Gujarat High Court
Shree Ganesh Trading Company vs Employees Provident Fund Organization ... on 22 September, 2015
Author: Abhilasha Kumari
Bench: Abhilasha Kumari
C/SCA/13400/2014 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 13400 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE SMT. JUSTICE ABHILASHA KUMARI
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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SHREE GANESH TRADING COMPANY....Petitioner(s)
Versus
EMPLOYEES PROVIDENT FUND ORGANIZATION & 1....Respondent(s)
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Appearance:
MR AS ASTHAVADI, ADVOCATE for the Petitioner(s) No. 1
MR CHINTAN H DAVE, ADVOCATE for the Respondent(s) No. 1
MR RITURAJ M MEENA, ADVOCATE for the Respondent(s) No. 2
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CORAM: HONOURABLE SMT. JUSTICE ABHILASHA
KUMARI
Date : 22/09/2015
ORAL JUDGMENT
1. Rule. Mr.Chintan H. Dave, learned advocate waives service of notice of Rule for respondent No.1. Mr.Rituraj M. Meena, learned advocate waives service of notice of Rule for respondent No.2Gujarat Page 1 of 17 HC-NIC Page 1 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT Industrial Development Corporation ("GIDC", for short). On the facts and in the circumstances of the case and with the consent of the learned counsel for the respective parties, the petition is being heard and decided finally.
2. By preferring this petition under Article226 of the Constitution of India, the petitioner has, inter alia, prayed that the communication dated 27.01.2014, issued by respondent No.1, as well as the communication dated 22.11.2013, issued by respondent No.2, calling upon the petitioner to make good the dues of the erstwhile owner of the property in question and other related companies, be quashed and set aside and to hold that the petitioner is not liable to pay any amount towards the dues of respondent No.1.
3. Briefly stated, the facts of the case are as follows :
3.1 The petitioner is a Proprietorship Firm and describes itself as an Entrepreneur. The Gujarat State Financial Corporation ("GSFC", for short) had issued a Page 2 of 17 HC-NIC Page 2 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT public notice dated 24.05.2011 in the vernacular daily newspaper "Gujarat Samachar" for the sale of Plot No.2103/A, GIDC Estate, Halol, admeasuring 3035 sq.mtrs. leasehold land along with plant and machineries and the construction standing thereupon.
The said property belonged to M/s.Eazy Slide Fasteners Limited and the sale was to be conducted in exercise of power under Section29 of the Gujarat State Financial Corporations Act, 1951. GSFC called for tenders from purchasers, who intended to take part in the tender procedure. As the petitioner was interested in the purchase of the above property, he tendered his bid and took part in the public auction held on 26.03.2011. The petitioner offered the price of Rs.1,11,11,111/ (Rupees One Crore Eleven Lac Eleven Thousand One Hundred and Eleven only) for the purchase of the said land. The offer of the petitioner was accepted by the Recovery Committee of the GSFC in its meeting dated 14.07.2011 and a sale letter dated 22.07.2011 was issued in favour of the petitioner. 3.2 The petitioner paid the abovementioned sale consideration as per the terms of the sanction letter Page 3 of 17 HC-NIC Page 3 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT to the GSFC and the possession of the plot in question was given by the GSFC to the petitioner. The GSFC entered into a Sale DeedcumAssignment of Leasehold Rights with the property dated 14.12.2012. Pursuant thereto, the petitioner was desirous of mutating its name in the record of respondent No.2GIDC. When the petitioner approached respondent No.2 with a request to enter its name in the said record, respondent No.2 issued the impugned letter dated 22.11.2013, stating that the petitioner ought to get a "No Due Certificate" from respondent No.1. On approaching respondent No.1, the petitioner was issued the impugned letter dated 27.01.2014 by the said respondent, whereby the petitioner was asked to pay the dues of the earlier owner as follows :
M/s.Eazy Slide Fasteners Ltd. Rs.15,23,581/ M/s.Hatari Tape Cast Ltd. Rs.9,25,356/ M/s.Vibgyor Zippers Ltd. Rs.7,99,162/ Total Rs.32,48,099/ 3.3 M/s.Hatari Tape Cast Ltd. and M/s.Vibgyor Zippers Ltd. are the earlier names of M/s.Eazy Slide Page 4 of 17 HC-NIC Page 4 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT Fasteners Ltd., which has been purchased by the petitioner.
