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Judgment
S. Nagamuthu, J.—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;
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.
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 u/s 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.
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 v. Assistant Provident Fund Commissioner and another reported in 2006 (5) CTC 1.
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.
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 u/s 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.
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 Co. Ltd. Vs.
Mubasir Ahmed and Another, , 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 u/s 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.
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 u/s 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.
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 u/s 16 is pending or any scheme referred to u/s 17 is under preparation or consideration
or a sanctioned scheme is under implementation or where an appeal u/s 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.
In Deputy Commercial Tax Officer and Ors. v. Corromandal Pharmaceuticals and Ors. 1997 105 STC 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.
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 u/s 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.
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.
Corromandal Pharmaceuticals and Others''s case came up for consideration before the Hon''ble Supreme Court in Tata Davy Ltd. v. 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.
In Aluminium Industries Ltd. Vs. State of Kerala, , 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 u/s 22 therefore would apply only to such dues reckoned or included in the sanctioned Scheme for rehabilitation.
When a question arose as to whether enforcement of notice u/s 226(3) of the Income Tax Act would be barred by Section 22 of SICA, the
Gujarat High Court in Ezy Slide Fastners Ltd. Vs. Joint Commissioner of Income Tax (Assessment), ; 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 u/s
226(3) of the Income Tax Act.
In respect of recovery of wages, the Gujarat High Court in Rajnagar Textile Mills No. 1, Ahmedabad Vs. Textile Labour Association,
Ahmedabad, 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:
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 u/s 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.
While dealing with the Gratuity Act in Rabindra Nath Banerjee Vs. The Certificate Officer and Others, 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.
Delhi High Court had an occasion to examine whether the relief u/s 17(B) of the Industrial Disputes Act can be withheld by a sick company in
Mideast India Ltd. Vs. Shri K.M. Unni and Others, . After referring to various judgments, the Court has held as follows:-
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 u/s 17B of the Act....
The High Court of Karnataka in Indian Plywood Mfg. Co. Ltd v. Commissioner of Labour and Ors. 1999 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 u/s 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. and Others Vs. Deputy Commissioner of Labour and Others, , 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.
In yet another judgment in Girni Kamgar Sangharsha Samiti and Others Vs. Khatau Mackanji Spinning and Weaving Co. Ltd. and Others, it
has been held as follows:
Thus, it is a settled law that it is not 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. v.
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.
In Indian Plywood Manufacturing Co. Ltd. v. Commissioner of Labour and Ors. 2000 (2) LLN 677 (Kar.) it has been held that a recovery
certificate issued u/s 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. Presiding Officer, Labour Court and Another, and the Madhya Pradesh High Court in Kedia
Distilleries v. General Secretary, Chhatisgarh Chemical Mill Majdoor Sangh 2001 Lab IC 1815. A Division Bench of Bombay High Court in
Ranjan Bhagwant Kedar and Another Vs. HMP Engineers Ltd. and Others, has also held that Section 22(1) of SICA could have no application to
the recovery under recovery Certificate issued by the Industrial Court.
In Modi Industries Ltd. v. Add. labour Commissioner, Ghaziabad and Ors. 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 u/s 3 of the Act of 1978 for compelling petitioner to make payment of the wages already accrued to the workers.
(Emphasis supplied)
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 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 Government 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)
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 u/s 17(B) of the Industrial Disputes Act are not covered within the embargo of Section 22 of SICA.
(iv) Recovery certificate issued u/s 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 u/s 22(1) of SICA.
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 u/s 22(1) of SICA cannot be made applicable
to proceedings in respect of recovery of workmen compensation.
A recovery certificate issued u/s 31 of WC Act can be equated to a certificate issued u/s 33(C) of the Industrial Disputes Act. It has been
consistently held by various High Courts, that the authorities can enforce such certificates issued u/s 33(C) of the Industrial Disputes Act despite
the fact that the company has become sick and so declared by the BIFR. While that be so, hardly can there be any reason to hold that a certificate
issued u/s 31 of the Workmen''s Compensation Act alone cannot be enforced further by the authorities. Thus, Section 22(1) of SICA cannot be an
embargo to proceed further to enforce a certificate u/s 31 of the Workmen''s Compensation Act.
