P.guru Vittal And Others v. The Regional Provident Fund Commissioner (enforcement And Recovery), Tamil Nadu Region And Others

1. These two writ petitions are interconnected and hence the same are dealt with in common. The result of W.P.No.10227 of 2000 is dependent upon the result of W.P.No.6242 of 2000. W.P.No.6242 of 2000 has been preferred by the partners of one Sri Padmanabha theatre situated at Walltax Road, Chennai-600 069. The said theatre is an establishment covered under provisions of the Employment Provident Fund and Miscellaneous Provisions Act. At the instance of the first and second respondents proceedings were initiated for recovery of contributions in respect of the establishment, Sri Padmanabha Theatre for the period from 11/96 to 5/99.

2. It transpires that a total sum of Rs.5,74,177.50 was found to be due from the establishment by way of contribution and other charges. By proceedings dated 5.8.1999, the Recovery Officer was furnished with the certificate under Sec.8-B of the Employees Provident Fund and Miscellaneous Provisions Act, (hereinafter called The Act), pursuant to which by notice of attachment dated 10.8.1999, the second respondent attached certain moveables belonging to the establishment such as projector and certain other accessories. By yet another communication dated 10.8.1999, the attached properties were left in the custody of the first petitioner. Subsequently, a revised notice of attachment dated 19.8.1999 was forwarded to the establishment attaching the very same properties which were attached earlier in the notice dated 10.8.1999. Again on 24.12.1999 a notice of proclamation of sale was issued indicating that the properties attached earlier will be sold by an auctioner at the site on 25.1.2000 for the recovery of a sum of Rs.5,74,177.50. Subsequently, the petitioners were issued with a communication dated 20.1.2000 by the second respondent claiming to be an order attaching the business carried on by the petitioners under the name and style of Sri Padmanabha Theatres at No.16, Walltax Road, Chennai-600 079 and the petitioners were prohibited and restrained from transferring or changing the said business. The said proceedings were also initiated for the purpose of recovering the arrears amount of Rs.5,74,177.50. Closely followed by that, by proceedings dated 21.1.2000, the third respondent was appointed as a receiver to manage and run the business of Sri Padmanabha Theatres, Chenni-600 079 on and from 24th January, 2000, investing him with all the powers necessary for the management of the said business in accordance with the rules. Though, it is stated in the said communication that certain enclosures were also annexed to it, the petitioners claim that no such enclosures were forwarded to them.

3. The petitioners have averred that without notice to them, the first respondent has appointed a third party as a receiver who has also taken control of the theatre and was taking steps to run the theatre, that when the petitioner approached the first respondent to pay the amounts in instalments, the said request of the petitioners was turned down and that they were asked to pay the entire amount of Rs.5,74,177.50 in one lump sum, while the third party was permitted to deposit a sum of Rs.3 lakhs, while taking over the management and pay the balance amounts in instalments of Rs.10,000 p.m., that the action of the first and second respondents in appointing a receiver behind the back of the petitioner, while rejecting the petitioners request to make the payments in instalments was highly illegal and therefore, liable to be interfered with. It is stated that the petitioners are also willing to make a payment of rupees three lakhs to the third respondent, which is stated to have been paid by him to the first and second respondents and clear the balance amount in instalments at the rate of Rs.25,000 per month.

4. The petitioners have therefore, come forward with the prayer for the issuance of a writ of certiorarified mandamus to call for the records of the first and second respondents relating to the order dated 21.1.2000 appointing the third respondent as a receiver and so direct the respondents to due from them in instalments of Rs.25,000 and for payment of the entire amount within three months.

5. The said writ petition was resisted at the instance of the first and second respondents by filing a counter affidavit contending that after the attachment of the moveables, the petitioner did not come forward to clear the dues, that the employees of the theatre filed a representation for appointment of a receiver to run the theatre so as to keep the business alive and to pay their salaries, that the business of the establishment namely Sri Padmanabha theatre was attached on 20.1.2000 and that the third respondent was appointed as a receiver in exercise of powers under Sec.8-B read with Sec.8-G of the. It is claimed that a copy of the order appointing the receiver was communicated to all the parties on 21.1.2000. It is also stated that the receiver was appointed under certain terms and conditions as prescribed under the rules and on payment of Rs.3 lakhs towards the arrears and also have obtained an undertaking that the third respondent would clear the current statutory dues every month besides payment of Rs.10,000 towards arrears of contribution, as claimed in the demand notice. According to the first and second respondents, the abovesaid proceedings of attachment as well as appointment of receiver were all passed well within the powers vested with it under the provisions of the read with II and III of Schedules of the Income tax Act and the Income Tax Certificate proceeding rules.

