Sick companies should remit PF arrears to PF Department

Chennai, Oct 12 (UNI) Madras High Court today ruled that sick companies were liable to remit Profident Fund (PF) arrears to the PF Department without the consent of the Board of Industrial and Financial Reconstruction (BIFR).

A Full Bench of Chief Justice A P Shah, Mr Justice D Murugesan and Mr Justice R Sudhakar gave the ruling while dismissing a batch of writ appeals and writ petitions from sick companies, challenging PF Department's order to recover dues payable under the provisions of the Employees PF and Miscellaneous Provisions Act (EPF Act).

According to one company, it defaulted in remitting the amount due to the EPF scheme of Rs 10.96 lakh between September and December 2000. A notice dated November 10, 2005 had been issued by Regional PF Commissioner, Madurai, calling upon the company to remit dues within ten days, failing which action would be taken to recover dues. Meanwhile, the company made a reference to the BIFR under Section 15 (1) of Sick Industrial Companies (Special Provisions) Act (SICA) and BIFR rejected the application on May 1, 2002.

Against this an appeal was preferred to the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The appeal was allowed on November 7, 2005 and the matter remitted back to the BIFR. Meanwhile, the company challenged the EPF department's notice through a petition, contending that with regard to the provisions of Section 22 (1) of SICA, the recovery proceedings without BIFR's consent were not maintainable and a Single Judge granted an interim stay on the condition that the company should deposit 50 per cent of the total amount, failing which the stay granted stood automatically vacated.

Aggrieved, the company preferred the present appeal.

The matter came up before a Division Bench, which said no action for realisation against a sick company was permissible without BIFR's prior consent. When the matter came up before another bench later, it differed with the judges earlier observation and took the view that Section 22 (1) of SICA had no application and proceedings under the EPF Act would not come within its purview. Consequently, the matter was placed under the full bench.

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