Yet another reason also finds favour with the above conclusion. As held in various judgments referred to above, Section 22(1) of SICA is an
embargo only in respect of those transactions which do not form part of the day to day operation of the company. Surely, a compensation payable
to a workman under the Workmen Compensation Act does form part of the day to day operation of the company. As I have already stated, as
soon an there is an adjudication order passed by the Commissioner for Workmen Compensation, the amount falls due. As reflected in Section
4(A) and various other provisions of the Workmen''s Compensation Act, as soon as the amount falls due, the company is liable to pay the same to
the workman concerned. Even if an appeal is sought to be made challenging the award, the employer is required statutorily to deposit the entire
compensation awarded as a condition precedent. These provisions would go to indicate that as soon as the amount becomes due, though the
money is retained by the company without making immediate payment, the money belongs to the workmen. Therefore, as held by the Full Bench
of this Court in Gowri Spinning Mills (P) Ltd. v. Assistant Provident Fund Commissioner''s case (cited supra), since the compensation amount
belongs to the workmen, though it is withheld or retained by the employer, Section 22(1) of SICA cannot place any embargo for recovery of the
same.
The above conclusions arrived at by me are fortified by the judgment of the Bombay High Court in Duttatraya Laxman Kulkarni Vs.
Aurangabad Paper Mills Ltd., wherein, while dealing with Workmen''s Compensation Act, the Court has held that Workmen Compensation
award would not fall within the embargo of Section 22(1) of SICA.
Though it is true that the laudable object of SICA is to revive and rehabilitate the sick industries as quickly as possible, it cannot be forgotten
that the object of Workmen''s Compensation Act is more laudable which has been enacted to rehabilitate the Workmen who have suffered injuries
or the dependents of the workmen who lost their lives. The Company, being a big organisation, may find its many ways to rehabilitate itself. But,
the workmen cannot be expected to find resources other than the resource provided under the Workmen''s Compensation Act to rehabilitate. The
Workmen Compensation Act, being a piece of welfare legislation for the benefit of the workmen, should receive a correct interpretation so as to
accomplish the welfare of the workmen. If a different interpretation is made, I am sure, it would be to the detriment of the workmen and the same
would keep the object of the Workmen''s Compensation Act in cold storage. One cannot expect the poor workmen who have lost their limbs to
wait for the company getting rehabilitated in due course of time. When it is the question of revival or rehabilitation for the sick industrial Company,
it is the question of survival for the poor workmen. A workman like the one in the instant case, who has lost his limb, if, made to suffer without
compensation amount being paid, then the result would be disheartening. Not only he, but his entire family would be left in the lurch. Such a
construction of any provision of law adding to the miseries of the poor cannot be allowed to be made. Though several measures have been taken
by means of various enactments to ensure the security and safety of the workmen, it also happens that workmen either lose their lives or sustain
serious injuries while at work. If timely compensation is not paid to them, then, it would amount to adding insult to the injury. This Court cannot be
blind to the agonies and anguish of the poor workmen when they knock at the doors of this Court praying for justice. As I have already held, the
moment, the compensation amount falls due, it becomes the amount of the workmen. The Company either sick or non-sick has no right to retain
the said amount without paying the same. Having regard to all the above, I do not have even a semblance of hesitation to hold that Section 22(1) of
SICA shall not put an embargo on the recovery proceedings initiated under the Revenue Recovery Act, on the basis of a certificate issued u/s 31
of the Workmen''s Compensation Act.
32.Now, let me refer to the order of BIFR dated 09.07.2002. In paragraph 10(k) of the order the Board has directed as follows:
The Company shall not dispose of, lease out, encumber or alienate in any way any of its fixed or current assets without specific prior approval of
BIFR and the charge-holders u/s 22-A of the Act. However, the current assets could be utilized for running day to day operations, subject to
keeping proper records thereof and routing all transactions through the account with the company''s financing bank only.
The above clause in the BIFR order would go to show that the BIFR has given free hand to the company to utilise its current assets for running
of the day to day affairs of the company. There can be no doubt that the payment of wages, gratuity and workmen 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 u/s 22(1) of 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 perils. 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.
In the result, the Writ Petition is allowed. The respondents 1 and 2 are directed to recover the amount as per the Certificate issued by the
Commissioner in accordance with the provisions of Revenue Recovery Act expeditiously, preferably within three months from the date of receipt
of a copy of this order.