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MANU/WB/0170/2001
Equivalent Citation: (2001)3CALLT186(HC), [2001]106CompCas518(Cal), [2001(91)FLR591], (2001)
IILLJ1193Cal
IN THE HIGH COURT OF CALCUTTA
W.P. No. 497 of 2001
Decided On: 03.07.2001
Appellants: Universal Paper Mills Limited and Ors.
Vs.
Respondent: Regional Provident Fund Commissioner and Ors.
Hon'ble Judges:
Pinaki Chandra Ghose, J.
Subject: SICA
Catch Words:
Acts/Rules/Orders:
Constitution of India - Articles 19 and 226; Sick Industrial Companies (Special Provision) Act, 1985 -
Sections 2(1), 3(1)(O), 16, 17, 22, 22(1), 23, 25 and 32; Companies Act, 1956 - Section 529A;
Employees' Provident Fund and Miscellaneous Provisions Act, 1952 - Sections 7A, 8(B), 14(B) and 71;
State Financial Corporation Act - Section 29
Cases Referred:
Maharashtra Tubes Limited v. SIIC of Maharashtra, (1993)2 SCC 144; M.V. Damodaran v. Regr. of Co-
operative societies, (1999)95 Comp Cases 116; Gram Panchayat v. Shree Vallabh Glass Works, AIR 1990
SC 1017; IFCI v. Maharashtra Steel Limited, AIR 1988 All 170; Comet Filaments (I) Ltd. v. Pradeshiya
Industrial & Investment Corporation of U.P. Ltd., (1989) Comp Cases, 124; Himalaya Rubber Products v.
BIFR, 76 Comp Cases 281; Tata Davy Ltd. etc. v. State of Orissa and Ors., 1997(7) JT 216(SC); Reliance
Ispat Industries' case, (1993) 77 Comp Cases 381; Union of India v. Krishna Mills Limited, 81 Comp Cases
150 (RAJ); Bhoruka Steel Limited v. Fairgrowth Financial Service Limited, (1997)89 Comp Cases 547;
Regional Provident Fund Commissioner v. Nuddea Industries Limited, W.P. No. 2137 of 1998; Poysha
Industrial Company Limited v. Union of India and Ors., (1994)2 Cal LT 330(HC); Kusum Engineering Co.
Ltd. v. The Regional Provident Fund Commissioner, West Bengal and Ors., Appeal No. 591 of 1990 and
Matter No. 2254 of 1990; Polliwolf Limited v. R.P.F.C. and Ors., W.P. No. 1688 of 2000; Vikram Poddar v.
R.P.F.C. and Ors., 2001 CHN 476; Deputy Commercial Tax Officer v. Corromondal Pharmaceuticals, AIR
1997 Sc 2027; Indrajit C. Parekh and Ors. v. B.K. Bhatt and Anr., AIR 1974 SC 1183
Disposition:
Application rejected
Case Note:

SICA statutory liabilities Section 22 of Sick Industrial Companies (Special Provision) Act,
1985 and Employees Provident Fund and Miscellaneous Provisions Act, 1952 company has no
right to take shelter under Section 22 in respect of statutory liabilities employees are entitled
to have their statutory benefits under Act of 1952 any default on part of employer under Act
of 1952 cannot attract Section 22 or can get away taking advantage out of said Section
purpose and object of Section 22 cannot be interpreted in manner to give shelter to petitioners
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against Order passed by respondent authorities.

JUDGMENT
The Court
1. This is an application challenging the demand notices issued by the respondent authorities calling upon
the petitioner No. 1 and its Director to make payment of a sum of Rs. 65,56,417/- on account of
employer's contribution under the Employees' Provident Fund & Miscellaneous Provisions Act, 1952
(hereinafter referred to as the said Act) and threatening to proceed against them under the provisions of
Section 8B to 8G of the said Act and further the thereat of attachment in respect of bank account of the
petitioner No. 1.
2. The petitioner has challenged the said notice inter alia on the ground that the petitioner No. 1 is a sick
company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act,
1985 (hereinafter referred to as SICA Act) and further according to the petitioner, under Section 2(1) of
the said SICA Act, 1985 when an inquiry under Section 17 is under preparation or consideration or a
sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial
company is pending, then, notwithstanding anything contained in the Companies Act, 1956 or any other
law or the Memorandum and Articles of Association of the industrial company or any other instrument
having effect under the said Act or other law, no proceedings for the winding up of the industrial company
or for execution, distress or like against any of the property of the industrial company or for the
appointment of a Receiver in respect thereof shall lie or be proceeded with further except with the consent
of the Board or, as the case may be the Appellate Authority. The petitioner is also bound to get direction
under Section 32 of the said SICA Act.
