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Issues: (i) whether the bar under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applied to recovery of amounts deducted from employees' wages but not remitted to the society; (ii) whether the directors were personally liable for the default under section 49 of the Maharashtra Co-operative Societies Act, 1960; (iii) whether lack of proper service vitiated the proceedings against all the petitioners.
Issue (i): whether the bar under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applied to recovery of amounts deducted from employees' wages but not remitted to the society.
Analysis: The bar under section 22 was held inapplicable because the proceedings were not for recovery of a loan, advance, or guarantee in the ordinary sense. The amounts in question were deducted wages, which the employer had undertaken to remit to the society. Wages and terminal dues were treated as outside the protective sweep of section 22, and recovery of such sums was distinguished from recovery of sales tax or similar liabilities.
Conclusion: The statutory bar under section 22 did not apply, and the challenge based on sick-company protection failed.
Issue (ii): whether the directors were personally liable for the default under section 49 of the Maharashtra Co-operative Societies Act, 1960.
Analysis: Section 49 contemplates deduction from salary or wages pursuant to an agreement and makes the employer personally liable where the deducted amount is not remitted. The Court treated the employer's role as fiduciary in character and held that, where the company's ultimate control vested in its directors and there was no effective nomination shielding them, the directors could also be fastened with liability. The deducted amount retained by the company was treated as wages, and the reasoning supporting liability of the employer extended to the directors in charge.
Conclusion: The directors were held liable along with the company for the deducted but unremitted amounts.
Issue (iii): whether lack of proper service vitiated the proceedings against all the petitioners.
Analysis: The Court accepted service and non-appearance as fatal to the challenge only for some petitioners, but found that petitioners 3 to 6 had not been properly shown to have been served before the ex parte order. The record did not establish due service against them in a manner sufficient to sustain the proceedings, whereas the challenge failed for the petitioners who had been duly served and had either appeared or not pursued available remedies.
Conclusion: The proceedings were sustained against petitioners 1, 2 and 7, but were set aside and remanded for petitioners 3 to 6.
Final Conclusion: The challenge to recovery on the basis of sick-company protection failed, liability of the company and the concerned directors was upheld, and the matter was remanded only for the petitioners found not to have been properly served.
Ratio Decidendi: Deducted employee wages retained by an employer and payable to a society are not protected by section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and the employer's personal liability under section 49 of the Maharashtra Co-operative Societies Act, 1960 may extend to directors in control of the company.
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