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Assistant Provident Fund Commissioner Versus Vijaya Bank And Ors

E-auction - Power of the petitioner or its Recovery Officer to lift the corporate veil - maintainability of appeal - Held that:- Piercing of corporate veil, even if permitted to the petitioner / its Recovery Officer, has to be in public interest. It is of the view that it is not in the larger public interest to stall any further the auction scheduled for today by the respondent no.1 Bank.It cannot be lost sight of that the dues for recovery whereof the respondent no.1 Bank is proceeding to aucti .....

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ppropriate to at this stage interfere with such sale.

The petitioner if aggrieved from the measures taken by the respondent no.1 Bank under the SARFAESI Act had the remedy available of approaching the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act and which the petitioner has again failed to do. It is a well settled principle that jurisdiction under Article 226 will not be exercised when an alternative efficacious remedy is available. Reference in the said regard ca .....

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4970/2016 & CM No. 20687/2016 (for stay). - Dated:- 26-5-2016 - MR. RAJIV SAHAI ENDLAW J. For the Appellant: Mr. Pankaj Garg, Mr. Milind Garg and Mr. A.S.M. Tripathi, Advs. For the Respondents: Mr. Vaibhav Dang, Adv. for R-1 with Mr. Surender Singh, Law Officer. MR. RAJIV SAHAI ENDLAW CM No.20686/2016 (for exemption). 1. Allowed, subject to just exceptions. 2. The application stands disposed of. W.P.(C) No.4970/2 .....

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he financial assistance granted by the respondent no.1 Bank to the respondent no.2 Creative Home Fashions Pvt. Ltd. (Company). The respondents no.5 to 9 are stated to be Directors in each of the respondents no.2 to 4 Companies. 4. It is inter alia the claim of the petitioner Assistant Provident Fund Commissioner that the petitioner has a charge over the properties being auctioned on account of Provident Fund (PF) dues owed by the respondent no.2 Company. 5. The respondent .....

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ing in this Court till 30th July, 2014 when it was allowed, reasoning that the respondents no.3&4 Companies are separate juridical entities than the respondent no.2 Company which is stated to owe PF dues to the petitioner and that the assets of the respondents no.3&4 Companies cannot be proceeded against for recovery of PF dues of the respondent no.2 Company. The contention of the petitioner then also, of the respondents no.2 to 4 Companies being one and the same entity, was rejected and .....

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t, 1952 (PF Act) though the petitioner was authorised to recover its dues from third parties which owed the said dues to the entity owing PF to the petitioner but the same had also not been done and it had not been established that the respondents no.3&4 Companies owed any money to the respondent no.2 Company which was stated to be owing PF dues to the petitioner. 7. The petitioner preferred LPA No.23/2016 against the aforesaid judgment allowing the writ petition of the responden .....

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the reply of the respondent no.1 Bank to the show cause notice (none of the other noticees responded) found a) all the three respondents 2 to 4 Companies to be operating and carrying on business from the said properties; b) the respondents no.5 to 9 to be Directors in all the three respondents no.2 to 4 Companies and thus having the same management; c) the motive of respondents no.2 to 4 Companies being to defraud the revenue under social legislation;

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o.1 Bank and attached the said properties for the recovery of PF dues of ₹ 2,96,87,014/- and penal damages / interest to the tune of ₹ 3,44,77,868/- owed by the respondent no.2 company. 9. I have enquired from the counsel for the petitioner as to what is the power of the petitioner or its Recovery Officer to lift the corporate veil. 10. The counsel for the petitioner, save for generally stating that the petitioner exercises judicial functions, is unable to cite .....

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e proceed to recover the amount from the establishment or, as the case may be, the employer by one or more of the modes prescribed therein, namely by attachment and sale of movable or immovable property of the establishment or, as the case may be of the employer or by arrest of the employer and his detention in prison or by appointing a receiver for the management of the movable or immovable properties of the establishment or, as the case may be, of the employer. The remaining provisions 8C to 8 .....