6. It is the case of the first and second respondents that the petitioners were chronic defaulters and therefore there was every justification for the first and second respondents in resorting to the appointment of the receiver as made in the proceedings dated 20.1.2000 which was sent to all the petitioners by R.P.A.D. to their residential addresses and that the proceedings were conducted on 21.1.2000 by the first respondent where the third respondent was appointed as a receiver after following the usual procedure. It is further stated that the third respondent deposited a sum of Rs.3 lakhs, towards arrears of contribution apart from agreeing to clear the arrears at the rate of Rs.10,000 per month and also for paying current monthly contributions. The third respondent is also stated to have executed a bond with two solvent sureties. The respondent has averred that the third petitioner was appraised of the entire situation and was called upon Sec.8-B of the can be withheld. The first and second respondents denied that no prior notice was given to the petitioners about the various steps taken by them before the appointment of the receiver. It is further stated that after the appointment of the third respondent, he has incurred a sum of Rs.12,63,720 as per the statement submitted by the third respondent. It is claimed that the order determining the contribution were made as early as on 17.1.1997, that before passing the order dated 12.7.1999, ample opportunities were given to the petitioners, that after the passing of the order dated 12.7.1999, the petitioners did not take any steps under Sec.7A(4) of the, that in view of the recalcitrant attitude of the petitioners, the first and second respondents were forced to take the extreme steps of appointment of receiver in order to recover the contribution due from them.

7. The third respondent filed a counter affidavit and he endeavored to explain the condition in which the theatre was handed over to him, that he took extreme care to note down the stage at which the furnitures and other properties were existing at the time when the theatre was handed over to him by the first and second respondents, that some meager amounts are being collected by permitting certain parties to park the vehicles in the theatre premises, that the allegations about his address were not true, that in any event, his appointment as a receiver was legally justified and therefore, no interference was called for.

8. The petitioner in W.P.No.10227 of 2000 has come forward with the writ petition for the issuance of a writ of certiorarified mandamus to call for the records of the first respondent, namely the Commissioner of Police, Egmore in his proceedings dated 28.4.2000, to quash the same and to direct the first respondent to renew the C form license of Sri Padmanabha theatre. By the order impugned in W.P.No.10227 of 2000, the first respondent has asked the petitioner in that writ petition to get orders from the competent Court of Law, appointing him as receiver of the theatre along with the existing joint receiver. According to the petitioner, by order dated 17.7.1989 made in Application No.1523 of 1989 in C.S.No.6 of 1988, the third and fourth respondents were appointed as joint receivers, that huge arrears to the extend of Rs.5,74,177.50 was due and payable by way of Provident Fund contributions, that since respondents 3 to 5 could not make the payment, the petitioner was appointed as a receiver pursuant to which he deposited a sum of Rs.3 lakhs towards arrears payable by respondents 3 to 5 apart from agreeing to pay a sum of Rs.10,000 per month towards arrears of contribution. The petitioner claimed that as on the date of filing of the writ petition, he had spent a total sum of Rs.12,00,000 towards repairs and renewals of Sri Padmanabha Theatres in order to make it worthy for exhibiting films. It is contended that by order dated 21.1.2000 the responsibility for running the theatre establishment was entrusted to him on and from 24.1.2000, that when he approached the first respondent on 11.2.2000 for the renewal of C form licence, the proceedings impugned in the writ petition came to be issued, that when the order appointing the petitioner as receiver at the instance of the second respondent was perfectly valid and in accordance with law, the first respondent is bound to renew the C form licence. The said writ petition was resisted by respondents 3 to 5 on various grounds raised in their writ petition filed in W.P.No.6242 of 2000.

