IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 04.03.2009 CORAM: THE HONOURABLE MR.JUSTICE S.NAGAMUTHU Writ Petition No. 531 of 2008 and M.P.No.1 of 2008 K.Logachandran .. Petitioner Vs 1. The District Collector, O/o the District Collector Salem 636 001 2. The Tahsildar, Taluk office, Salem 636 001 3. The Management of Annamalai Cotton Mills Ltd., Veerasamypudhur, Trichy Main road, Gajjainaickenpatti, Salem. ... Respondents Prayer:- Writ petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of mandamus directing the respondents 1 & 2 to recover the sum of Rs.41,137/- with interest at the rate of 12% per annum with effect from 08.08.1998 upto the date of recovery from the third respondent as per the award in W.C.No.36/99 dated 03.05.2001. For petitioner : Mr. S.Ayyathurai For Respondents : Mrs.MalarvizhiUdhayakumar Special Govt.Pleader (R1 & R2) . . . ORDER Whether enforcement of an award made under the Workmen Compensation Act can be stalled by the employer by taking re- course to Section 22(1) of the Sick Industrial Companies Act (Special Provision) 1985; https://hcservices.ecourts.gov.in/hcservices/ 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? Seeking answer to these questions, a poor workman who has lost his right arm while at work 10 years ago, knocks at the doors of this Court for justice. 2. The petitioner/workman, working in the third respondent Industry, lost his right hand while at work in the year 1998. On a claim made by him, the Commissioner for Workmen Compensation passed an award on 03.05.2001, awarding a sum of Rs.41,137/- payable by the third respondent herein with interest at the rate of 12% per annum from the date of the accident if the amount was not deposited within 30 days from the date of receipt of a copy of the award. The third respondent did not pay the amount. At the instance of the petitioner, the Commissioner for Workmen Compensation issued a Revenue Recovery Certificate under Section 31 of WC Act on 28.09.2005 to the first respondent and the first respondent in turn directed the second respondent, by an order dated 23.9.2006, to recover the amount. The second respondent, thereafter, by his proceeding dated 08.12.2006 directed the third respondent to deposit the amount in Court. But the third respondent, by its letter dated 28.01.2009, informed the second respondent that the third respondent-Company had become sick and the same was so declared by BIFR by order dated 09.07.2002 under the provisions of Sick Industrial Companies (Special Provision) Act 1985 (hereinafter referred to as "SICA"). Based on the said letter, the second respondent has expressed his inability to recover the amount from the third respondent. It is in these circumstances, the petitioner has come forward with the present writ petition seeking appropriate direction to the respondents 1 and 2 to recover the amount. 3. It is contended by the learned counsel for the petitioner that Section 22(1) of SICA cannot operate against an award made under the Workmen's Compensation Act (hereinafter referred to as "WC" Act). He relies on a Full Bench Judgment of this Court in Gowri Spinning Mills (P) Ltd. rep. by the Managing Director, Vs Assistant Provident Fund Commissioner and another reported in 2006(5) CTC 1. 4. The third respondent has not made appearance despite service of notice. The learned Special Government Pleader appearing for respondents 1 and 2 has produced a copy of the order of B.I.F.R. made in No.333 /2001 dated 9.7.2002 and also a letter from the third respondent to the second respondent dated 28.01.2009, wherein the third respondent has stated that the award cannot be satisfied without further orders from B.I.F.R. The learned counsel has also produced a report from the second respondent, expressing his inability to recover the amount. https://hcservices.ecourts.gov.in/hcservices/ 5. In order to appreciate the legal position on this subject, at first, it would be useful to examine the scheme of Workmen's Compensation Act. Admittedly, it is a piece of Labour Welfare Legislation providing for payment by certain class of employers to their workmen of compensation for the injury by accident. Section 3 of the Act provides that in case of any personal injury caused to a workmen, by accident, arising out of and in the course of employment, his employer shall be liable to pay compensation in accordance with the provisions of the Act. Section 4(A) of the Act provides, "Compensation under Section 4 shall be paid as soon as it falls due". It also provides " in case where the employer does not accept the liability for compensation to the extent claimed, he shall be bound to make provisional payment based on the extent of liability which he accepts and such payment shall be deposited with the Commissioner or made to the Workman as the case may be without prejudice to the right of the workman to make any further claim. 