Akshaya Textiles Limited vs The Tahsildar and Others

P. Jyothimani, J.—This writ petition is directed against the order of the first respondent dated 16-08-2004 under which the respondent has

directed the writ petitioner to pay the sum of Rs. 15,82,446/-. In the impugned order, the first respondent has directed to make payment failing

which action will be taken in attaching the movable and immovable properties of the writ petitioner. The writ petitioner which was a Company

registered under the Companies Act running the textile mill became sick and was referred to the Board for Industrial and Financial Reconstruction

(BIFR) under the provisions of Sick Industrial Companies (Special Provisions) Act. By an order dated 30-08-2001, the BIFR has directed

winding up of the Company and the same is forwarded to the High Court for necessary action. The appeal filed against the said order was also

dismissed on 23-05-2002, as against which the petitioner has filed W.P. No. 19611 of 2002 by which there was an order of interim stay regarding

the proceedings in AAIFR and BIFR which was made absolute subsequently. Fifteen persons who were working in the petitioner''s Company

retired from service and have filed applications under the Payment of Gratuity Act, 1972 before the Assistant Commissioner of Labour,

Coimbatore - 18 for payment of gratuity. The case of the petitioner is that they were not aware of the notice served in respect of the proceedings

and it is also the case of the petitioner that settlement u/s 18(1) with regard to gratuity has been arrived at and the petitioner mill is providing

employment to the said workers and therefore, the petitioner would submit that it has a valid defence u/s 18(1) of the Payment of Gratuity Act,

1972. On the basis of a judgment of the Division Bench, when the matter is pending before the authorities under the Sick Industrial Companies

(Special Provisions) Act, the authority under the Payment of Gratuity Act has no right to pass such orders and hence the respondent has no right to

order recovery of the amount of Rs. 15,82,446/-.

Mr. Parthiban, learned Counsel appearing for the petitioner would submit that at the time when the writ petition was filed, the Division Bench of

this Court held that in respect of the amounts due under the Payment of Gratuity Act and other Acts pendency of proceedings under the Sick

Industrial Companies (Special Provisions) Act will protect the employer.

On the other hand, the learned Counsel appearing for the respondents 2 to 9 who were impleaded in these writ petitions and who were the

persons eligible for the gratuity amount would submit that as per Section 8 of the Payment of Gratuity Act, the respondents 2 to 9 are entitled to

the interest on the amount of gratuity awarded by the competent authority. However, such interest shall not be above the award amount passed by

the competent authority and on that basis has also filed the calculation, but as admitted by the learned Counsel for the petitioner, the amount has

not been paid. It is also brought to the notice of this Court that on a writ petition filed by the respondents 2 to 9 earlier in W.P. No. 25644 of

2005, this Court by an order dated 11-08-2005 directed District Collector and the Tahsildar, Coimbatore North to proceed further and recover

the amount in accordance with law as per the proceedings dated 30-04-2001 and pay the amount to the petitioners, if there is no other legal

impediment, within twelve weeks from the date of receipt of a copy of the said order. In spite of the said specific order passed by this Court, no

amount is forthcoming. The learned Counsel also would rely upon the Full Bench judgment of this Court reported in 2006 (5) CTC 1 (Gowri

Spinning Mills (P) Ltd., v. Assistant Provident Fund Commissioner), by which the judgment of the Division Bench of this Court has been

overruled.

I have heard the learned Counsel for the petitioner and perused the entire records. The only point that has to be decided in this case is as to

whether the respondents 2 to 9 are eligible for payment u/s 8 of the Payment of Gratuity Act in spite of the pendency of proceedings under the

Sick Industrial Companies (Special Provisions) Act either before AAIFR or BIFR. In 2004(1) LLJ 133(Mad)(T. Venkatesan v. District

Collector, Tiruvallur) following an unreported judgment of the Division Bench in W.A. No. 1831 of 2001, the learned Single Judge has held that

the protection granted to the sick companies u/s 22 of the SICA against levy or execution or distress proceedings without consent of the BIFR or

Appellate Authority cover proceedings for recovery of gratuity. However, the said judgments have been overruled by the Full Bench judgment of

this Court in Gowri Spinning Mills (P) Ltd. v. Assistant Provident Fund Commissioner 2006 (5) CTC 1. The Full Bench consisting of A.P. Shah,

C.J., D. Murugesan and R. Sudhakar,JJ. have expressly overruled the said judgment and the relevant portion of the same reads thus:

34, The unreported judgment of the Division Bench of this Court in W.A. No. 1831 of 2001 seems to have proceeded on the assumption that

Section 22(1) of the SICA is implicitly applicable to the workers dues as well as their claims for gratuity, provident fund, etc. The Division Bench

has not considered the reported judgment of other Courts and the effect of the amended Section 14-B of the EPF Act. In T. Venkatesan v.

District Collector, Tiruvallur 2004 (1) LLJ 133, a learned single Judge of this Court following the unreported decision of the Division Bench in Writ

Appeal No. 1831 of 2001 has held that the protection granted to the sick companies u/s 22 of the SICA against levy or execution or distress

proceedings without consent of the BIFR or Appellate Authority cover proceedings for recovery of gratuity. In our opinion, the unreported

decision of the Division Bench in Writ Appeal No. 1831 of 2001 and the decision of the learned single Judge in T. Venkatesan v. District

Collector, Tiruvallur 2004 (1) LLJ 133 do not lay down the correct law. Section 22 of the SICA would not operate in the field of payment of

wages, gratuity and other statutory benefits payable to the workmen.

In view of the Full Bench judgment overruling the earlier Division Bench judgment, it is clear now that pendency of any proceedings against the

petitioner''s company under the provisions of SICA, is not a bar for respondents 2 to 9 to claim the statutory amounts due under the Payment of

Gratuity Act. In view of the same, the impugned order cannot be said to be unlawful and the writ petition is liable to be dismissed. At this stage, it

is also relevant to point out that u/s 8 of the Payment of Wages Act, 1972 in respect of amount of gratuity due from the employer when an

application is made by the aggrieved person to the Collector, it is the duty to recover the amount, together with compound interest thereon from

the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto. However, in the proviso it is

made clear that the said interest payable shall not exceed the amount of gratuity, payable u/s 8 of the Payment of Gratuity Act. Section 8 of the

Payment of Gratuity Act reads thus:

Recovery of gratuity.- If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person

entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount

to the Collector, who shall recover the same, together with compound interest thereon 38[at such rate as the Central Government may, by

notification, specify], from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto.-

39[Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of

showing cause against the issue of such certificate:

Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act.]

Therefore, it is made clear that the respondents 2 to 9 are eligible to proceed under the Payment of Gratuity Act.

The writ petition is dismissed with a direction to the first respondent to recover the statutory amounts due to the respondents 2 to 9 as per the

Payment of Gratuity Act and also take further action as per the Act so as to make recovery at the earliest point of time. If any interim deposit has

been made by the writ petitioner it is open to the first respondent to give credit of that amount and the balance amount has to be recovered

expeditiously, in any event, within a period of three months from the date of receipt of a copy of this order.