3. It further contended that since the Employees' Provident Fund Act does not contain any non-obstante
Clause and the SICA Act and the said Act are both special statutes and since SICA Act came into force
later than that of the provident fund Act, in that case, it has been contended that the said Act must prevail
over the same.
4. The ground for challenging the said notice and the attachment that the respondent failed to consider
the representation made by the petitioner company vide letter dated 15th November, 2000 and
furthermore, the respondent did not consider that the petitioner has paid the entire employees'
contribution and nothing was due and payable. Therefore, the respondents cannot have authority to take
coercive measure against the petitioners including the issuance of the said notice attaching the back
account. The entire business of the petitioner has come to standstill and further the scheme which has
been placed by the petitioners before the Board for Industrial and Financial Reconstruction (hereinafter
referred to as BIFR) and the same is still pending. Therefore, actions taken by the respondents against the
petitioners are wrongful.
5. Mr. Saha appearing on behalf of the petitioners drew my attention to the said section and further
contended that in the case of "Maharashtra Tubes Limited v. S.I.I.C. of Maharashtra" reported in
MANU/SC/0427/1993 the Hon'ble Supreme Court has held that the meaning of the expression,
"Proceeding for distress or the like" in Section 22(1) has to be broadly construed so as not to confine it to
"legal proceedings" and accordingly such proceedings are not restricted to proceedings before a Court or
Tribunal and even a proceeding by a State Financial Corporation under Section 29 of the State Financial
Corporation Act is not permissible. In "M.V. Damodoran v. Regr. of Co-op Societies" reported in (1999)95
Comp. Case 116, the company had deducted amounts from employees' wages for paying over to the Co-
Op. Credit Society but failed to do so according to the understanding. It was held that Section 22(1) bars
recovery of such money from the company.
6. He also submitted that Section 22(1) has been judicially interpreted by Courts as imposing a restriction
on even the recovery of statutory dues. In support of such submission he relied upon the judgments
reported in MANU/SC/0188/1990 (Gram Panchayat v. Shree Vallabh Glass Works). MANU/UP/0190/1988
(IFCI v. Maharashtra Steel Limited), (1989) Comp Cases 124 (Comet Filaments (I) Ltd. v. Pradeshiya
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Industrial & Investment Corporation of U.P. Limited), (1993) 76 Comp Cases 281 (Cal.) (Himalaya Rubber
Products v. BIFR). In a decision reported in 1997 (7) JT 216 (Tata Davy Ltd. etc. v. State of Orissa and
Ors.) the Hon'ble Supreme Court has held that arrears of sales tax cannot be recovered from a sick
industry by coercive process. In a case of "Reliance Ispat Industries" reported in (1993) 77 Comp Cases
381 it has been held that even a notice containing a threat amounts to a coercive action.
7. He further contended that with reference to non-obstante Clause contained in Section 22(1) and the
non-obstante provisions of Section 32, it as been held in "Union of India v. Krishna Mills Limited" reported
in 81 Comp. Cases 150 (Raj) that the effect of the same is that whatever may be the other law or its
effect, no proceeding against the property of a sick company would lie or be proceeded with. In the said
case it was held that the Sick Industrial Companies (Special Provisions) Act, 1985 being a special statute
in relation to sick Industrial Companies and a later statute, it will prevail over the general provisions of the
Companies Act, 1956 and the non-obstante Clauses in Sections 22 and 32 will prevail as against the non-
obstante Clause in Section 529A of the Companies Act.
8. He also submitted that where there are two special statutes which contain non-obstante Clauses, the
later statute must prevail. In support of such submission he relied upon a judgment reported in (1997) 89
Comp Cases 547 (Bkoruka Steel Limited v. Fairgrowth Financial Services Limited).
9. He further contended that Section 22(1) amounts to statutory interdict to the realisation of provident
fund dues and that by reason of the same no steps can be taken to realise such dues by taking recourse
to oppressive measures. In support of such contention he relied upon an unreported judgment of the
Division Bench of this Hon'ble Court in APOL 80 of 1999, GA 469 of 1999, WP No. 2137 of 1998 (Regional
Provident Fund Commissioner v. Nuddea Industries Limited).