3.4 Being aggrieved by the demand of recovery of the dues of the erstwhile owner of the property from the petitioner by respondent No.1 and refusal to issue the "No Due Certificate" in favour of the petitioner, the petitioner has approached this Court by filing of the present petition.
4. Mr.A.S.Asthavadi, learned advocate for the petitioner has submitted that the action of the respondents in fastening liability of the original loanee unit on the petitioner is illegal, arbitrary and dehors the settled legal position.
4.1 That, at the time of the sale of the assets, GSFC had not disclosed any concrete amount with regard to the dues of respondent No.1. The public notice dated 24.05.2011 states that the sale would be on "as is where is" basis. Further, there was a Note that it would be the duty of the purchaser to inquire about the dues of any other institutions. However, such a condition was incorporated by the GSFC to save itself from payment in future and only because of such a Page 5 of 17 HC-NIC Page 5 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT condition, the petitioner cannot be said to be liable to pay the dues of the erstwhile owner, which otherwise, he is not liable to pay as per law. 4.2 That the liability of the Provident Fund cannot be said to be a liability attached to the property. The petitioner has purchased the property of the erstwhile loanee unit in a public auction conducted by the GSFC. The petitioner has no privity of contract with the erstwhile owner of the property, therefore, in view of the principles of law enunciated by this Court in the case of Employees Provident Fund Organization Vs. Jai Corporation Ltd., reported in 2009 (1) GLR 123, respondent No.1 cannot ask the petitioner to make good the amount owed by the erstwhile unit.
4.3 That the provisions of Section17B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("the Employees' Provident Fund Act", for short) would only apply in case the transfer of property is made by the employer to any other party through sale, gift, lease or licence or any other manner. In the present case, the transfer of the Page 6 of 17 HC-NIC Page 6 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT property has been made by the GSFC through a public auction, therefore, the provisions of this section would not be applicable in the case of the petitioner. 4.4 That, it is evident from the record that the dues of the Provident Fund are pending since the year 2001 to 2007. The petitioner has purchased the property in 2012. Respondent No.1 has failed to take any measures to recover the dues from 2001 to 2012 and has only started the process of recovering the dues when the petitioner purchased the property and came into picture.
4.5 On the above grounds, it is prayed that the petition be allowed in terms of the prayers made in the petition.
5. Mr.Chintan H. Dave, learned advocate for respondent No.1 has submitted that in the sale letter dated 22.07.2011, addressed by GSFC to the petitioner, condition No.1 stipulates that the assets are sold on "as is where is" basis. This means that the liability of the erstwhile owner towards the Provident Fund dues that had already been crystallized at the time of sale, would be passed on to the petitioner and the Page 7 of 17 HC-NIC Page 7 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT petitioner would be liable to pay the amount due. 5.1 It is next submitted that it is the duty of the purchaser to inquire about any pending dues as on the date of the purchase of an asset. The petitioner ought to have inquired about any pending dues and as the sale is on "as is where is" basis, the dues would have to be paid by the petitioner.
5.2 Referring to the provisions of Section17B of the Employees' Provident Fund Act, the learned advocate for respondent No.1 has submitted that these provisions clearly state that where an employer in relation to an establishment, transfers that establishment in whole or in part, by sale, gift, lease or licence, or any other manner whatsoever, the employer and the person to whom the establishment is so transferred shall jointly and severally be liable to pay the contribution and other sums due from the employer under any provision of the Act. It is further submitted that in the present case, the property has been transferred by a public auction which means that it has been transferred "in any other manner" as stipulated in Section17B, therefore, the liability of Page 8 of 17 HC-NIC Page 8 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT the purchaser, that is, the petitioner to pay the dues of the erstwhile owner is clearly made out in terms of these provisions of law, as well.