6.From the above provisions of the act, it could be understood that as soon as the compensation becomes due, the employer is legally obliged to pay the same. The crucial expression"falls due" came to be considered by the Hon'ble Supreme Court in NATIONAL INSURANCE CORPORATION LTD. v. MUBASIR AHAMED (2007(2)SCC 349), wherein the Hon'ble Supreme Court has reiterated that the date of adjudication is the date on which the amount falls due and not the date of accident. In the case on hand, admittedly, the amount fell due on 03.05.2001. Therefore, as per Section 4(A) of the Act, the employer is bound to pay the same on or soon after 03.05.2001. If the employer is aggrieved by the award of compensation, within 60 days from the date of award, he may prefer an appeal to the High Court under Section 30 of the Act. But, such an appeal by an employer shall not lie unless the memorandum of appeal is accompanied by a certificate of the Commissioner to the effect that the appellant has deposited with him the amount payable under the order appealed against. 7. The aim of the Act, as could be perceived from the above provisions, is to ensure that the amount of compensation is paid to the workmen as early as possible, in any event, within 30 days from the date of its falling due. If it is not so paid, then under Section 31 of the Act, the Commissioner is empowered to recover the same as arrears of land revenue as per the provisions of the Revenue Recovery Act of 1890. 8. Let me now refer to Section 22 of the SICA, which reads as follows:- "Section 22: Suspension of legal proceedings, Contracts etc.: (1) When in respect of an industrial company, an inquiry under Section 16 is pending or any scheme https://hcservices.ecourts.gov.in/hcservices/ 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, 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 there of 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 g ranted tot he 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". 9.The scope and amplitude of Section 22 of SICA in relation to various other special enactments came to be considered by various High Courts and the Hon'ble Supreme Court on several occasions. At this juncture, it would be worthwhile to analyse some of those judgments. 10. In Deputy Commercial Tax Officer and others v. Corromandal Pharmaceuticals and Others (1997 (Vol 105) Sales Tax Cases 327), in the concurring judgment of Hon'ble Mr.Justice B.P.Jeevan Reddy, His Lordship has observed as follows:- "It is also a well-known fact that the proceedings before the Board of Industrial and Financial Reconstruction take a long time to conclude and all the while the protective umbrella of section 22 by certain industrial companies-and the wide language employed in the section is providing them a cover We are sure section 22 was not meant to breed dishonesty nor can it be so operated as to encourage unfair practices. The ultimate prejudice to public monies should not be overlooked in the process of promoting industrial progress. We are quite sure that the Government is fully alive to the situation and are equally certain that they must be thinking of necessary modifications in the Act. These few observations are meant merely to record the need for changes in the Act." https://hcservices.ecourts.gov.in/hcservices/ 11.Keeping in mind the above painful observation made by Mr.Justice B.P.Jeevan Reddy, let me now refer to the law laid down by the Hon'ble Supreme Court in the said judgment. Speaking for the Bench, His Lordship Justice K.S.Paripoornan, has held as follows:- "So, we are the view that though the language of section 22 of the Act is of wide important regarding suspension of legal proceedings from the moment an enquiry 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 SICA can apply only to such of those dues reckoned are included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within section 22 of the Act. 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 unreasonable. Such a construction which is unfair, unreasonable and against spirit of the statute in a business sense, should be avoided." 