Research › Search › Judgment

Bombay High Court · body

2021 DIGILAW 1405 (BOM)

Amravati Municipal Corporation v. Assistant Provident Fund Commissioner And Officer In Charge, Sub Regional Office, Akola

2021-10-21

A.S.CHANDURKAR, G.A.SANAP

body2021
JUDGMENT : A. S. CHANDURKAR, J. The challenge raised in this Letters Patent Appeal is to the judgment of learned Single Judge dated 29-3-2012 in Writ Petition No. 1071/2007. By that judgment, the writ petition preferred by the appellant challenging the order dated 26-2-2007 passed by the Assistant Provident Fund Commissioner seeking deposit of dues towards provident fund by treating it to be the principal employer was dismissed. 2. The facts in brief are that the respondent No. 2 herein-Security Services Agency has been registered as an establishment under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (for short “the said Act”). The services of the Security Agency were contractually engaged by the Municipal Corporation for providing security guards. As the dues of the employees of the Security Agency were not paid, proceedings under section 7-A of the said Act were initiated against the Security Agency. An order under section 7-A was passed on 5-5-2006, determining the amount of liability towards dues at Rs. 30,01,866/-. Since the aforesaid dues were not paid by the Security Agency, the Assistant Provident Fund Commissioner sought to recover that amount from the Municipal Corporation treating it to be the principal employer by resorting to the provisions of section 8 of the said Act. This was resisted by the Municipal Corporation and pursuant to the notice issued under section 8-F of the said Act on 20-2-2007, an order dated 26-2-2007 came to be passed. By the said order, the Assistant Provident Fund Commissioner called upon the Municipal Corporation as the principal employer to remit the aforesaid amount failing which penal action against the Municipal Corporation was to follow. 3. Being aggrieved, the aforesaid order was challenged by the Municipal Corporation in Writ Petition No. 1071/2007. By the impugned judgment, it was held that in the light of provisions of section 2(f) of the said Act, it was the responsibility of the Municipal Corporation to pay the contribution of the employees of the Security Agency. Reference was also made to Paragraph No. 30(3) of the Employees’ Provident Funds Scheme, 1952 (for short, the Scheme). The Writ Petition was accordingly dismissed. Hence, the present Letters Patent Appeal. 4. Shri C. S. Kaptan, learned Senior Advocate for the appellant submitted that Municipal Corporation could not have been held to be the principal employer for the purposes of recovering the dues of the Security Agency. The Writ Petition was accordingly dismissed. Hence, the present Letters Patent Appeal. 4. Shri C. S. Kaptan, learned Senior Advocate for the appellant submitted that Municipal Corporation could not have been held to be the principal employer for the purposes of recovering the dues of the Security Agency. That agency was independently registered with the provident fund authorities and it was also given a separate code number. The notice under section 7-A of the said Act was issued only to the Security Agency and not to the Municipal Corporation. It was only when the Assistant Provident Fund Commissioner sought to recover the dues that were already determined that the provisions of section 8-F of the said Act came to be invoked against the Municipal Corporation. He submitted that the liability as principal employer could not have been determined for the first time in recovery proceedings under section 8-F of the said Act. He then urged that considering the terms of contract, it was the sole responsibility of the Security Agency to pay the dues of its employees. The Municipal Corporation had no control or power of supervision over the employees of the Security Agency. By no stretch of imagination, could it be said that the Municipal Corporation was the principal employer for being held liable to pay the dues of the Security Agency. In that regard, he placed reliance on the decisions in Panther Security Service Private Limited vs. Employees Provident Fund Organization, reported in (2021) 1 SCC 193 , Managing Director, Hassan Co-operative Milk Producer’s Society Union Limited vs. Assistant Regional Director, Employees State Insurance Corporation, reported in (2010) 11 SCC 537 and Bharat Heavy Electricals Limited vs. Mahendra Prasad Jakhmola and others, (2019) 13 SCC 82 and thus, submitted that the impugned order was liable to be set aside. 5. Shri H. N. Verma, learned Advocate for the respondent No. 1 supported the impugned order. According to him, the Security Agency was providing security guards to the Municipal Corporation and though the Security Agency was being paid contractual amounts, the Municipal Corporation was the principal employer and was rightly held liable to pay the dues. 5. Shri H. N. Verma, learned Advocate for the respondent No. 1 supported the impugned order. According to him, the Security Agency was providing security guards to the Municipal Corporation and though the Security Agency was being paid contractual amounts, the Municipal Corporation was the principal employer and was rightly held liable to pay the dues. He referred to the provisions of section 2(f) of the said Act and submitted that as the contract between the Municipal Corporation and the Security Agency was not a principal to principal engagement, it was clear that the Municipal Corporation was the principal employer. He referred to the documents considered by the Assistant Provident Fund Commissioner while holding the Municipal Corporation liable under section 8-F of the said Act. Thus, according to him the impugned order did not call for any interference. 