2009 (3) TMI 581 - HC - Companies Law

Whether enforcement of an award made under the Workmen s Compensation Act, 1923, can be stalled by the employer by taking re-course to section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985? A company which has become sick wants to revive ; whereas a poor workman who has fallen sick struggles to survive ; revival or survival, which overtakes the other ? Held that - There can be no doubt that the payment of wages, gratuity and workmen s compensation form part of the day-to-day operation of the company. Since the BIFR itself has given such a free hand to the company, it is not at all fair on the part of the third respondent to refuse to pay the workman compensation by taking an untenable plea of embargo under section 22(1) of the SICA. It should be noted that the petitioner lost his right hand in the year 1998 and adjudication award was made in the year 2001 but still, the petitioner is not able to get the benefit of compensation. The pain and anguish of such a poor workman is understandable. The long arm of the court under article 226 of the Constitution of India, if not extended, the armless man s life would be further put in peril. As I have already concluded, this is a very appropriate situation where the power under article 226 of the Constitution of India should be exercised in favour of a poor litigant like the petitioner. Writ petition is allowed. Respondents Nos. 1 and 2 are directed to recover the amount as per the certificate issued by the Commissioner in accordance with the provisions of the Revenue Recovery Act, 1890 expeditiously, preferably within three months from the date of receipt of a copy of this order.

Issues Involved:
1. Whether enforcement of an award under the Workmen's Compensation Act, 1923, can be stalled by the employer by invoking Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Issue-wise Detailed Analysis:

1. Enforcement of Workmen's Compensation Award vs. Section 22(1) of SICA:
The petitioner, a workman who lost his right hand while working, was awarded compensation by the Commissioner for Workmen's Compensation. The employer, declared a sick company by the BIFR, failed to pay the compensation, citing Section 22(1) of SICA, which suspends legal proceedings against sick companies.

2. Legal Framework and Interpretation:
The Workmen's Compensation Act mandates prompt payment of compensation once it falls due. The Supreme Court in National Insurance Co. Ltd. v. Mubasir Ahmed clarified that compensation falls due on the date of adjudication, not the date of the accident. Section 4A of the Act obligates employers to pay compensation promptly or face recovery as arrears of land revenue under Section 31.

3. Scope of Section 22(1) of SICA:
Section 22(1) of SICA suspends legal proceedings against sick companies, including execution and distress. However, it does not apply to all dues. The Supreme Court in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals and Tata Davy Ltd. v. State of Orissa differentiated between dues included in the rehabilitation scheme and those arising post-scheme. The Kerala High Court in Aluminium Industries Ltd. v. State of Kerala and the Gujarat High Court in EZY Slide Fastners Ltd. v. Joint CIT emphasized that taxes collected from consumers belong to the state and cannot be withheld.

4. Applicability to Workmen's Compensation:
Various High Courts have held that statutory benefits like wages, gratuity, and compensation under labor laws are not covered by Section 22(1) of SICA. The Gujarat High Court in Rajnagar Textiles Mills No. 1 v. Textile Labour Association and the Calcutta High Court in Rabindra Nath Banerjee v. Certificate Officer ruled that such benefits are the workman's right and cannot be withheld. The Delhi High Court in Mideast India Ltd. v. K. M. Unni and the Karnataka High Court in Indian Plywood Mfg. Co. Ltd. v. Commissioner of Labour supported this view.

5. Judicial Consensus on Workmen's Rights:
The Full Bench of the Madras High Court in Gowri Spinning Mills (P.) Ltd. v. Assistant Provident Fund Commissioner concluded that provident fund dues are not covered by Section 22(1) of SICA. The Bombay High Court in Duttatraya Laxman Kulkarni v. Aurangabad Paper Mills Ltd. specifically held that workmen's compensation awards are not barred by Section 22(1).

6. Day-to-Day Operations and Current Assets:
The BIFR's order allowed the company to use current assets for day-to-day operations, which includes paying statutory benefits to workmen. The court emphasized that the compensation amount belongs to the workman once adjudicated and cannot be withheld by the company.

Conclusion:
The court concluded that Section 22(1) of SICA does not bar the recovery of workmen's compensation. The writ petition was allowed, directing respondents to recover the amount as per the certificate issued by the Commissioner under the Revenue Recovery Act, 1890, within three months. The judgment underscores the priority of workmen's statutory rights over the protective provisions of SICA for sick companies.

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