9. In the counter filed on their behalf it is contended that the petitioner in W.P.No.10227 of 2000 had not experience in the running of a cinema theatre his place of residence was not proved to the satisfaction of the authorities concerned, that there was no necessity of all for spending a sum of Rs.12,00,000 to renovate the theatre, that proper inventory was not taken before taking over possession by him, that the very appointment of the petitioner in W.P.No.10227 of 2000 was in total violation of all principles of natural justice, that the second respondent did not follow the proper procedure in the matter of appointment of a receiver which is considered to be a harsh and extreme step in the matter of recovery or under any other circumstances and therefore, when the appointment of the petitioner as receiver itself is not in accordance with law, he is not entitled for any relief as claimed by him, in the said writ petition, it is also contended that the entire terms and conditions appointing the petitioner as receiver was deliberately suppressed, that the petitioner in collusion with the officials of the second respondent got himself appointed as a receiver and that it was not shown as to whether proper sureties were taken by the respondent as claimed in the proceedings dated 21.1.2000.

10. In the counter affidavit filed on behalf of the 2nd respondent, the claims of the petitioner were fully supported. On behalf of the respondents 3 to 5 a supplemental affidavit was filed which was based on the inspection carried on at the theatre on 18.1.2000 as per the suggestion of this Court in the presence of the petitioner. In the said supplemental counter, various averments were made as to the manner in which the properties of the theatre were handled, that the receiver was in receipt of huge sum by way of income, by letting out the open area to various parties, that the portrait and other paintings which were hitherto maintained by the respondents 3 to 5 were dismantled and removed, that the receiver in any event was not entitled to deal with the open space of the theatre promises, that there were serious doubts as to the place in which the petitioner claimed to have been residing namely Beddu Naicken Street, that the manner in which the petitioner was appointed as a receiver by proceedings dated 20.1.2000 and 21.1.2000 created lot of suspicion, and in the circumstances, the bona fide of the second respondent in appointing the petitioner as a receiver itself being in serious doubts, no relief should be granted in the writ petition.

11. A reply affidavit was filed at the instance of the petitioner in W.P.No.10227 of 2000 contending that the claim of the respondents 3 to 5 that the petitioner was appointed as a receiver in collusion with the second respondent was not true. It is also claimed that he has got sufficient experience in cinema business and that he could run the theatre establishment in a successful manner. The petitioner attempted to explain as to how the various properties in the theatre were handled while taking over possession, in his capacity as a receiver. The second respondent also filed a reply affidavit contending that the allegations of respondents 3 to 5 relating to the appointment of the petitioner as a receiver was baseless.

12. A counter affidavit was filed at the instance of the first respondent contending that in view of the earlier orders of this Court, dated 17.7.1989 in Application No.1523 of 1989 in C.S.No.6 of 1988, it became incumbent for the first respondent to call upon the petitioner to take appropriate directions from this Court to enable him to seek for the renewal of C form licence. It is therefore, claimed that the writ petition deserved to be dismissed.

13. In the above stated background of claims and counter claims made in the above two writ petitions, the point that arises for consideration in this writ petition is about the justifiability of the order of appointment of receiver made by the first and second respondents in W.P.No.6242 of 2000, appointing the third respondent in the said writ petition to run the theatre namely Sri Padmanabha Theatre in his capacity as receiver. While attacking the said proceedings, the learned counsel for the petitioners contended that the said proceedings were vitiated for the reasons that the credibility of the third respondent was not properly scrutinised by the first and second respondents before appointing him as a receiver, that when the first and second respondents initiated proceedings by way of attachment of the moveables and went to the extent of bringing them for sale by fixing a date for auction, the resort of the first and second respondents to the appointment of a receiver of the third respondent, that too without giving proper notice to the petitioners is mala fide and also suffered from all vice and such as violation of principles of natural justice, arbitrariness etc. it is contended that the said action of the first and second respondents was in total violation of Secs.8-B and 8-G of the Employees Provident Fund Act read with the Sec.222 as well as Part IV of the 2nd Schedule of the Income Tax Act.

14. The learned counsel relied upon various judgments reported in Dilmanrai v. Srinarayan Sharma and another A.I.R. 1983 Sikkim 11, [LQ/SikHC/1982/2] Sangram Singh 1988 T.N.L.J. 358 for the proposition that in the matter of appointment of a receiver, which is considered in the various judgments to be an extreme and harsh remedy to be resorted to, the present action of the first and second respondents in appointing the third respondent as a receiver without giving proper opportunity to the petitioner is totally unjustified illegal and invalid and therefore, liable to be set aside.

