IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 08.06.2010 CORAM: THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.Nos.11208 of 2005, 19413 of 2009 and 334 of 2010 and connected miscellaneous petitions M/s.Protchem Industries India Limited Rep. By its Managing Director. ... Petitioner in W.P.No.11208/2005 M/s.Goenka Infrastructures (P) Ltd. Represented by its Senior Manager T.K.Ravindran ... Petitioner in W.P.No.19413/2009 M/s.Foods Fats and Fertilizers Ltd., Represented by its Authorised Signatory T.K.Ravindran ... Petitioner in W.P.No.334/2010 Vs 1.The Regional Provident Fund Commissioner, Employee's Provident Fund Organisation, Tamilnadu and Pondicherry States, (Ministry of Labour,Govt.of India) Regional Office, Tamilnadu Region, 37, Royapettah High Road, Chennai 600 014. 2.The Assistant Provident Fund Commissioner, Employee's Provident Fund Organisation, (Ministry of Labour,Govt.of India) Regional Office, Tamilnadu Region, 37, Royapettah High Road, Chennai 600 014. ...Respondents in
W.P.No.11208/2005
1.The Recovery Officer,
E.S.I.Corporation,Puducherry Region,
Bouvankare Street,
Mudaliarpet, Puducherry 605 004.
2.The Chairman and Managing Director,
M/s.IDBI Bank Ltd.,
IDBI Tower, WTC Complex,
Cuffe Parade, Mumbai 400 005.
3.M/s.Protchem Industries (India)Ltd.,
F-105, 3rd Street,
Behind Valliammal College,
Annanagar East, Chennai -102. …Respondents in
W.P.No.19413/2009
1.The Assistant Provident Fund Commissioner,
Sub Regional Office,
Sri Venni Complex,
No.101, 100 Feet Road, Cholan Nagar,
Olandai Keerapalayam,
Puducherry 605 004.
2.Regional Provident Fund Commissioner,
Regional Office, Chennai.
3.M/s.Protchem Industries (India)Ltd.,
F-105, 3rd Street,
Behind Valliammal College,
Annanagar East, Chennai -102.
4.M/s.Induslland Bank,
Nungambakkam, Chennai. …Respondents in
W.P.No.334/2010
W.P.No.11208/2005
PRAYER:-Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of certiorari, call for the records from the file of the 2nd respondent herein in its proceedings bearing No.E 8/PC/482/Enf/Regl/05 dated 2.3.2005 and to quash the same.
W.P.No.19413/2009
PRAYER:-Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of certiorari, calling for the records on the file of the first respondent relating to the impugned order dated 14.9.2009 bearing Ref.No.55-21492-34 and quash the same and consequently forbear the first respondent from in any manner proceeding against the petitioner or his property in respect of the dues to be paid by the third respondent
W.P.No.334/2010
PRAYER:-Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of mandamus, forbearing the first respondent from in any manner proceeding against the petitioner company or its property in respect of the provident fund dues to be paid by the third respondent.
For Petitioners
W.P.No.11208 of 2005 : Mr.H.Balaji
W.P.No.19413/09 and
W.P.No.334 of 2010 : Mr.Bharath Chakravarthy
for M/s.Sai, Bharath &
Ilan
For Respondents : Mr.K.Gunasekaran
for R1 and R2 in
W.P.Nos.11208/05 and
W.P.No.334 of 2010
Mr.K.C.Ramalingam for R1
in W.P.No.19413 of 2009
C O M M O N O R D E R
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 dues to the previous company. If at all the PF Commissioner should proceed against the properties of the said company. The bank cannot be threatened by a distraint action in this fashion.
9. The learned counsel also stated that since the properties have already been sold to them and if there were any attachment to the said property even before the sale, the dues from the sale proceeds can be recovered only by filing a suit. He also submitted that if at all any due recoverable by the PF Department, it can be done only by filing an application before the Sale Officer. The Officer will determine the amount payable to the secured creditor and unsecured creditor and it cannot proceed to attach the properties of the petitioner company under Section 8F of the PF Act. For this purpose he also contended that the SARFAESI Act will prevail over any other enactment because of the non obstante clause contained therein. Therefore, the PF law cannot be said to be a special law overriding the provisions of the SARFAESI Act.
