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2007 DIGILAW 2740 (ALL)

SUSHIL KUMAR MAHESHWARI v. UNION OF INDIA

2007-11-15

ASHOK BHUSHAN

body2007
Judgment : ASHOK BHUSHAN, J. (1) HEARD Gopal Misra, learned counsel for the petitioner and P. K. Pandev, learned counsel appearing for the respondent No. 2 as well as learned Standing counsel. With the consent of learned counsel for the parties and looking to the nature of the issues raised in the writ petition, the writ petition is being disposed of at the admission stage itself, without inviting counter affidavit. (2) BY means of present writ petition, the petitioner has prayed for a writ of certiorari, quashing the notice dated July 25, 2007, issued by the Deputy Director/ Recovery Officer asking the petitioner to show cause as to why the petitioner be not committed to the civil prison in execution of the certificate for recovery. A writ of mandamus has also been sought for commanding the respondent No. 2 not to take any coercive measure in relation of the impugned notice and further directing the respondents No. 3 and 4 not to harass the petitioner on the basis of the impugned notice. (3) BRIEF facts of the case necessary to be noted for deciding the issues raised in the writ petition are that the petitioner is one of the directors of Company Sri Tirupati Perfumers pvt. Ltd. The petitioners case is that petitioner closed the company w. e. f. March, 1995 and a formal closure notice dated March 24, 1995 was served to all concerned. In the year 2006, the petitioner came to know about the complaint filed by the Insurance Inspector under Sections 85/86 of the Employees State insurance Act, 1948 (hereinafter referred to as 1948 Act)before the Chief Metropolitan magistrate, Kanpur Nagar. The complaint was with regard to arrears of contribution from September, 1994 to April, 1997. The petitioner received a notice dated July 25, 2007, which stated that the petitioner failed to pay the amount of arrears of Rs. 1,93,630/-for the period May, 1989 to May, 1991 and June, 1991 to December, 1996. The notice stated that it is proposed to execute the recovery certificate by arrest and imprisonment. The petitioner filed a reply dated September 3, 2007 to the notice, copy of which has been filed as Annexure-5 to the writ petition. The petitioner thereafter filed this writ petition challenging the aforesaid notice. The notice stated that it is proposed to execute the recovery certificate by arrest and imprisonment. The petitioner filed a reply dated September 3, 2007 to the notice, copy of which has been filed as Annexure-5 to the writ petition. The petitioner thereafter filed this writ petition challenging the aforesaid notice. (4) GOPAL Misra, learned counsel for the petitioner challenging the notice, made the following submissions in support of the writ petition: (i) The respondents could not have resorted to the arrest and detention of the petitioner without first taking proceedings for recovery, if any, against the properties of the establishment. (ii) According to Section 77 (1) (b) of the 1948 Act, the respondents could have claimed the amount only within five years of the period to which such claim relates. The claim being for the period more than five years ago, the said claim is barred by Section 77 (1) (b). Learned counsel for the petitioner in support of the above submissions, has placed reliance on the division Bench judgment of the Andhra pradesh High Court in the case of Regional provident Fund Commissioner, Employees provident Fund Organisation, Hyderabad and another v. Deccan Foam Plastics Pvt. Ltd. Narsapur (rep. by its M. D. 2005 (105) FLR 1184 (A. P.)and Full Bench judgment of the kerala High Court in the case of Regional director, Employees State Insurance corporation v. Kerala Electrical and Allied engineering Co. Ltd. 2003 (99) FLR 480 (Ker-FB). P. K. Pandey, learned counsel appearing for the respondents refuting the submissions of the learned counsel for the petitioner, contended that by virtue of Section 45-C of 1948 Act read with Section 45-H and second as well as third Schedule of Income Tax Act, 1961, it was open for the respondents to resort to any mode of recovery as provided under Section 45-C. He further contends that Section 77 (1) (b)has no application in the present case since section 77 is applicable with regard to claims raised before the Employees Insurance Court and present is not a case of any claim raised before the Employees Insurance Court. (5) I have considered the respective submissions advanced by learned counsel for the parties and have perused the record. The impugned notice states that petitioner has failed to pay the amount of Rs. (5) I have considered the respective submissions advanced by learned counsel for the parties and have perused the record. The impugned notice states that petitioner has failed to pay the amount of Rs. 1,93,630/-for the period May, 1989 to