The EPF Act prioritizes workers' dues over all other liabilities, and prohibitory orders must comply with statutory inquiry procedures to protect employees' rights.

JUDGMENT:

N. J. JAMADAR, J.

1. Rule. Rule made returnable forthwith and, with the consent of the learned Counsel for the parties, heard finally.

2. This Petition under Article 227 of the Constitution of India assails the legality, propriety and correctness of a prohibitory order dated 22^nd August 2025 passed by the Assistant Provident Fund Commissioner / Recovery Officer, Nashik (R1), whereby the Petitioner has been restrained from making payment of the amount which the Petitioner owes to M/s Niphad Sahakari Sakhar Karkhana Ltd (R2), the employer or to any person whomsoever, except the Recovery Officer.

3. The background facts leading to this Petition can be stated in brief as under:

3.1 Niphad Sahakari Sakhar Karkhana (R2) was an employer. The employer committed default in payment of the provident fund and other dues. The Respondent No. 2 was in arrears of provident fund and other sums to the tune of Rs.2,52,17,137/-. Recovery certificates were issued.

3.2 Respondent No.2 had availed financial facilities from Nashik District Central Cooperative Bank Limited, Nashik (R3). In the wake of default in the discharge of the liabilities, the Respondent No.3 initiated action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) and took possession of the factory of the Respondent No.1 over which security interest was created (the establishment).

3.3 The Respondent No.3, with a view to make the factory functional, generate revenue and recover the loan amount, entered into a Lease Agreement dated 9^th December 2022 with the Petitioner. It was inter alia, agreed that factory would be leased out to the Petitioner for a term of 25 years commencing from the crushing season 2022-2023 and the Petitioner would pay the rent, at the agreed rate. Out of the said amount, the Respondent No. 3 lessor would utilise 50% of the amount towards the payment of the statutory dues and other liabilities of the Respondent No.2 and the balance 50% would be utilised to discharge liabilities of the Respondent No.2 to the bank (R3). The parties agreed for enhancement in the ratio of the amount to be utilised towards the recovery of the loan. It was further agreed that the statutory dues and the dues of the workmen would be paid by the lessor (R3).

3.4 On the strength Recovery Certificate, the Respondent No.1 addressed notices to the Petitioner calling upon the Petitioner to remit the amount of Rs. 2,52,17,137/- (vide Notice dated 27^th September 2023) under Section 17B of the Employees Provident Fund and Misc Provisions Act, 1952 (“EPF Act”), asserting that the transferee was jointly and severally liable to pay the contribution and other sums due from employer up to the date of the transfer. It seems that the Petitioner disputed the liability by filing Reply. The Respondent No.1, however, persisted with the demand.

3.5 Eventually by the impugned order dated 22^nd August 2025, the Respondent No.1 restrained the Petitioner from making payment of amount owed to the Respondent No.2, while simultaneously restraining the Respondent No.2 from receiving the amount payable by the Petitioner. It was, inter alia, contended that a certificate to recover the amount of Rs.4,91,31,464/- has been issued under Section 8-B of the EPF Act. The Petitioner was put to notice that, in the event of default, the said amount would be recovered from the Petitioner as the amount due from the Petitioner.

3.6 Being aggrieved the Petitioner has preferred this Petition.

4. I have heard Mr. Sanskar Marathe, the learned Counsel for the Petition