MISCELLANEOUS

CHAPTER XXI
XXI.3 c : BOARD OF INDUSTRIAL & FINANCIAL RECONSTRUCTION
(BIFR) AND ITS FUNCTIONING
Introdct!on: In t"# $%&# o' (!c&n#(( !n t"# contr)*( !nd(tr!%+ c+!,%t# -r#.%!+!n/
!n t"# #!/"t!#(0 t"# Go.#rn,#nt o' Ind!% (#t - !n 12310 % Co,,!tt## o' E4-#rt(
nd#r t"# C"%!r,%n("!- o' S"r! T.T!$%r! to #4%,!n# t"# ,%tt#r %nd r#co,,#nd
(!t%5+# r#,#d!#( t"#r#'or#. B%(#d on t"# r#co,,#nd%t!on( o' t"# Co,,!tt##0 t"#
Go.#rn,#nt o' Ind!% #n%ct#d % (-#c!%+ +#/!(+%t!on n%,#+)0 t"# S!c& Ind(tr!%+
Co,-%n!#( (S-#c!%+ Pro.!(!on() Act0 1236 (1 o'1237) co,,on+) &no$n %( t"# SICA.
The main objective of SICA is to determine sickness and expedite the revival of potentially
viable units or closure of unviable units (unit here in refers to a Sick Industrial Company).
It as expected that by revival! idle investments in sick units ill become productive and
by closure! the locked up investments in unviable units ould "et released for productive
use elsehere.
The Sick Industrial Companies (Special #rovisions) Act! $%&' (hereinafter called the
Act) as enacted ith a vie to securin" the timely detection of sick and potential sick
companies onin" industrial undertakin"s! the speedy determination by a body of experts
of the preventive! ameliorative! remedial and other measure hich need to be taken ith
respect to such companies and the expeditious enforcement of the measures so determined
and for matters connected thereith or incidental thereto.
The (oard of experts named the (oard for Industrial and )inancial *econstruction ((I)*)
as set up in +anuary! $%&, and functional ith effect from $'th -ay $%&,. The Appellate
Authority for Industrial and )inancial *econstruction (AAI*)*) as constituted in April
$%&,. .overnment companies ere brou"ht under the purvie of SICA in $%%$ hen
extensive chan"es ere made in the Act includin"! inter/alia! chan"es in the criteria for
determinin" industrial sickness.
SICA applies to companies both in public and private sectors onin" industrial
undertakin"s0/
(a) #ertainin" to industries specified in the )irst Schedule to the Industries (1evelopment
and *e"ulation) Act! $%'$! (I1* Act) except the industries relatin" to ships and other
vessels dran by poer and2
386 ESIC REVENUE MANUAL
CHAPTER XXI MISCELLANEOUS
(b) 3ot bein" 4small scale industrial undertakin"s or ancillary industrial undertakin"s5
as defined in Section 6(j) of the I1* Act.
(c) The criteria to determine sickness in an industrial company are (i) the accumulated
losses of the company to be e7ual to or more than its net orth i.e. its paid up capital plus
its free reserves (ii) the company should have completed five years after incorporation
under the Companies Act! $%'8 (iii) it should have '9 or more orkers on any day of the
$: months precedin" the end of the financial year ith reference to hich sickness is
claimed. (iv) it should have a factory license.
;(+<CTI=<S ;) SICA
The objectives of this Act (SICA) as incorporated in its preamble! emphasises the folloin" points0
The SICA had been enacted in the public interest to deal ith the problems of industrial sickness
ith re"ard to the crucial sectors here public money is locked up.
It contains special provisions for timely detection of sick and potentially sick industrial compa/
nies! speedy determination and enforcement of preventive! remedial and other measures ith
respect to such companies.
Those measures are to be taken by a body of experts.
The measures are mainly
(a) >e"al
(b) )inancial restructurin"
(c) -ana"erial
GENISIS OF SICA, 1985
Industrial sickness had started ri"ht from the pre/Independence days.
.overnment had earlier tried to counter the sickness ith some ad/hoc measures.
3ationalisation of (anks and certain other measures provided some temporary relief.
*(I monitored the industrial sickness.
A study "roup! came to be knon as Tandon Committee as appointed by *(I in $%,'.
ESIC REVENUE MANUAL 387
MISCELLANEOUS
In $%,8! ?.3. *ay committee as appointed.
