Liquidator is obliged to admit only those claims which represent amounts that the company was obliged to pay directly to the workmen in the first place. Any claim with regard to the Provident Fund dues can only lie before the Commissioner, Provident Fund, under the relevant statute.
HIGH COURT OF DELHI
Daewoo Motors India Ltd.
CO. PETITION NO. 66 OF 2003
DECEMBER 5, 2015
Nitesh Jain and Karan Kanwal, Advocates for the Appellant. Kanwal Choudhary, Advocate Deepak Prakash, Ms.Shruti Srivastva, Advocates Ajay Bhatnagar Advocate and N. Sebestian Advocate for the Respondent.
1. This application has been moved under Rule 9 of the Companies (Court) Rules, 1959 on behalf of some of the employees of the company in liquidation praying for directions to the Official Liquidator to apply to the concerned Commissioner, Provident Fund, for releasing provident fund dues of the applicants who claim to be the workers of the company in liquidation.
2. Counsel for the applicants, inter alia, relies on a decision of the Bombay High Court in Vishwanath Namdeo Patil v. Official Liquidator of Swadeshi Mills,  1 Comp. LJ 130 (Bom). After examining the relevant facts and circumstances in that case, the Bombay High Court had issued certain directions to the Official Liquidator. Be that as it may, at least, to my mind, the nature of direction sought by the applicant in this case does not appear to have any sound legal basis. This is because notwithstanding the fact that the company has been ordered to be wound up on 28.07.2004, it still remains in existence with all its rights and obligations intact. The only significant difference for our purposes is that the same has been placed under administration in the hands of the liquidator. The Liquidator has merely stepped into the shoes of the erstwhile management and is now in control of the affairs of the company with the mandate to proceed with the liquidation of the company, inter alia, by determining all dues payable to and by the company; including any claims that may be made upon it by workmen for the payment of all such dues that the company was obliged to pay to them in law. It is in this context that the claim of the applicants towards release of their provident fund dues from the company has to be examined.
3. There is no gainsaying the fact that in terms of the extant law, all moneys due to workmen are to be paid by the Commissioner, Provident Fund, who happens to be a statutory Authority under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”). In terms of the said statute, the company is under an obligation to forward certain payments towards provident fund as deducted from the workmen’s dues from time to time, along with its own contributions, to the Commissioner, Provident Fund, to enable him to thereafter disburse the same whenever required. In this context, the Commissioner, Provident Fund, is also duty bound under the statute to raise appropriate demands on the company in case it becomes necessary to do so. Counsel for the applicants has not been able to demonstrate anything in law, or in fact, that circumvents this procedure; or, in any way, reorders the respective obligations of the company concerned or of the Commissioner, Provident Fund, merely because the company has gone under administration. The only change in circumstances that has come about is that the company has been placed under administration to ensure that its assets are not misapplied, or diluted to the detriment of the creditors and shareholders and that, all aspects are managed in an above board and transparent manner by the Liquidator, who steps into the shoes of the company management. There is however nothing to indicate that the respective obligations of the third parties, i.e., the workmen, the Commissioner, Provident Fund, and the company, to each other are, in any way, altered. It is therefore obvious that at least in this context, the company; or in this case, the Official Liquidator currently administering its affairs; cannot be compelled to do something which it was not obliged to do in the normal course before the company went into administration. In other words, there can be no ground in law to place an additional compulsion on the Official Liquidator to either process or pursue the claims of the workmen with the Commissioner, Provident Fund, which even the company was not obliged to do. To my mind, under the relevant provisions of the Act, the concerned workmen remain under an obligation to apply to the Commissioner, Provident Fund, who is thereafter obliged to calculate their dues and to pay the same; if necessary, after raising an appropriate demand from the company by filing the necessary claim before the Liquidator in this behalf. Once that is done, the Liquidator would be obliged to examine the claim and to admit it as per law whilst granting it the appropriate priority.
4. Unfortunately, counsel for the applicants has no cogent response to the aforesaid proposition, and he merely states that, “as far as the Delhi High Court is concerned, the Official Liquidator is examining the claim of the workers”. To my mind, counsel for the applicant has really failed to grasp the true nature of the liquidation process. While it is true that any claim that is preferred has to be examined on its merits by the Liquidator, however, after due examination, the Liquidator is obliged to admit only those claims which represent amounts that the company was obliged to pay directly to the workmen in the first place. Any claim with regard to the Provident Fund dues can only lie before the Commissioner, Provident Fund, under the relevant statute. Consequently, whilst other claims for any unpaid wages etc. may well be admitted by the Official Liquidator, however, any claims raised directly to the Official Liquidator for payment of Provident Fund dues would be an exercise in futility since it is bound to be rejected on the ground that the company was never obliged to pay workmen any such amounts in the first place. As is well known, under the EPF Act, a special statutory relationship has been posited between the workmen and the Commissioner, Provident Fund, on the one hand and the company and the Commissioner, Provident Fund, on the other; and there is nothing to suggest that the Commissioner, Provident Fund, has been absolved of his duty in maintaining all relevant records of workmen’s dues towards provident fund; whilst also ensuring that all such dues entrusted to him by the company are duly disbursed in accordance with law. There is nothing to presume that this Court can absolve the Commissioner, Provident Fund, of his statutory duties in this regard and place them on a third party such as the Official Liquidator.
