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1987 I LLJ 235 Mad
V Ratnam
Sri Angappa Spinning Mills And Ors.
Versus
Regional Commissioner, Employees Provident Fund Tamilnadu And Pondicherry
Decided on : 29/10/1985
.
EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 - SECTION 17-B - TRANSFER OF ESTABLISHMENT - LIABILITY FOR CONTRIBUTIONS AND OTHER SUMS - COURT SALE - NOT A TRANSFER BY EMPLOYER - NOT COVERED BY SECTION 17-B.
Fact of the Case:
Raja Mills, a partnership firm, ran a mill under the name and style of Kanakavel Nadar & Sons. The mill premises and machinery belonged to the partnership firm. The mill came under the purview of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the Schemes framed thereunder from 1st November, 1952. For the period September, 1967, to October, 1969, the firm had not remitted contributions for the Employees' Provident Fund, administration charges, and damages. The amounts totaling Rs. 1,19,648.10 p. were recoverable from the partnership firm. In 1965, the partnership firm executed a mortgage in favor of Bank of Madurai Limited over the assets belonging to it in Raja Mills. The Bank obtained a preliminary decree and a final decree in a suit to enforce the mortgage and for the sale of hypotheca. In the court auction sale held on 30th August, 1976, Krishnamaraja, the petitioner in W.P. No. 4151 of 1979, became the purchaser. Krishnamaraja leased out the property to Shri Angappa Spinning Mills, the petitioner in W.P. No. 3760 of 1979. Krishnamaraja sold the property to the petitioner in W.P. No. 3760 of 1979 on 3rd November, 1977. The petitioner in W.P. No. 3760 of 1979 took possession of the superstructure as well as the machinery and started running the mill from 1st May, 1978. The Regional Provident Fund Commissioner, Tamil Nadu, sent a communication to the petitioner in W.P. No. 4151 of 1979 in 1978 that Provident Fund contributions in respect of persons employed by the firm Kanakavel Nadar and Sons for the years 1966 to 1969 had not been remitted. The petitioner in W.P. No. 4151 of 1979 sent a detailed explanation that he was only a purchaser in court auction sale and as such the provisions of section 17-B of the Act would be inapplicable. The Regional Provident Fund Commissioner, Tamil Nadu, took the view that even an involuntary sale, like the court sale in this case, would be covered by section 17-B of the Act and the petitioners cannot dispute their liability for the contributions not remitted by Raja Mills during the time when it was run by the partnership firm of Kanakavel Nadar and Sons.
Finding of the Court:
The court held that section 17-B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, cannot be applied to fasten liability on the petitioners for the contributions and other charges which had remained unpaid in respect of a period long prior to the petitioners becoming the employers as defined in the Act. The court held that a court sale is not a transfer by an employer and, therefore, not covered by section 17-B of the Act.
Issues: Whether section 17-B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, can be applied to fasten liability on the petitioners for the contributions and other charges which had remained unpaid in respect of a period long prior to the petitioners becoming the employers as defined in the Act.
Ratio Decidendi: The court held that section 17-B of the Act contemplates a transfer by an employer and not any other. A court sale takes place by operation of law and not by any transaction intervolves. In that sense, it is an involuntary sale against the wishes of the person whose property is sold. That can hardly be called a transfer, as ordinarily understood, which connotes a voluntary transaction entered into between two parties. The enumeration of the nature of the transaction of transfer like sale, gift, lease or licence is also significant in that a transfer by sale or gift or lease or licence is normally between one person and another. The words "in any other manner whatsoever" occurring in section 17-B of the Act would not cover a case of involuntary sale or court sale.
Final Decision: The court allowed the writ petitions and quashed the order of the respondent imposing liability on the petitioners for the contributions and other charges which had remained unpaid in respect of a period long prior to the petitioners becoming the employers as defined in the Act.
1. An interesting question regarding the interpretation of section 17-B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, Act 19 of 1952 (hereinafter referred to as 'the Act') arises for decision in these writ petitions, impugning the order of the respondent herein in proceedings No. E.7/TN/161/Regional dated 10th August, 1979. Though the petitioners are different in the Writ Petitions, the order impugned is the same and as a common question arises for decision they are default with together.
2. The facts giving rise to the writ petitions may now be noticed. A partnership firm under the name and style of Kanakavel Nadar & Sons was running a mill at Madurai known as Raja Mills. The site over which the mills had been put up belongs to a Mutt called Vyasaraya Mutt and the partnership firm had obtained a lease of the site from it. The mill premises comprising of the superstructure as well as the machinery installed therein belonged to the partnership firm Kanakavel Nadar and Sons. There is no dispute that Raja Mills came under the purview of the provisions of the Act and the Schemes framed thereunder with effect from 1st November, 1952. For the period September, 1967, to October, 1969, it had not remitted contributions for the Employees' Provident Fund. Likewise, the administration charges and damages for the period March, 1966, to October, 1969, had remained unremtted. There is no dispute that the aforesaid amounts totaling to Rs. 1,19,648.10 p. were recoverable from the partnership firm Kanakavel Nadar and Sons, which was then running Raja Mills. However, in 1965 the partnership firm of Kanakavel Nadar and Sons executed a mortgage in favour of Bank of Madurai Limited over the assets belonging to it in Raja Mills comprising of the superstructure and the machinery installed therein. The amounts repayable under the mortgage having remained unpaid, the Bank of Madurai Limited instituted O.S. No. 118 of 1971. Sub Court, Madurai to enforce the mortgage and for the sale of hypotheca. In due course, the Bank of Madurai Limited obtained a preliminary decree and as the amount declared payable under the preliminary decree continued to remain unpaid, the Bank of Madurai Limited proceeded to obtain a final decree as well. In E.P. No. 172 of 1975, the Bank of Madurai Limited put the final decree obtained by it in O.S. No. 118 of 1971 into execution and sought the sale of hypotheca with a view to realise the amounts due to it under the final decree. In the court auction sale held on 30th August, 1976, Krishnamaraja, the petitioner in W.P. No. 4151 of 1979, became the purchaser. Meanwhile, from about 20th August, 1976, the partnership firm of Kanakavel Nadar and Sons stopped running Raja Mills. Owing to the pendency of proceedings for setting aside the Court sale and other proceedings, the petitioner in W.P. No. 4151 of 1979 was unable to take possession of the property purchased by him in court auction, though a sale certificate was obtained by him on 22nd March, 1977. On account of the inability of the petitioner in W.P. No. 4151 of 1979 to secure possession of the property, a receiver was appointed to take possession and he leased out what was purchased in Court auction to a firm called Shri Angappa Spinning Mills, the petitioner in W.P. No. 3760 of 1979. Ultimately, on the termination of the proceedings taken to set aside the sale, the petitioner in W.P. No. 4151 of 1979 took possession. Subsequently, he sold the property on 3rd November, 1977 to the petitioner in W.P. No. 3760 of 1979. That sale comprised of the superstructure as well as the items of machinery. The petitioner in W.P. No. 3760 of 1979 took possession of the superstructure as well as the machinery pursuant to the sale dated 3rd November, 1977 and also obtained a renewal of the lease from the owner of the site, namely, Vyasaraya Mutt. Thereafter, carrying out renovation and repairs, the petitioner in W.P. No. 3760 of 1979 started running the mill fr
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