CHAPTER XXI
In $%&$! Tiari Committee as appointed to su""est a comprehensive special le"islation desi"ned
to deal ith the problem of sickness layin" don its basic objectives and parameters! remedies
necessary for revival of sick @nits.
The committee submitted its report to the .ovt. in September $%&6 and su""ested the folloin"0
3eed for a special le"islation
3eed for settin" up of exclusive 7uasi/judicial body.
Thus the SICA came into existence in $%&' and (I)* started functionin" from $%&,.
IMPORTANT PROVISIONS OF SICA
Constitution of two quasi-u!i"ia# $o!i%s & 'IFR an! AAIFR an! t(%i) '%n"(%s*
P)o"%!u)% of t(% 'oa)! an! t(% A++%##at% Aut(o)it,*
Fi#in- of )%f%)%n"%s u.s 15 an! ")it%)ia of si"/n%ss*
P)o0ision of %nqui), u.s 11*
A++oint2%nt of S+%"ia# 3i)%"to)s an! OAs u.s 11456 an! 17486*
P)%+a)ation of san"tion%! s"(%2% un!%) s%"tion 17496, 17486 : 18456*
P)o0ision fo) 2onito)in- of s"(%2%s u.s 184196
R%(a$i#itation $, -i0in- finan"ia# assistan"% u.s 19*
;in!in- u+ of si"/ in!ust)ia# "o2+ani%s u.s 9<*
P)ot%"tion to saf%-ua)! t(% int%)%sts of t(% si"/ "o2+ani%s u.s 99416, 99496, 99486*
P)o0isions fo) !%a#in- wit( +ot%ntia# si"/n%ss u.s 98, 984a6, 984$6*
P)o0ision in "as% of 2isf%asan"% u.s 95*
P)o0ision fo) s%%/in- info)2ation an! -i0in- info)2ation & C%nt)a# Go0t*, R'I, FIs Stat%
institutions an! si"/ "o2+ani%s an! in "as% of a2a#-a2ation, ot(%) "o2+ani%s*
Pow%) to s%%/ assistan"% of MMs : 3Ms u.s 99*
388 ESIC REVENUE MANUAL
CHAPTER XXI MISCELLANEOUS
SICA (as o0%))i!in- +)o0isions u.s 89 o0%) ot(%) #aws %="%+t t(% +)o0isions of FERA, 1978 an!
t(% >?CRA,1971*
P%na#t, u.s 88 fo) 0io#ation of t(% A"t*
:$.$: #rocedure to be folloed in (I)* cases A ?7rs letter no. T/$$B6$B(I)*B:99$ dated 6$.'.:99$C
All activities concernin" (I)* cases in respect of the re"ions ill be handled by *.1. 1elhi
((I)* Cell) instead of ?rs office.
As far as <SIC is concerned the first task before us on receipt of application under SICA throu"h
(I)* is to find out hether <SI Act is applicable and hether the factories or establishments! run by the
appellant company ! is re"istered and if so! the code number and the re"ion here it is re"istered. If there
are more than one factory or establishment under the company concerned! each of the code number and
the re"ion here it is located includin" (ranch offices! Sales ;ffice! Administrative ;ffice etc. situated in
the same re"ion or other re"ion had to be located. This is the first task before us so that the *1 concerned
could be informed of the filin" of a case before (I)* at the earliest and the *1 concerned can immediately
"ather the total arrears position updatin" the interest and also finaliDe the determination of contribution
or dama"es for period in default.
To enable the above! a proforma has been devised . The (I)* cell at *;! 1elhi immediately on
receipt of a fresh application under SICA! ill take out information from the application! to the extent
possible to complete the proforma and send the same to the *;! 1elhi ho ill then locate the code
number and furnish additional information such as arrears due and other factories or establishments
includin" branches situated outside the re"ion. Thereafter one copy of this proforma should be sent to
?7rs ((I)* cell) immediately. In case the factoryBestablishment is situated in non implemented area or is
not a coverable factoryBestablishment ! this should be intimated to *;! 1elhi by a )AE ithin 6 days.
As soon as it is ascertained that the factory B establishment is coverableB covered and is in
implemented area and the code numbers are ascertained! *1 should Bimmediately set in motion finaliDation
of pendin" determination of dues under F'AB&'( calculated upto date interest and dama"es and complete
the C/$% action hich 69 days of receipt of the first intimation from *;! 1elhi. The arrearsG position as
available as per the proforma! should be sent to *; 1elhi ((I)* Cell) by speed post and ithin a month
thereafter the action for issue of C/$%B1/$% or intimatin" up/to/date interest to the defaulter should also
be completed and intimated subse7uently by a revised letter to *; 1elhi so that the arrears statement is
updated in all respects.
