TMI Blog2017 (4) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 M/s.Safari Apparel Pvt. Ltd. (respondent No.2). 2. The facts in brief are:- 2.1 The petitioner is a Nationalized Bank, which had given various credit facilities to respondent No.2 company and respondent Nos.3 to 5, being Directors, had stood as guarantors to such credit facilities. 2.2 To secure such credit facilities, the respondent Directors had executed guarantees in favour of the Bank and had also created equitable mortgage on certain immovable properties. 2.3 On account of serious defaults 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. The issue of priority of claim came to be extensively considered by Full Bench of the Apex Court in the case of Central Bank of India Vs. State of Kerala Ors ., reported in (2009) 4 SCC, 94 . In the said judgment, the Apex Court was considering whether Section 38C of of Bombay Sales Tax Act, 1959 and Section 26B of Kerala General Sales Tax Act, by which first charge is created 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 Act, 1952 ( the EPF Act for short). After considering the judgment of Division Bench of Kerala High Court on the point of precedence of EPF Act, where Section 11(2) creates first charge, the Apex Court held as under:- 126.While enacting the DRT Act and Securitisation Act, Parliament was aware of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 legislation intended to protect the interest of a weaker section of the society, i.e., the workers employed in factories and other establishments, it is imperative for the courts to give a purposive interpretation to the provisions contained therein keeping in view the Directive Principles of State Policy embodied in Articles 38 and 43 of the Constitution. In this context, we may usefully notice the following observations made by Krishna Iyer, J. in Organo Chemical Industries v. Union of India (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 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he section makes it clear that the amount due is required to be paid in priority to all other debts. Any doubt on the width and scope of Section 11 qua other debts is removed by the use of expression `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 time when a debt is created in respect of the assets of the establishment, the dues payable under the Act would always remain first charge and shall be paid first out of the assets of the establishment notwithstanding anything contained in any other law for the time being in force. It is, therefore, reasonable to take the view that the statutory first charge created on the assets of the establishment by sub-section (2) of Section 11 and priority given to the payment of any amount due from an employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Recovery of Debts due to Banks and Financial Institutions Act provides for a period of 180 days for disposal of recovery applications, the cases are pending for many years due to various adjournments and prolonged hearings. In order to facilitate expeditious disposal of recovery applications, it has been decided to amend the said Acts and also to make consequential amendments in the Indian Stamp Act, 1899 and the Depositories Act, 1996. 3. The amendments proposed in the Recovery of Debts due to Banks and Financial Institutions Act, 1993 inter alia, include (i) expeditious adjudication of recovery applications (ii) electronic filing of recovery applications, documents and written statements; (iii) priority to secured creditors in repayment of debts; (iv) debenture trustees as financial institutions; (v) empowering the Central Government to provide for uniform procedural rules for conduct of proceedings in the Debts Recovery Tribunals and Appellate Tribunals. 7. 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 rate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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