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INDIAN OVERSEAS BANK Versus EMPLOYYES PROVIDENT FUND ORGANIZATION AND 4

2017 (4) TMI 875 - GUJARAT HIGH COURT

Attachment of immovable properties ordered by PF organization - priority over the dues - Secured creditors (Banks) or PF organization - Held that:- Inclusion of Section 31B does not change the position insofar as primacy of claim under the provisions of the EPF Act is concerned. The mention of Government dues which would include revenues, taxes, cesses and rates due to the Central Government, State Government or local authority would not take into its fold, the first charge created by operation .....

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9 of 2017 - Dated:- 10-4-2017 - MR. ANANT S. DAVE AND MR. A.Y. KOGJE, JJ. FOR THE PETITIONER : MR ANIP A GANDHI, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE A.Y. KOGJE) 1. This petition is filed under Articles 226 and 227 of the Constitution of India challenging the decision of respondent No.1-Employees Provident Fund Organization (hereinafter to be referred as the PF organization ) dated 09.08.2016, whereby the PF organization had ordered attachment of immovable properties belonging to one .....

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ts and irregularities in repayment against the credit facilities, account of respondent No.2 was classified as non-performing account on 31.07.2009. 2.4 The petitioner Bank, therefore, under the provisions of the SARFAESI Act, 2002 issued notice under Section 13(2) of the Act on 05.10.2009, whereby demand of ₹ 5,17,87,035/- was made. 2.5 The petitioner-Bank attempted to take over possession of the mortgaged and hypothicated properties, but as handing over of the peaceful possession was res .....

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respondent No.2, admeasuring 6227 sq. mtr. with shed and machinery located in plot No.17/18 bearing revenue survey No.92 and other of village Sachin, Tal. Choryashi, Dist. Surat. 2.8 The impugned order of attachment of immovable properties issued by the respondent PF organization was also in respect of the very same properties and therefore, claim of the petitioner was to claim priority over the properties to satisfy its debts over the claim of PF dues. 3. It is in this regard, the present peti .....

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fact that in connection with the property in question, there exists legally enforceable decree, the respondent PF organization ought not to have passed the order without prior hearing of the petitioner-Bank as some interest is already created in its favour. 4.1 He has referred to a judgment of Full Bench of Madras High Court in the case of The Assistant Commissioner (CT) Vs. The Indian Overseas Bank & Anr. in Writ Petition No.2675 of 2011 and cognate matters to substantiate his argument tha .....

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ed on the property of a person who is liable to pay sales tax, are in consistent with the provisions of DRT Act, 1993 and SARFAESI Act, 2002 for enforcement of security interest and whether by virtue of non obstante clause in relevant Section of the DRT and Securitisation Act will have primacy over the said legislations, were considered. The Apex Court proceeded to not only consider the Sales Tax Act but also several other Acts including the Employees Provident Funds and Miscellaneous Provisions .....

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the property of the borrower, then it would have incorporated a provision like Section 529A of the Companies Act or Section 11(2) of the EPF Act and ensured that notwithstanding series of judicial pronouncements, dues of banks, financial institutions and other secured creditors should have priority over the State's statutory first charge in the matter of recovery of the dues of sales tax, etc. However, the fact of the matter is that no such provision has been incorporated in either of these .....

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similar to those contained in Section 14A of the Workmen's Compensation Act, 1923, Section 11(2) of the EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25(2) of the Mines and Minerals (Development and Regulation) Act, 1957, Section 30 of the Gift-Tax Act, and Section 529A of the Companies Act, 1956 would have been incorporated in the DRT Act and Securitisation Act. 130. Undisputedly, the two enactments do not contain provision similar to Workmen's Compensation Act, etc. In .....

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te qua or affect the proceedings initiated by banks, financial institutions and other secured creditors for recovery of their dues or enforcement of security interest, as the case may be. 5.1 In a subsequent decision also in the case of Maharashtra State Cooperative Bank Limited Vs. Assistant Provident Fund Commissioner & Ors., reported in (2009) 10 SCC, 123, the Apex Court was directly dealing with the subject and has held in paras-30 and 31 as under:- 30. Since the Act is a social welfare .....

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1979) 4 SCC 573: "28. The pragmatics of the situation is that if the stream of contributions were frozen by employers' defaults after due deduction from the wages and diversion for their own purposes, the scheme would be damnified by traumatic starvation of the Fund, public frustration from the failure of the project and psychic demoralisation of the miserable beneficiaries whey they find their wages deducted and the employer get away with it even after default in his own contribution a .....

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filled by the employer collecting, by deducting from the workers' wages, completing it with his own equal share and duly making over the gross sums to the Fund. If the employer neglects to remit or diverts the moneys for alien purposes the Fund gets dry and the retirees are denied the meagre support when they most need it. This prospect of destitution demoralises the working class and frustrates the hopes of the community itself. The whole project gets stultified if employers thwart contrib .....

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achieve the object of the treaty. 41. A policy-oriented interpretation, when a welfare legislation falls for determination, especially in the context of a developing country, is sanctioned by principle and precedent and is implicit in Article 37 of the Constitution since the judicial branch is, in a sense, part of the State. So it is reasonable to assign to "damages" a larger, fulfilling meaning." 31. We shall now consider the question whether the provision contained in Section 11 .....

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all other debts' in both the sub-sections. This would mean that the priority clause enshrined in Section 11 will operate against statutory as well as non-statutory and secured as well as unsecured debts including a mortgage or pledge. Sub-section (2) was designedly inserted in the Act for ensuring that the provident fund dues of the workers are not defeated by prior claims of secured or unsecured creditors. This is the reason why the legislature took care to declare that irrespective of tim .....

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er will operate against all types of debts. 5.2 Similarly, in a later judgment in the case of Maharashtra State Cooperative Bank Limited Vs. Kannad Sahakari Sakhar Karkhana Limited & Ors., reported in (2014) 14 SCC, 456, again dealing with the provisions of the EPF Act, the Apex Court reiterated the law laid down in the case of Maharashtra State Cooperative Bank Limited Vs. Assistant Provident Fund Commissioner & Ors (supra) and held in para-10 as under:- 10. The provisions of the Essent .....

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t have any bearing on the correct interpretation of Section 11 of the 1952 Act. Therefore, we cannot ignore the ratio of the three-Judge Bench judgment by entertaining a wholly untenable argument advanced by the learned counsel for the petitioner. 6. Section 31B of the RDDB Act reads as under:- "31B. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which se .....

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as under:- The Recovery of Debts due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, were enacted for expeditious recovery of loans of banks and financial institutions. Presently, there are approximately seventy thousand cases pending in Debts Recovery Tribunals. Though the Recovery of Debts due to Banks and Financial Institutions Act provides for a period of 180 days for disposal of recov .....

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