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2014 Supreme(Cal) 727
High Court of Judicature at Calcutta
JYOTIRMAY BHATTACHARYA & TAPASH MOOKHERJEE, JJ.
The Assistant Provident Fund Commissioner, CC-I, Employees’ Provident Fund Organisation & Another
Versus
M/s. Biswamata Heemghar Private Limited & Another
M.A.T.No. 1484 of 2013 with C.A.N.No. 10380 of 2013 (Appellate Side)
Decided on: 11-12-2014
For the Appellants:S.C. Prasad, Advocate.
For the Respondents:Sisir Kumar Bhowmick, Sailesh Gupta, Advocates.
The EPF authorities cannot lift the corporate veil and make inquiries under Section 13 of the Act without conducting a valid inquiry to ascertain the applicability of the Act to the establishment in question.
Headnote:
EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 - SECTION 13 - SCOPE AND APPLICABILITY - INTERPRETATION OF SECTION 13 - LIFTING OF CORPORATE VEIL - VALIDITY OF SHOW CAUSE NOTICE - The court interpreted Section 13 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, which empowers the EPF authorities to conduct inquiries and lift the corporate veil to determine compliance with the Act. The court held that the show cause notice issued by the EPF authorities was invalid as it prejudged the issue without conducting a valid inquiry to ascertain the applicability of the Act to the respondent company.
Fact of the Case:
The Employees' Provident Funds authorities issued a show cause notice to M/s. Biswamata Heemghar Private Limited, alleging that it was carrying on the same business as the previous company, Biswamata Cold Storage Private Limited, which had defaulted on its statutory liabilities under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The respondent company challenged the show cause notice, arguing that it had acquired the assets of the previous company through an auction and was not liable for its liabilities.
Finding of the Court:
The court held that the show cause notice was invalid as it prejudged the issue without conducting a valid inquiry to ascertain the applicability of the Act to the respondent company.
Issues: 1. Whether the EPF authorities could lift the corporate veil and make inquiries under Section 13 of the Act without conducting a valid inquiry to ascertain the applicability of the Act to the respondent company. 2. Whether the show cause notice issued by the EPF authorities was valid.
Ratio Decidendi: 1. Section 13 of the Act has two parts: the first part authorizes EPF authorities to conduct inquiries to ascertain whether the provisions of the Act are applicable to any establishment, and the second part prescribes follow-up actions if the establishment is found to be covered by the Act. 2. The impugned show cause notice suggested that the authority had already prejudged the issue, which was not permissible in law. 3. The EPF authority is given the liberty to conduct a fresh inquiry into the matter strictly according to law and in the light of the observations made by the court.
Final Decision: The court dismissed the appeal filed by the EPF authorities and upheld the decision of the learned Single Judge quashing the show cause notice.
Tapash Mookherjee, J.
1. The Present mandamus appeal is directed against an order passed by the learned Single Judge, in Writ Petition No. 15480 (W) 2013. By the said order learned Single Judge quashed a notice dated April, 22, 2013 issued by the Respondent No. 2 in the Writ Petition, i.e., the Appellant No. 1 in this appeal upon the Respondent No.1/company in this appeal.
2. The facts leading to the present litigations, in short, are as follows:-
3. One Bishwamata Cold Storage Pvt Ltd had been running a business of Cold Storage. The company availed of loans of huge amount from West Bengal Financial Corporation by creating mortgage over the land, plants and machineries and other assets, by deposit of title deeds. Subsequently, the said company failed to repay those loans for which, the lender, i.e., the West Bengal Financial Corporation exercised their legal rights for the recovery of loan amount and during such process took over the possession of the mortgaged land and other hypothecated assets of the borrower company. Subsequently, the financial corporation put the aforesaid immovable and movable properties, in auction according, to law and in that auction M/s. Biswamata Heemghar Pvt Ltd, i.e., the Respondent No. 1 in this appeal purchased those properties, put in auction, and became the owner thereof. Now, it was the view of the Appellant that the purchase of the properties in question by the present Respondent No. 1 from the West Bengal Financial Corporation was a sham transaction and the Respondent No. 1/company has been continuing the business of Biswamata Cold Storage Pvt Ltd with all its rights and statutory liabilities. The Appellant authority, therefore, issued several notices upon the Respondent No. 1/company and thereby claimed the payment of all the statutory dues of the previous company under the provisions in The Employees’ Provident Funds and Miscellaneous provisions Act, 1952.
4. In reply, to all the aforesaid notices by the Appellant the Respondent No. 1 informed that the Respondent No. 1/company had been incorporated on 17th June, 2010 only and that they had purchased the assets of the previous company in auction and hence they had no liability to clear any statutory liability under The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 of the previous company, if any. It had been further pleaded by the Respondent No. 1/company that it was not covered under any provision of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and so it had no independent liability also under the aforesaid Act.
5. The Appellant not being impressed by the aforesaid pleas of the Respondent No. 1/company finally issued a ‘show cause’ notice dated 22.04.2013 upon the Respondent No. 1/company and thereby directed the Respondent No. 1/Company to submit statutory monthly and annual returns and remittance of P.F. and allied dues since March, 2009 to January, 2013of the Biswamata Cold Storage Pvt. Ltd. The Respondent No. 1/company has challenged the said notice in the present Writ Petition being No. 15480 (W) 2013. The parties appeared in the Writ Court and pleaded their respective cases and after hearing the parties and considering the relevant materials produced, the learned Single Judge, came to the conclusion that the ‘show cause’ notice in question, issued by the present Appellant was bad in law and hence learned Single Judge quashed and set aside the ‘show cause’ notice in question. Being aggrieved by and dissatisfied with such decision, the Employees’ Provident Funds authorities filed the present appeal.
6. Mr. Prasad, learned Advocate appearing for the appellant has argued that M/s. Biswamata Heemghar Private Limited the Respondent No. 1/company in this appeal is carrying on the same business which had been carried on previously by Biswamata Cold Storage Private Limited and the change of name is nothing but a camouflage to avoid the statutory liabilities under The Employees’ Provident F
