Provident fund recovery against a sick company is not barred where deducted employee contributions were unlawfully retained.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 bars coercive recovery only where proceedings would impede a sick company's revival process, and it does not extend to recovery of employees' provident fund contributions deducted from wages and unlawfully retained by the employer. The court noted that such statutory dues belong to workers and form part of the social security regime under the provident fund law, while the limited protection referred to in that law concerns damages, not the principal contributions. Recovery of these dues was therefore held not to frustrate rehabilitation, and the writ challenge to the attachment proceedings failed.

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Issues: Whether recovery proceedings for employees' provident fund contributions and allied dues against a sick industrial company are barred by section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 suspends coercive proceedings against a sick company where an enquiry is pending, a scheme is under preparation or consideration, a sanctioned scheme is under implementation, or an appeal is pending. The provision is intended to protect the revival process from impediment, but its reach is not unlimited. The scheme of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 shows that employee contributions deducted from wages and employer contributions are statutory dues forming part of a social security regime. The employer cannot retain amounts deducted from workers' wages, and the legislative protection granted in relation to sick industrial companies under the provident fund law is confined to damages under section 14B and does not excuse payment of contributions themselves. The recovery sought here related to amounts withheld from employees' wages and therefore represented dues legitimately belonging to the workers. On the reasoning applied, such recovery does not frustrate the object of rehabilitation and does not fall within the protective embargo of section 22(1).

Conclusion: Section 22(1) does not bar recovery of employees' provident fund contributions and related statutory dues from the petitioner, and the challenge to the attachment proceedings fails.

Final Conclusion: The writ petition was rejected and the attachment proceedings were left undisturbed.

Ratio Decidendi: The bar under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 applies only to proceedings that would impede the rehabilitation scheme and does not extend to recovery of statutory employees' provident fund contributions deducted from wages and unlawfully retained by the employer.

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