Amounts due for Provident Fund contributions have precedence over other debts and are deemed first charge on the assets of the establishment, even if procedural violations occur in the sale process.

JUDGMENT :

(Ravi Cheemalapati, J.)

Challenging the orders dated 25.03.2014 passed by learned Single Judge in Writ Petition No.29185 of 2011; the writ petitioner filed this writ appeal.

2. Through the orders impugned in this writ appeal, the writ petition filed to declare the action of respondent nos. 3 & 4 in selling the property of the petitioner company to respondent no.6 as illegal and void and to direct respondent no.5 to cancel the Registration Endorsement viz., Document No.3, Book No.1, year 2011, dated 05.09.2011; was disposed of, rejecting the relief sought by the petitioner with a direction to the EPFO to approach BIFR duly intimating the sale of petitioner company assets, seek its ratification for appropriation of the sale proceeds towards PF dues of petitioner company and with a further direction to BIFR to undertake required formalities to ratify the action of EPFO.

3. The facts that are necessary for the purpose of determination of the issue involved in this writ appeal, in brief, are as follows:

(a) Since the petitioner company went into losses, the Board for Industrial and Financial Reconstruction (BIFR) initiated proceedings in case No.95/95 and by order dated 21.06.2000 recommended for winding up of the company in accordance with Section 20(1) of the Sick Industrial companies (Special Provisions) Act, 1985 (‘SICA’). The company appeal No.172 of 2000 preferred by the petitioner was dismissed on 12.01.2001 and the writ petition filed challenging the said order was dismissed for non-prosecution on 19.03.2009. So far no orders winding up the petitioner company as recommended by BIFR were passed.

(b) Consequent to failure of Employees Provident Fund contribution of its employees, which was determined at Rs.60,21,000/- inclusive of interest and damages; the property of the petitioner company in an extent of Ac.12- 31 cents was attached vide orders dated 28.03.2007 and an extent of Ac.4-89 cents out of the land attached was sold in open auction, wherein respondent no.6 stood as highest bidder at Rs.64,50,000/- and later the sale was confirmed, sale certificate was issued to respondent no.6 and the same was registered by respondent no.5 on 05.09.2011.

(c) Thereafter, the petitioner filed writ petition.

(d) The learned single Judge, though held that there was infraction of the procedure contemplated under Section 20(4) of the SICA; however considering the circumstances such as, the petitioner failed to demonstrate as to how the auction conducted by BIFR in violation of Section 20(4) of the SICA has invaded judicially enforceable right vested in him; Section 11 of the Employees Provident Fund Act (‘EPF Act’) and Section 530(1) of the Companies Act envisage that the amount due towards contribution to the provident fund shall have precedence over the other debts and shall be deemed to be the first charge on the assets of the establishment; further upsetting the sale held and confirmed in the year 2011 at this length of time would adversely affect the interest of the bonafide purchaser, who had parted with huge sum towards sale price; and as there is no record to show that liabilities of petitioner company towards Provident Fund Contributions were placed before BIFR and that Employees Provident Fund Organization (FPFO) was appraised that sale of assets of the company can be conducted by BIFR alone in view of Section 20(4) of SICA; disposed of the writ petition as indicated in para-2 of this judgment. Assailing the same this writ appeal has been preferred by the liquidator representing the writ petitioner company.

4. Heard Sri P.Kamalakar, learned counsel for the appellant, and Sri T.Balaji, learned Standing Counsel for Employees Provident Fund.

5. Sri P.Kamalakar, learned counsel, while reiterating the contents of the writ affidavit and grounds of Writ Appeal, would further contend that since Provident Fund Commissioner was added as respondent no.11 before BIFR and liability of the petitioner company towards PF contributions was par