In case the *1 finds that the company also have same factoryBestablishment or branch in some
other re"ion in respect of hom the arrears position is not available.! *1 should immediately address the
ESIC REVENUE MANUAL 389
MISCELLANEOUS CHAPTER XXI
*1 concerned demi/officially "ivin" the (I)* case number! instruction from ?7rs and advise the *1 to
complete determination of arrearsBdama"es and interest and intimate the same directly to the *; 1elhi
((I)* cell) ith intimation to you so that e have up/to/date arrearsG position before filin" the same
before (I)*.
It may also be remembered that SICA applied only to schedule industries other than those relatin"
to shippin". These are industries referred to in first schedule of the Industries 1evelopment and *e"ulation
Act.! $%'$ and include only those factories here manufacturin" process is carried out or is ordinarily
carried on ith aid of poers employin" '9 or more orkers on any day precedin" the $: month as ell
as factories here manufacturin" processs is bein" carried on ithout the aid of poer here in $99 or
more okers ereBare orkin" on any day of the precedin" $: months. Therefore! any company applyin"
for declaration and rehabilitation under SICA before (I)* should be conformin" this position. If our
records sho that they have in fact not employed the re7uisite number of employees as per the returns
submitted to us includin" the information "iven in the I.*. ( hich includes employees drain" 8'99B/
per month or above! e should immediately oppose their application before (I)*. The *.1. should
invariable ensure this. ?oever! the number of employees mentioned above is the total employees if
there are more than one factory or establishment and ill include the employees drain" a"e more than
*s.8'99B/ also.
If the *.1. points out that the information furnished by the employer throu"h )orm/9$ or throu"h
*C as ell as the information available throu"h I.*. takin" into account covered and non/covered employees
shos employment of less number of employees to 7ualifyin" for (I)* intervention under SICA! this
should immediately be intimated to the *; 1elhi so that he may look into the ori"inal application herein
the employer conforms the number of employees employed by him for a particular period and ill advise
*1 to issue C/$& (adhoc) to such employers reducin" the number of employees in respect of hom
compliance have been made as ell as those ho have been confirmed to be drain" more than *s.8'99B
/ in the I.*. This ill be independent and simultaneous to our submission to (I)* that the information
"iven by the application is ron" accordin" to our record.
The *e"ional 1irector should! therefore! ensure that the reference from ?7rsB*1 1elhi ((I)*
Cell) on (I)* application is handled very promptly! code nos. are immediately located! arrears statement
(contribution! interest and dama"es) is furnished ithin , days and determination of further arrears! interest
and dama"es is completed ithin 69 days. Any false information ith reference to eli"ibility under SICA
is immediately reported to *; 1elhi. for movin" (I)*. Similarly C/$& (adhoc) on assumed a"e basis
shall be issued! assumin" the information on no. of employees "iven by employer to (I)* to be covered.
At all sta"es of reference! the matter should be handled speedily! so that e ill have no difficulty in
handlin" cases before (I)*.
390 ESIC REVENUE MANUAL
CHAPTER XXI MISCELLANEOUS
:$.$6 >aunchin" of criminal prosecution a"ainst companies hich are under the consideration of (I)*
A?7rs instruction no T/$$B$6B':B:$B%&/Ins III dtd 'B,B9C0
It has been observed on occasions that herever a company is re"istered ith (I)* and declared
as sick under Sick Industrial Companies ( Special #rovisions) Act! $%&'! the employer continues to be a
defaulter in payment of contribution or submission of returns etc. ;ften the employers deduct employees
share and fail to pay even the employeesG share! attractin" prosecution action uBs F9'BF98 of I#C besides
the <SI Act . Hhen a sho cause notice is issued proposin" criminal prosecution under <SI Act or under
I#C! the employers seek exemption from prosecution under section :: of SICA. In some case here
prosecution as launched ! the employers have taken this stand in the criminal court or in hi"her courts!
creatin" some amount of confusion on the 7uestion hether section :: of SICA prohibits criminal
prosecution.
It is made clear that section :: of SICA prohibits only proceedin"s for indin" up of the
company for execution ! distress or the like a"ainst any of the properties of the industrial company! or for
the appointment of a receiver in respect of such properties as also civil suit for recovery of money or for
enforcement of any security a"ainst the companies! includin" "uarantee in respect of loans and advances.
