IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 10563 of 2007(G)
1. M/S.SOUTHERN PAPER PRODUCT,
... Petitioner
Vs
1. THE EMPLOYEES' PROVIDENT FUND
... Respondent
2. THE RECOVERY OFFICER, EMPLOYEES'
3. THE KERALA FINANCIAL CORPORATION,
4. M/S.PARAGON PACKS, REPRESENTED BY ITS
For Petitioner :SRI.SATHISH NINAN
For Respondent :SRI.L.MOHANAN, SC, KFC
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :21/08/2008
O R D E R
S. SIRI JAGAN, J.
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W.P.(C)No.10563 OF 2007
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Dated this the 21st day of August, 2008
JUDGMENT
The 4th respondent borrowed money from the 3rd
respondent, Kerala Financial Corporation. The 4th respondent
defaulted repayment of the same to the 3rd respondent. At the
same time, the 4th respondent owed money to the Employees’
Provident Fund Organisation, the 1st respondent herein, for dues
under the Employees Provident Funds and Miscellaneous
Provisions Act. The 4th respondent had mortgaged their
properties in favour of the 3rd respondent as security for loan
amounts taken by them from the 3rd respondent. Despite the
same, the 1st respondent, under the provisions of the Employees’
Provident Funds and Miscellaneous Provisions Act, had priority of
charge over the properties of the 4th respondent for recovery of
amounts due from the 4th respondent under the Employees’
Provident Funds and Miscellaneous Provisions Act. It appears
that both the Provident Fund Organisation and the KFC were
mutually unaware of the dues from the 4th respondent to the
W.P.(c)No.10563/08 2
other. Without knowing the same, the 3rd respondent took
over the mortgaged properties under Section 29 of the State
Financial Corporation Act and the same was sold in public
auction. The petitioner herein purchased the same and they
paid the entire amount to the KFC. Now by Exts.P4 and P6,
respondents 1 and 2 have initiated proceedings against the
petitioner for recovery of the amounts due from the 4th
respondent to the Provident Fund Organisation as dues under
the Employees’ Provident Funds and Miscellaneous Provisions
Act. The petitioner is challenging Exts.P4 and P6.
2. According to the petitioner, what the Provident Fund
Organisation has, is only a right to enforce the statutory
charge on the property in question and that can still be
enforced against the sale consideration paid by the petitioner
to the KFC by directing the KFC to make over the proceeds of
the sale to the extent to satisfy the demand of the Provident
Fund Organisation. The petitioner, therefore, seeks the
following reliefs:
“i) Call for the records leading to Exhibits P4
and P6 and issue a writ in the nature of certiorari
quashing the same;
ii) issue a writ in the nature of mandamus or
any other appropriate writ, order or direction,W.P.(c)No.10563/08 3
commanding the respondents 1 and 2 to demand the
outstanding towards provident fund dues and realise
the same from the Kerala Financial Corporation who
has auctioned the property to the petitioner for a
sum of Rs.20,30,000/-;
iii) Issue a writ in the nature of mandamus or
any other appropriate writ order or direction
declaring that in view of the firt charge of Employees
Provident Fund Organisation on the property
purchased by the petitioner, the sale conducted by
the Kerala Financial Corporation is subject to the said
charge and therefore only after adjusting the dues
outstanding to the provident fund the balance amount
loan can be appropriated by the Kerala Financial
Corporation and that no proceedings can be initiated
against the petitioner;”.
3. The Provident Fund Organisation would contend that
in so far as they have statutory charge over the properties
belonging to the 4th respondent for the dues under the
Employees’ Provident Funds and Miscellaneous Provisions Act,
the sale conducted by the KFC does not bind them and they
can still proceed against the property notwithstanding the sale
of the property by the KFC, to the petitioner. They would
therefore, submit that there is nothing wrong in Exts.P4 and
P6.
4. The learned Standing counsel for the KFC would
submit that they were not at any time made aware by the
W.P.(c)No.10563/08 4
Provident Fund Organisation regarding any amounts due from
the 4th respondent to the Provident Fund Organisation and
therefore, they are not liable to make over any money realised
by them by sale of the mortgaged properties to the Provident
Fund Organisation. He would further submit that the
Provident Fund Organisation has to proceed against the 4th
respondent for recovery of the amounts due.
After hearing all parties, I am not inclined to countenance
the contentions of either the KFC or the Provident Fund
Organisation. The petitioner is a bona fide purchaser of the
property. He was not made aware of any charge in respect of
the property in favour of the Provident Fund Organisation. In
any event, the Provident Fund Organisation’s claim is only for
enforcing the charge over the property, which can still be
enforced by proceeding against the sale consideration received
by the KFC. Since as between the KFC and the Provident Fund
Organisation, the Provident Fund Organisation has a better
claim having statutory charge over the property, the KFC is
bound to make over that part of the sale consideration
sufficient to satisfy the demand of the Provident Fund
Organisation for amounts due from the 4th respondent to them.
W.P.(c)No.10563/08 5
Therefore, it is for the Employees Provident Fund Organisation
to make a demand to the KFC to make over that much amount
from the sale consideration to the Provident Fund
Organisation. It would be totally inequitable to make the
petitioner liable for any further amounts in respect of the
property in question. Accordingly, I quash Exts.P4 and P6. I
declare that the petitioner or the property purchased by them
cannot now be subjected to any further proceedings by the
Employees Provident Fund Organisation or the KFC in so far as
they have paid the entire sale consideration to the KFC.
However, I make it clear that it would be open to the Provident
Fund Organisation to make their claim to the KFC for recovery
of the amounts sufficient to discharge the liability of the 4th
respondent from the sale consideration in the hands of the KFC
obtained by them, by sale of the property belonging to the 4th
respondent.
The writ petition is allowed as above.
S. SIRI JAGAN, JUDGE
Acd
W.P.(c)No.10563/08 6