15. The learned counsel also filed upon the judgments reported in M.V.K.Thyagarajan v. Syndicate Bank, Erode Branch, represented by its Branch Manager, Erode and others M.V.K.Thyagarajan v. Syndicate Bank, Erode Branch, represented by its Branch Manager, Erode and others M.V.K.Thyagarajan v. Syndicate Bank, Erode Branch, represented by its Branch Manager, Erode and others (2000)1 MLJ. 47 [LQ/MadHC/1999/731] , Industrial Credit and Investments Corporation of India Ltd. for the proposition that even in respect of an appointment of a receiver for the purpose of recovery of statutory arrears, notice should have been given to the party who will be affected by the appointment of such a receiver.

16. The learned counsel by relying upon the judgment reported in Chanumulu Nirmala and others v. Ch.Indira Devi and another Chanumulu Nirmala and others v. Ch.Indira Devi and another Chanumulu Nirmala and others v. Ch.Indira Devi and another A.I.R. 1994 S.C. 662 contended that in any event, the first respondent should have permitted the petitioner to clear the arrears in instalments instead of resorting to the extreme step of appointing a 3rd party as a receiver.

17. On behalf of the 3rd respondent, the learned counsel submitted that the various contentions raised at the instance of the petitioners relating to the appointment of a receiver by relying upon the various judgments cited at their instance were all rendered while dealing with the appointment of a receiver in civil proceedings which were all totally inapplicable to a case like that of the present one, where the appointment of receiver is pursuant to and based on the special provisions relating there to contained in the Employment Provident Fund and Miscellaneous Provisions Act and therefore, the various principles set out in the judgments relied upon by the petitioner, will have no application to the facts of this case.

18. The learned counsel contended that in a case like that of the present one where the appointment of receiver by way of a mode of revenue recovery, is governed by the provisions of the Income tax Act, the judgment reported in Collector of Malabar and another v. Erimal Ebrahim Hajee Collector of Malabar and another v. Erimal Ebrahim Hajee Collector of Malabar and another v. Erimal Ebrahim Hajee 32 I.T.R. 124 would alone apply and that the provisions contained under Sec.222 of the Income Tax Act read with paras.20 and 69 of Schedule 2 of the said Act would show that the respondents 1 and 2 can as well resort to the appointment of a receiver, in the manner done by them under the proceedings impugned in this writ petition.

19. The learned counsel by relied upon Union of India v. J.N.Sinha and another Union of India v. J.N.Sinha and another Union of India v. J.N.Sinha and another A.I.R. 1971 S.C. 40, Union of India and Ram Narayan Agarwal and others v. State of Uttar Pradesh and others Ram Narayan Agarwal and others v. State of Uttar Pradesh and others Ram Narayan Agarwal and others v. State of Uttar Pradesh and others (1983)4 S.C.C. 276 in support of his contention that the exercise of power by the first and second respondents as has been done by them was fully justified and no interference is called for.

20. Secs.8-B and 8-G of the Employees Provident Fund Act enables the authorities functioning under the provisions of the said act to resort to various measures that are available under the provisions of the Income Tax Act for the purpose of recovery of the contributions from the defaulting employees. Sec.222 enables the Tax Recovery Officer on receipt of a certificate to resort to the recovery by one or more of the methods mentioned therein and in accordance with the rules laid down in the 2nd schedule. Part IV of the 2nd schedule deals with the mode of recovery by way of appointment of receiver. Part V of the second schedule describes the mode of recovery by way of arrest and detention of the defaulter. Para.82 of Part VI of the second schedule states that every Tax Recovery Officer or other Officer acting under the 2nd schedule shall in the discharge of his functions under the said schedule, be deemed to be acting judicially within the meaning of Judicial Officers Protection Act, 1850.

21. As far as the appointment of a receiver under Part IV is concerned, para.69 of the Income Tax Act of the said part reads hereunder:

Appointment of receiver for business: 69(1) Where the property of a defaulter consists of a business, the Tax Recovery Officer may attach the business and appoint a persons as receiver to manage the business.

