The legislative urge to ensure recovery of provident fund dues and the inability to enforce the charge against the property mortgaged or hypothecated to the Corporation.

1. M/s. Darpan Electronics (Private) Limited owes Rs. 37,150/- towards its contribution to the Employees' Provident Fund and Rs. 15,95,693/- to the Kerala Stale Financial Corporation (the Corporation for short). The question for consideration in this petition under Art.226 of the Constitution of India is, whether, by virtue of Ss.29 and 46-B of the State Financial Corporations Act, 1951 ("the Act" for brevity), the Corporation has the overriding right to recover its debts from the assets of Darpan Electronics, notwithstanding the fact that under S.11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act ( "The Provident Fund Act" for the sake of brevity), the amount, of provident fund dues is a first charge on. the assets of the employer. The facts giving rise to this question are in paragraphs No. 2 below.

2. On 20-2-1987 Darpan Electronics (Private) Ltd. borrowed Rs. 10.89 lakhs from the Corporation created under the State Financial Corporation Act - a central Act. Darpan Electronics (Pvt.) Ltd. mortgaged its immovable properties and hypothecated the movables with the Corporation on 23-2-1987. On 10-10-1991 a sum of Rs. 15,95,693 was due and payable by Darpan Electronics. The Corporation initiated proceedings under S.29 of the Act and on 18-11-1991 all the property of Darpan Electronics were taken over by the Corporation. On 20-12-1993 movables were sold for realisation of the debt due to the Corporation. A sum of Rs. 89,083/- is lying in its account with the South Indian Bank Ltd. the Respondent No. 2.

A sum of Rs. 37,150/- is due from Darpan Electronics towards the employer's contribution to the provident fund. The Respondent No.1 is the Recovery Officer as defined in clause (kb) of S.2 of the Provident Fund Act. On 3-2-1992 the Recovery Officer issued a demand notice in respect of this sum. Eventually on 6-3-1992, the Recovery Officer attached 37 cents of land from Sy. Nos. 1763 and 1784 of Palkulangara Village in Trivandrum District which was mortgaged with the Corporation, by Darpan Electronics.

The Recovery Officer considered that the Corporation, by virtue of its possession of the property of the defaulter was also a defaulter, issued notice dated 16-12-1993 (Ext. R1(g) calling upon the Corporation as to why the amount should not be recovered from it. By order dated 6-1-1994, the Recovery Officer prohibited the South Indian Bank, Trivandrum from transferring the amount of Rs. 89,083/- lying in the account of the Corporation.

3. The nature of the rights claimed by the Corporation and the Recovery Officer may be considered in the light of the relevant provisions of law. The right of the Corporation to take over the assets of its debtor is created by S.29 of the Act. The Corporation shall have the right to:

(i) take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and

(ii) realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.

The Legislature, aware that there may be provisions in other laws which may affect the Corporation's right to take over and sell the assets of its debtors, enacted S.46-B which gives overriding effect to the provisions of the Act. The provisions of the Act, the rules and orders made under it "shall have effect notwithstanding anything inconsistent there with contained in any other law for the time being in

force".

4. The Provident Fund Act was enacted in 1952 a year later than the Act. Under S.8-G of the Provident Fund Act the provisions of the Second and Third Schedules to the Income Tax Act and Incometax (Certificate Proceedings) Rules, 1962 shall apply as if the said provisions and the rules, referred to the arrears of the amount of provident fund contributions instead of to the income tax. The Respondent No.1 derives his power to recover the arrears of contribution from Darpan Electronics, from S.8-G and S.11(2) of the Provident Fund Act read with the rules in