# J.K. Cotton Spg. & Wvg. Mills Co. Ltd v. State of U.P. & Ors

- **Citation:** (2019) 2 ILRA 1649
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-09-23
- **Case number:** Writ- C No. 18094 of 2004
- **Bench:** Yashwant Varma
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/j-k-cotton-spg-wvg-mills-co-ltd-v-state-of-u-p-ors-44621
- **Pages:** 5

## Headnote

A. Employees State Insurance Act, 1948 -
Sick
Industrial
Companies
(Special
Provisions) Act, 1985 - S. 32 - Levy of
penalty and damages - Provision of the
Scheme as sanctioned in terms of
1650 INDIAN LAW REPORTS ALLAHABAD SERIES
Section 32 of SICA would clearly bind
and override all other statutes and
instruments mandating to the contrary -
Sanctioned scheme restrict liability in
respect of ESI due to the principal
amount
only
and
penal
levies
is
specifically excluded - It absolves the
petitioner from liability towards interest
and penalties under the Act. (Para 4 & 8)

Writ Petition allowed (E-1)

Case relied on :-

## Text

2 All. J.K. Cotton Spg. & Wvg. Mills Co. Ltd. Vs. State of U.P. & Ors.
1649
do so arises by necessary implication by
reason of the statutory right vested in the
person coming within the ambit of subsection (4-F). The lack of specific
provision for making an application under
the Act is no ground to dismiss the
application as not maintainable. The
revenue records should naturally fall in
line with the rights statutorily recognized.
The Sub-Divisional Officer was therefore
within his rights to allow the application
and direct the correction of the records.
The Board of Revenue and the High
Court should not have set aside that order.
The fact that the Land Management
Committee of Gaon Sabha had created
lease hold rights in favour of the
respondents herein is of no consequence.
Such lease, in the face of the statutory
right of the appellant, is non est in the eye
of law and is liable to be ignored."

8. On a consideration of the
principles so enunciated, it is manifest
that sub-section (4-F) not only protects
the possession of an agriculturual labourer
belonging to the SC/ST category, it also
confers
non-transferable
bhumidhari
rights on eligible occupants. It is thus a
provision which not only enables the
agricultural labourer belonging to the
SC/ST category to protect his possession
over the land, but to also claim title over
the same by virtue of the provisions made
in that section. An agriculturual labourer,
otherwise satisfying the requirements of
sub-section (4-F) and being eligible, is
neither obliged nor can be compelled to
obtain a declaration with regard to these
rights which are granted and conferred by
the
statute
itself.
Manorey
further
commands the revenue authorities to
ensure that the revenue records are
brought in line and in tune with the rights
so conferred in order to give effect to the
legislative mandate. The SDM was
consequently incorrect in holding that no
title stood vested in the petitioners.

9. It would be apposite to reiterate
that the SDM also does not allude to any
evidence which may have established that
the petitioners were not in possession of
the land in question on the relevant date
or were otherwise ineligible. On an
overall conspectus of the aforesaid facts,
this Court finds itself unable to sustain the
orders impugned.

10. The writ petition is accordingly
allowed. The impugned orders dated 18
November 1998 and 31 May 2007 are
consequently quashed.
----------

(2019)10ILR A 1649

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 23.09.2019

BEFORE

THE HON'BLE YASHWANT VARMA, J.

Writ- C No. 18094 of 2004

J.K. Cotton Spg. & Wvg. Mills Co. Ltd.
 ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Ritvik Upadhya, Sri V.K. Upadhyay

Counsel for the Respondents:
C.S.C., Sri P.K. Pandey, Sri Sunita Jhingan

A. Employees State Insurance Act, 1948 -
Sick
Industrial
Companies
(Special
Provisions) Act, 1985 - S. 32 - Levy of
penalty and damages - Provision of the
Scheme as sanctioned in terms of
1650 INDIAN LAW REPORTS ALLAHABAD SERIES
Section 32 of SICA would clearly bind
and override all other statutes and
instruments mandating to the contrary -
Sanctioned scheme restrict liability in
respect of ESI due to the principal
amount
only
and
penal
levies
is
specifically excluded - It absolves the
petitioner from liability towards interest
and penalties under the Act. (Para 4 & 8)

