M/S. Gajmukh Vinimay Private Ltd. ... vs The Regional Provident Fund ...
2023 Latest Caselaw 5446 Cal

Form No.J(2)


                 IN THE HIGH COURT AT CALCUTTA
                CONSTITUTIONAL WRIT JURISDICTION
                         APPELLATE SIDE
Present :

The Hon'ble Justice Raja Basu Chowdhury



                            WPA 10788 of 2023

               M/s. Gajmukh Vinimay Private Ltd. & Ors.
                                Versus
            The Regional Provident Fund Commissioner & Ors.


For the petitioners     :       Mr. Partha Ranjan Chowdhury,
                                Mr. Soumya Majumder,
                                Mr. Satyendra Kumar Singh,
                                Mr. Ravi Kumar Dubey

For the Provident Fund :        Ms. Aparna Banerjee,
Authorities.

For the Respondent no.3:        Mr. D. N. Sharma,

Ms. U. Chakraborty, Mr. Abhishek Jain

Heard on : 23rd August, 2023.

Judgment on             :       23rd August, 2023.


Raja Basu Chowdhury, J:

1. The present writ application has been filed, inter alia, challenging

two several notices both dated 20 th February, 2023 whereby, the

petitioners have been directed to show-cause why warrant of arrest

shall not be issued.

2. The petitioners claim that petitioner no. 1 had entered into a

Memorandum of Understanding on 1 st July, 2020, to take over one

jute mill run under the name and style of Jai Jute and Industries

Limited situated at Kanthalpara, P.O. and P.S. Naihati, 24-

Parganas (North), Pin. 743165 (hereinafter referred to as the "said

establishment").

3. The petitioners claim that Jai Jute and Industries Limited is

covered by the provisions of Employees' Provident Funds and

Miscellaneous Provisions Act, 1952 (hereinafter referred to as the

"said Act"). PF Code has also been allotted to the said establishment

being WB 36/WB 47 by the provident fund authorities. It is also the

petitioners' contention that when the Memorandum of

Understanding was executed, the said establishment and its mill

were non-functional. As such the said agreement could not be acted

upon. Subsequently, a leave and licence agreement dated 13 th

November, 2020 had been executed in relation to operation of the

said mill, whereupon the mill was restarted and production

resumed from 1st April, 2021. The said agreement was renewed

from time to time and/or is valid and in force.

4. By referring of the said agreement, it is contended that the

petitioners have not taken over the assets of the establishment. Mr.

Chowdhury, learned Advocate representing the petitioners, by

drawing attention of this Court to two separate notices both dated

20th February, 2023, being notice to show cause, which are

impugned in the present writ application, submits that the

aforesaid notices have been issued without the Provident Fund

Authorities determining liability of the petitioners under Section 7A

of the said Act. No certificate proceeding had been initiated.

Despite the aforesaid, the notices have been issued threatening

issuance of warrant of arrest.

5. By placing reliance on the provisions of Section 8F and Section 8G

of the said Act, it is submitted that the provisions of Second and

Third Schedules of the Income Tax Act, 1961 and the Income Tax

(Certificate Proceedings) Rules, 1962, as is in force from time to

time, shall apply with necessary modifications, for recovery of

arrears mentioned in Section 8 of the said Act. By further drawing

attention of this Court to the Second Schedule Part V of the Income

Tax Act, 1961, he submits that prior to issuance of a warrant of

arrest, the provisions laid down in Rule 73 of the Second Schedule

of the Income Tax Act, are required to be strictly complied with. In

support of his aforesaid contention, he has placed reliance on two

several judgments delivered by Coordinate Bench of this Hon'ble

Court, namely, the case of Vikram Poddar v. Regional Provident

Fund Commissioner & Ors., reported in 2001(2) LLN 748, and

the case of Jagadish Roy v. Regional Provident Fund

Commissioner, West Bengal & Ors., reported in 2006 SCC

OnLine Cal 140.

6. According to Mr. Chowdhury, the Recovery Officer had proceeded to

issue the aforesaid notices in derogation of the provisions contained

in Rule 73, of the Second Schedule of the Income Tax Act, 1961. In

any event, it is submitted that in terms of Section 17B of the said

Act, the transferee can at best be made liable to the extent of the

value of the assets obtained by them, from such transfer. In the

facts stated hereinabove, it is submitted that the impugned notices

which have been issued in derogation of the Income Tax Act and

Rules framed thereunder, and which form the subject-matter of this

writ application, should be quashed.

7. Ms. Chakraborty, learned Advocate representing the respondent no.

3, submits that the said establishment had been declared sick

under the provisions of Sick Industrial Companies (Special

Provisions) Act, 1985 (hereinafter referred to as the "SICA").

Subsequently, a scheme was sanctioned by the Board for Financial

and Industrial Reconstruction (BIFR). Although, an appeal was

filed by the Provident Fund Authorities before the Appellate

Authority for Industrial and Financial Reconstruction (AAIFR),

however, subsequently, the Sick Industrial Companies (Special

Provisions) Act, 2003 having been repealed by the Sick Industrial

Companies (Special Provisions) Repeal Act, 2013, and the Provident

Fund Authorities having failed to apply before the National

Company Law Appellate Tribunal (NCLAT), within the time specified

in the Insolvency and Bankruptcy Code, 2016 (hereinafter referred

to as the "Code"), the appeal stood abated.

