TMI Blog2002 (6) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinafter referred to as the company ) was running an industrial concern engaging employees and was covered by the provisions of the E.P.F. M.P. Act, 1952. The Company had obtained loans from the first respondent Corporation for the purpose of setting up its business. On 21.2.1997, it executed a loan agreement securing by mortgage certain immovable property belonging to it and by a deed of hypothecation certain movable properties. During the period March 1990 and December 1990 the Company committed default in payment of the contributions to the Employees Provident Fund under the E.P.F. M.P. Act. It also committed default in repayment of the loan which it had taken from the first respondent Corporation. The first respondent initiated proceedings under Section 29 of the State Financial Corporations Act, 1951 (hereinafter referred to as S.F.C. Act ) and took over all the movable and immovable assets of the Company on 18th November, 1991. On 20.12.1993, the movable assets were sold towards realisation of the debts due to the first respondent Corporation. A sum of ₹ 89,083/- is lying in the account of the said company with the second respondent Bank. A sum of ₹ 37,150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial concern. 7. The E.P.F. M.P. Act, 1952 is an Act to provide for the institution of Provident Fund, Pension Fund, Deposit Linked Insurance Fund etc. in factories and other establishments, to carry forward the constitutional mandate of rendering social justice to the working class. It is intended to give social security to industrial workers at the end of their careers. The E.P.F. M.P. Act requires every employer to deduct certain prescribed amounts from the wages payable to employees along with prescribed contribution by the employer and deposit such contributions in the Provident Fund. The Provident Fund is administered by the Central and Regional Provident Fund Commissioners, who are statutory authorities. What is of importance to us is that Section 11 of the E.P.F. M.P. Act declares the priority of payment of contribution under the Act over other debts. Sub-section (1) of Section 11 of E.P.F. M.P. Act deals with the question of priority where an employer is adjudicated insolvent or being a company subjected to an order of winding up. Sub-section (2) of Section 11 deals with other types of priorities and reads as under : 11(2). Without prejudice to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by the first respondent that, since the charge itself came into effect subsequently, the first respondent Corporation is a transferee for valuable consideration and, obviously, without notice of charge. For this reason, it is contended. that the first respondent's debts are to be first met out of the assets before the Provident Fund dues can be realised therefrom. These arguments have substantially been accepted by the learned single Judge for coming to the conclusion that the first respondent has a higher priority in the matter of realisation of its debts. 9. With regard to the argument based on Section 100 of the Transfer of Property Act, the matter is no longer res integra. In State Bank of Bikaner and Jaipur v. National Iron Steel Rolling Corporation Ors., (1995)2 SCC 19, this question came up specifically for consideration of the Supreme Court and the answer given by the Supreme Court is unmistakably against the first respondent. That was a case where the State Bank of Bikaner claimed priority over Sales Tax arrears due to the State on the ground that it was a secured creditor. Section 11-AAAA of the Rajasthan Sales Tax Act declares that any amount of tax, pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and effectively recover the amounts due by taking possession of the property of the defaulter instead of having resort to the cumbersome method of recovery through a court of law. While this was the law, Parliament amended Section 11 of the E.P.F. M.P. Act by specifically enacting sub-section (2) thereof, declaring that the amount due as contribution to the Employees Provident Fund has first charge on the assets of the establishment and that notwithstanding anything contained in any other law for the time being in force, it shall be paid in priority against all other debts. In fact the second facet of Section 11(2) of the E.P.F. M.P. Act goes one step further than what is provided in Section 46-B of S.F.C. Act. The reason for this is obvious. While the State Financial Corporation would have to be helped to recover the debts due to it from a defaulting debtor, the Provident Fund payable to workers is of greater moment, since it is a matter of terminal social security benefit made available by statute to the working class. Taking into consideration that E.P.F. M.P. Act is a social benefit legislation, and the evil consequences of Provident Fund dues being defeated by prior clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ialisation and to enable recovery of amounts advanced and the Companies Act was also an Act dealing with Companies including winding up such companies, the proviso to sub-section (1) of the Section 529 and Section 529-A being a subsequent enactment, the non obstante clause in Section 529-A prevails over Section 29 of the S.F.C. Act. Hence, the Supreme Court held that statutory right to sell the property under Section 29 of the S.F.C. Act had to be exercised with the rights of pari passu charge to the workmen specifically created by the proviso to Section 529 of the Companies Act. Under the proviso to sub-section (1) of the Section 529, the liquidator shall be entitled to represent the workmen to enforce the above pari passu charge. The judgment of the Company Court was upheld. While upholding the judgment of the Company Court, it was pointed out by the Supreme Court that State Financial Corporation could not stay outside the winding up proceedings. It was also held that Section 529-A of the Companies Act imposes upon the Company Court the duty to ensure that the workmen's dues are paid in priority to all other debts in accordance with the provisions of the above section. The Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, the reasoning advanced by the Supreme Court in A.P. State Financial Corporation (supra) is equally applicable to the case before us. Firstly, Section 11(2) of the E.P.F. M.P. Act is subsequent in point of time and, therefore, must be taken to be the latest manifestation of the intendment of the Parliament. Secondly, the social purpose behind the amendment of Section 11(2) is to protect the terminal social security dues of workmen, and therefore, needs to be given higher priority as intended by Parliament. 15. We are, therefore, of the view that the appellant shall be entitled to exercise his powers as a Recovery Officer for recovering the Provident Fund dues. Hence, the notices issued vide Exts. P1 and P3, and the orders at Exts. P4, P5(a), P5(b) and P5(c) were perfectly legal and justified. We are unable to accept the reasoning of the learned single Judge and conclusions arrived at on the inter se contest between the provisions of Section 46-B of the S.F.C. Act and Section 11(2) of the E.P.F. M.P. Act. 16. In the result, we set aside the judgment of the learned single Judge holding that the dues of the Employees Provident Fund have higher priority as against the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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