Recovery of public dues.
Undoubtedly, public money should be recovered and recovery should be made expeditiously. But it does not mean that the financial institutions which are concerned only with the recovery of their loans, may be permitted to behave like property dealers and be permitted further to dispose of the secured assets in any unreasonable or arbitrary manner in flagrant violation of the statutory provisions.
It also requires to be noticed that Section 45-H of the ESI Act which prescribes the procedure for recovery of employees insurance dues reads as follows:-
“45-H. Application of certain provisions of the Income-Tax Act. — The provisions of the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961) and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount of contributions, interests or damages under this Act instead of to the income-tax:
Provided that any reference in the said provisions and the rules to the “ assessee ” shall be construed as a reference to a factory or an establishment or the principal or immediate employer under this Act.” In the context of attachment of the bank account of the Petitioner with the Second Respondent for the recovery of the employees insurance dues by the First Respondent, it would be necessary to look into Rules 2, 3, 4, 5, 8, 11, 12, 13, 20, 21, 22, 26, 28, 30 and 47 of the Second Schedule to the Income Tax Act, 1961. On a conspectus of those legal provisions, it becomes clear that the concerned authorities under the Act would have to ensure that the following requirements must be fulfilled while taking any recovery action:-
(i) A notice would have to be served upon the defaulter to pay the specified amount within 15 days from the date of its service and intimating that in default, steps would be taken to realize that amount.
(ii) No steps in execution shall be taken until the period of 15 days has elapsed from the date of service of the notice requiring such payment.
(iii) However, if the defaulter is likely to conceal or remove or dispose of the whole or any part of his movable property, which would delay or obstruct the realization of the amount due, the Recovery Officer may attach the movable property by dispensing with the notice to the defaulter for reasons to be recorded in writing while passing such order.
(iv) When a defaulter, whose property has been so attached, furnishes security to the satisfaction of the Recovery Officer, such attachment shall be cancelled from the date of acceptance of the security by the Recovery Officer.
(v) Where any objection is made to the attachment of any property on the ground that the property is not liable to such attachment, the Recovery Officer would have to investigate into that objection on the basis of the evidence adduced by the objector in that regard.
(vi) Where the Recovery Officer on such investigation comes to the conclusion that the property attached is not owned by the defaulter, such part of the property shall be released from the attachment made.
(vii) A warrant of attachment signed by the Recovery Officer with his name specifying the name of the defaulter and the amount to be realized shall be served on the defaulter.
(viii) The Recovery Officer shall proceed to attach the movable property of the defaulter only if the amount mentioned in the warrant is not paid forthwith.
(ix) In the case of debt or other movable property not in the possession of the defaulter, the attachment has to be in writing prohibiting the creditor from recovering the debt and the debtor from making payment thereof or giving it over to the defaulter until further order from the Recovery Officer and a copy of such order shall be furnished to the defaulter and the person in possession of the debt.
(x) Where the property attached is currency notes, it shall be credited to the Central Government and the amount so credited shall be adjusted towards employees insurance dues and other amounts recoverable from the defaulter and the balance, if any, remaining shall be paid to the defaulter.
It would assume significance that every stage of the recovery proceedings contemplates to afford an opportunity to the defaulter to either remit the dues or place his objection with supporting materials in that regard in consonance with the principles of natural justice before proceeding further. Such protection statutorily guaranteed to ensure the salutary object that justice is not only done, but also manifestly seen to be done, cannot be lost sight in the anxiety to complete the recovery process by the authorities under the ESI Act.
- Apart from the fact that the impugned order does not contain the details of the assessment orders for which the recovery proceedings have been initiated, the First Respondent has not placed any materials before this Court to show that the First Respondent has waited for a period of 15 days after calling upon the Petitioner to remit the amount claimed to be due. Similarly, no order containing reasons for dispensing with such notice informing the Petitioner before attaching its bank account, has been produced. There is also nothing to show that the Petitioner was simultaneously informed of the attachment of its bank account. Such non-compliance would necessarily mean that the required opportunity to remit the dues before effecting attachment of the amount in the bank account of the Petitioner had not been granted. That apart, the scheme for recovery postulates that objections could be made in respect of the attachment which would have to be investigated by the Recovery Officer. In this case, no time had been granted for raising such objections and on the other hand, the First Respondent has been warned in the attachment orders itself that if payment of the attached amount had not been made, recovery would be made from the Second Respondent as if it was the defaulter for payment of the arrears of employees insurance of the Petitioner that had fallen due. Such coercive methods of recovery adopted by the First Respondent in glaring transgression of the rule of law cannot be countenanced.
- The result of the foregoing discussion is that the impugned order is set aside and the matter is remitted back to the First Respondent to follow the prescribed procedure for recovery of employees insurance dues claimed from the Petitioner in accordance with law as explicated in this order.
Ref: V.Naaharaj vs The Recovery Officer, Employees’ State Insurance Corporation,
W.P. No. 34525 of 2012 IN THE HIGH COURT OF JUDICATURE AT MADRAS
