Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(Mad) 2233

High Court of Judicature at Madras
K. CHANDRU
M/s. Protchem Industries India Limited Rep. By its Managing Director & Another
Versus
The Regional Provident Fund Commissioner, Employees Provident Fund Organisation, Tamilnadu and Pondicherry States, (Ministry of Labour, Govt. of India) Regional Office, Tamilnadu Region, Chennai & Others
W.P.Nos.11208 of 2005, 19413 of 2009 and 334 of 2010 & connected miscellaneous petitions
Decided On : 08-06-2010

Advocates Appeared:
For the Petitioners:H. Balaji, Bharath Chakravarthy for M/s. Sai, Bharath & Ilan, Advocates.
For the Respondents:R1 and R2, K. Gunasekaran & K.C. Ramalingam, Advocates.

The EPF Act's priority in recovering dues and the non-obstante clause in Section 11(2) of the EPF Act over the SARFAESI Act.

Headnote:
Employees Provident Fund - Challenge to Order under Section 7A - EPF Act, 1952 - Summary of Acts and Sections: EPF Act, 1952, Sections 7A, 7I, 8F, 11, 14-B, 15(2), 17(6), 45-C to 45-I; SARFAESI Act - The court dismissed the writ petitions challenging orders under Section 7A of the EPF Act, emphasizing the priority of EPF dues and the non-obstante clause in Section 11(2) of the EPF Act over the SARFAESI Act.
Fact of the Case:

The petitioner challenged an order under Section 7A of the EPF Act, 1952, after the company's assets were sold under the SARFAESI Act. The PF Commissioner proceeded against the purchaser of the assets and the ESI Corporation issued a notice of taking physical possession of the property.
Finding of the Court:

The court dismissed all writ petitions, emphasizing the priority of EPF dues and the non-obstante clause in Section 11(2) of the EPF Act over the SARFAESI Act. It held that the petitioners should have moved the Appellate Tribunal or raised disputes before the ESI Court.
Issues: Challenge to EPF order, liability of purchaser under SARFAESI Act, priority of EPF dues, and jurisdiction of EPF and ESI authorities.
Ratio Decidendi: EPF Act's priority over SARFAESI Act, non-obstante clause in Section 11(2) of the EPF Act, and the need to approach the appropriate tribunals for disputes.
Final Decision: All writ petitions were dismissed, emphasizing the priority of EPF dues and the non-obstante clause in Section 11(2) of the EPF Act over the SARFAESI Act. The petitioners were directed to approach the Appellate Tribunal or the ESI Court for their grievances.

Judgment :-

1. Heard both sides.

2. The first writ petition (W.P.No.11208/2005) is filed by M/s.Protchem Industries India Limited, challenging the order of the second respondent dated 02.03.2005 and seeks to set aside the same. The impugned order is passed under Section 7A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952.

3. The writ petition was admitted on 04.04.2005. Pending the writ petition, this Court granted an order of interim stay. Subsequently, when the matter came up on 02.08.2006, the interim stay was made absolute on condition that the petitioner pays 50% of the amount demanded by the impugned order dated 02.03.2005 and to furnish a Bank Guarantee for the remaining amount within a period of four weeks from the date of the said order.

4. Subsequent to the entertainment of the writ petition, it was found that the petitioner company was brought under the control of the Industrial Development Bank of India (IDBI) and the Authorised Officer of the IDBI Bank sold the assets of the petitioner company in terms of SARFAESI Act to M/s.Foods, Fats and Fertilizeres Limited on 31.05.2007. It was intimated by the IDBI Bank to Assistant PF Commissioner vide their letter dated 02.12.2008, wherein it was stated as follows:

"Case No.348/2004-M/s.Protchem Industries (India) Limited- Payment of Outstanding Dues We are in receipt of your letter CHN/SRO/PONDY/PC/482/COMP/2007 dated November 30, 2007 on the above subject. In this connection, we advise that the AO of IDBI has sold the assets of M/s.Protchem Industries (India) Limited (PIIL) under SARFAESI Act to M/s.Foods Fats and Fertilisers Limited on May 31, 2007.

As per the terms of the sale of assets of PIIL through SARFAESI Act "All payments due to any person whatsoever and payment of all statutory dues, including but not restricted to property taxes, sales taxes, customs and central excise dues, cess, transfer charges and other dues/levies etc., if any, shall be ascertained and borne by the successful bidder".

We, therefore, request to take up the issue directly with M/s.Foods Fats and Fertilisers Limited having their registered office at 7th Floor, Fountain Plaza, Pantheon Road, Egmore, Chennai – 600 008 being the successful bidder of the assets of PIIL."

5. It was thereafter, the Provident Fund Commissioner proceeded against M/s.Foods Fats and Fertilizers Limited on finding that they are holding a sale certificate in respect of the assets of the petitioner company (W.P.No.11208 of 2005) and issued a notice dated 02.07.2008 stating as to why it should not be treated as an employer of the previous company since they are the successful bidder and took over the company. The said company sent a reply dated 22.07.2008 stating that their Advocates were examining the various legal aspects. Subsequently, IndusInd Bank sent a letter informing that company that an attachment order under Section 8F of Employees Provident Funds and Miscellaneous Provisions Act was in existence regarding the statutory dues payable by the previous company and the PF contribution by the previous company was to the extent of Rs.20,39,704.45Ps and the Bank had informed that they had paid a sum of Rs.14,767.89 and Rs.10,539.93 in favour of Assistant Provident Fund Commissioner.

6. As against the said information, M/s.Foods, Fats and Fertilisers Limited filed W.P.No.334 of 2010 seeking for a direction to forbear the Assistant Provident Fund Commissioner from proceeding against the petitioner company or its property in respect of the PF dues payable by M/s.Protchem Industries (India) Ltd.

7. When that writ petition came up for admission, this Court directed the earlier writ petitions to be posted along with W.P.No.334 of 2010.

8. The contention of the purchaser of the company under the SARFAESI Act viz., M/s.Foods Fats and Fertilisers Limited was that though they are having a valid sale certificate of the assets of the previous company they could never held to be liable for the payment of

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