10. He also submitted that in the case of "Poysha Industrial Company Limited v. Union of India and Ors."
reported in 1994(2) Cal LT 330 a learned single Judge of this Hon'ble Court was pleased to set aside the
impugned order passed under Section 14B of the Employees' Provident Fund & Miscellaneous Provisions
Act, 1952 in view of the provisions of Section 22(1) of the Sick Industrial Companies (Special Provisions)
Act, 1985 and to refer the matter back to the appropriate authority for a fresh decision upon considering
the said provision.
11. He further contended that the Employees' Provident Fund & Miscellaneous Providents Act, 1952 being
a social Welfare legislation, no construction of the Sick Industrial Companies (Special Provisions) Act,
1985 can be given effect to which takes away or suspends the right of the provident fund authorities from
realising the provident fund dues and damages. In support of such contention he relied upon an
unreported Divisions Bench Judgment of this Hon'ble Court reported in Appeal No. 591 of 1990, Matter
No. 2254 of 1990 (Kusum Engineering Co. Ltd., v. The Regional Provident Fund Commissioner, West
Bengal and Ors.). Accordingly, he submitted that this application should be allowed.
12. Mr. Binoy Mishra, learned Advocate, appearing on behalf of the respondent submitted that there is
nothing illegal in the attachment of bank account under Section 8B(a) of the said Act. He further
contended that the petition is not maintainable as the order passed under Section 7A of the said Act and
petitioner has a right of appeal under Section 71 of the said Act. The petitioner did not take any steps or
exhausted the said remedy which has been given under the said statute. Accordingly, he submitted that
this application should be dismissed.
13. He further contended that the Bombay High Court in an unreported judgment reported in W.P. No.
1688 of 2000 (Palllwolf Limited v. R.P.F.C. and Ors.) that Section 22(1) of SICA Act, 1985 is of no
assistance to the petitioner having regard to the nature of payments required to be made by way of
provident fund and other contributions under the said Act.
14. It is further contended that the appeal was preferred from the said judgment and the Hon'ble
Supreme Court was pleased to reject the said Special Leave Petition. Accordingly, he submitted that the
said judgment has been upheld by the Hon'ble Supreme Court and thereby the view taken by the Bombay
High Court has been approved by the Hon'ble Supreme Court on the said point.
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15. He further submitted that the judgment delivered by the Hon'ble Division Bench of this High Court in
Appeal No. 591 of 1990 (Kusum Engineering Co. Ltd. v. R.P.F.C. and Ors.), the Hon'ble Division Bench
held that it is a statutory liability and the Provident Fund Act is a piece of social welfare legislation enacted
for the purpose of welfare of the labourers. If the industry is to run the labour welfare legislation has to be
given effect to and that construction of the said Act could be given which takes away or suspends the right
of the Provident Fund Authorities from realising the Provident fund dues and/or damages.
16. He further contended that in the judgment reported in 2001 CHN 476 (Vikram Poddar v. R.P.F.C. and
Ors.) the Hon'ble High Court held that merely because the company is a sick company and it has been
referred to BIFR is not an impediment in recovering the dues of Provident Fund. He also relied upon a
judgment reported in MANU/SC/1598/1997 (Deputy Commercial Tax Officer v. Corromondal
Pharmaceuticals) and submitted that the Hon'ble Supreme Court has held that Section 22 was not meant
to freed dishonesty nor can it be so operated as to encourage unfair practice. The amount due to revenue
and/or statutory liability cannot be withheld indefinitely and unreasonably and it is against the spirit of the
statute.
17. He further submitted that if there is any default in paying the amount under the said Act the
defaulters are liable to be prosecuted under paragraph 76(a) of the scheme. In support of such contention
he relied upon a judgment reported in MANU/SC/0368/1974 (Inderjit C. Parekh and Ors. v. B.K. Bhatt and
Anr.). In the facts and circumstances of this case this application should be dismissed.
18. After considering the facts and circumstances of this case and the order passed by the Board for
Industrial and Financial Reconstruction in respect of the petitioner No. 1 where the BIFR has specifically
held that the company is sick under Section 3(1)(o) of the SICA Act, 1985 appointed a special Director of
the company to safeguard its financial and other interest. It further appears that the Bench acceded to the
request made on behalf of the petitioner to submit a rehabilitation scheme for the unit within 60 days.
