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2017 Supreme(Guj) 731
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Anant S. Dave and Alpesh Y. Kogje, JJ.
Indian Overseas Bank - Appellants
Vs.
Employees Provident Fund Organization and Ors. - Respondent
Special Civil Application No. 4879 of 2017
Decided On : 10-04-2017
For the Appellant : Anip A. Gandhi
Headnote:
Constitution of India , Article 226 and 227 –Petition is filed under Articles 226 and 227 of the Constitution of India challenging the decision of respondent No. 1-Employees Provident Fund Organization whereby the PF organization had ordered attachment of immovable properties belonging to one M/s. Safari Apparel Pvt. Ltd. (respondent No. 2) –Petitioner is a Nationalized Bank given various credit facilities to respondent No. 2 - company and respondent Nos. 3 to 5, being Directors, had stood as guarantors to such credit facilities –Held, Amendments proposed in the Recovery of Debts due to Banks and Financial Institutions Act, 1993 inter alia, include (i) expeditious adjudication of recovery applications (ii) electronic filing of recovery applications, documents and written statements; (iii) priority to secured creditors in repayment of debts; (iv) debenture trustees as financial institutions; (v) empowering the Central Government to provide for uniform procedural rules for conduct of proceedings in the Debts Recovery Tribunals and Appellate Tribunals –Change the position insofar as primacy of claim under the provisions of the EPF Act is concerned. The mention of Government dues which would include revenues, taxes, cesses and rates due to the Central Government, State Government or local authority would not take into its fold, the first charge created by operation of law in the form of Section 11(2) of the EPF Act –Petition is dismissed.
Anant S. Dave, J.
1. This petition is filed under Articles 226 and 227 of the Constitution of India challenging the decision of respondent No. 1-Employees' Provident Fund Organization (hereinafter to be referred as "the PF organization") dated 09.08.2016, whereby the PF organization had ordered attachment of immovable properties belonging to one M/s. Safari Apparel Pvt. Ltd. (respondent No. 2).
2. The facts in brief are:-
2.1 The petitioner is a Nationalized Bank, which had given various credit facilities to respondent No. 2 - company and respondent Nos. 3 to 5, being Directors, had stood as guarantors to such credit facilities.
2.2 To secure such credit facilities, the respondent-Directors had executed guarantees in favour of the Bank and had also created equitable mortgage on certain immovable properties.
2.3 On account of serious defaults and irregularities in repayment against the credit facilities, account of respondent No. 2 was classified as non-performing account on 31.07.2009.
2.4 The petitioner Bank, therefore, under the provisions of the SARFAESI Act, 2002 issued notice under Section 13(2) of the Act on 05.10.2009, whereby demand of Rs. 5,17,87,035/- was made.
2.5 The petitioner-Bank attempted to take over possession of the mortgaged and hypothecated properties, but as handing over of the peaceful possession was resisted by the respondent-Company and its Directors, the petitioner-Bank took over symbolic possession of such mortgaged and hypothecated immovable properties on 20.03.2010.
2.6 The petitioner-Bank thereafter filed OA No. 172 of 2010 before the Debts Recovery Tribunal-II, Ahmedabad for issuance of recovery certificate under the provisions of the RDDB Act. The said OA came to be decreed in favour of the petitioner-Bank.
2.7 The properties mortgaged to the petitioner-Bank included factory premises of respondent No. 2, admeasuring 6227 sq. mtr. with shed and machinery located in plot No. 17/18 bearing revenue survey No. 92 and other of village Sachin, Tal. Choryashi, Dist. Surat.
2.8 The impugned order of attachment of immovable properties issued by the respondent PF organization was also in respect of the very same properties and therefore, claim of the petitioner was to claim priority over the properties to satisfy its debts over the claim of PF dues.
3. It is in this regard, the present petition is filed.
4. Learned Advocate for the petitioner, relying upon Section 31B of the RDDB Act, 1993, claimed priority over the dues of the respondent PF organization. He submitted that Section 31B clearly prescribes that the right of the secured creditor to realize its debts by sale of assets, over which security interest is created, shall have priority over all other debts and Government dues and therefore, the impugned order of attachment cannot sustain. He also submitted that in view of the fact that in connection with the property in question, there exists legally enforceable decree, the respondent PF organization ought not to have passed the order without prior hearing of the petitioner-Bank as some interest is already created in its favour.
4.1 He has referred to a judgment of Full Bench of Madras High Court in the case of The Assistant Commissioner (CT) Vs. The Indian Overseas Bank & Anr. in Writ Petition No. 2675 of 2011 and cognate matters to substantiate his argument that the dues as mentioned in Section 31B of the RDDB Act shall have priority over all other dues and Government dues.
5. The issue of priority of claim came to be extensively considered by Full Bench of the Apex Court in the case of Central Bank of India Vs. State of Kerala & Ors., reported in (2009) 4 SCC, 94. In the said judgment, the Apex Court was considering whether Section 38C of Bombay Sales Tax Act, 1959 and Section 26B of Kerala General Sales Tax Act, by which first charge is created on the property of a person who is liable to pay sales tax, are in consistent with the provisions of DRT Act, 1993 and SARFAESI Act, 2002 for enforcement of secur