Writ Petition allowed (E-1)

Case relied on :-
1. Raheja Universal Vs N.R.C. (2012) 4 SCC
148.
2. J.K. Cotton Weaving & Spinning Mills & anr.
Vs U.O.I. 1988 SCR (1) 700.
3. ESI Corp. Vs HMT Ltd. (2008) 3 SCC 35.
(Delivered by Hon'ble Yashwant Varma, J.)

1. Heard Sri V.K. Upadhyay, learned
Senior Counsel assisted by Sri Ritvik
Upadhya in support of this petition.
Although, respondents are duly represented,
none has appeared on their behalf even when
the matter is taken in the revised call.

2.

The
petition
challenges
proceedings initiated by the Employees
State Insurance Corporation [hereinafter
to be referred to as "the Corporation"]
and seeks quashing of a demand dated 2
April 2004. The Corporation has in terms
of the impugned demand called upon the
petitioner to discharge liabilities towards
dues payable under the Employees State
Insurance Act, 1948 together with
penalty and damages. Sri Upadhyay,
learned Senior Counsel, has assailed the
demand principally on the ground that the
liability of the petitioner under the
provisions of the aforementioned Act
shall stand governed by the provisions
made in a Scheme of Rehabilitation
sanctioned by the BIFR in respect of the
petitioner. Referring to the provisions
made in that Scheme insofar as ESI dues
are concerned, Sri Upadhyay has drawn
the attention of the Court to the relevant
clause of the Sanctioned Scheme which
provided that the Corporation would
accept liquidation of ESI dues over two
years without demanding any interest or
penalties thereon. In view of that
stipulation in the Sanctioned Scheme, Sri
Upadhyay contends that the demand
insofar as it places a liability of interest
and damages is unsustainable.

3. Insofar as the question of
principal dues are concerned, there is no
dispute before this Court. Sri Upadhyay
has stated that the principal dues have
already been paid. That only leaves the
Court to consider whether the impugned
demand insofar as it levies interest and
damages is sustainable.

4. Undisputedly, the Sanctioned
Scheme restricts the liability of the
petitioner in respect of ESI dues to the
principal amount only with interest and
penal
levies
being
specifically
and
unambiguously excluded. The provision
of the Scheme as sanctioned in terms of
Section 32 of SICA would clearly bind
and override all other statutes and
instruments mandating to the contrary.
This is manifest from the plain language
employed in that provision which reads
thus: -

"S. 32. Effect of the Act on
other laws.- (1) The provisions of this
Act and of any rules or schemes made
thereunder
shall
have
effect
notwithstanding
anything
inconsistent
therewith contained in any other law
except the provisions of the Foreign
Exchange Regulation Act, 1973 (46 of
1973), and the Urban Land (Ceiling and
2 All. J.K. Cotton Spg. & Wvg. Mills Co. Ltd. Vs. State of U.P. & Ors.
1651
Regulation) Act, 1976 (33 of 1976) for
the time being in force or in the
Memorandum or Articles of Association
of an industrial company or in any other
instrument having effect by virtue of any
law other than this Act....."
 (emphasis
supplied)

5. Section 32, in unambiguous terms
statutorily confers overriding authority to
schemes
sanctioned
under
SICA
notwithstanding anything inconsistent in
any other law. The only statutes which
stand
saved
from
the
position
of
preeminence
conferred
to
schemes
sanctioned under SICA are the Foreign
Exchange Regulation Act, 1973 and the
Urban Land (Ceiling and Regulation) Act,
1976.