A plain readin" of section :: ill clarify that criminal prosecution for offences committed by the company
or the principal employer of that company under the <SI Act or any other act is not covered by section ::.
This has been clarified by the ?i"h Courts and Supreme Court in a number of cases. Hhere necessary the
<SI advocates ill be able to locate these cases from the la reports or the commentary on the Sick
Industrial Companies ( Special #rovisions) Act! $%&'.
In a recent case -Bs Sarvaraya Textile >td! ?yderabad ( (I)* Case 3o :96B%&)! the employer
moved (I)* seekin" a direction a"ainst <SIC and <#) authorities a"ainst launchin" criminal prosecution
a"ainst them. The (I)* vide order dated '.$:.:999 clarified that section :: of SICA provides protection
to the companies only in matters of civil proceedin"s and not for criminal proceedin"s. A copy of the said
order is enclosed for makin" use at appropriate sta"es. If employers raise any such 7uestion before a
Court a"ainst criminal prosecution launched or proposed to be launched! the said decision as also reported
jud"ments of ?i"h Courts and Supreme Court available ith the Advocate may be made use of .
Since there is no le"al bar in launchin" criminal prosecution a"ainst employers includin"
companies re"istered ith (I)*! the *e"ional 1irectors may examine and file criminal prosecution under
<SI Act or sec. F9'BF98 of I#C or under 3e"otiable Instruments Act. as the case may be! a"ainst defaulters
in accordance ith the existin" procedure and practice In respect of factories hich are actually functionin"
even after the declaration of the company as IsickG and durin" the consideration of rehabilitation scheme
by (I)* and here the employer is chronic defaulter or employeesG share is bein" deducted and not
deposited ith <SIC ! prosecution may invariably be launched.
The ?7rs instruction 3o. 'B%% issued vide letter 3o. T/$$B$6B$B%8/Ins. III dated 8.&.99 in this
re"ard stands modified.
ESIC REVENUE MANUAL 391
MISCELLANEOUS CHAPTER XXI
:$.$F HaiverB*eduction of 1ama"es uBs &'( of the Act and 6$C of the re"ulations. A ?7rs instructions
no. T/$$B$%B$B:99, *ev I dt. 9,B9$B:99&C 1ele"ated poers to aive or reduce dama"es levied B leviable
in relation to a )actoryB<stablishment in respect of hich *ehabilitation Scheme has been sanctioned by
the (I)*. 0
*eference to this office -emo 3o. T/$$B$%B$B:99$/Ins. III dated $'B9'B:99: on the subject
cited above. The matter re"ardin" enhancin" dele"ation of poers for aiverBreduction of dama"es leviedB
leviable in respect of factoriesBestablishment hich have been declared sick and rehabilitation scheme
has been sanctioned by (I)* as placed before the Standin" Committee J <SI Corporation in its meetin"
held on $:.$9.:99, and $&.$:.:99, respectively. The Standin" Committee and <SI Corporation have
accorded approval to the revised dele"ation of poers to aive dama"es leviedBleviable as under0/
1escription of #oer Authority B ;fficers
exercisin" the poers
<xistin" #oers <nhanced
1ele"ation of
#oers
To aive dama"es $. Chairman ! <SI Above *s. $9 Above *s. '9 lacs
leviedBleviable in each Corporation
case as per *e"ulation
6$/C of <SI ( .eneral)
lacs in each
case
but upto *s. $ crore
in each case
*e"ulations ! $%'9 in :. Chairman! Above *s.' lacs Above *s. :' lacs
relation to a
factoryBestablishment
Standin" Committee
of <SI Corporation
upto *s. $9 lacs
in each case
but upto *s. '9 lacs
in each case
declared sick and in
respect of hich a
rehabilitation scheme
has been sanctioned by 6. 1irector .eneral
the (oard for Industrial
@pto *s. ' lacs
in each case
Above *s. $' lacs
and upto *s. :' lacs
in each case
J )inancial
*econstruction
F. Insurance
Commissioner
'. Additional
Commissioner B
1irector (*ev)
8. *e"ional
1irectors B 1irector (
#une)
,. +oint 1irectors
IBc of S*;s
@pto *s. : lacs
in each case
@pto *s. $ lacs
in each case
@pto *s.
