Decided on March 06,2013

Regional Provident Fund Commissioner -II Respondents


- (1.) The petitioner before this Court is a public limited company registered under the Indian Companies Act having its registered office at Motahaldu, Haldwani, district Nainital. It is covered under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (from hereinafter referred to as 1952 Act.
(2.) The petitioner has challenged before this Court the proceedings initiated by the Regional Provident Fund Commissioner-II, Haldwani, district Nainital for recovery of such amount which the respondent claims to be dues against provident fund contribution. Since the amount has not been paid, a recovery has been initiated by the respondent against the petitioner which has presently been challenged by means of the present petitions. The petitioner neither denies the dues payable to the respondent nor is there any contest as to the amount being charged by the respondent as such dues. The petitioner has only raised a legal question before this Court which is that since the company had already moved an application before the Board for Industrial & Financial Reconstruction (from hereinafter referred to as the Board) which is a Board constituted under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (from hereinafter referred to as 1985 Act) and though his claims stand rejected by the Board yet he has preferred an appeal under Section 25 of the 1985 Act before the appellate authority which is still pending. In short, his matter is pending before the appellate authority under Section 25 of the 1985 Act. He, therefore, claims that the dues which the petitioner was liable to be given to the respondent under the 1952 Act and presently has failed to deposit cannot be recovered from the petitioner, as he has a protection under Section 22 of the 1985 Act. Section 22(1) of 1985 Act on which such a heavy reliance has been placed by the petitioner reads as under:- 22. Suspension of legal proceedings, contracts, etc.-(1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to 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 (1 of 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 the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and 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 the consent of the Board or, as the case may be, the Appellate Authority. (2)....
(3.) The Employees' Provident Fund Organization is being represented by its counsel Mr. D.S. Patni, who submits that the protection as claimed by the petitioner is not available to him and what is being claimed by the respondent is not a recovery of loan or any other similar dues but the respondent is rather claiming what is just and rightful dues of the workmen which the petitioner is liable to deposit under 1952 Act. He further relies upon a Full Bench judgment of Madras High Court in M/s. Gowri Spinning Mills (P) Ltd. v. Assistant Provident Fund Commissioner, Salem & another,2006 4 MadLJ 1261 wherein it has been held that the dues which are payable under the provisions of 1952 Act are payable by a company inspite of the fact that the proceedings regarding the said company are pending under the 1985 Act. In other words, the amount which is for the benefit of the workmen has been given a greater importance than the protection which has been given to an ostensibly sick company under Section 22 of the 1985 Act. Paragraph Nos. 14 and 15 of the said judgment which are relevant for our purposes read as under:- 14. Both the statutes are special statutes. Whereas the object of enactment of the SICA was to provide for the revival and rehabilitation of sick industrial companies, the object of the EPF Act, as indicated herein before, was a measure to provide social security to the employees. The contribution of the employees as well as the employer towards provident fund is not a tax due. It is also not an amount recoverable under a contract. The moneys, which have been deducted from the wages of the employees as well as the amounts, which the employer is required to pay as its contribution, belong to the employees, and constitute their rightful and just entitlement for the eventual payment of provident fund benefits. 15. In our opinion, the provision of Section 22(1) of the SICA has no application to the provident fund dues and the provisions of the EPF Act would not come within the purview thereof. The provident fund and other dues payable under the EPF Act are part of the legitimate statutory settlements of the workers. The employer is obligated to pay the contribution of the employees as well as his contribution to the Fund, which is set up under the Act, and the Scheme framed there under. The employees contribution together with the employers contribution is required to be paid into the Fund by the employer within the stipulated period. These amounts whether by way of contribution of the employee or the contribution of the employer, are moneys which belong to the employee. An account which is required to be maintained in the name of each member of the provident fund, contains contribution of the employee, the employer as well as the interest which has been credited. Provident Fund is the foundation of an important measure of social security provided to employees of those establishments to whom the Act applies. In the aforesaid situation, an employer cannot refuse to comply with the statutory mandate to pay the contribution made by the employees as also his share, which was by way of social security scheme. Although the object of the SICA is laudable, but, in our view, the same should not deprive the hard earnings of the employees. It does not and cannot stay the recovery proceedings for recovery of money to which employees are entitled by way of social security scheme. The money does not belong to the company it belongs to the employees. These moneys can be withdrawn by the employees in certain eventualities even prior to the attainment of age of superannuation. The Scheme makes provision for withdrawal from the Fund and for the grant of advances from the Fund in special cases.;

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