(2) Attachment of a business under this rule shall be made by an order prohibiting the defaulter from transferring or charging the business in any way and prohibiting all persons from taking any benefit under such transfer or charge, and intimating that the business has been attached under this rule. A copy of the order of attachment shall be served on the defaulter, and another copy shall be affixed on a conspicuous part of the premises in which the business is carried on and on the notice board of the office of the Tax Recovery Officer.

22. Under Para-73 of Part V of the II Schedule, it is specifically proved that no order for the arrest and detention in civil prison of a defaulter should be made unless the Tax Recovery Officer issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice to show cause why he should not be committed to the civil prison. There is no such provision made in the matter of appointment of a receiver.

23. Para 72 of Part IV of the II Schedule stipulates that the attachment and management under the foregoing rules can be withdrawn at any time at the discretion of the tax Recovery Officer or if the arrears are discharged by the receipt of such profits and rents or otherwise paid.

24. A conjoint reading of the above stated provisions do show that the authorities constituted under the have been vested with the powers to resort to different modes of the recovery of the arrears payable under the provisions of the. It includes, the power of attachment of the moveables, immovables as well as the business of an establishment. As regards the power relating to attachment of the administration of a business is concerned, the whole purpose seems to be to continue the business as before, with a view to generate income and thereby provide scope for the recovery of the arrears while simultaneously sustaining the operation of the business activities without bringing it to a grinding half. When the various modes of recoveries approved under the 2nd schedule are looked into, it also shows that in the matter of recovery of statutory arrears from a defaulter, the authorities can resort to different modes of recoveries with a view to achieve the ultimate object or recovering the arrears from the defaulter. While resorting to the recovery by arrest and detention of the defaulter, it is made incumbent upon the Recovery Officer to issue a show cause notice before resorting to the said mode.

25. Therefore, the ruling cited at the instance of the third respondent, reported in Collector of Malabar and another v. Erimal Ebrahim Hajee Collector of Malabar and another v. Erimal Ebrahim Hajee Collector of Malabar and another v. Erimal Ebrahim Hajee 32 I.T.R. 124 which was rendered at a point of time when the provisions much as the one contained in para.73 of Part V of the 2nd Schedule was not brought to the statute book, may not be applicable. The said judgment was rendered based on Sec.48 of the Madras Revenue Recovery Act (Madras Act II of 1864) which provided that when areas of revenue cannot be liquidated by the sale of the property of the defaulter, then the Collector if he had reasons to believe that the defaulter was wilfully withholding payment of arrears or has been guilty of fraudulent conduct, in order to evade payment of tax can lawfully cause the arrest and imprisonment of the defaulter. Sec.5 of the very same Act provided that whenever revenue was in arrears it was lawful for the collector or other officer empowered by the Collector on his behalf to proceed to recover the arrears together with interests, by sale of the defaulters moveables and immovables or by execution against the person of the defaulter in the manner approved therein. It was in that context and based on the provisions prevailing then, the Honourable Supreme Court was pleaded to hold that when an arrest is made under Sec.48 after complying with its provision, the arrest was not for any offence committed or a punishment for default in any payment, but being a mode for recovery of the amount due and when there is nothing to suggest in Sec. 48, which requires the Collector to give the defaulter an opportunity to be heard before arresting him, the prior notice was not necessary. It was stated that one of the conditions precedent to take action under Sec.48 was the existence of the arrears of revenue and on payment of arrears, that condition would not longer exist and the debtor would be entitled to release and freedom from arrest. The primary consideration which weighed with the Honourable Supreme Court on a reading of Sec.5 along with Sec.48 of the Madras Act, discloses that the said Act did not provide for another opportunity to be given to the defaulter, which resorting to the mode of recovery by way of arrest of a person.