'9!999B/ in each
case
@pto
*s.:9!999B/ in
each case
Above *s. $9 lacs
and upto *s. $' lacs
in each case
Above *s.' lacs and
upto *s. $9 lacs in
each case
Above *s. 6lacs and
upto *s. ' lacs in
each case
@pto *s 6 lacs in
each case
1etailed instructions issued vide -emo 3o. T/$$B$%B$B:99$/Ins. III dated $'B9'B:99: re"ardin" submission
of 7uarterly statement indicatin" the details of dama"es aived and submission of document sK includin"
copy of order of (I)* declarin" the factoryBestablishment sick! copy of Sanctioned *ehabilitation Scheme
and copy of order under Section &'/( in respect of cases referred to ?7rs. shall! hoever! remain unchan"ed.
392 ESIC REVENUE MANUAL
CHAPTER XXI MISCELLANEOUS
(K the documents as mentioned above are re7uired in respect of cases here the amount of dama"es
proposed to be aived under *e"ulation 6$/C! exceeds the poers of *e"ional 1irectorB+oint 1irector IB
c so that a decision could be taken on aiver by ?7rs office)
:$.$' *evenue *ecovery action a"ainst the Sick Industrial Companies hich fall to comply ith the
provisions of the *ehabilitation Scheme sanctioned by (I)* A?7rs instructions no. L/$$B:6B:6B$B:99$
Ins III dtd $&.$9.:99:C 0
The 7uestion as to hether the recovery of outstandin" <SI dues can be made not ithstandin"
section ::($) of SICA in case a sick industrial company fails to comply ith the provisions of *ehabilitation
Scheme sanctioned by (I)* as examined in consultation ith Assistant >e"al Advisor! <SIC ( ?7rs) in
vie of jud"ement of Molkata ?i"h Court in the case of -Bs @niversal #aper -ills J ;thers vBs *e"ional
#rovident )und Commissioner J ;thers (:99$ vol $98 company cases '$&). The Assistant >e"al Advisor
has opined that in case the company fails to comply ith the provisions made in the *ehabilitation
Scheme sanctioned by (I)* no protection ould be available to the company under section :: of SICA
and outstandin" <SI dues could be recovered by enforcin" action a"ainst the company.
:$.$8 >i7uidation cases 0
A?7rs instructions no =/6,B$:B'B%&/Ins III dtd :&B&B%&C 0/
i) In case here (I)* has declared a company as 4Sick5 and Sanctioned *ehabilitation Scheme for its
revival ! close atch may be kept to see that the provisions made in the sanctioned scheme are in accordance
ith our "uidelines circulated vide ?7rs ;ffice 3o T/$$B$6B$:($)B&%/Ins III ( Instruction 3o :) dated
:$.8.%9 and upto date dues hich the company oes to the Corporation have been properly incorporated.
After the receipt of Sanctioned *ehabilitation Scheme! it is the primary responsibility of *e"ional ;ffice
to atch that compliance is made strictly in accordance ith the provisions of the Sanctioned Scheme. If
at any sta"e non/compliance is noticed! the same should be brou"ht immediately to the notice of ;peratin"
A"encyB(I)*B?7rs office besides *e"ional ;ffice! 1elhi for takin" suitable steps in this re"ard. Close
atch should be kept on release of the money to such companies so as to ensure that our of money
released! suitable share is set apart for clearin" the <SI dues.
ii) In case of companies hich had "one into li7uidation ! e should stake out claim immediately! as <SI
dues have first priority. Close atch may also be kept on advertisements of the company "one into
li7uidation and about distribution of money out of sale proceeds of their assets. SS;!s may also be directed
to be dili"ent in brin"in" such cases to the notice of *e"ional ;ffice so that recovery of <SI dues may be
promptly effected. #eriodical liaison ith the official li7uidator and other concerned officials may also be
kept so that the steps that are bein" taken by them are ithin our knoled"e enablin" us to approach them
at the ri"ht time.
iii). Installment facilityA ?7rs instruction issued vide memo no T/$$B$6B$:($)B&%/Ins III dtd ::B8B%9 and
letter no T/$$B$6B$B%6/Ins III dtd $6B%B%6C. The Standin" Committee and <SI Corporation has dele"ated
the poer to the 1irector .eneral to accept the arrears of <SI dues in installments spread over a period
ESIC REVENUE MANUAL 393
MISCELLANEOUS CHAPTER XXI
beyond & years in the case of establishments declared sick by the (I)* and in respect of hich *ehablitation
Scheme has been approved by it subject to folloin" conditions0/
$. At least 1on payment of :9N from "rant sanction from *ehabilitation Scheme.