5. To this, counsel for the applicants has submitted that, “there is no provision in law that the Provident Fund claims of the workers of the company in liquidation have to be sought from the Official Liquidator by the Provident Fund Commissioner”. Once again I feel that there is no force in this submission for the reason because, at least to my mind, counsel for the applicants has failed to appreciate certain fundamental processes that govern the functioning and winding up of a company visa-a-vis the duties and obligations created under the EPF Act. It bears repetition that in the context of the matter at hand, there is no difference between a company under administration and a company under independent management. It remains a listed company as a legal entity; and whatever is required to be done in terms of the EPF Act and Rules by the Commissioner, Provident Fund, has to be done regardless of who is managing the company. Counsel then responds by stating that since the Official Liquidator had invited claims, therefore, the applicants had placed their claims for their provident funds also before the Official Liquidator. To my mind, the approach of the applicants is clearly wrongheaded. The invitation of claims by the Liquidator of a company can only be limited to such claims that can legitimately be made by the claimant against that company. If the claim for provident fund could not lie against the company in the first place, then there can hardly be any ground for the same to be legitimately paid by the Official Liquidator. Of course, it goes without saying that under the relevant statute, it would always be open to the applicants to move appropriate claims before the Commissioner, Provident Fund, who would thereafter be obliged to compute the same; and further, in case the Commissioner, Provident Fund, concludes that there are some dues payable to him by the company in this behalf, it would be for him to move an appropriate claim before the Official Liquidator in his capacity as a trustee of provident fund dues.
6. I might note that instead of giving a structured and logical response of any of the aforesaid propositions put to him by this Court, counsel for the applicants keeps repeating that he is relying on the conclusions in paragraphs 93 and 94 of the aforesaid judgment of the Bombay High Court. He has however not even referred to any other portion of the judgment with a view to further elucidating his client’s right to the relief sought in this application, while also dealing with the aforesaid propositions. The only answer he gives is the bald statement that he is relying on the judgment, and nothing more. The said judgment is of a learned Single Judge of the Bombay High Court. While it may be of some persuasive value, it does not bind me; and looking to the approach adopted, including the complete lack of any effort on the part of counsel for the applicants to deal with queries put and the propositions raised by this Court; I am not inclined to go into that judgment at all, and to grant any relief on that basis to the applicants.
7. At this juncture, I might also note that Sh. Deepak Prakash and Ms. Shruti Srivastva, Advocates, have also entered appearance on behalf of DCM Daewoo Employees Union (Registered) in the main matter as well as some other applications; and on a query put to them, state that their client is the only registered union of the company in liquidation, duly authorized to represent all the employees.
8. Mr. Deepak Prakash, Advocate, also states that as regards workers’ dues, the union shall approach the concerned Commissioner, Provident Fund, in this behalf.
9. At this juncture, counsel for the applicants states that he wishes to withdraw.
10. It is put to him whether he is withdrawing the application or he seeks to withdraw his vakalatnama to represent the applicants in this application; counsel replies, “both, Your Lordship”.
11. Before this application is disposed off in view of the above, I consider it appropriate to quote a separate order passed today in the main petition that may have some relevance since that also involves workers’ dues;
Counsel for DCM Daewoo Employees Union (Regd) submits that his clients are the only registered Union and represents all the workmen of the company in liquidation. He further states that as regards provident fund claims of the workmen, appropriate claims shall be raised with the concerned Commissioner, Provident Fund, within six weeks from today. Let the same be done.
Looking to the unique circumstances; and the fact that the company is under liquidation, and is currently under the charge of the Official Liquidator who is also duty bound to examine and admit all relevant claims and to thereafter declare dividend in order of preference, and as per law; I consider it appropriate to also issue notice to the Commissioner, R.P.F.C. (Meerut) to file an up-to-date status report with regard to any claims that may have been received by his office in connection with the workmen of the company in liquidation, at least four weeks before the next date of hearing; returnable on 28.04.2016.
This direction is being given keeping in view some other instances where the entire exercise of admission of claims and declaration of dividends has been seriously prejudiced due to late assessment and filing of claims by the concerned Provident Fund Commissioner with the Official Liquidator.”
12. Under the circumstances, the application is dismissed as withdrawn.