6. While the law on this issue is well
settled, the Court deems it apposite to
only notice two decisions referred to
hereinafter. In Raheja Universal Vs.
NRC1, the Supreme Court enunciated the
legal position as follows: -

"[37] This Court has taken the
view in Tata Motors Ltd., (2008) 7 SCC
619 that the Act of 1985 has been enacted
to secure the principles specified in
Article 359 of the Constitution of India. It
seeks to give effect to the larger public
interest. It should be given primacy
because of its higher public purpose. As
the Act of 1985 is a special law and on the
principle that a special law will prevail
over a general law, it is permissible to
contend that even if the provisions
contained in Section 22(1) read with
Section 32 of the Act, giving overriding
effect vis-à-vis the other laws, other than
the Foreign Exchange Regulation Act,
1973 and the Urban Land Ceiling and
Regulation Act, 1976 had not been there,
the provisions of the general law like the
Companies
Act,
for
regulation,
incorporation, winding-up etc. of the
companies
would
have
still
been
overridden to the extent of inconsistency.
We have already seen that this Court had,
in the case of Jay Engineering, taken the
view that the Interest on Delayed Payments
to Small Scale and Ancillary Industries
Undertaking Act, 1993 shall have to give
way for enforcement of the provisions of
the Act of 1985. In the case of Tata Davy
also, the Court took the view that the State
Sales Tax Act would have to be read and
construed in comity to the provisions of the
Act of 1985 which shall have the
overriding effect. In the case of Tata
Motors Ltd. v. Pharmaceuticals Product of
India Ltd., this Court was concerned with
the provisions of mismanagement and
oppression contained in Sections 391 and
394 of the Companies Act and whether the
Company Court will have the jurisdiction
to pass orders in preference to the
proceedings pending before the Court
under the Act of 1985. The Court while
holding the primacy of the Act of 1985
held as under:-

"SICA furthermore was enacted
to secure the principles specified in
Article 39 of the Constitution of India. It
seeks to give effect to the larger public
interest. It should be given primacy
because of its higher public purpose.
Section 26 of SICA bars the jurisdiction
of the civil Courts.

What
scheme
should
be
prepared by the operating agency for
revival and rehabilitation of the sick
industrial company is within the domain
of BIFR. Section 26 not only covers
orders passed under SICA but also any
matter which BIFR is empowered to
determine.
1652 INDIAN LAW REPORTS ALLAHABAD SERIES

23. The jurisdiction of civil
court is, thus, barred in respect of any
matter for which the appellate authority or
the Board is empowered. The High Court
may not be a civil court but its jurisdiction
in a case of this nature is limited."

7. A Division Bench of the Court in
J.K. Cotton Weaving & Spinning Mills
Vs. Union of India2 was called upon to
consider the validity of a demand raised
by Excise authorities inconsistent with the
provisions made in a Sanctioned Scheme.
Dealing with that question the Court held:
-

"6. A perusal of the said
Scheme would show that as per the terms
and conditions of the Rehabilitation
Scheme
it
was
provided
that
the
respondent-department
would
grant
exemption to the petitioner-company from
payment of interest, penalty etc. and
accept payment of excise duty finally
payable in pending cases over a period of
2 years from the year in which such
amount becomes payable.

7. It was contended that in view
of the Scheme and the specific provisions
contained
in
Clause
8.04(d),
the
impugned demand for Rs.6,89,000/- was
absolutely illegal and in violation of the
specific terms and conditions of the
Rehabilitation Scheme.

...

27. The question that now
remains for consideration of this Court is
that whether the petitioner is liable for
payment of interest and penalty as
demanded by the impugned notice dated
17-6-2005.
28. As already noticed in Clause 8.04 (d)
of the Rehabilitation Scheme dated 12-112002 framed by the BIFR, the petitioner is
not liable for payment of interest and
penalty. Section 22 of the Act clearly
provides that once proceedings have been
initiated under the Act and an inquiry
under Section 16 is pending or any
Scheme referred to under Section 17 is
under preparation or consideration or a
sanctioned
Scheme
is
under
implementation
then,
notwithstanding
anything contained in any other law for
the time being in force no proceeding for
the winding up or execution or distress or
the like against any of the properties of
the industrial undertaking company and
no proceedings for recovery of money or
for enforcement of any security against
the company etc. shall be maintainable.