10. For this proposition, the learned counsel placed reliance upon the judgment of the Supreme Court in Tata Motors Limited v. Pharmaceutical Products of India Limited and another reported in (2008) 7 SCC 619. He further placed reliance upon the judgment of the Supreme Court in AI Champdany Industries Limited v. The Official Liquidator and Anr reported in 2009 (3) CTC 881 for the purpose of contending that the purchaser is under no legal duty to enquire with regard to liabilities of the company and in respect of such company even if Municipal tax arrears to be paid, in respect of the property sold in auction it did not constitute charge on such property. Therefore, the company has no liability to pay its past dues. If there was any statutory duty without creating any encumbrance on the property, the purchasers have no obligation to enter into such liabilities. If once the property is sold, the assets of the company are required to be distributed to the creditors in the order of preference but such liability do not extend to the purchaser as if he was a successor in interest.
11. The petitioner also relied upon a judgment of a Division Bench of this court in Indian Bank v. Commercial Tax Officer reported in 2009 Indlaw Mad 2885 for the purpose of contending that a tax due can have a priority of debt over others. But such a creditor can only be an unsecured creditor and an unsecured creditor cannot have a priority over a secured creditor.
12. In the meanwhile, M/s.Goenka Infrastructures (P) Ltd., represented by its Senior Manager filed W.P.No.19413 of 2009, seeking to challenge the order of the E.S.I.Corporation dated 14.09.2009 giving notice of taking physical possession of the property of M/s.Protchem Industries India Limited, pursuant to the order of attachment of the immovable property dated 07.12.2004. Earlier ESI Corporation had issued a notice under Section 45-C to 45-I of the ESI Act and the building and related superstructure of the company was attached and therefore, since the property was already under the constructive possession of the Recovery officer, the said notice was given. The petitioner challenging the said notice stated that the properties have been sold under the SARFAESI Act to the petitioner on the basis of ‘As is where is condition’ and that the SARFAESI Act is a special law. In the said writ petition, notice of motion was ordered on 18.09.2009 and an order of interim stay was granted.
13. Subsequently, the respondents ESI Corporation had filed a counter affidavit dated 29.01.2010. It was stated that under Section 93 of the ESI Act, any transfer made, the transferee is jointly and severally liable to pay the amount due to the corporation. The contentions raised in these writ petition are no longer res integra.
14. The Supreme Court very recently while analysing the scope of the EPF vide its decision in Maharashtra State Co-operative Bank Ltd. v. Assistant Provident Fund Commissioner and others reported in (2009) 10 SCC 123 has held in paragraphs 66 to 69 which is as follows:-
“66. Section 11 gives statutory priority to the amount due from the employer vis-`-vis all other debts. Clause (a) of sub-section (1) of Section 11 is applicable to cases where an employer is adjudicated insolvent or, being a company, an order of its winding up is made. In that situation, the amount due from the employer in relation to an establishment to which any scheme or the Insurance Scheme applies in respect of any contribution payable to the Fund or, as the case may be, the Insurance Fund, damages recoverable under Section 14-B, accumulations required to be transferred under Section 15(2) or any other charges payable by him under any other provision of this Act or of any provision of the Scheme or the Insurance Scheme. Clause (b) is applicable to cases where the amount is due from the employer in relation to exempted establishment in respect of any contribution to the provident fund or any insurance fund insofar it relates to exempted employees under the rules of provident fund or any insurance fund, any contribution payable by him towards the Pension Fund under Section 17(6), damages recoverable under Section 14-B or any charges payable by him to the appropriate Government under the Act or under any of the conditions specified in Section 17. This sub-section then lays down that such amount shall be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up. Sub-section (2) lays down that any amount due from the employer whether in respect of the employees contribution deducted from the wages of the employee or the employers contribution shall be deemed to be the first charge on the assets of the establishment, and shall be paid in priority to all other debts.
67. The expression any amount due from an employer appearing in sub-section (2) of Section 11 has to be interpreted keeping in view the object of the Act and other provisions contained therein including sub-section (1) of Section 11 and Sections 7-A, 7-Q, 14-B and 15(2) which provide for determination of the dues payable by the employer, liability of the employer to pay interest in case the payment of the amount due is delayed and also pay damages, if there is default in making contribution to the Fund. If any amount payable by the employer becomes due and the same is not paid within the stipulated time, then the employer is required to pay interest in terms of the mandate of Section 7-Q. Likewise, default on the employers part to pay any contribution to the Fund can visit him with the consequence of levy of damages.
