1. Recovery of provident fund dues — Conflict between statutory priority under the PF Act and secured creditors' charges under the SARFAESI Act. (Para 2 , 3 )
Back
Next 
2025 Supreme(SC) 1269
SUPREME COURT OF INDIA
VIKRAM NATH, SANJAY KAROL, SANDEEP MEHTA, JJ.
M/S Edelweiss Asset Reconstruction Limited - Appellants
Versus
Regional Pf Commissioner II And Recovery Officer, RO Bengaluru (Koramangala) & Anr. – Respondents
Civil Appeal No. 11105 2025 (Arising Out Of SLP(Civil) No. 11069 of 2024)
Decided On : 26-08-2025
Advocates appeared:
For the Petitioner(s): Mr. Shivendra Singh, AOR
For the Respondent(s): Mr. Dushyant Parashar, AOR Mr. Manu Parashar, Adv. Mr. Dinesh Pandey, Adv. M/S. Dua Associates, AOR Mr. Jaskaran Singh Bhatia, Adv.
For the Petitioner(s): Mr. Shivendra Singh, AOR
For the Respondent(s): Mr. Dushyant Parashar, AOR Mr. Manu Parashar, Adv. Mr. Dinesh Pandey, Adv. M/S. Dua Associates, AOR Mr. Jaskaran Singh Bhatia, Adv.
The judgment addresses the conflict between the priority of provident fund dues under Section 11(2) of the PF Act and secured creditors' rights under Section 35 of the SARFAESI Act, remanding the matter to determine which charge takes precedence over auctioned property proceeds.
Headnote:(A) Employees Provident Fund and Miscellaneous Provisions Act, 1952 - Section 11(2) - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 35 - Appeal against dismissal of writ petition regarding recovery of provident fund dues from auction proceeds - High Court directed transmission of fund to EPFO without examining priority of claims. (Paras 11, 12)
(B) The court emphasized that all parties must be heard concerning the priority of charges over auctioned properties, stressing the need for fairness in determining debt recovery order. (Paras 6, 12)
(C) The appellant argued for proportional recovery from Axis Bank post-sale of properties, asserting the EPFO’s first charge, which was contested by the Bank. (Paras 4, 5)
Facts of the case:
The appeal arose after the Karnataka High Court dismissed a writ petition challenging EPFO's right to recover dues which had not been adequately considered amidst the competing claims from Axis Bank and other financial institutions.
Findings of Court:
The court concluded it was essential for the High Court to reassess the claims concerning the priority of charge before allowing recovery.
Issues: The key issue involved the determination of the priority of the EPFO relative to Axis Bank regarding the recovered sale proceeds.
Ratio Decidendi: The judgment highlighted the necessity of determining the order of priority among creditors, particularly in light of statutory provisions asserting EPFO's rights over provident fund dues.
Result: Appeal allowed; writ petition restored for fresh consideration.
Legal Category Hierarchy
Table of Contents
2. Whether statutory dues under the PF Act prevail over secured charges under the SARFAESI Act and whether recovery should be proportionate among creditors. (Para 4 , 5 , 6 , 9 , 10 )
3. The High Court must determine the priority of charge between the EPFO and secured creditors by analyzing Section 11(2) of the PF Act and Section 35 of the SARFAESI Act. (Para 11 , 12 )
4. The priority of charge between statutory dues under the PF Act and secured creditors under the SARFAESI Act requires a detailed judicial examination of the respective statutes. (Para 11 )
5. Appeal allowed — Impugned order set aside — Writ petition restored for fresh adjudication after impleading the secured creditor. (Para 12 , 13 )
6. What is the legal conflict regarding the priority of recovery between the EPFO and secured creditors?
The conflict arises between the priority claimed by the EPFO under Section 11(2) of the PF Act and the first charge claimed by secured creditors under Section 35 of the SARFAESI Act. (Para 6 , 9 , 11 )
7. Why did the court remand the matter back to the High Court for fresh adjudication?
The court held that the High Court must first determine the priority of charge between the EPFO and the secured creditors, which necessitated impleading the secured creditor to ensure all parties were heard and pleadings exchanged. (Para 11 , 12 , 13 )
JUDGMENT :
VIKRAM NATH, J.
1. Leave granted.
2. The present appeal assails the correctness of the judgment and order dated 01.02.2024 passed by the Karnataka High Court in Writ Petition No.2543 of 2023 (L-PF), whereby the High Court dismissed the writ petition filed by the present appellant and further directed that the amount deposited, vide order dated 02.02.2023, be transmitted to the account of the respondent no.1 herein, i.e., the sole respondent before the High Court. Brief facts giving rise to the present appeal are narrated hereunder:
2.1. M/s Acropetal Technologies Pvt. Ltd. (hereinafter referred to as the 'Establishment') was covered under the ambit of EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT , 19521.[For short, “PF Act”]. The Establishment defaulted in payment of provident fund dues since July, 2013 and accordingly an enquiry was initiated under Section 7(A) of the PF Act. After due enquiry and affording opportunity of hearing to the Establishment, the Regional Provident Fund Commissioner-II, Bangalore, vide order dated 08.06.2015, determined a liability of Rs.1,28,90,486/- against the Establishment and accordingly directed it to deposit the same within 15 days. The order further indicated that any default or failure may entail prosecution under Section 14/14(A) of the PF Act in addition to recovery proceedings under Section 8(B) to 8(G) of the PF Act. It was also clarified that the above quoted amount did not include the interest and the damages under Sections 7(Q) and 14(B) of the PF Act.
2.2. The Establishment, vide communication dated 29.06.2015, informed that all its bank loan accounts with the Bank had been declared NPA (Non-Performing Asset) and that the Banks had initiated recovery process by auctioning their property. It was also mentioned in the said communication that Axis Bank Ltd. had initiated recovery process for auction of their property at 255- B in Bommasandra Industrial Area, Attibele Hobli, Anekal Taluk, Bangalore (hereinafter referred to as the 'Attibele property'). The communication further mentioned that the auction date fixed by the Bank was 29.07.2015 and also that they would have sufficient balance after settling the bank loan and accordingly would address the statutory dues from the sale amount.
2.3. It further requested the Employees’ Provident Fund Organisation2[In short, “EPFO”] to communicate to the Axis Bank Ltd. for making payment directly to them towards the dues. Upon receipt of the aforesaid communication, the EPFO, vide letter dated 08.07.2015, addressed to the Axis Bank Ltd. referring to Section 11(2) of the PF Act and the judgment of this Court in the case of Maharashtra State Co-operative Bank vs. Assistant PF , Commissioner asked the Bank to remit a total amount of Rs.2,96,76,656/- as outstanding dues on 08.07.2015 by way of Demand Draft in favour of Regional Provident Fund, Commissioner payable at Bangalore out of the sale proceeds of the auction scheduled on 29.07.2015.
2.4. The Axis Bank in response, vide letter dated 20.07.2015, claimed first charge by referring to Section 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20023[In short “SARFAESI Act”]. Immediately, on 23.07.2015, the EPFO re-asserted its priority under Section 11(2) of the PF Act and further issued an order of attachment of the immovable property i.e. the 'Attibele property'.
2.5. The EPFO issued a reminder dated 06.08.2015 to the Axis Bank which in response issued a communication informing that the auction could not take place as the same was stayed by an order of status quo passed by the High Court of Karnataka. The EPFO demanded a copy of the stay order, vide its communication dated 14.08.2015. Again, vide communication dated 02.09.2015, the EPFO requested for copy of the stay order.
2.6. The writ petition apparently was disposed of some time in October/November 2015 whereafter, again communications started flowing between EPFO and Axi