:. *evolvin" (ank "uarantee for payment of $: installments.
6. #ayment of current dues re"ularlyG
F. Hithdraal of all court casesG
'. $:N p.a. interest or such hi"her rates as may be specified in the *e"ulations.
iv. ?7rs Ins. 3o. T/$$B$6B(I)*B:9$$/*ev.I dt. $:/9$/:9$$ reiteratin" the earlier instruction
3o. T/$$B$6B$B:996B$B:996 Ins.III dt $,/9$/:996 has been issued to take coercive action
a"ainst companies hose reference ith (I)* is admitted as Sick unit
:$.$, APPLICABILIT8 OF BIFR PROTECTION TO ESIC DUES0 ?7rs vide 1.; 3o T/$$B$6B
$B:99:/Ins III dtd $,B$B:996! advised to revie all pendin" (I)* cases as they involve substantial arrears
for appropriate action in li"ht of folloin" le"al position 0/
($) The employeesG share of contribution formin" part of the total arrears may be recovered
notithstandin" pendency of any (I)* case usin" all coercive poers includin" prosecution. The *e"ional
1irector may summon the principal employer and direct him to pay the same ithin a "iven short period
and thereafter proceed ith full force of la.
(:) Hhere a rehabilitation scheme has already been sanctioned and the employer is strictly payin"
as per the scheme! namely the first lump sum and subse7uent monthly due! e may not disturb the
scheme and may only recover B receive the initial payment B monthly instalment as per the scheme. Such
cases may be removed from the cate"ory of 4non recoverable due to (I)*5! and added in the recoverable
cate"ory and included in the list of cases here instalments are "iven ith remarks that instalment is
"iven by (I)*. A re"ister for monitorin" instalment cases is re7uired to be maintained here instalment
is "iven as per the *esolution of the Corporation by the *e"ional 1irector or by the Court or by the (I)*
throu"h the sanctioned rehabilitation scheme. ?oever! the instalment arran"ement ill be restricted to
claims reflected in the scheme upto the cut off date only and not to any subse7uent due includin" dama"es
for period after cut off date.
(6) Hhere rehabilitation scheme has been sanctioned but the employer has not paid as per the scheme
either the first lump sum payment or any some of the instalment! it may be treated as 4non (I)* cases5
for all purposes and coercive recovery action includin" prosecution may be launched ith special effort
to recover ithout any delay and they may be removed from the cate"ory of 4not currently recoverable
due to (I)*5.
(F) Hhether the cases are reportedly pendin" before (I)*! the current status should be "ot checked
from the (I)* Cell B 1elhi *e"ion by addressin" the concerned officer demi/officially to kno the
present status. In such cases! no relief or protection should be "iven for the employeeGs share and if the
case is pendin" beyond three years! the employer may be summoned by the *e"ional 1irector and advised
394 ESIC REVENUE MANUAL
CHAPTER XXI MISCELLANEOUS
about the above jud"ement and direction of the (I)* and after "ivin" a short period! the employer share
and interest may also be recovered. The *e"ional 1irector can consider "rantin" suitable instalment for
such employersG share and interest if there is a ritten proposal as per instruction already issued and such
instalment arran"ements should be minuted ith the si"nature of the #rincipal employer and the *e"ional
1irector in such a ay that if a sin"le instalment fails! the arran"ement ill stand cancelled automatically
ith coercive! recovery and prosecution action.
(') In all cases here the (I)* case is currently pendin" ith reference to the employer share!
individual reference may be made to (I)* Cell so that here there is no direction a"ainst protection
under Section :: of SICA! such specific clarification can be sou"ht on the line of the above jud"ements.
?oever! here the (I)* has already clarified that such protection ill not be available in individual
cases and communicated to you! e may "o ahead and recover the dues usin" coercive poer and
prosecution.
CAS< >AH0
I. The (ombay ?i"h Court in *alliolf >td vBs *#)C A(:99$)$ (om>* :6'! :99:>IC :&9!
:99$($)>>+ ,,FC traversed the case la includin" several of the Apex Court jud"ments in the context of
#) dues under <#) Act $%':! both the employee share and employerGs share ! and held that the recovery
of #) and other dues under <#) Act $%': does not fall ithin the scope of purvie of section :: ($) of
SICA $%&'! and only limited protection confined to aiver of dama"es uBs $F/( of the <#) Act as "iven
in the case of Sick industries.
