BIFR proceedings do not bar recovery of statutory ESI dues where welfare law gives those dues priority.

Pendency of proceedings before BIFR under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 did not by itself bar recovery of Employees' State Insurance dues. The Court treated statutory welfare dues as standing on a different footing from ordinary commercial debts and applied the priority attached to such liabilities under the ESI framework, noting the similarity in effect to the first-charge protection under the provident fund law. As a result, the recovery notices were upheld and the employer's challenge failed; the liability for ESI contribution and interest remained enforceable.

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Issues: Whether recovery of Employees' State Insurance dues could be stayed or invalidated by reason of proceedings before the Board for Industrial and Financial Reconstruction under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The dispute concerned recovery of ESI contribution together with interest, while the employer relied on the pendency of BIFR proceedings and the framing of a rehabilitation scheme. The Court held that section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 does not automatically bar recovery of statutory dues merely because the company is before the BIFR. Applying the principle that statutory dues such as provident fund or ESI dues stand on a different footing from ordinary commercial debts, the Court relied on the reasoning that priority provisions operate according to their own statutory force. It noted that section 94 of the Employees' State Insurance Act, 1948 is similar in effect to section 11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, which creates a statutory first charge and priority in favour of such dues.

Conclusion: The protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was held not to preclude recovery of the ESI dues, and the writ petitions failed.

Final Conclusion: The challenge to the recovery notices was rejected, and the statutory liability for ESI contribution and interest was left undisturbed.

Ratio Decidendi: Pendency of rehabilitation proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 does not, by itself, suspend recovery of statutory dues where the governing welfare statute confers priority or first-charge protection in favour of those dues.

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