May, 1991 and june, 1991 to December, 1996 specified with certificate dated September 14, 1998 and July 22, 1993. The notice thus refers to two earlier certificates for the period specified therein. The notice was issued to show cause as to why warrant of arrest be not issued. The notice thus, refers to a certificate of recovery which was earlier claimed to have been issued. The recovery certificate thus, was earlier issued on receipt of which steps are sought to be taken for arrest of the petitioner. The present is a case in which the amount due have already been determined and proceedings are being stepped for recovery by arrest and imprisonment. Section 45-A of the Act provides for determination of contribution in certain cases, section 45-B provides that any contribution payable under this Act may be recovered as arrears of land revenue, Section 45-C entitles the authorised officer to issue a certificate specifying the amount of arrears. Section 45-H provides for applicability of certain provisions of the Income Tax Act. Sections 45-C 45-D and 45-H are being quoted herein below: "45-C. Issue of certificate to the Recovery officer. Section 45-H provides for applicability of certain provisions of the Income Tax Act. Sections 45-C 45-D and 45-H are being quoted herein below: "45-C. Issue of certificate to the Recovery officer. (1) Where any amount is in arrears under this Act, the authorised officer may issue, to the Recovery Officer, a certificate under his signature specifying the amount of arrears and the Recovery Officer, on receipt of such certificate, shall proceed to recover the amount specified therein from the factory or establishment or, as the case may be, the principal or immediate employer by one or more of the modes mentioned below (a) attachment and sale of the movable or immovable property of the factory or establishment or, as the case may be, the principal or immediate employer; (b) arrest of the employer and his detention in prison; (c) appointing a receiver for the management of the movable or immovable properties of the factory or establishment or, as the case may be, the employer: provided that the attachment and sale of any property under this Section shall first be effected against the properties of the factory or establishment and where such attachment and sale is insufficient for recovering the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such proceedings against the property of the employer for recovery of the whole or any part of such arrears. (2) The authorised officer may issue a certificate under sub-section (1)notwithstanding that proceedings for recovery of the arrears by any other mode have been taken. 45-D. Recovery Officer to whom certificate is to beforwarded-(l) The authorised officer may forward the certificate referred to in section 45-C to the Recovery Officer within whose jurisdiction the employer (a) carries on his business or profession or within whose jurisdiction the principal place of his factory or establishment is situate; or (b) resides or any movable or immovable property of the factory or establishment or the principal or immediate employer is situate. (2) Where a factory or an establishment or the principal or immediate employer has property within the jurisdiction of more than one Recovery Officer and the Recovery officer to whom a certificate is sent by the authorised officer- (a) is not able to recover the entire amount by the sale of the property, movable or immovable, within his jurisdiction; or (b) is of the opinion that, for the purpose of expediting or securing the recovery of the whole or any part of the amount, it is necessary so to do, he may send the certificate or, where only a part of the amount is to be recovered, a copy of the certificate certified in the manner prescribed by the Central Government and specifying the amount to be recovered to the Recovery officer within whose jurisdiction the factory or establishment or the principal or immediate employer has property or the employer resides, and thereupon that recovery Officer shall also proceed to recover the amount due under this Section as if the certificate or the copy thereof had been the certificate sent to him by the authorised officer. 