12.A glance through the above judgment of the Hon'ble Supreme Court would make it clear that if an amount already determined has been included in the scheme, then Section 22(1) of SICA is an embargo to collect the amount by means of coercive steps without permission from BIFR. In the case on hand, in the order of the B.I.F.R., it is not known as to whether the compensation awarded in favour of the petitioner has been included in the scheme or not. In the absence of any such clear material on record, I cannot hold that Section 22 of SICA would be an embargo for the petitioner to enforce the award. 13.Yet another principle laid down by the Hon'ble Supreme Court in the same judgment is that the money collected by the company from the consumers towards tax belongs to the Government and the same cannot be withheld by the company, either sick or non sick. Applying the said principle to the Workmen Compensation Act, it needs to be examined as to whether the money awarded by way of compensation becomes the money of the workman as soon as the adjudication. I will discuss about the same later. https://hcservices.ecourts.gov.in/hcservices/ 14.Corromandal Pharmaceuticals and Others's case came up for consideration before the Hon'ble Supreme Court in Tata Davy Ltd. Vs State of Orissa and ors (AIR 1998 SC 2298). In the said judgment, distinguishing the facts involved in Corromandal Pharmaceuticals and Others's case, the Court held that arrears of sales tax from the sick company cannot be recovered without first seeking consent of BIFR in this behalf if the arrears of tax pertain to the period prior to the date of declaration of the company as sick by the BIFR. Thus, in respect of the tax amount for the period subsequent to the order of BIFR, Corromandal Pharmaceuticals and Others case holds the field. 15.In Aluminium Industries Ltd. v. State of Kerala (2006 (133) CompCas530(ker)), while dealing with sales tax recovery proceedings, relying on Corammandal Pharmaceutical Ltd.,s case, the Kerala High Court has held as follows:- "Only the liability or amounts covered by the scheme would be taken in by Section 22, Section 22(1) could apply only to such of those dues reckoned or included in the sanctioned Scheme. Such amounts like sales tax etc. which the sick industrial company is enabled to collect after the date of the sanctioned Scheme legitimately belonging to the Revenue cannot be and could not have been intended to be covered within Section 22 of the Act. The bar under Section 22 therefore would apply only to such dues reckoned or included in the sanctioned Scheme for rehabilitation." 16.When a question arose as to whether enforcement of notice under Section 226(3) of the Income Tax Act would be barred by Section 22 of SICA, the Gujarat High Court in EZY Slide Fastners Ltd., v. Joint Commissioner of Income Tax (2004 (122) Com. Cases 242 (Gujarat); after having elaborately dealt with the above said cases of the Hon'ble Supreme Court, has distinguished sales tax and the income tax by stating that sales tax amount collected from the consumers is the money belonging to the Government whereas the income tax is a tax on income of the company and unless income tax is paid, it does not belong to the State. On this interpretation, the Gujarat High Court has held that Section 22 of SICA is an embargo to enforce notice under Section 226(3) of the Income Tax Act. 17.In respect of recovery of wages, the Gujarat High Court in Rajnagar Textile Mills No.1, Ahmedabad v. Textile Labour Association, Ahmedabad (1998 (93) CompCas 447 (Guj) has held that Section 22 of SICA is not an embargo to recover wages of the workman from the sick company and in paragraph No.8 it has been held as follows:- https://hcservices.ecourts.gov.in/hcservices/ "8. It is very clear that the pre-requisites or condition precedents set out in Section 22 (1) are totally wanting in the facts of the present case and there is no question of defeating claim with regard to the wages and work on the basis of the provisions of Section 22. Despite the wide import of the word 'proceeding' as have been given by the Supreme Court in the judgment delivered in Maharashtra Tubes Limited's case (Supra) this Court does not find that the impugned orders passed by the Labour Court and the Industrial Court with regard to the due wages and the work with reference to the agreement dated May 24, 1983, can be set aside so as to defeat the claim of the respondent association. On the basis of the provisions of Section 22 of the Act as aforesaid the impugned orders cannot be quashed and set aside and the embargo under Section 22 does not apply to the cases where the claim is with regard to the wages and on the basis of the ratio of the Bombay High Court's judgment which has been rendered after considering Supreme Court judgment in the case of Deputy Commercial Tax Officer and others (Supra) this Court is of the considered opinion that proceedings with regard to the recovery of wages and in relation to work to the employees are not covered." 