68. As mentioned earlier, sub-section (2) was inserted in Section 11 by Amendment Act 40 of 1973 with a view to ensure that payment of provident fund dues of the workers are not defeated by the prior claims of the secured and/or of the unsecured creditors. While enacting sub-section (2), the legislature was conscious of the fact that in terms of existing Section 11 priority has been given to the amount due from an employer in relation to an establishment to which any scheme or fund is applicable including damages recoverable under Section 14-B and accumulations required to be transferred under Section 15(2). The legislature was also aware that in case of delay the employer is statutorily responsible to pay interest in terms of Section 17. Therefore, there is no plausible reason to give a restricted meaning to the expression any amount due from the employer and confine it to the amount determined under Section 7-A or the contribution payable under Section 8.
69. If interest payable by the employer under Section 7-Q and damages leviable under Section 14 (sic Section 14-B) are excluded from the ambit of expression any amount due from an employer, every employer will conveniently refrain from paying contribution to the Fund and other dues and resist the efforts of the authorities concerned to recover the dues as arrears of land revenue by contending that the movable or immovable property of the establishment is subject to other debts. Any such interpretation would frustrate the object of introducing the deeming provision and non obstante clause in Section 11(2). Therefore, it is not possible to agree with the learned Senior Counsel for the appellant Bank that the amount of interest payable under Section 7-Q and damages leviable under Section 14-B do not form part of the amount due from an employer for the purpose of Section 11(2) of the Act.”
15. Therefore, this Court is not inclined to entertain the writ petitions solely on the ground that one petitioner is a purchaser under the SARFAESI Act and therefore, they are not liable to pay any amount either to the PF or ESI Corporation. Further, the contention that SARFAESI Act is a special law and therefore, it overrides the other prior enactment cannot be countenanced in the light of the judgment of the Supreme Court referred to above.
16. The writ petition in W.P.No.11208 of 2005 will stand dismissed as it is only a notice under Section 7A of the EPF Act. If at all the writ petitioner company was aggrieved by that order, they should have moved the Appellate Tribunal constituted under Section 7I of the EPF Act.
17. Similarly in W.P.No.19413 of 2009, the petitioner if at all aggrieved, he has to raise a dispute before the ESI Court under Section 75 and not rush to this Court on an intimation of taking possession of the property which was already under attachment. Hence, W.P.No.19413 of 2009 stands dismissed.
18. In so far as W.P.334 of 2010 is concerned, the decision relied on by the petitioner has no application to the case on hand. On the contrary, the PF Department is entitled to invoke the distraint mechanism under Section 8F of the PF Act. The PF Act is also a special law in respect of recovery of dues under the Act and it is not subordinate to SARFAESI Act under which the petitioner had purchased the property in the light of the decision indicated above. Hence, W.P.No.334 of 2010 will stand dismissed.
19. In the result, all the three writ petitions will stand dismissed. NO costs. Consequently, connected miscellaneous petitions are closed.
08.06.2010
Index: Yes/No
Internet :Yes/No
svki
To
1.The Regional Provident Fund Commissioner,
Employee’s Provident Fund Organisation,
Tamilnadu and Pondicherry States,
(Ministry of Labour,Govt.of India)
Regional Office, Tamilnadu Region,
37, Royapettah High Road,
Chennai 600 014.
2.The Assistant Provident Fund Commissioner,
Employee’s Provident Fund Organisation,
(Ministry of Labour,Govt.of India)
Regional Office, Tamilnadu Region,
37, Royapettah High Road,
Chennai 600 014.
3.The Recovery Officer,
E.S.I.Corporation,Puducherry Region,
Bouvankare Street,
Mudaliarpet, Puducherry 605 004.
2.The Chairman and Managing Director,
M/s.IDBI Bank Ltd.,
IDBI Tower, WTC Complex,
Cuffe Parade, Mumbai 400 005.
4.M/s.Protchem Industries (India)Ltd.,
F-105, 3rd Street,
Behind Valliammal College,
Annanagar East, Chennai -102.
5.M/s.Protchem Industries (India)Ltd.,
F-105, 3rd Street,
Behind Valliammal College,
Annanagar East, Chennai -102.
6.M/s.Induslland Bank,
Nungambakkam, Chennai.
K.CHANDRU,J.
Svki
Pre-Delivery order in
W.P.Nos.11208 of 2005,
19413 of 2009 and
334 of 2010
08.06.2010