45-H. Application of certain provisions of the Income Tax Act: The provisions of the second and the Third Schedules to the income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount of contributions, interests or damages under this Act instead of to the income-tax: provided that any reference in the said provisions and the rules to the "assessee" shall be construed as a reference to a factory or an establishment or the principal or immediate employer under this Act. " (6) THE emphasis in the present case by learned counsel for the petitioner is on proviso to subsection (1) of Section 45-C and learned counsel contends that in view of the said proviso out of the three modes provided under section 45-C (l), the Corporation has to necessarily proceed with first mode i. e. attachment and sale of moveable or immoveable property of factory or establishment before resorting to any other mode. Learned counsel for the petitioner relied in support of his submissions on the judgment of Andhra Pradesh High Court in the case of regional Provident Fund Commissioner, employees Provident Fund Organisation (supra). Learned counsel for the petitioner relied in support of his submissions on the judgment of Andhra Pradesh High Court in the case of regional Provident Fund Commissioner, employees Provident Fund Organisation (supra). For appreciating the submissions of learned counsel for the petitioner, it is necessary to decipher the scheme of recovery as contained in Chapter IV of the Act. As noted above, Section 45-H makes the provisions of second and third schedule of the Income Tax act, 1961 applicable. The second schedule of the Income Tax Act provides for procedure for recovery of tax. Rule 4 of the second schedule of the Income Tax Act provides for mode of recovery which is as follows: "4. Mode of recovery. If the amount mentioned in the notice is not paid within the time specified therein or within such further time as the Tax Recovery officer may grant in his discretion, the Tax recovery Officer shall proceed to realise the amount by one or more of the following modes: (a) by attachment and sale of the defaulters movable property; (b) by attachment and sale of the defaulters immovable- property; (c) by arrest of the defaulter and his detention in prison; (d) by appointing a receiver for the management of the defaulters movable and immovable properties. " (7) BOTH sub-section (1) of Section 45-C and Section 45-H read with second schedule of income Tax Act provide for recovery by one or more modes. The issue to be considered is as to whether any limitation can be read in the provisions for resorting to one mode before another mode for recovery. The submission of learned counsel for the petitioner is that at first instance only the mode of attachment or sale of moveable or immoveable property of the establishment has to be adopted, which is provided in mode (a) and mode of arrest of the defaulter has to be adopted thereafter. The relevant words mentioned in Section 45-C (1)are " by one or more of the modes mentioned below" The provision does not give any indication that modes have to be adopted in a chronological order or after exhausting mode (a) and only then mode (b) can be resorted, rather it mentions that by one or more of the modes can be adopted. Adoption of one or more modes may be simultaneous may be one or after another. Adoption of one or more modes may be simultaneous may be one or after another. Thus, the plain reading of the provisions give complete discretion to the recovery Officer to adopt any or more of the modes and there is no indication that other modes have to be adopted after exhausting mode (a). (8) THE emphasis of learned counsel for the petitioner is on proviso to sub-section (1) of section 45C, which provides that attachment and sale of any property under this Section shall be first effected against the properties of the factory or establishment and where such attachment and sale is insufficient for recovering the whole or any part of such arrears specified in certificate, the Recovery Officer may take such proceeding against the property of the employer. The proviso thus confines its operation with regard to attachment and sale of any property. The proviso provides that first the attachment and sale shall be made of the properties of the factory or establishment and only thereafter when recovery is not satisfied, the property of the employer be proceeded with. The proviso thus, has application with regard to only mode (a) as mentioned in Section 45-C (l). Thus submission is that the above proviso has to be read with other modes prescribed in (b) and (c). A plain reading of the proviso and various modes indicated in Clause (a) (b) and (c) makes it clear that proviso is confined to only mode (a). Proviso uses the word "the attachment and sale of any property under this Section", attachment and sale of property has been mentioned only in mode (a). Mode (c) refers to appointment of a receiver for management of the movable or immovable properties of the factory or establishment. Thus, in mode (c), the proviso could have no application. With regard to mode (b) that is arrest of the employer, also the proviso has no application. Proviso comes into application when mode (a) is resorted, the proviso has no application when any other mode given under Section 45-C (1) is resorted to. Thus the plain reading of Section 45-C indicates that there is no prohibition on the recovery officer to first resort to mode provided under (a) and thereafter only other modes can be adopted. Proviso comes into application when mode (a) is