18.While dealing with the Gratuity Act in Rabindra Nath Banerjee v. Certificate Officer (2006 (131) CompCas 85 (cal.)) the Calcutta High Court has held that gratuity amount belongs to the workman and so the same cannot be withheld by a sick Industrial Company under the cover of Section 22 of SICA. Gratuity is nothing but deferred payments as earned during the life time of service and connotes retirement benefits which are nothing but a protection under social security concept in terms of Article 41 of the Constitution of India. The same is also protected further under the International Charters of Human Rights being the Universal Declaration of Human Rights, 1948, under Article 25 Clause (1). Gratuity and retirement benefits are the rights being an emanated fundamental right from Article 21 of the Constitution of India in view of the wide amplitude of the meaning of the word 'life' as envisaged under Article 21. The right to enjoy the retirement benefits at the old age under the social security scheme and social welfare legislation in a democratic State cannot be whittled down and/or negatived by any legislations under the garb of rehabilitation of sick industry. 19.Delhi High Court had an occasion to examine whether the relief under Section 17(B) of the Industrial Disputes Act can https://hcservices.ecourts.gov.in/hcservices/ be withheld by a sick company in Mideast India Ltd., v.Shri K.M.Unni and others (2003 (115) CompCas 184 (Delhi)). After referring to various judgments, the Court has held as follows:- "13.In view of the judicial pronouncements noted above, there can be no doubt that the pendency of proceedings before the BIFR and invocation of Section 22 of SICA cannot come in the way of the respondent being granted relief under Section 17-B of the Act...." 20.The High Court of Karnataka in Indian Plywood Mfg. Co.Ltd v. Commissioner of Labour and Others (1999 (Vol.I) LLJ 201) had an occasion to interpret the word "distress" as found in Section 22 of SICA. The Karnataka High Court in the said judgment has held as follows:- "what is barred under Section 22 of 1985 Act is the execution of distress proceedings or the appointment of the Receiver in respect of the property of the Company. The recovery of money or for enforcement of any security against the Company or any guarantee in respect of any loan or advance guaranteed to the Company cannot be restored to by way of suit in a civil Court. The impugned notice and recovery certificate cannot be termed to be the recovery of money by way of suit. Being conscious of this position of law, the learned counsel for the Appellant has tried to impress upon us that the amount sought to be recovered was distress and the recovery being effected in execution proceedings was not permissible. The word 'distress' used in Section 22 of 1985 Act has to be read ejusdem generis to the words, "no proceeding for winding up execution, distress or the like against any of the properties of an industrial company." (Emphasis Supplied) 21.In Modistone Ltd. Vs Deputy Commissioner of labour (1999 (2) LLJ 1043), Justice A.P.Shah, of Bombay High Court (as he then was) has held as follows:- "Section 22(1) of the SICA would not operate in the field of payment of wages, gratuity and other statutory benefits payable to the workmen". 22.In yet another judgment in Girni Kamgar Sanghatana Samiti VS Khatau Mackanji Spinning and Weaving Com. Ltd. (1998(2) LLJ 264 (Bom.)) it has been held as follows:- "9.Thus, it is a settled law that it is not https://hcservices.ecourts.gov.in/hcservices/ open for the company to take shelter of Section 22 in respect of the workers' wages and other dues. A feeble attempt was made by Mr.Vasudeo to distinguish the above judgment by contending that the present case relates to the payment of gratuity to the workmen and since such claim is in the nature arrears, the case would be governed by the decision of the Apex Court in Tata Davy Ltd. Vs State of Orissa and ors, AIR 1998 SC 2298. I am unable to accept the submission made by the learned counsel for the petitioners. By no stretch of imagination gratuity can be called arrears of wages. The basic minimum which the workman is entitled to get is the wages and the gratuity and other statutory benefits." 