EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952

Setion 11

Employees Provident Fund and Miscellaneous Provisions Act, 1952 - Section 7

Priority of payment of contributions over other debts - EARC already paid an amount of dues proportionate to sale consideration - Axis Bank claimed first charge as per section 35 of SARFAESI Act - Liability of payment of balance dues upon

EPFO initiated enquiry against the company as per section 7A, as the company defaulted in payment of provident fund. The EPFO determined a liability against the company and accordingly directed it to deposit the same. The company informed that banks had initiated recovery process by auctioning their property. The EPFO asked Axis Bank to remit amount as outstanding dues, but the Axis Bank claimed first charge by referring to section 35 of SARFAESI Act. However, another property was being auctioned by EARC. The EPFO demanded an amount from EARC as per priority under section 11(2) of PF Act. EARC filed a writ petition against the same, but the petition was dismissed by High Court. EARC filed an appeal before Apex Court against the order on the ground that it had already paid an amount of Rs.75 lakhs, which was proportionate to the sale consideration received by it. Therefore, the balance amount due to the EPFO was to be paid by the Axis Bank as proportionate to sale consideration. Held:Section 35 of the SARFAESI contains that the dues of bank being secured would have a priority over sale tax and other dues payable to the Government or local authority and, therefore, no recovery can be made from Axis Bank till such time its entire dues are liquidated and satisfied. It is an admitted position that Axis Bank has realised an amount of Rs. 12 crores approximately, whereas EARC has realised only Rs.7 crores approximately. Further, EARC had already deposited Rs. 75 lakhs to the EPFO. In respect of realization of the balance outstanding dues, it would be appropriate that the High Court first deals with the issues raised by Axis Bank that it has first charge and priority over and above the EPFO to satisfy its dues from the secured property in view of section 35 of the SARFAESI Act and thereafter decides liability to pay the balance dues. Thus, the appeal is allowed and the petition is restored.

REFERRED :

FAVOUR : In favour of appellant.

A.Y. :

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