5.3 The learned advocate for respondent No.1 has further referred to a sale letter dated 22.07.2011, addressed by the GSFC to the petitioner, wherein it is stated in Clause4 that the liability of the excise and ESIC (Employees State Insurance Corporation) would be borne by the purchaser. It is submitted that from this communication as well, it is clear that the petitioner is liable to pay the Provident Fund dues of the erstwhile owner to respondent No.1, as on the date of purchase, the liability was already crystallized.
6. Mr.Rituraj M. Meena, learned advocate for respondent No.2 has submitted that the contention of the petitioner that it is not liable to pay any amount towards the dues of respondent No.1, is not correct. When the property was sold, it was made clear to the petitioner by the GSFC vide sale letter dated 22.07.2011, that the liability to excise and Employees State Insurance Corporation would have to be borne by the petitioner. This fact is also confirmed by the Page 9 of 17 HC-NIC Page 9 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT Sale DeedcumAssignment of Leasehold Rights dated 14.12.2012. Respondent No.2Corporation is a statutory body, therefore, it is required to register the claims of various institutions and protect their interests. It is further submitted that in the letter dated 22.11.2013, addressed by respondent No.2 to the petitioner, it is stated that apart from the Provident Fund dues of respondent No.1, there are dues of Central Excise Department and the Employees State Insurance Corporation pending as well. The said two institutions have not been made partyrespondents in the present petition. On the above grounds, it is prayed by the learned counsel for the respondents that the petition be rejected.
7. While making submissions in rejoinder, Mr.A.S.Asthavadi, learned advocate for the petitioner has stated that insofar as the impugned communication dated 22.11.2013, addressed by respondent No.2 to the petitioner is concerned, the petitioner had preferred two separate writ petitions regarding the dues of the Central Excise Department and the Employees State Insurance Corporation, therefore, this petition is confined only to the dues of the Provident Fund, as Page 10 of 17 HC-NIC Page 10 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT claimed by respondent No.1. Insofar as Clause4 contained in the letter dated 22.07.2011, addressed by the GSFC to the petitioner is concerned, it is submitted that this clause refers only to the liability of the Excise Department and the Employees State Insurance Corporation, for whom separate petitions have been preferred, therefore, the objection taken by the learned counsel for the respondents in this regard is not tenable. The present petition has only been preferred against the Provident Fund dues of respondent No.1 and this Court may limit the adjudication of the present petition to that extent.
8. This Court has heard the learned counsel for the respective parties, perused the averments made in the petition, contents of the other pleadings and the documents on record.
9. The grievance of the petitioner insofar as respondent No.1 is concerned, is that it is not liable to pay the Provident Fund dues of the erstwhile owner. On the other hand, the learned advocate for respondent No.1 submits that in view of the provisions of Page 11 of 17 HC-NIC Page 11 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT Section17B of the Employees' Provident Fund Act, such dues are liable to be paid by the petitioner. In order to ascertain the correctness of the submissions advanced by the learned counsel for the respective parties, it may be necessary to incorporate the provisions of Section17B, which reads as below :
"17B. Liability in case of transfer of establishment Where an employer, in relation to an establishment, transfers that establishment in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever, the employer and the person to whom the establishment is so transferred shall jointly and severally be liable to pay the contribution and other sums due from the employer under any provision of this Act or the Scheme or [the [Pension] Scheme or the Insurance Scheme], as the case may be, in respect of the period up to the date of such transfer:
Provided that the liability of the transferee shall be limited to the value of the assets obtained by him by such transfer."
10. The provisions of this section have been interpreted in detail by this Court in the case of Employees Provident Fund Organization Vs. Jai Corporation Ltd. (Supra.), wherein this Court has held as below :
Page 12 of 17
HC-NIC Page 12 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT "27. At first blush, plain reading of said Section may suggest the meaning such as the one canvassed by the petitioner, however a closer look brings out the different and real meaning and scope. No doubt that the said provision comes in play when there is transfer of an establishment, but it is pertinent to note that under this provision, the words "transfers that establishment in whole or in part" are qualified and prefixed by the words "where an employer."
