 3.

Detailed Analysis:

1. Applicability of Section 22 of the SIC (SP) Act, 1985:
The court examined whether Section 22 of the SIC (SP) Act, 1985, which provides a moratorium on certain legal proceedings against a sick industrial company, was applicable. The court held that Section 22 was not applicable to the proceedings under Section 49 of the Maharashtra Co-operative Societies Act, 1960, as these were not suits but rather orders sought to be executed. The court clarified that Section 22 would not apply to the recovery of wages deducted from employees and not remitted to respondent No. 5, as these amounts were not loans or advances but wages. The court cited previous judgments, including Baburao P. Tawade v. Hes Ltd. and Carona Ltd., to support the view that wages and terminal benefits are not covered by Section 22. Consequently, the relief sought by the petitioners based on Section 22 was rejected.

2. Personal Liability of Petitioner Nos. 2 to 7:
The court analyzed Section 49 of the Maharashtra Co-operative Societies Act, 1960, which allows for deductions from the salary of employees to meet society's claims. The court noted that the employer, having deducted the wages, acts in a fiduciary capacity and is personally liable for remitting the amounts to the society. The court referred to the judgment in Madanlal Tantia v. Collector of Bombay, which held that directors could be held jointly and severally responsible for non-payment of dues deducted from employees' wages. The court concluded that petitioner Nos. 2 to 7, being directors, were personally liable along with petitioner No. 1 for the amounts deducted but not remitted.

3. Validity of Service of Notice and Consequent Orders:
The petitioners contended that they were not properly served notices, and thus the orders of respondent Nos. 2 and 3 should be set aside. The court found that petitioner Nos. 1, 2, and 7 were duly served and had chosen not to appear, thus they could not claim non-service. However, the court observed that petitioner Nos. 3 to 6 were either served on the date of the hearing or after, which did not provide them a fair opportunity to respond. Therefore, the court set aside the orders against petitioner Nos. 3 to 6 and remanded the matter to respondent No. 2 for a fresh hearing.

Conclusion:
The court issued the following orders:
- The relief based on Section 22 of the SIC (SP) Act was rejected.
- The orders of respondent Nos. 2 and 3 were confirmed for petitioner Nos. 1, 2, and 7.
- The orders dated 1st October 2003 and 13th November 2003 were set aside for petitioner Nos. 3, 4, 5, and 6, and the matter was remanded for a fresh hearing.
- The attachment warrant against petitioner Nos. 3, 4, 5, and 6 would continue pending the fresh hearing and for four weeks thereafter if the order was adverse to respondent No. 5.

The petition was partly allowed, and no order as to costs was made.