29. Section 32 of the act further
provides that the Schemes made under the
Act shall have effect notwithstanding
anything inconsistent therewith contained
any other law except two Acts namely
FERA and Urban Land Ceiling Act for
the time being in force and Memorandum
or Articles of Association of an Industrial
Company or in any other instrument
having effect by virtue of any other law
other than this Act. The Excise Act has
not been exempted from the applicability
of section 32 of the Act.

...

35. In our opinion, the judgment
referred to in the case of Voltas
Ltd.(supra) was on its own facts and does
not help the respondents inasmuch as in
the Scheme under consideration before
the Apex Court, there was no express
waiver from the statutory liability of
payment of interest at the rate of 18%.
However, in the case before us the
provisions of Clause 8.04(d) of the
Rehabilitation
Scheme
contains
an
express waiver from payment of interest,
penalty etc. and to accept payment of
excise duty finally payable in pending
cases over a period of 2 years, from the
2 All. Manoj Kumar Yadav Vs. State of U.P. & Ors.
1653
year in which such amount becomes
payable.

36.
The
petitioner
having
already deposited a sum of Rs.6,89,000/-
as 50% part payment for 2004-2005 and
having given an undertaking for payment
of remaining 50% amount of Rs.689000/-
which also was paid on 6-3-2006
(Annexure-SA1 to the supplementary
affidavit) the liability towards payment of
excise duty had been duly discharged as
per the demand notice and the company
was not liable for payment of penalty or
interest in terms of the specific provisions
of the Rehabilitation Scheme."

8. The necessary corollary to the
enunciation of the statutory position noticed
above would be that the liability of the
petitioner insofar as ESI dues are concerned
would be governed exclusively by the
provisions made in the Sanctioned Scheme
in that respect. That Scheme admittedly
absolves the petitioner from the liability
towards interest and penalties under the Act.
That damages are penal in character cannot
possibly be doubted in light of the decision
of the Supreme Court in ESI Corp. Vs.
HMT Ltd.3 where it was held: -

"16. It is a well-known principle
of law that a subordinate legislation must
conform
to
the
provisions
of
the
legislative Act. Section 85-B of the Act
provides for an enabling provision. It does
not envisage mandatory levy of damages.
It does not also contemplate computation
of quantum of damages in the manner
prescribed under the Regulations.

17. The statutory liability of the
employer is not in dispute. An employee
being required to be compulsorily insured,
the employer is bound to make his part of
the contribution. An employee is also
bound to make his contribution under the
Act. But the same does not mean that levy
of damages in all situations would be
imperative.

18. Section 85-B of the Act uses
the words "may recover". Levy of
damages thereunder is by way of penalty.
The legislature limited the jurisdiction of
the authority to levy penalty i.e. not
exceeding
the
amount
of
arrears.
Regulation 31-C of the Regulations,
therefore, in our opinion, must be
construed keeping in view the language
used in the legislative Act and not dehors
the same."

9. In light of the legal position
noticed above, the Court is of the
considered view that the impugned
demand insofar as it places a burden of
interest and damages upon the petitioners
cannot be sustained.

10. The petition is accordingly
allowed. The impugned demand dated 2
April 2004, insofar as it imposes a
liability towards payment of interest and
damages upon the petitioner shall stand
set aside.
----------

(2019)10ILR A 1653

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 19.09.2019

BEFORE

THE HON'BLE SIDDHARTHA VARMA, J.

Writ- C No. 4329 of 2019

Manoj Kumar Yadav ...Petitioner
Versus
State of U.P. & Ors. ...Respondents