Thus, the obligation of joint and several liability cast by this provision will come in play when an "establishment is transferred by employer of that establishment," by sale, gift, lease or licence or in other manner.
28. It is clear that legislature has intended to keep "enforced sale" or "auction sale/purchase"
or a "sale by operation of law" or "involuntary sale" out of the purview of this provision otherwise there was no purpose of using, at the outset of the Section, the words "where an employer. The said opening words are attached to and qualify the word "transfers" so as to mean "where an employer transfers........." The Section takes in its fold voluntary transfer by an employer. Otherwise, the Section would have been framed differently.
If the legislature did not intend to restrict the applicability or coverage of this Page 13 of 17 HC-NIC Page 13 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT provision to only those transfers which are made voluntarily by employer and if the intention was to take in its fold even the transfers imposed by operation of law then the said words "where an employer......." would not have been used. The use of the said words at the outset of the Section is clear pointer about the intention of legislature. Any other interpretation would render the said words "where an employer......."
nugatory.
29. Thus, this provision would come in play and can be invoked by the department when the transfer is effected by the employer. Hence, in present case, the department must show, to take shelter under the said provision, that the transfer of erstwhile establishment was effected by its 'employer'.
30. In present case, there is no dispute about the fact that prior to the auction, the employer was Santogen Spinning Mills and there is also no dispute about the fact that said Santogen Spinning Mills and/or its employer has not transfered in any manner whatsoever the erstwhile establishment or any of its assets to present respondent No.1.
Thus, present case would not come within the purview of said Section."
11. In the present case as well, a submission has been advanced by the learned advocate for the petitioner to Page 14 of 17 HC-NIC Page 14 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT the effect that the petitioner has purchased the property through an auction sale conducted by GSFC. The employer (meaning thereby the erstwhile owner of the property) has not transferred the establishment either in whole or in part by sale, gift, lease, licence or in any other manner to the petitioner, therefore, there would be no joint or several liability of the employer and the petitioner and the provisions of Section17B would not be applicable in the case of the petitioner.
12. In the view of this Court, the case of the petitioner is squarely covered by the principles of law enunciated by this Court in the above judgment.
13. There is another aspect of the matter which is evident from the affidavitinreply filed by respondent No.1, itself. It is stated in paragraph2.3 of the reply that the dues of the erstwhile owner pending from January, 2003 to September, 2007 were sought to be recovered by forwarding Recovery Certificates dated 18.12.2013, issued by the Recovery Officer for an amount of Rs.15,23,581/. It is evident from the record that prior to the issuance of said Recovery Certificates, no steps have been taken by respondent Page 15 of 17 HC-NIC Page 15 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT No.1 to recover the dues of the erstwhile owner of the property who has defaulted in payment of Provident Fund dues. It is only after the petitioner came into picture that respondent No.1 has suddenly become active and started to claim the dues from the petitioner.
14. In any case, in view of the interpretation of the provisions of Section17B of the Employees' Provident Fund Act, as made by this Court, the claim of respondent No.1 for the Provident Fund dues of the erstwhile owner from the petitioner cannot be upheld.
15. For the aforestated reasons, the following order is passed :
The communication dated 27.01.2014, addressed by respondent No.1 to the petitioner is quashed and set aside. The communication dated 22.11.2013, addressed by respondent No.2 to the petitioner is quashed and set aside only to the extent of asking for a "No Due Certificate" from respondent No.1.
16. The petition is allowed, in the above terms. Rule is made absolute, accordingly. There shall be no orders as to costs.
Page 16 of 17 HC-NIC Page 16 of 17 Created On Thu Sep 24 01:08:53 IST 2015 C/SCA/13400/2014 JUDGMENT (SMT. ABHILASHA KUMARI, J.) Gaurav+ Page 17 of 17 HC-NIC Page 17 of 17 Created On Thu Sep 24 01:08:53 IST 2015