2004 (8) TMI 417 - HC - Companies Law

Legal Priority: BIFR Scheme Trumps ESIC Act in Jurisdictional Conflict

The court held that a BIFR scheme under the Sick Industrial Companies Act, 1985, prevails over the provisions of the Employees' State Insurance Act, 1948. ... Employees’ State Insurance Corporation Issues:1. Whether a BIFR scheme under the Sick Industrial Companies (Special Provisions) Act, 1985, will have overriding effect over the Employees' State Insurance Act, 1948 or not.Analysis:The judgment dealt with the question of whether a BIFR scheme under the Sick Industrial Companies (Special Provisions) Act, 1985, would prevail over the provisions of the Employees' State Insurance Act, 1948. The petitioner argued that the Sick Industrial Companies Act, being a special Act, should take precedence over the general provisions of the Employees' State Insurance Act. The petitioner contended that the scheme formulated under the Sick Industrial Companies Act specified a particular rate of interest that the company was obligated to pay, and any claim beyond that rate by the Employees' State Insurance Corporation should not be enforceable. The petitioner relied on legal precedents to support the argument that special Acts generally prevail over general Acts, especially when there is a non obstante clause in the special Act. The judgment emphasized that the scheme under the Sick Industrial Companies Act had statutory force and was binding, highlighting the importance of jurisdictional conflict between the two Acts.The judgment also addressed the respondent's argument, which relied on a previous court decision to suggest that BIFR proceedings might not have overriding effect concerning provident fund dues. However, the court distinguished the cited case from the present situation, emphasizing the absence of certain factual elements in the previous case. The respondent's argument regarding the quashing of a previous scheme and the subsequent rate of interest claim by the Employees' State Insurance Corporation was also considered in detail.In conclusion, the court held that the BIFR was the appropriate authority to determine the issue of interest and payment obligations. The court directed the BIFR to consider the matter comprehensively, keeping all questions open for further examination and decision within a specified timeframe. The judgment underscored the importance of jurisdictional conflicts between special Acts and the need to follow the provisions of the later Act in case of controversies, especially when a non obstante clause exists, as in the Sick Industrial Companies Act.Overall, the judgment provided a detailed analysis of the legal principles involved in determining the overriding effect of a BIFR scheme under the Sick Industrial Companies Act over the provisions of the Employees' State Insurance Act, emphasizing the statutory nature of the scheme and the jurisdictional considerations between the two Acts.