26. In contrast to the said provision, the present rules relating to Para.73 of Part V of the 2nd schedule would specifically stipulate that a notice of show cause to be issued to the defaulter. The said ruling is therefore no longer applicable in matters relating to the recovery by resorting to the mode of arrest of the defaulter under the Income Tax Act. Moreover, the legislative intent is explicit by inserting a provision providing for issuance of the show cause notice in the matter of a arrest of a defaulter apparently with a view to reduce the hardship that may be caused to such a defaulter, when his freedom to move about is to be clipped. Therefore, in the present day context, when the itself provides for the issuances of a show cause notice in the matter of arrest of a defaulter, I am of the view that while dealing with the other mode of recovery of attachment of a business and consequential appointment of a receiver for the administration of a business should also be approached in the same manner in which the legislature seeks to deal with a person when resort is to be made by recovering the arrears through other mode of arrest. In other words, I am of the view that when the business of an establishment is sought to be controlled at the instance of the revenue with a view to recover the arrears due from a defaulter, while recognising such powers exercisable by the authorities concerned it cannot be lost sight of that before resorting to such extreme step of clipping the wings of the defaulter, namely the employer herein from continuing his business in a free manner and in the normal courses, such as extreme step should be preceded by at least one opportunity to enable the employer to realise the seriousness of the situation so that, he can take all efforts to clear the statutory dues, if at all he should be permitted to continue his business activities in a state of laissez-fair; the theory of practice of Governmental absention from interference in the working of the market etc., and inspite of any such opportunity having been given, if it transpires that the defaulter had no intention of setting right things or was unable to make good the payment, then the action of the Recovery Officer cannot be found fault with. In my view, when by appointment of a receiver, the freehold right of a entrepreneur to carry on his business activity is interfered with, thereby depriving him of arranging his business activities in the manner suitable to him, in respect of the business established by him, while recognising the power and authority of the Recovery Machinery to resort to such mode, there is nothing wrong in expecting the said machinery to provide atleast one opportunity to the employer, as the resort to such mode would result in various other civil consequences.

27. When the business of the establishment being in existence in the form of building machinery and other immovable properties, by giving a reasonable opportunity to the defaulter, there is no scope for the defaulter to resort to any means by which the various properties attached to the business could be removed from the accessibility of the Recovery Officer. Therefore, I am of the firm view that even while resorting to the attachment of business and consequential appointment of a receiver for running of the said business, there should and must be a fair and minimum opportunity to the concerned defaulter before resorting to such mode of recovery. A reading of Rule 69 of Part IV of the second schedule along with Rule 82, discloses that a Tax Recovery Officer when discharges his functions under the schedule he should be deemed to be acting as Judicial Office. If that be so, it goes without saying that there should be a fair application of mind in the manner in which any judicial proceedings would be adjudicated upon.

28. A reading of paragraph 69(2) discloses that in the first instance, there should be an order of attachment of a business under the said rule, by the Recovery Officer prohibiting the defaulter from transferring or changing the business etc. before the appointment of a receiver to manage the said business. In other words, the attachment of a business should precede the appointment of a receiver for running the said business. Therefore para.69 of 1 and 2 schedule postulates two independent actions in the matter of attachment of a business and appointment of a receiver. The attachment of a business when mandated to be made by a separate proceedings, it is in contemplation of one form of notice to the defaulter to make him realise that the resort to recovery to such a mode has become so very imminent that in order to get one self relieved of such an extreme mode of recovery, all efforts should be made by the employer to discharge the arrears so as to enable the Recovery Officer to resort to para.72 for withdrawal of its attempt to take over the management of the business. In such circumstances, any resorts had by the Recovery Officer by abruptly depriving of the employer of its business by initiating proceedings without giving a reasonable opportunity to the employer would be wholly unjustified and cannot be resorted to in such an abrupt and arbitrary manner.

29. In the above stated legal position, when the case of the petitioner is analysed, I find that though the first and second respondents claim that the petitioners were duly informed about the attachment of the business and the appointment of a receiver, the records available disclose that the Recovery Officer proposed the appointment of a receiver only on 19.1.2000. In the file, there is a communication dated 20.1.2000 from the third respondent addressed to the first respondent stating that he came to know about the proposal for leasing of the theatre premises, that he is prepared to pay some advance amount, apart from clearing the past arrears of contribution and therefore, he should be permitted to run the theatre on lease. On the very same day, i.e., on 20.1.2000, the order attaching the business of Sri Padmanabha Theatres has been made by the second respondent. The file also discloses that the said order attaching the business was despatched to the petitioners only on 25.1.2000. Curiously on 21.1.2000, the proceedings of the first respondent for the appointment of receiver have also been drawn in the presence of first and second respondents along with the third respondent and his sureties. It is significant to note that on that date, the first respondent was also aware of certain recovery proceedings initiated at the instance of the Special Tahsildar, Urban Land Tax, to the tune of Rs. 7,97,259.60. It also transpires that there were certain other dues such as property tax, water tax etc., involving huge liabilities to be discharged by the theatre establishment.

