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TMI Blog2001 (8) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... substantially and the petitioner has been declared as a sick industrial company under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (the SICA). The petitioner-company, under the provisions of the EPF Act is liable to file monthly returns and also pay the employees contributions. The petitioner-company has been filing the monthly returns and has been contributing to the fund regularly. The petitioner-company is liable to pay the employees share of the contribution from November, 1992 to November, 2000. Hence the respondent authorities issued the aforementioned impugned proceedings of attachment, appointing a receiver. Assailing the said proceedings, the present petition has been filed by the petitioner. 3. Shri C. Kodanda Ram, the learned counsel appearing for the petitioner submits that the petitioner-company has been declared as a sick industrial company as defined under section 3(1)( o ) of the SICA, and hence, the petitioner-company is not liable to pay any amounts which are included in the scheme and that the respondents are not entitled to initiate any proceedings for any recovery. He places strong reliance on section 22 of the SICA and conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ) defines the expression sick industrial company . Under sub-section (1) of section 15 of the SICA, where an industrial company has become a sick industrial company, the board of directors of the company shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company. Under sub-section (1) of section 16 of the SICA, the Board is empowered to make an enquiry for determining whether any industrial company has become a sick industrial company. Under sub-section (2) of section 16, the Board can appoint an operating agency to enquire into and make a report with respect to such matter as may be specified by it section 17 of the SICA specifies that after making an enquiry under section 16, if the Board is satisfied that a company has become a sick industrial company, the Board shall decide as to whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. Under sub-section (3) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or execution, distress or the like or for the appointment of a Receiver that can lie or be proceeded with except with the permission of the Board or the appellate authority but no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with such consent of the Board or the appellate authority. The provisions of section 22 of the SICA have an overriding effect notwithstanding anything contained in the Companies Act, 1956 or in any other law. In fact, once a scheme is made, even the scheme is given an overriding effect by section 32 of the SICA. The provisions of the SICA have been interpreted in several judgments of the Apex Court. In Maharashtra Tubes Ltd. v. State Industrial Investment Corpn. of Maharashtra Ltd. [1993] 78 Comp. Cas. 803, the Apex Court considered the applicability of the provisions of section 22(1) of the SICA in relation to the provisions of the State Financial Corporation Act, 1951. The Supreme Court held that both the 1951 Act as well as the SICA Act are special statutes, the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waive damages in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the BIFR under the provisions of the SICA, subject to the terms and conditions of the scheme. In order to render the second proviso applicable, it has become essential that the establishment must be a sick industrial company and a scheme should have been sanctioned by the BIFR in respect of such sick industrial company under the SICA, for its rehabilitation and that reduction or waiver of damages would be subject to the terms and conditions as may be specified in the scheme framed under the SICA. Para 32 of the Employees Provident Fund Scheme, 1952 expounds upon the second proviso to section 14B. Clause B of para 32B postulates that the Central Board may allow a waiver of damages up to 100 per cent in cases where the BIFR for the reasons to be recorded in the scheme recommends such waiver. 10. By virtue of the amendment to the EPF Act, the Parliament empowered the Central Board to reduce the quantum of damages that may be required to be paid under section 14B. It is relevant to point out that there is no provision by which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckoned or included in the sanctioned scheme. Consequently, where a sick industrial company had after the date of their sanctioned scheme collected the amount of sales tax, but had failed to pay it over to the revenue, it would not be open to the company to seek shelter under the provisions of section 22(1). Observing so, the Supreme Court held as follows : "....The language of section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by section 22 of the Act. So, we are of the view that though the language of section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal under section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in section 22(1) of the Act can apply only to such of those dues reckoned or included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the workmen under article 21 should not be recovered. It should also be noted that the provident fund and other dues payable under the provisions of the EPF Act, are part of the legitimate statutory settlements of the workers. The employer is obligated to pay the contribution to the fund, which is set up under the Act. The contribution of the employees is, in fact, a deduction from the wages which are due and payable to the employees. The deduction which is made from the wages is required to be deposited into the fund by the employer. These contributions belong to the employees. The employees are entitled to those contributions and can draw upon them even while they are in service for meeting the unforeseen eventualities and exigencies that may arise in the life of an employee. They constitute an important measure of social security. The circumstances in which withdrawals and advances can be given to an employee in service are specified in the scheme. No industrial undertaking can work or operate without the work, which is rendered by the employees. The payment of provident fund dues to the fund, therefore, stands on the same footing as the payment of wages, which is due to the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Apex Court in another lucid judgment in Corromandal Pharmaceuticals case ( supra ) had an occasion to analyse the scope of section 22 and held as hereunder : "10. On a fair reading of the provisions contained in Chapter III of Act 1 of 1986 and in particular sections 15 to 22, we are of the opinion that the plea put forward by the revenue is reasonable and fair in all the circumstances of the case. Under the statute, the BIFR is to consider in what way various preventive or remedial measures should be afforded to a sick industrial company. In that behalf, BIFR is enabled to frame an appropriate scheme. To enable the BIFR to do so, certain preliminaries are required to be followed. It starts with the reference to be made by the board of directors of the sick company. The BIFR is directed to make appropriate inquiry as provided in sections 16 and 17 of the Act. At the conclusion of the inquiry, after notice and opportunity afforded to various persons including the creditors, the BIFR is to prepare a scheme which shall come into force on such date as it may specify in that behalf. It is in implementation of the scheme wherein various preventive remedial or other measures, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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