6. We have heard the learned Advocates for the parties at length and with their assistance, we have perused the material on record. It is not in dispute that agreements were entered into between the Municipal Corporation and the Security Agency under which the Security Agency supplied services of security guards to the Municipal Corporation. Under the said contract, it was the responsibility of the contractor to make the payments to the security guards from the contractual amount that was to be paid by the Municipal Corporation. It is further not in dispute that the Security Agency has been separately registered as an establishment under the said Act and has also been given a separate code number. 7. The facts on record indicate that proceedings under section 7-A were initiated by the Assistant Provident Fund Commissioner against the Security Agency. Despite various notices, the Security Agency did not appear before the Assistant Provident Fund Commissioner. Thus, by taking the minimum wages per month at Rs. 1690/- from May, 2001 to 15-9-2005 the liability came to be determined. It is an admitted position that no notice under section 7-A of the said Act was issued to the Municipal Corporation. Since the amount determined as due and payable by the Security Agency was not paid by it, the authorities sought to initiate recovery proceedings under section 8 of the said Act. Notice under section 8-F of the said Act was thus issued to the Municipal Corporation to recover the amounts that were not paid by Security Agency. Since the amount determined as due and payable by the Security Agency was not paid by it, the authorities sought to initiate recovery proceedings under section 8 of the said Act. Notice under section 8-F of the said Act was thus issued to the Municipal Corporation to recover the amounts that were not paid by Security Agency. The basis on which the recovery proceedings were initiated against the Municipal Corporation was that it was the principal employer and in the light of Paragraph No. 30 (3) of the Scheme, such payment of dues was to be made by it. 8. Under section 7-A (1) the Regional Provident Fund Commissioner is empowered to determine the amount due from any employer under any provision of the said Act. The amount due from an employer has to be determined by conducting an inquiry as contemplated by section 7-A(2) of the said Act. As held in Bharat Heavy Electricals Limited vs. ESI Corporation, (2008) 3 SCC 247 the powers conferred under section 7-A being statutory powers, there is a legal duty to exercise the same when the situation arises. Failure to exercise jurisdiction would result in nullification of the order passed in the inquiry. Since this is the initial stage of holding an inquiry for determining the liability as regards the amount due from any employer, it was necessary for the Assistant Provident Fund Commissioner to have issued notice to the Municipal Corporation if it intended to proceed against it on the premise that the Municipal Corporation was the principal employer. In the inquiry under section 7-A of the said Act, the Municipal Corporation had no opportunity to appear and dispute the aspect that it was not the principal employer as sought to be urged by the provident fund Authorities. This is for the reason that only when recovery was initiated under section 8-F of the said Act that the Municipal Corporation was noticed. It cannot be disputed that recovery proceedings under section 8-F are summary in nature and the scope of disputing the liability would be limited in these proceedings. It is in this backdrop that the order of recovery dated 26-2-2007 was sought to be challenged by the Municipal Corporation. It cannot be disputed that recovery proceedings under section 8-F are summary in nature and the scope of disputing the liability would be limited in these proceedings. It is in this backdrop that the order of recovery dated 26-2-2007 was sought to be challenged by the Municipal Corporation. Since we find that there was no notice to the Municipal Corporation while determining the liability under section 7-A of the said Act, it would not be permissible to hold that the Municipal Corporation was the principal employer while seeking to recover dues under section 8-F of the said Act. As the amount of dues were sought to be recovered on this premise, the action of recovery becomes clearly unsustainable and the same is therefore liable to be set aside. The learned Single Judge failed to consider this jurisdictional aspect that goes to the root of the matter thus making out a case for interference in certiorari jurisdiction. 9. For the aforesaid reasons the judgment of learned Single Judge dated 29-3-2013 in Writ Petition No. 1071/2007 and the order dated 26-2-2007 passed by the Assistant Provident Fund Commissioner under section 8-F of the said Act are set aside. The respondent No. 1 is at liberty to initiate fresh proceedings in accordance with law for seeking recovery of dues of provident fund of the employees of the Security Agency. Needless to say that if the authorities intend to proceed against the Municipal Corporation, appropriate notice as required by law be issued to them. All other points including the aspect whether Municipal Corporation is the principal employer or not are kept open for adjudication. The Letters Patent Appeal is allowed in above terms with no order as to costs. 