30. In the above stated situations, by drawing up the proceedings dated 20.1.2000, while attaching the business of the theatres, by proceedings dated 21.1.2000, the appointment of the third respondent as a receiver has been resorted to by the first respondent. Whatever may be the compelling circumstances that prompted the first respondent to resort to drawing of such proceedings. It is quite astounding as to how the first respondent could without making appropriate basis for resorting to the appointment of a receiver could abruptly come to a conclusion and take a decision to appoint the third respondent as a receiver and thereby create a situation in which, even the third respondent was not in a position to commence the operation of the business without getting appropriate clearance from the various other authorities who were equally waiting for an opportunity to recover certain other statutory dues. In such a situation, the impugned proceedings of the first, respondent, smacks of total non application of mind and abuse of the powers vested in him.

31. It is one things to say that the first respondent has been vested with ample powers for the purpose of recovering the arrears of contribution by resorting to one or several modes of recoveries provided under the. The same did not mean that the first respondent should act in a haste and without preparing necessary basis for resorting to such extreme step of the appointment of a receiver. By virtue of the present action resorted to by the first respondent, it has created a situation, wherein the very purpose of appointment of a receiver has been nullified, in that the receiver appointed by the first respondent though has been forced to part with a huge sum of Rs.3,00,000 apart from few instalment payments made by him, he has been deprived of running of the business of the theatre which was the prime object while resorting to the mode of attachment of a business and consequent appointment of a receiver.

32. I am of the view that the first respondent has proceeded with some undue haste in resorting to the passing of the impugned proceedings. The proceedings also suffer for failing to follow the basic principles of natural justice. The impugned proceedings also demonstrate the highest degree of imprudent action resorted to by the first respondent while invoking the revenue recovery machinery approved under the. It is also arbitrary inasmuch as the first respondent has not explored the various other options that have been available in the matter of running of the business by a receiver. It is also not known how a decision which was taken on 19.1.2000 to entrust the running of the business to a receiver came to the knowledge of the third respondent on the very next day i.e., on 20.1.2000 without any publication in any form and above all, the said offer of the third respondent made on 20.1.2000 was immediately accepted on the very next day i.e. on 21.1.2000 and that too without even formally informing the petitioners who would be directly affected by resorting to such an extreme step of appointment of a receiver to take over the business of a large enterprise that of a theatre. As stated be me earlier, the notice of attachment of the business itself was dated 20.1.2000 i.e., the date on which an offer was made by the third respondent. In such a situation, when the above proceedings came to be issued at the instance of the first respondent, it can be only said that the same locked in bona fides.

33. In the circumstances, I find that the proceedings impugned in W.P.No.6242 of 2000 are wholly illegal and the same are liable to be set aside. Nevertheless, the petitioner being defaulters cannot expect the first respondent to remain idle for years to come without any payment. The petitioner having come forward to make the payment of Rs.3,00,000 immediately apart from paying a sum of Rs.25,000 in monthly instalments and clear the whole arrears within three months, it would be only appropriate while setting aside the order impugned in this writ petition to direct the petitioners, to deposit the said sum of Rs.3,00,000 with the first respondent within two weeks from this date and also commence payment of the monthly instalment payments of Rs.25,000 from the month of January 2001 which should be paid on or before 5th of February, 2001 and also clear the entire dues periodically apart from paying the current dues if any. In the event of the petitioner failing to comply with the direction relating to the payment of the contributions due, it would be open to the first respondent to take appropriate proceedings for the recovery of the entire dues in the manner known to law.

34. Having regard to the orders passed in W.P.No.6242 of 2000, there is no scope for considering the claim of the petitioner in W.P.No.10227 of 2000 as the consideration of the said prayer no longer survives. The said writ petition therefore is dismissed. W.P.No.6242 of 2000 is allowed on the above terms. No costs. Consequently connected W.M.Ps. are closed.