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deemed to be acting judicially within the meaning of the Judicial Officers Protection Act, 1850 and Clause 83 provides that the said officers shall have the powers of a Civil Court while trying a suit for the purpose of receiving evidence, administering oaths, enforcing the attendance of witnesses and compelling the production of documents. 13. The said provisions, in my view would not make the petitioner or its Recovery Officer a Court, as the counsel for the petitioner contends. A .....

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to be one entity and thereby making the provisions of the PF Act applicable, without however going into the question; however neither of the two entities was a 'company' within the meaning of the Companies Act and the question of corporate veil did not arise; (b) Supreme Court to have in Calcutta Chromotype Ltd. Vs. Collector of Central Excise, Calcutta (1998) 3 SCC 681 held that there is no bar on the authorities to lift the veil of a company to see it was not wearing that .....

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> (d) G.V. Films Ltd. Vs. S. Priyadarshan MANU/TN/2550/2005 where a Single Judge of the High Court of Madras to have held that the Tax Recovery Officer, acting under Rules 82 and 83 of the Second Schedule to the Income Tax Act, 1961, is entitled to lift the veil of corporate entity and pay regard to the realities; though a number of judgments were relied upon but if I may respectfully say so, none is with respect to the power of the authorities such as the petitioner herein or its RO and are in .....

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ccordingly, the realisation of provident fund dues of another company from its holding company was upheld; (f) K. Ramasamy Vs. Commissioner of Income Tax MANU/TN/2670/2002 where a Division Bench of the High Court of Madras held that income tax authorities are entitled to pierce the veil of corporate personality and look at the reality of transaction; (g) Bhaskar Tea & Industries Ltd. Vs. Employees Regional Provident Fund Organization MANU/WB/0483/2014 also holding tha .....

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eficial legislations, provisions whereof are applicable only upon a certain minimum number of employees being employed therein and in the context of the definition and meaning of establishment and employer in the said statutes and the said judgments may not be applicable in the context of recovery of PF dues of one company by attachment and sale of properties of another company by lifting/piercing the corporate veil as has been done in the present case. The judgment supra of this court is also i .....

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orate veil. Mention may also be made to Regional Provident Fund Commissioner Vs. ABS Spinning Orissa Ltd. MANU/SC/8103/2008 where a holding company was held to be not liable for provident fund dues of its subsidiary. 16. In my view, corporate veil can be lifted either where it is permitted by a statute or where it is contractually so agreed or under the common law. 17. The question is not whether the corporate veil can be pierced or not. It definitely can be. There is also .....

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Third Schedules of the Income Tax Act, in my opinion, neither provides for corporate veil to be pierced nor empowers the authorities under PF Act to lift corporate veil to recover the dues of one company from another. Lifting of corporate veil entails adjudication of facts and which I do not find the authorities under the PF Act to be empowered to do. Merely because Rules 82 and 83 afford protection to authorities under PF Act as available to judicial officers and vest in the said authorities p .....

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fting of corporate veil under the common law cannot be by the authorities under the statute and can be only by the Courts. To me it prima facie appears that the petitioner, if desirous of lifting corporate veil, will have to approach the Civil Court. The Bombay High Court in Oil and Natural Gas Corporation Ltd. Vs. Jindal Drilling and Industries Limited MANU/MH/0735/2015 and in Wind World (India) Limited Vs. Enercon GmbH MANU/MH/0411/2016 has held that Arbitral Tribunal has no power to lift the .....

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al question or to render a final view on the said aspect, being of the view that the present petition is liable to the dismissed for other reasons. 19. Piercing of corporate veil, even if permitted to the petitioner / its Recovery Officer, has to be in public interest. I am of the view that it is not in the larger public interest to stall any further the auction scheduled for today by the respondent no.1 Bank. 20. It cannot be lost sight of that the dues for recovery where .....

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