10. On other aspects the learned advocate would submit that the petitioners are not coming with any case of the award having been induced as is required by the second proviso to sub-section (3) of section 36 of the Arbitration Act so that the lower Court could have stayed the execution of the award unconditionally. He would further submit that the respondent had promptly invoked the arbitration clauses by issuing a legal notice and filing an application before the Arbitrator. It was done promptly and was not barred by limitation. He would further submit that the respondent had promptly invoked the arbitration clauses by issuing a legal notice and filing an application before the Arbitrator. It was done promptly and was not barred by limitation. He would further submit that since it is a matter of execution of a money decree no blanket stay could have been granted as held by the Supreme Court in the case of Malwa Strips Private Limited vs. Jyoti Limited, (2009) 2 SCC 426 . No unconditional stay is permissible under section 36(2) of the Arbitration Act as has been held in the case of Pam Developers Private Limited vs. State of West Bengal, (2019) 8 SCC 112 . No error is committed by the learned Judge in granting stay subject to deposit of money with interest and asking for security. 11. I have carefully considered the rival submissions and the papers as also the decisions cited at the Bar. So far as the preliminary objection raised by the learned advocate for the respondent as regards maintainability of the present proceeding before a Single Judge in the present form, one needs to bear in mind that the Arbitration Act is a special statute whereas the C.C. Act is a general one. Therefore, even if by virtue of the provisions of the C.C. Act the proceeding before the Lower Court has been transferred and decided by a Commercial Court at the District Court level, and even if section 13 of the C.C. Act provides for appeals to be lodged with the Commercial Appellate Division, since the impugned order is an interlocutory order passed under section 36 of the Arbitration Act against which no appeal is provided, there is no question of resorting to the provisions of section 13 of the C.C. Act which is a general statute in supersession of the provision of appeals contained in section 37 of the Arbitration Act. In other words, when there is a specific provision contained in section 37 of the Arbitration Act which is a special statute, there could not be any appeal and when it is trite that the right of appeal is a statutory right, it would not be governed by a general provision of appeal and forum therefor contained in section 13 of the C.C. Act. With respect, this is what has been observed and laid down by the Supreme Court in the case of Kandla Export Corporation and another vs. OCI Corporation and another; 2018(4) ALL M.R. 912. It was a matter touching a similar dispute concerning the inter play between the provision of section 50 of the Arbitration Act and section 13 of the C.C. Act. Section 50 provides for appeal against a Foreign Award whereas section 37 provides a similar remedy in respect of other Awards. Therefore, the principles and the logic can clearly be pressed into service. Suffice for the purpose to refer to the observations in paragraph No. 16, 23, 24 and 27 : “16. Thus, an order which refers parties to arbitration under section 8, not being appealable under section 37(1) (a), would not be appealable under section 13(1) of the Commercial Courts Act. Similarly, an appeal rejecting a plea referred to in sub-section (2) and (3) of section 16 of the Arbitration Act would equally not be appealable under section 37(2)(a) and, therefore, under section 13(1) of the Commercial Courts Act. 23. This, in fact, follows from the language of section 50 itself. In all arbitration cases of enforcement of foreign awards, it is section 50 alone that provides an appeal. Having provided for an appeal, the forum of appeal is left to the Court authorized by law to hear appeals from such orders. Section 50 properly read would, therefore, mean that if an appeal lies under the said provision, then alone would section 13(1) of the Commercial Courts Act be attracted as laying down the forum which will hear and decide such an appeal. 24. In fact, in Sumitomo Corporation vs. CDC Financial Services (Mauritius) Ltd. and ors., (2008) 4 SCC 91 , this Court adverted to section 50 of the Arbitration Act and to sections 10(1)(a) and 10F of the Companies Act, 1956, to hold that once an appeal is provided for in section 50, the Court authorized by law to hear such appeals would then be found in sections 10(1) (a) and 10F of the Companies Act. The present case is parallel instance of section 50 of the Arbitration Act providing for an appeal, and section 13(1) of the Commercial Courts Act providing the forum for such appeal. The present case is parallel instance of section 50 of the Arbitration Act providing for an appeal, and section 13(1) of the Commercial Courts Act providing the forum for such appeal. Only, in the present case, as no appeal lies under section 50 of the Arbitration Act, no forum can be provided for. 27. In this view of the case, it is unnecessary to advert to Shri. Giri’s arguments based on section 21 of the Commercial Courts Act. Section 21 would only apply if section 13(1) were to apply in the first place, which, as has been found, cannot be held to apply for the reasons given hereinabove. Equally, it is unnecessary to advert to the arguments of the learned counsel for the Appellants based on section 11 of the Commercial Courts Act.” 12. Bearing in mind these principles, when this is not an appeal under section 13 of the C.C. Act when the Arbitration Act does not provide for any appeal against the order impugned in the present matter which is passed under section 36 of that Act, one need not referring to the provisions of the C.C. Act decide the forum to challenge the order of the kind challenged in the present matter. Therefore, in my considered view there is no substance in the submission of the learned advocate for the respondent either as regards the nature of the present proceeding as it is styled or competence of the Single Judge to decide the matter in view of the provisions of the Bombay High Court Appellate Side Rules contained in Chapter XVII, Rule 18. 