Section $F ( of the <#) Act referred above! corresponds to the :nd provisio to section &'(()
under the <SI Act! inserted by amendment Act :% of $%&% .e.f.$.$.%:. The (ombay ?i"h Court hile
holdin" that section :: of SICA ill not protect <#) dues! took note of the fact that the amendment in
<#) Act to provide relief ith re"ard to dama"es in respect of Sick Industries before (I)* as made
subse7uent to the enactment of SICA in $%&' and hile doin" so the #arliament as conscious of the
existence of SICA $%&' and therefore! held that 4the extent of the immunity conferred upon such (sick)
undertakin"s ith reference to provident fund dues may be confined to hatever have been le"islated by
#arliament and the extent of the immunity or exemption can not be extended beyond hat as amended
by an amendment act notified on 9$/9%/$%%$ in <#) Act ! $%': ( re"ardin" of aiver of dama"es).
The Court also noted the observation in various jud"ments herein it as inter alia held that
4Section :: ould not operate in the field of payment of a"es! "ratuity and other statutory benefits
payable to the orkmanO The basic minimum hich the orkman is entitled to "et is the a"es and
"ratuity and other statutory benefits5. The Court also! referrin" to Supreme Court jud"ment! enunciated
the principle that 4 the #) and other dues payable under <#) Act! $%':! are part of the le"itimate benefits
to the orkers! employer is obli"ed to pay the contribution of the employees as ell as his on contribution
to the fund These contribution belon" to the employees they constitute an important measure of social
security! these are dues hich are payable hether or not the undertakin" is sick5
ESIC REVENUE MANUAL 395
MISCELLANEOUS CHAPTER XXI
:. .ori Spinnin" -ills (#)>td. =s Asst. #rovident )und Commissioner A:99, >IC &FC The
-adras ?i"h Court ()() The appellant Co. had committed default in remittin" the amounts to <#)
Scheme to the tune of *s. $9!%8!8,8.99 durin" the period from Sep. :999 to 1ec. :999. Therefore! notice
dated $9/$$/:99' as issued by the *#)C (CJ*) -adurai callin" upon the appellant to remit the amount!
failin" hich action under Section &( to &. of the <#) Act! $%': ill be taken to recover the dues. In the
meanhile! the appellant made a reference to (I)* uBs $' ($) of the SICA. The said application as
rejected on 9$/9'/:99: a"ainst hich appeal as preferred to AAI)* vide order dated 9,/$$/:99' hich
as alloed and the matter remitted back to the (I)* and conse7uently the matter is no ith (I)*. The
sole basis of challen"e as that havin" re"ard to provisions of section :: ($) of the SICA! the recovery
proceedin" ithout the consent of (I)* is not maintainable. The ?Gnble court held that provident )unds
dues under the <#) Act are not covered by section ::($) of SICA and provident dues can not be placed on
the same footin" as taxes of the .overnment or dues of the commercial venture or the dues to the Corporate
like others.
6. -a"num #olymers (India) >td. =s. *1! <SIC/H.#. 3o. $%6F:B:99F 1t. $F/9&/:99%. The ?i"h
court of -adras dismissed the rit petition prayin" for restrainin" the respondent <SIC from recovery of
<SI contribution till disposal of the matter before (I)*.
F. Arihant Threads >td =s. <SIC. CH# 3o. %':$B:99& 1t. $F/9,/:99%. The #unjab J ?aryana
?i"h Court hile upholdin" the jud"ment in case of *alliolf >td vBs *#)C and its applicability to <SI
has held that the statutory interdict contained under Section :: of SICA does not operate a"ainst notice of
recovery of arrears of *s. 6$!:'!89F.99 as payable by rit petitioner company under section 6%(') of the
<SI Act on the pain of arrest and imprisionment.
'. S. (. #acka"in" >td. =s. #rovident Commissioner. CH# 3o. $:'8$B:998 dt. 9&/9%/:99&. The
?i"h Court of #ujab J ?aryana held that it is a fact SICA Act came into operation in $%&'! and <#)
and
-isc. #rovisions Act! $%':! as amended by Act 66 of $%&&. Such amendment specially notices the
position of the SICA Act of $%&' and therefore can not be said that the said Act must prevail over <#) and
-isc. #rovisions Act! $%':.