8. By referring to the sanctioned scheme, it is submitted that the said

establishment is entitled to waiver of penal damages under Section

14B and chargeable interest under Section 7Q, charged for delayed

payment and/or non-payment of Provident Fund. By referring to

the Eighth Schedule of the Code, and the third proviso thereof, it is

submitted that the sanctioned scheme under implementation, in

terms of the provisions contained in SICA, shall be deemed to be an

approved plan under Sub-Section (1) of Section 31 of the Code, and

the same shall be dealt with in accordance with provisions of part II

of the Code. Since, a protection has been afforded to the said

establishment under the aforesaid scheme, the Provident Fund

Authorities cannot choose to ignore the said Scheme.

9. She, however, denies that any certificate or any order under Section

7A of the said Act has been served on the respondent no. 3.

10. Per contra, Ms. Banerjee, learned advocate representing the

Provident Fund Authorities, submits that a sum of

Rs.60,25,96,347/- is recoverable from the establishment having

PF Code WB 36 and 47. By placing reliance on the letter dated 9 th

December, 2022, she submits that not only the respondent no. 3

but all its Directors were all along aware with regard to the factum

of passing of the order under Section 7A of the said Act, including

the certificate proceedings. Notices have been issued from time to

time calling upon the said establishment and/or its Directors to

make payment. Notwithstanding the aforesaid, no payment has

been made.

11. By referring paragraph 14.1 of the scheme sanctioned by the

BIFR, she submits that although, the respondent no. 3 was obliged

in terms of the said Scheme to make payment of unpaid Provident

Fund contribution to the extent of 26.29 lakhs in 28 equal quarterly

installments, commencing from 1st quarter of 2008, the said

direction has not been complied with. In the light of the aforesaid, it

does not lie in the mouth of the respondent no. 3 to contend that

there has been no determination under Section 7A of the said Act,

as the amount has already been quantified and a portion thereof, as

recorded in the scheme relied on by the respondent no.3 was

directed to be paid in installments. Insofar as the petitioners are

concerned, she submits that from time to time notices have been

issued on the petitioners calling upon them to make payment of the

amount of Rs.60,25,96,347/-. In support of her contention she has

placed reliance on the letter dated 25 th November, 2022. It is

submitted that the petitioners were all along aware with regard to

the demand of the provident fund authorities. The petitioners are

jointly and severely liable along with the said establishment and/or

its Directors. The petitioners have not even bothered to respond to

the notices issued by the Recovery Officer.

12. In the facts stated hereinabove, she prays for dismissal of the

writ application. Copies of the letters relied on by the learned

advocate for the Provident Fund Authorities are taken on record.

13. Heard learned Counsel for the respective parties and considered

the materials-on-record. In this case I find that although, a scheme

had been sanctioned by the BIFR, the respondent no. 3 has not

even bother to comply with the same. No payment in terms of the

scheme had been made to the Provident Fund Authorities.

Whatever may be the internal arrangement between the

establishment and the petitioners, the fact remains that the

Provident Fund dues to the extent of Rs. 60 crores approximately,

remains unpaid.

14. From the records it would reveal that the petitioners have not

only entered into a Memorandum of Understanding with the

respondent no. 3 on 1 st July, 2023, but had also entered into a

lease agreement. I have been informed by the learned Advocate for

the petitioners that the monthly turnover of the petitioners is

around 10 crores, although, no document in support thereof had

been produced. I have also been able to ascertain that the

petitioners are further making payment of the current Provident

Fund dues, under the same Code allotted to the said establishment.

15. From the submissions of Ms. Banerjee, it would appear that an

order of attachment of immovable property concerning the

establishment has also been served both on the petitioners and the

respondent no. 3 on 17th January, 2023.

16. In the conspectus of facts and without going into the question,

whether the petitioners can be made liable in respect of the

provident fund dues, by taking into consideration that only show

cause notices have been issued, as to why warrant of arrest shall

not be issued both on the petitioners as also on the Directors of the

said establishment, and since, the Recovery Officer is yet to decide

the matter, no interference in my opinion is called for.

17. I find that the judgment relied on by Mr. Chowdhury are

distinguishable on facts. Both the aforesaid judgment takes into

consideration the procedures to be followed by the Tax Recovery

Officer or the Recovery Officer, as the case may be, while issuing

the warrant of arrest. In this case admittedly no warrant of arrest

has been issued and as such the apprehension of the petitioners

that the provisions of the Rule 73 or 74 of the Second Schedule of

Income Tax Act, 1961, shall not be complied with, is misconceived

and without any basis.

18. Having regard to the aforesaid, no further order is required to be

passed and no inference is called for.

19. Since, no affidavit in opposition has been called for, the

allegations made in the writ application are deemed not to have

been admitted by the respondents.

20. The writ application fails, the same accordingly stands dismissed

without any order as to costs.

21. Urgent Photostat certified copy of this order, if applied for, be

given to the parties upon compliance of necessary formalities.

(Raja Basu Chowdhury, J.)