23. In Indian Plywood Manufacturing Company Ltd. VS Commissioner of Labour and others, (2000(2) LLN 677(Kar.)) it has been held that a recovery certificate issued under Section 33 (c) of the Industrial Disputes Act cannot be regarded as governed by Section 22(1) of SICA. Similar view has been taken by Uttaranchal High Court in Uptron India Ltd., Vs P.O.Labour Court, 2004(2) LLJ 378 and the Madhya Pradesh High Court in Kedia Distilleries Vs General Secretary, Chhatisgarh Chemical Mill Majdoor Sangh (2001 Lab IC 1815) (MP). A Division Bench of Bombay High Court in Ranjan Bhagwant Kedar VS HMP Engineers Ltd., (2004 (3) LLJ 939) has also held that Section 22 (1) of SICA could have no application to the recovery under recovery Certificate issued by the Industrial Court. 24.In Modi Industries Limited VS Add.labour Commissioner, Ghaziabad and others (1993 (2)LLN, 548), the learned Judge of the Alahabad High Court has observed with pains as follows:- "if the industry cannot run without workers, the workers also cannot be expected to work without payment of their wages. The timely payment of the wages for which the provisions of the Act of 1978 has been enacted. Both the acts are thus complimentary to each other. Section 22 cannot thus affect the proceedings taken under Section 3 of the Act of 1978 for compelling petitioner to make payment of the wages already accrued to the workers". (Emphasis supplied) 25.After analysing many of the above judgments including various judgments of the Hon''ble Supreme Court in extensio, a Full Bench of this Court in Gowri Spinning Mills (P) Ltd., represented by its Managing Director v. Assistant Provident Fund https://hcservices.ecourts.gov.in/hcservices/ Commissioner, Sub-Regional Office (2006(5) CTC 1) has held as follows:- "For all the aforesaid reasons, we are of the considered view that the provident fund dues under the EPF Act are not covered by Section 22(1) of the SICA and the provident fund benefits which the employees are entitled to cannot be placed on the same footing as taxes of the Gvoernment or dues of other Commercial Venture or dues to Corporation or like others. In the result, Writ Appeal Nos.173,230 & 583 of 2006 as well as W.P.Nos.41166 of 2005 and 1662 of 2006 are dismissed with costs. The appellants are given three months' time to make payment of the provident fund dues as per the determination made by the Provident Fund Authorities." (Emphasis Supplied) 26. By a close reading of all the above judgments and the Full Bench judgment of this Court, the following principles could be culled out:- (i)Any amount which had already fallen due and covered by the scheme or any proceeding under the SICA will fall within the embargo of Section 22 of SICA. (ii)The wages, gratuity and other statutory benefits payable to the workman shall not fall within the embargo of Section 22(1) of SICA. (iii)Wages to be paid to workman under Section 17(B) of the Industrial Disputes Act are not covered within the embargo of Section 22(1) of SICA. (iv)Recovery certificate issued under Section 33(C) of the Industrial Disputes Act and similar recovery certificates issued under other enactments pertaining to labour legislations would not fall within the embargo of Section 22(1) of SICA. (v)Taxes such as sales tax, Central Excise etc., which are collected from the customers and others by the company belong to the State and the sick industrial company cannot withhold said payment by taking re-course to Section 22(1) of SICA. (vi)Any amount due which does form part of the day to day operation of the company are not covered by the embargo under Section 22(1) of SICA. 27.If the above principles are applied to the workmen Compensation award, there can be no difficulty in holding that such a compensation payable to a workman is a statutory benefit payable by the employer. The right to get workmen compensation, though a statutory right, in deed, emanates from right to life guaranteed under Article 21 of the Constitution of India. So, the embargo under Section 22(1) of SICA cannot be made applicable to proceedings in respect of recovery of