resorted, the proviso has no application when any other mode given under Section 45-C (1) is resorted to. Thus the plain reading of Section 45-C indicates that there is no prohibition on the recovery officer to first resort to mode provided under (a) and thereafter only other modes can be adopted. (9) SECTION 45-D gives discretion to the authorised Officer to forward the recovery certificate to the Recovery Officer within whose jurisdiction the employer carries on his business or profession or within whose jurisdiction the principal place of his factory or establishment is situated or within whose jurisdiction the employer resides or any movable or immoveable property of the factory or establishment is situated. Section 45-D also does not put any limitation on the power of the authorised officer to sent recovery certificate to the place where the property of employer is situated. In his discretion, the authorised officer can forward the recovery certificate to places where employer carries on his business or factory is situated or where the employer resides. Thus, in case recovery certificate is sent to a place where the employer resides only, there can be no error in sending the recovery certificate. Section 45-D also did not indicate that recovery certificate must be sent to a place where the property of the establishment or employer is situated. (10) THE judgment of the Andhra Pradesh high Court in the case of Regional Provident fund Commissioner, Employees Provident fund Organisation (supra) does support the submissions raised by learned counsel for the petitioner. In the said case Andhra Pradesh High court was considering the provisions of Section 8-B of Employees Provident Fund and miscellaneous Provisions Act, 1952. Following was laid down in paragraph 11 of the aforesaid judgment. "it is for that reason, this Court took the view that the arrest of the employer and his detention in prison cannot at all be made in view of the proviso to Section 8-B (l) of the act without exhausting the remedy of attachment and sale of properties of establishment for realization of amounts of arrears. The proviso cannot be read in isolation but is to be read alongwith Sections 8-B (l) (a), (b) and (c) of the Act. The proviso cannot be read in isolation but is to be read alongwith Sections 8-B (l) (a), (b) and (c) of the Act. It is no doubt true that the Punjab and Haryana High court took the view holding that nothing in section 8-B (l) and other provisions of the act prevents Recovery Officer to adopt the method specified in Clause (b) of Section 8-B (1) of the Act before exhausting the other modes of recovery. Such an interpretation in out considered opinion causes hardship and inconvenience. It is settled rule of interpretation that no statutory provision can be read in such a manner, which results in hardship and inconvenience. For the aforesaid reasons, we are not inclined to take a different view other than the one taken by this Court in W. A. No. 177/2002; We are not inclined to agree with the view taken by the punjab and Haryana High Court. " Another judgment of the Punjab and haryana High Court in Mohan v. Regional provident Fund Commissioner and Another 2002-III-LLJ-779 (Pandh) has taken, a contrary view to one taken by Andhra pradesh High "court. In the aforesaid judgment Andhra Pradesh High Court in paragraph 11 held that if it is interpreted that it is open for the Recovery Officer to adopt the method specified in Clause (b) of section 8- B (l) before exhausting other modes of recovery, such an interpretation would cause hardship and inconvenience. Apex Court in CIT Agriculture v. Keshav chandra AIR 1950 SC 265 , held: "hardship or inconvenience cannot alter the meaning of the language employed by the Legislature if such meaning is clear on the face of the statute. " (11) IN view of the foregoing discussions, to my mind, the view taken by Punjab and haryana High Court in Mohan v. Regional provident Fund Commissioner and Another (supra) has more persuasive value than the judgment of the Andhra Pradesh High Court and I am of the considered opinion that under section 45-C, it is open for the Recovery officer to proceed with any one or more modes and it is not necessary that Recovery Officer should first exhaust the mode provided in clause (a) of Section 45-C (1) and thereafter adopt other modes. No such limitation can be read in his power given under Section 45-C. All the methods provided under Section 45-C for recovery as arrears of land revenue, are coercive methods and the Legislature did not provide any chronological order in which modes have to be adopted one after other. Thus, submission of learned counsel for the petitioner that notice for arrest and detention without adopting the other modes, is against the provisions of the Statute, is not acceptable. P. K. Pandey, has also justified the issuance of such notice in view of the case of the petitioner