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2014 Supreme(Del) 2823
DELHI HIGH COURT
Vibhu Bakhru, J.
Vijaya Bank - Appellant
Versus
EPFO & Ors. - Resopndent
W.P.(C) 1726/2012 & CM No. 3811 of 2012
Decided On : 30-07-2014
For the Petitioner:Mr. Vaibhav Dang, Advocate.
For the EPFO :Mr. Rajesh Manchanda and Mr. Rajat Manchanda, Advocates.
The main legal point established is that the assets of guarantors cannot be proceeded against for recovery of dues of the borrower.
Headnote:
EPF Dues - Recovery of Assets - SARFAESI Act, 2002, EPF Act, 1952 - Section 13(4), Section 8B - Summary: The court addressed the issue of whether the subject properties of guarantors could be proceeded against for PF dues assessed as payable by the borrower. The court analyzed the provisions of the EPF Act and SARFAESI Act, emphasizing that the assets of guarantors cannot be proceeded against for recovery of dues of the borrower. The court set aside the impugned orders as they were without authority of law.
Fact of the Case:
The petitioner bank sought quashing of prohibitory and attachment orders issued by EPFO, restraining the bank from delivering certain immovable properties taken under SARFAESI Act. The controversy was whether the subject properties of guarantors could be proceeded against for PF dues assessed as payable by the borrower.
Finding of the Court:
The court found that the impugned orders were erroneous as the subject properties did not belong to the borrower but to the guarantors. The court emphasized that the assets of guarantors cannot be proceeded against for recovery of dues of the borrower.
Issues: The main issue was whether the subject properties of guarantors could be proceeded against for PF dues assessed as payable by the borrower.
Ratio Decidendi: The court held that the impugned orders were without authority of law as the assets of guarantors cannot be proceeded against for recovery of dues of the borrower.
Final Decision: The court allowed the writ petition and set aside the impugned orders, leaving the parties to bear their own costs.
1. The present writ petition has been filed by the petitioner Bank seeking quashing of two prohibitory orders dated 20.01.2012, whereby the petitioner Bank was restrained by respondent nos.1 & 2 (hereinafter collectively referred to as ‘EPFO’) from delivering certain immovable properties (Industrial Plot Nos. 44 & 45, Block-B, Sector 58, NOIDA), which the petitioner Bank had taken physical possession of under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the “SARFAESI Act”). The petitioner has also challenged an attachment order dated 20.01.2012 passed by the respondent nos.1 & 2 under Section 8B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the “EPF Act”).
2. Brief facts of the present case are that petitioner Bank had granted various credit facilities to one M/s Creative Home Fashions Pvt. Ltd/respondent No. 3 (hereinafter referred to as the ‘CHF’). The said credit facilities were secured by M/s G.K. Products Pvt. Ltd/respondent No. 4 (hereinafter referred to as the ‘GKP’) and M/s Well Computer Exim Pvt. Ltd/respondent No. 5 (hereinafter referred to as the ‘WCE’), who had stood as guarantors. GKP and WCE are hereinafter collectively referred to as ‘guarantors’. GKP and WCE also created equitable mortgage in favour of the petitioner, in respect of their immovable properties, i.e. Industrial Plot No. 44, Block-B, Sector 58, NOIDA and Industrial Plot No. 45, Block-B, Sector 58, NOIDA respectively. The said properties are hereinafter referred to as the ‘subject properties’.
3. The CHF defaulted in the repayment of the credit facility and the loan accounts of the CHF were declared as Non-Performing Assets (NPA). Thereafter, the petitioner bank issued a notice dated 02.12.2008 under Section 13(2) of the SARFAESI Act to CHF as well as to the guarantors demanding a sum of Rs. 29,12,40,939 alongwith interest. Since the said demand was not satisfied, the petitioner took measures under Section 13(4) of the SARFAESI Act and symbolic possession of the aforementioned subject properties was taken by the petitioner on 31.03.2009.
4. Subsequently, on 14.11.2011, the petitioner took over physical possession of the subject properties in question and invited bids for sale/auction of the said properties. Thereafter, the EPFO issued a letter dated 05.01.2012 to the petitioner whereby the EPFO informed that CHF has committed a default in payment of Provident Fund (PF) dues for a sum of Rs. 81,83,988/- till October 2011 and requested the petitioner not to take any action against the property and assets of CHF by way of sale/auction till the PF dues were recovered. The petitioner, by its letter dated 15.01.2012, clarified that CHF was not the owner of the mortgaged subject properties and the legal owners of the subject properties were the two guarantors i.e. GKP and WCE and therefore, the subject properties could not be attached for recovering the PF dues payable by CHF.
5. Thereafter, the EPFO issued an order dated 20.01.2012 (Order No. 15162) under Section 8B of the EPF Act to the petitioner thereby restraining the petitioner from delivering the said properties to any person till further orders. The EPFO then served another prohibitory order dated 20.01.2012 (being No. 55035) whereunder, the respondent stated that CHF is in default of PF dues to the tune of Rs. 2,93,82,088/- and again restrained the petitioner from delivering the said properties to any person till further orders. In pursuance to the said prohibitory orders, the EPFO issued an attachment order dated 20.01.2012, thereby attaching the subject properties mortgaged with the petitioner Bank. The petitioner has filed the present petition impugning the said prohibitory orders and the attachment orders (hereinafter collectively referred to as the ‘impugned orders’).
6. The controversy involved in the present peti
