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2011 Supreme(Mad) 2972
High Court of Judicature at Madras
K. CHANDRU
A.L. Subramanian
Versus
Employees' Provident Fund Appellate Tribunal, New Delhi & Others
W.P.No.1410 of 2011 & M.P.No.1 of 2011
Decided on : 27-06-2011
For the Appellant:Mohd.Nazrullah for K.V. Shanmuganathan, Advocate.
For the Respondents:R2 & R3 - V. Vibhishanan, Advocate.
The main legal point established in the judgment is that the liability of the subsequent purchaser to pay the contribution and other sums due from the previous employer under the PF Act continues, and the application of the Act will continue to apply notwithstanding a fall in the establishment strength.
Headnote:
Employees Provident Fund - Transfer of Establishment - Section 17B of the PF Act - [Section 17B] - The court discussed the application of Section 17B of the PF Act, which holds the employer and the person to whom the establishment is transferred jointly and severally liable to pay the contribution and other sums due from the employer. The liability of the transferee is limited to the value of the assets obtained by him in such transfer. The court emphasized that even if the subsequent purchaser purchases a business by way of sale, they are liable to pay the contribution up to the date of transfer of the establishment. The application of the Act will continue to apply notwithstanding a fall in the establishment strength.
Fact of the Case:
The petitioner, a club proprietor, challenged an order passed by the Employees Provident Fund Appellate Tribunal, claiming that the previous club's dues should not be fastened on the present owners as he had purchased only the properties and not the business.
Finding of the Court:
The court dismissed the writ petition, stating that the liability of the transferee to pay the contribution and other sums due from the employer under the PF Act continues even if the subsequent purchaser purchases a business by way of sale. The application of the Act will continue to apply notwithstanding a fall in the establishment strength.
Issues: The main issue was whether the petitioner, as the subsequent purchaser of a club, was liable to pay the contribution and other sums due from the previous employer under the PF Act.
Ratio Decidendi: The court relied on Section 17B of the PF Act, which holds the employer and the person to whom the establishment is transferred jointly and severally liable to pay the contribution and other sums due from the employer. The liability of the transferee is limited to the value of the assets obtained by him in such transfer.
Final Decision: The writ petition was dismissed, and no costs were awarded. The court held that the liability of the subsequent purchaser to pay the contribution and other sums due from the previous employer under the PF Act continues, and the application of the Act will continue to apply notwithstanding a fall in the establishment strength.
1. The petitioner is a Proprietor of a club called M/s.A.L.S.Garden Club. He has filed the present writ petition, challenging an order passed by the Employees Provident Fund Appellate Tribunal made in ATA 508(13)2007 dated 08.01.2010.
2. When the matter came up on 24.01.2011, this Court ordered notice of motion in the writ petition and also recorded the notice taken by the learned Standing Counsel for respondents 2 and 3. This Court granted an interim stay on condition that the petitioner pays 50% of the amount demanded within a period of four weeks.
3. On notice from this Court, the respondents have filed a counter affidavit dated 01.03.2011.
4. The case of the petitioner was that a club by name M/s.Emperor Club was a partnership firm comprising of two partners. The petitioner purchased their movable and immovable properties. After purchasing the said properties, he started a new business in the name and style of M/s.A.L.S.Garden Club on 30.06.2005. He had also engaged new hands for running the club. The employees of the former establishment had duly settled their claims with their former employer M/s.Emperor Club. Prior to the sale, the said firm had suspended its operation and dissolved the firm with effect from 24.05.2005. The suspension of operation and the subsequent sale of immovable properties belonging to the firm was duly intimated to the PF organisation.
5. The petitioner had also registered his club with the Office of the Commercial Tax Office, Perur Circle, Coimbatore. But however the previous club which was covered by the provisions of the EPF Act did not pay the dues to the Department for the period from 6/2005 to 8/2006. The said dues worked out to Rs.75,487.10. The third respondent Recovery Officer summoned the petitioner pursuant to an enquiry initiated under Section 7A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short PF Act). The petitioner also participated in the said enquiry. But however, by an order dated 11.04.2007, the second respondent held that the petitioner Club is covered by the provisions of the PF Act and it is not a new establishment and was also liable to pay the arrears of the past dues. Notwithstanding the fall in strength of the workers, the Act continues to apply in terms of Section 1(5) of the PF Act.
6. Challenging the said order, the petitioner preferred an appeal to the first respondent Tribunal under Section 7I of the PF Act. The said appeal was taken on file by the Tribunal as ATA 508(13)2007. After hearing the counsel for the petitioner, the Tribunal dismissed the appeal. The Tribunal held that the petitioner had purchased the property of the previous club along with the business. The Memorandum filed by him showed that not only the property had been purchased but also the business. In fact it is specifically written that the business was sold to the petitioner. It was also stated that the previous club M/s.Emperor Club had engaged 20 persons and was covered by the provisions of the PF Act. Since there was only change in ownership, notwithstanding the reduction in number of work force, the Act continues to apply. With reference to the liability of the past dues, a reference was made to the judgment in Chinji Hutta Bone Mill Pvt. Ltd v. RPFC reported in(1968) LAB IC 148.In that case, it was held that liability will be attached to the factory once there is a factory and process of manufacturing continues. The liability under the statute continue irrespective of any change of ownership or management of that factory. Challenging the said order, the writ petition came to be filed.
7. Mr.Mohd.Nazrullah, learned counsel for the petitioner contended that the order passed by the Tribunal confirming the order of the second respondent is erroneous. What was purchased by him was mere properties and not the business. The dues of the previous club cannot be fastened on the present owners and the employees working in the previous club had settled their du