as taken in the writ petition itself that due to incident of August 10/11, 1994, in the premises, total assets of the company had eroded. (12) NOW comes the second submission of learned counsel for the petitioner that in view of section 77 (1-A) (b), the Corporation could not have claimed the arrears of contribution, which were of period five years preceding the date of demand. There are two reasons for not accepting the above submission. First, the notice dated July 25, 2007 is not a demand for arrears rather it is recovery proceedings in continuation of certificate dated September 14,1998 and July 22, 1993 which were referred to in the notice mentioning about the demands. The notice cannot be said to be raising any demand or claim with regard to any arrears rather notice is a step towards effecting the recovery of demands already raised by certificates mentioned thereunder. (13) SECONDLY Section 77 (1-A) (b) is a provision which comes into application when a claim is raised before Employees Insurance court by commencing a proceeding. In the present case, no proceeding has been commenced in the Employees Insurance Court at the instance of the Corporation. Reliance has been placed by learned counsel for the petitioner on a Full Bench decision of the kerala High Court in the case of Regional director, Employees State Insurance corporation v. Kerala Electrical and Allied engineering Co. Ltd. (supra). The provisions of Section 77 (1-A) (b)recently came up for consideration before the apex Court in the case of Employees State insurance Corporation v. C. C. Santha Kumar 2007-II-LLJ-3. The Apex Court also noted the full Bench judgment of the Kerala High Court in which correctness of the judgment of the kerala High Court was raised. Ltd. (supra). The provisions of Section 77 (1-A) (b)recently came up for consideration before the apex Court in the case of Employees State insurance Corporation v. C. C. Santha Kumar 2007-II-LLJ-3. The Apex Court also noted the full Bench judgment of the Kerala High Court in which correctness of the judgment of the kerala High Court was raised. The Apex Court after considering the provisions of Sections 45-A and 45-B, Sections 75 and 77, laid down that provisions of Section 45-A and Section 77 operate on different fields and there is no fetter or limitation on the Corporation to recover the amount by coercive process under chapter VI. Following was laid down by the Apex Court in paragraphs 26 and 29 of the aforesaid judgment at pp. 10 and 11 of LLJ "26. On a plain reading of Sections 45-A and 45-B in Chapter IV and 75 and 77 in Chapter vi of the Act, as indicated above, there cannot be any doubt that the area and the scope and ambit of Sections 45a and 75 are quite different. " "29. Section 77 of the Act relates to commencement of proceedings before the e. S. I. Court. The proviso to sub-section 77 of the Act cannot independently give any meaning without reference to the main provision, namely, Section 77 of the Act. Therefore, the proviso to Clause (b) of section 77 (1 A) of the Act, fixing the period of five years for the claim made by the corporation, will apply only in respect of claim made by the Corporation before the e. S. I. Court and to no other proceedings. " (14) THUS, in view of the above Apex Court judgment the submission of learned counsel for the petitioner based on Section 77 (1-A) (b)cannot be accepted. However, the fact which emerged from the materials on record that cannot be lost sight of, that the notice dated July 25, 2007 has been issued giving reference to recovery certificates dated September 14, 1998 and July22,1993 i. e. after more than nine years of the issuance of the recovery certificates. The petitioners case in the writ petition is that they were not issued any notice with regard to any dues or determination prior to the notice dated july 25, 2007. The petitioners case in the writ petition is that they were not issued any notice with regard to any dues or determination prior to the notice dated july 25, 2007. After receiving the notice dated july 25, 2007, the petitioner has submitted reply dated September 3, 2007 (Annexure-5 to the writ petition). In the facts of the present case, the petitioner has made out a case for directing the respondent Corporation to consider the aforesaid reply of the petitioner dated September 3, 2007 given in response to the show cause notice and proceed with the recovery only thereafter if any. (15) THUS, interest of justice be served in disposing of the writ petition, directing the respondent No. 2 to take a decision on the reply/objection of the petitioner dated september 3, 2007, expeditiously preferably within three months from the date of production of a certified copy of this order and take future steps accordingly thereafter. Till the above objections are decided, the proceedings for recovery initiated vide notice dated July 25, 2007 shall be kept in abeyance.