Such order was passed by the BIFR on 9th February, 1990. There is no whisper has been made in the
petition that the BIFR has accepted the scheme or any scheme has been filed by the petitioner No. 1 for
its rehabilitation before the BIFR. It further appears that the scheme has not been approved or sanctioned
by the BIFR. It further appears that the scheme was not annexed to the petition nor placed before this
Court. But it appears from the statements made in the petition that the Bank and the operating agency
deviated from one time settlement before the BIFR and the company filed a revisional application before
this Court, but no documents have been produced before this Court to that extent. In my opinion, those
facts ought to have been brought before this Court and the subsequent orders if passed in the matter
should have been brought on record which in my opinion purposefully has been suppressed by the
petitioners from this Court, it further appears that there is a provision under the said Act challenging the
demand notice issued by the petitioner before the said authorities. The petitioner did not take any step in
the said matter nor filed any appeal. The statute has given power to the petitioner to challenge the same
under Section 71 of the said Act. The petitioner purposefully did not avail of the said chance and has come
before this Court. Accordingly, in my opinion the writ Court should not interfere in the matter when a
specific right has been given to the petitioners under the said statute. It is further to be noted here that
the petitioner has specifically submitted that they have paid the employees' share but suppressed the
facts that the amount to be paid to the Provident Fund Commissioner, being an employer share in respect
of such provident Fund.
19. I further cannot accept the contention raised before me by Mr. Saha that the SICA Act must prevail
over the Provident Fund Act, 1952. It is a fact that the SICA Act came into operation in the year 1985, but
it is also to be noted that the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 was
amended by the Act 33 of 1988. Such amendment of 1988 expressly notices the position of the SICA Act
of 1985 and therefore, it cannot be said that the said SICA Act must prevail over the Employees' Provident
Fund Act. Section 14B of the said Act was amended taking into consideration of 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 SICA Act, 1985 subject to the terms and conditions of the scheme.
Therefore, the amendment of the said Employees' Provident Fund Act, 1952 was enacted by the Act 33 of
1988 and the legislators were conscious of the existence of the Sick Industrial Companies (Special
Provisions) Act, 1985. Therefore, in no way it can be said as sought to be contended before me that the
SICA Act, 1985 must prevail over the Provident Fund Act, 1952.
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20. Apart from that the further question arose whether a sick industrial company can claim the benefit of
the provisions of Section 22 in respect of the dues payable towards provident fund under the Employees'
Provident Fund Act, 1952. It further appears from the records that the matter was placed before BIFR in
the year 1990. The amount was to be paid by the petitioner company being the contributions of the
employer which have not been paid by the employer and the same have been unlawfully retained by the
employer.
21. The Hon'ble Supreme Court has held in "Deputy Commercial Tax Officer v. Corromondal
Pharmaceuticals" reported in MANU/SC/1598/1997 that Section 22(1) of the Act can apply only to such
dues recognised or included in the sanctioned scheme and the amounts which have been collected by the
Sick Industrial Company on account of sales tax etc. after the date of the sanctioned scheme legitimately
belonging to the revenue, cannot be and could not have been intended to be convered within Section 22
of the Act. The Hon'ble Supreme Court has specifically held that any other construction will be
unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect
amounts due to the revenue and withhold it indefinitely and unreasonably. Such a construction which is
unfair, unreasonable and against spirit of the statute in a business sense, should be avoided.
22. After considering the judgments cited before me I do not have any hesitation to hold that the
company has no right to take shelter under Section 22 in respect of statutory liabilities and the employees
are entitled to have their statutory benefits under the Employees' Provident Fund Act and thereby any
default on the part of the employer under the said Act cannot attract the said section or can get away
taking an advantage out of the said section and accordingly, in my opinion the purpose and object of
Section 22 cannot be interpreted in a manner to give a shelter to the petitioners against the orders passed
by the respondent authorities.
23. Accordingly, I am of the view that Section 22(1) of the SICA Act, 1985 would not be any assistance to
the petitioner in the facts and circumstances of this case having regard to the nature of the payments
required by way of Provident Fund and other contributions under the said Act and I do not find any
substance in this application and the same is rejected. However, there will be no order as to costs.
24. Application rejected
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