2005 Supreme(Cal) 401

High Court Of Calcutta
D. K. SETH, PINAKI CHANDRA GHOSH, SOUMITRA PAL
DALGAON AGRO INDUSTRIES LIMITED (NOW KNOWN AS TASATI TEA LIMITED) - Appellant
Versus
UNION OF INDIA - Respondent
W. P. 16037 (W) Of 2003
Decided On : 06/24/2005

The liability accrues as soon as the default is committed, not on the determination thereof under Section 14-B. The liability being a statutory liability yet to be quantified was existing on the date of transfer. Such liability might be more or less reduced or waived but even then subject to determination for quantifying the liability that existed. If such liability existed on the date of transfer in that event the same was definitely covered under Section 17-B.

Headnote:

EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 - SECTION 14-B - SECTION 17-B - TRANSFER OF ESTABLISHMENT - LIABILITY OF TRANSFEREE - JOINT AND SEVERAL LIABILITY - DAMAGES FOR DEFAULT - SCOPE OF SECTION 17-B - MEANING OF 'OTHER SUMS DUE' - WHETHER INCLUDES DAMAGES - DISTINCTION BETWEEN 'EMPLOYER' AND 'TRANSFEREE' - APPLICABILITY OF SECTION 17-B TO SECTION 14-B - RATE OF DAMAGES - APPLICABILITY OF AMENDED PROVISIONS - OPPORTUNITY OF HEARING TO TRANSFEREE FOR PRE-TRANSFER LIABILITY - WHETHER FUTILE - VIOLATION OF NATURAL JUSTICE - PRINCIPLES OF INTERPRETATION - STATUTORY LIABILITY - WHETHER CAN BE BRUSHED ASIDE ON GROUND OF NATURAL JUSTICE.

Fact of the Case:

Two matters were referred to a larger Bench in relation to the liability of a transferee of an establishment in relation to damages contemplated under Section 14-B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (1952 Act) in respect of defaults committed by the transferor/employer before the date of transfer in view of the expressions used in Section 17-B of that Act imposing joint liability upon both the transferor and the transferee. In both the cases the respective establishment was transferred pursuant to certain agreement which includes a condition that the transferee shall not be liable for any dues under the 1952 Act in respect of the period prior to the date of transfer arising after the date of transfer not known or determined on the date when the transfer was effected.

Finding of the Court:

The Court held that on transfer, whether voluntary or involuntary under a sanctioned scheme framed by the Court, the statutory liabilities remain unaffected; Section 17-B creates a fiction making the other person, the transferee jointly and severally liable even in respect of other sum due prior to the period of transfer; the expression 'contribution' and 'other sum due' under any provision of the Act etc employed in Section 17-B includes damages for default contemplated under Section 14-B being other sum due under Section 17-B of the provisions of the 1952 Act; the limitation of the liability in the proviso to Section 17-B to the extent of the assets received by the other person, the transferee on transfer is a limitation with regard to the liability of the transferee and it does not indicate the exception to the liability of the transferee for pre-transfer dues becoming the joint and several liability of the transferor and the transferee; the liability is that of the establishment irrespective of who the owners from time to time may be; in case of transfer that the transferee would be liable to the extent of the assets received on transfer by him and by reason thereof he cannot be proceeded against for the balance if any as against his personal assets when it would be the exclusive liability of the past employer, who can be proceeded against for recovery of the balance as regards the assets of the transferor; the transferee can very well be asked to explain a pre-transfer default in relation to the scope of Section 14-B which is confined only to the determination of the default and the period during which the default continued; save and except the same nothing requires to be explained [Hindustan Times (supra)] and as such the proviso would not be futile for the transferee who can explain the same from the records of the establishment supposed to be available with him; in case it is not so available in that event even without the transfer the employer would not have been able to explain, and in such eventuality the principles laid down in the decision in Organo Chemicals (supra) would apply; the damages imposed under Section 14-B is imposed on the transferor even then it would be a sum due recoverable from the establishment and can be recovered from the assets of the establishment at the hands of the transferee though not against the assets of the transferee or in other words no recovery could be effected in respect of the pre-transfer liability from any asset other than those of the establishment received on transfer and the liability of the transferee is limited only to that extent and not beyond.

Issues: Whether a transferee would be liable for the damages jointly and severally in respect of defaults committed prior to the date of transfer by reason of Section 17-B. Whether in terms of the provisions contained in Section 17-B, the amount recoverable under Section 14-B is a sum due under the provisions of the 1952 Act. Whether the provisions imposing liability joint and several on the transferee by reason of Section 17-B can be said to offend the principle of natural justice or unconscionable and a factor for construing the effect thereof in relation to pre-transfer default differently.

Ratio Decidendi: The liability accrues as soon as the default is committed, not on the determination thereof under Section 14-B. The liability being a statutory liability yet to be quantified was existing on the date of transfer. Such liability might be more or less reduced or waived but even then subject to determination for quantifying the liability that existed. If such liability existed on the date of transfer in that event the same was definitely covered under Section 17-B. Simply because the expression 'person' has been used to denote a transferee the liability cannot be avoided on the ground that it was the liability of the employer at a point of time when the transferee was a person by reason of the expression so employed in Section 17-B.

Final Decision: The Court answered the question referred to it in the following manner: (1) A transferee would be liable for the damages jointly and severally in respect of defaults committed prior to the date of transfer by reason of Section 17-B. (2) In terms of the provisions contained in Section 17-B, the amount recoverable under Section 14-B is a sum due under the provisions of the 1952 Act. (3) The provisions imposing liability joint and several on the transferee by reason of Section 17-B cannot be said to offend the principle of natural justice or unconscionable and a factor for construing the effect thereof in relation to pre-transfer default differently.