13. Now reverting back to the core issues, by virtue of the recent amendment which has come into force with effect from 11-3-2021 a second proviso is added to sub-section (3) of section 36 of the Arbitration Act which empowers the Court to stay execution and operation of the award unconditionally pending disposal of the challenge under section 34 of the Arbitration Act. However, it is applicable only where a challenge to the order is based on the ground that the arbitration agreement or the contract which is the basis of the award or the making of the award is alleged to have been induced or effected by fraud or corruption. However, it is applicable only where a challenge to the order is based on the ground that the arbitration agreement or the contract which is the basis of the award or the making of the award is alleged to have been induced or effected by fraud or corruption. Though such grounds have been sought to be made out in the present Writ Petition, the learned Judge in the impugned order has specifically observed that no such stand/ground is taken by the petitioners while challenging the Award under section 34 of the Arbitration Act. If this be so, the submission of the learned A.G.P. that the award has been ‘induced’ cannot be accepted. In fact, as can be understood from the wording of that proviso mere allegations regarding inducement is not sufficient but such inducement must be on the basis of some fraud practised or corruption made. No such allegations can be found and consequently no exception can be taken to the observations and conclusions of the learned Judge of the lower Court holding that the petitioners are not entitled to unconditional stay to the execution of the award by resorting to this proviso. 14. Having thus concluded that the petitioners are not entitled to seek any unconditional stay, the only thing that remains to be considered is as to if at all the learned Judge of the lower Court was justified in granting stay subject to the conditions as are imposed. 15. Though several issues touching the aspect of limitation and maintainability of the arbitral proceeding have been raised, those being the mixed questions of facts and law, this Court at this juncture cannot go into all these aspects. It is for the lower Court to decide these issues. Suffice for the purpose to observe that by virtue of the provisions of section 36, since it is a money decree and the Code of Civil Procedure in Order XLI, Rule 1(3) mandates imposition of the terms and conditions for even lodging of a proceeding challenging the award, no fault can be found with the learned Judge of the lower Court in expecting the petitioners to deposit 60% of the amount of award. 16. However, simultaneously, no justification can be found for issuing a direction for depositing the interest at the rate of 12% as well. 16. However, simultaneously, no justification can be found for issuing a direction for depositing the interest at the rate of 12% as well. The agreements between the parties do not stipulate for any such interest however, still, since it is arising out of a commercial transaction, by virtue of the provisions of the Interest Act, there could be a justification for grant of some interest commensurate with the current rate of interest being granted by the Nationalized Banks. 17. Similarly, though the provision of Order XXVII, Rule 8A of the Code of Civil Procedure granting immunity to the government from furnishing security is held to be archaic by the Supreme Court in the case of Pam Developers Private Limited (supra) it has not struck it down as can be seen from paragraph No. 29 which reads thus : “29. Although we are of the firm view that the archaic Rule 8-A of Order 27, CPC has no application or reference in the present times, we may only add that even if it is assumed that the provisions of Order 27, Rule 8-A, CPC are to be applied, the same would only exempt the Government from furnishing security, whereas under Order 41, Rule 5, CPC, the Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount. Rule 8-A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof.” 18. If this be so, even the impugned order to the extent of directing the petitioner to furnish security for the remainder amount of the award (40%) cannot be said to be legal and proper. 19. The Writ Petition is partly allowed. 20. The impugned order to the extent it directs deposit of amount together with 12% interest and further directing a security to be furnished is quashed and set aside. The order directing the petitioners to deposit 60% of amount of Rs. 32,62,48,730/- stands confirmed with a further condition that the petitioners shall deposit this amount together with interest at the rate of 6% p.a. 21. The Rule is accordingly made absolute.