Gujarat High Court
M/S Oscar Industries vs Assistant Provident Fund Commissioner on 14 June, 2022
Author: A.Y. Kogje
Bench: A.Y. Kogje
C/SCA/8304/2018 ORDER DATED: 14/06/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8304 of 2018
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M/S OSCAR INDUSTRIES
Versus
ASSISTANT PROVIDENT FUND COMMISSIONER & 5 other(s)
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Appearance:
MR.JAL SOLI UNWALA, SENIOR ADVOCATE with AMIRAJ R BAROT(8575)
for the Petitioner(s) No. 1
MS E.SHAILAJA(2671) for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2,3,4,5,6
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CORAM:HONOURABLE MR. JUSTICE A.Y. KOGJE
Date : 14/06/2022
ORAL ORDER
(1) This petition under Articles 226 and 227 of the Constitution of India for following relief:-
"(A) This Hon'ble Court may be pleased to issue a appropriate writ, order, or direction holding and declaring the impugned orders dated 17.05.2018 to be arbitrary, copricious, illegal and unreasonable and thereby violatative of Article 14 and 21 of the Constitution of India and thereby be pleased to quash and set aside the impugned orders dated 17.05.2008 at Annexure-A to the petition;
(2) Learned senior advocate Mr.Jal Soli Unwala appearing with learned advocate for Amiraj R. Barot submitted that by way of present writ petition invoking the provisions of Article 226 and 227 of the Constitution of India, inter alia, challenging the order/circular dated 17.05.2018 issued by the respondent no.1 herein, whereby the respondent no.1 decided and issued an order of attachment of immovable property and a warrant of attachment of movable property which is arbitrary and illegal. It is submitted that the present petitioner had purchased the establishment/property being A1 type Shed no. 38, Plot No. 506,100, Sheds Area, GIDC, Vapi from M/s Mathur Micro Motors and Appliances Private Ltd. vide registered assignment deed and sale deed bearing No. 8896 of 2007 dated Page 1 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022 C/SCA/8304/2018 ORDER DATED: 14/06/2022 30.11.2007. He submitted that under a notice dated 09.11.2017 issued under purported exercise of powers under Section 17B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short "the Act") to the present petitioner, calling upon to remit dues of Rs 34,37,697/- within 15 days from the date of receipt of the notice, failing which the petitioner would be declared as deemed in default.
(2.1) Another notice dated 09.11.2017 was issued through which the petitioner was called upon to make the payment of the amount within seven days from the receipt of the notice, failing which appropriate steps would be taken against the petitioner to realise the amount in accordance with the provisions of the Section 8B to 8G of the said statute and had further issued a notice dated 11.12.2017 ordering to attach immovable property of the present petitioner.
(2.2) That similar notices dated 06.10.2017 and 09.11.2017 to M/s ABN Process which is operating under Leave & License Agreement to deposit the monthly rent to EPFO. Inspite of taking steps against respondent no.2 herein, the respondent No.1 has once again ordered to attach immovable property and warrant of attachment of movable property of the present petitioner impugned order dated. It is submitted that the petitioner had purchased the said property after 2007 whereas the alleged dues that the respondent authority is putting on the shoulders of the present petitioner is before the said purchased of the property by the petitioner. the present petitioner is involved because the order of settlement before this Court in Special Civil Application No.15650 of 2012 by the respondent no.2 clearly states that the respondent no.2 is liable and is ought to pay the provident fund amount and therefore also when the company which can actually defaulted has paid the amount and has agreed to pay further amount should ultimately pay the amount due the respondent authority should initiate stricter action if needed Page 2 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022 C/SCA/8304/2018 ORDER DATED: 14/06/2022 against the respondent no. 2 company.
(3) As against this, learned advocate Ms.E. Shailja appearing for the respondent No.1 submitted that for attachment of immovable and movable property CP-16 & CP-2 dated-28.06.2017 was issued to establishment M/s Mathur Micro Motors & Appliances Pvt. Ltd. (Resp no. 2). Shri M M Desai, Enforcement Officer submitted his report dated 19.07.2017 that M/s Oscar Industries has purchased the property of-defaulting establishment and now M/s ABN Process is functioning on the premises of defaulting establishment vide Leave & License Agreement dated 11.03.2008 entered between M/s Oscar Industries and M/s ABN Process. On 12.06.2017 RRC has been transferred under section 8C(2) of Act to Regional Office, Bandra, Mumbai and Chennai as the address of Directors of defaulter establishment are situated at Mumbai and Chennai. A notice under section 17B of the Act dated 09.10.2017 was issued to M/s ABN Process and accordingly representative of M/s ABN Process appeared before Recovery Officer on 25.10.2017 and submitted the copy of Leave & License Agreement, copy of Deed of Conveyance & copy of Deed of Assignment.
(3.1) A Summons to appear dated 01.11.2017 was issued to Director of the defaulter establishment. In pursuance to notice under section 17B of the Act, M/s ABN Process on 07.11.2017 submitted a letter alongwith list of directors of defaulter establishment & copy of order date 23.10.2013 of High Court of Gujarat passed in Special Civil Application No. 15650 of 2012. A notice under section 17B of the Act and the notice of demand dated 09.11.2017 through Form No. CP-1 and was issued to M/s Oscar Industries. A notice dated 09.11.2017 under Sub section 3(i) of Section 8F of Act was issued to M/s ABN Process to deposit the monthly rent to PF office in lieu of M/s Oscar Industries The notice of demand through Form No. CP-1 and was issued to M/s ABN Process on 12.12.2017. For attachment of immovable and movable property CP-16 & CP-2 dated Page 3 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022 C/SCA/8304/2018 ORDER DATED: 14/06/2022 11.12.2017 was issued to petitioner establishment M/s Oscar Industries. A letter dated 05.12.2017 was received in the office of the deponent from M/s Oscar Industries (petitioner)through it's advocate against the notice dated 09.11.2017. A reply dated 12.01.2018 issued to M/s Oscar Industries (petitioner) against the advocate letter's dated 05.12.2017 alongwith various judgments of Hon'ble Supreme Court & High Courts. M/s Mathur Mirco Motors and Appliances Pvt.Ltd (respondent No. 2) submitted a letter dated 01.02.2018 in which they requested that they intended to pay full & fin. payment within 180 days and also mentioned the schedule of payment. Accordingly a letter for installment facility proposal was issued on 08.02.2018 to M/s Mathur Micro Motors and Appliances Pvt. Ltd to clear the outstanding dues. However, the defaulter failed to comply.
(3.2) It is submitted that a letter dated 04.04.2018 was received from Shri Vivek Mathur, Director of defaulter establishment in which it was stated that we shall clear the entire total outstanding dues of Rs. 34,37,697/- to be paid in full in single stroke on or before 30.04.2018. but they again failed to do so. CP-2 & CP-16 i.e Warrant of Attachment of Movable Property and Immovable Property dated 17.05.2018 issued to M/s Oscar Industries through Account Officer, Recovery. Vide communication dated 21.05.2018 Shri Deepak Sharma, Account Officer (Recovery) submitted his report in which it was stated that he executed the CP2 & CP-16 alongwith copy of panchnama and Sapurdnama. M/s Oscar Industries (petitioner) submitted a letter dated 28.05.2018 alongwith copy of oral order dated 24.05.2018 of High Court of Gujarat in the present case and requested not to proceed or take any action or steps in furtherance of attaching any of the properties belonging to M/s Oscar Industries as the matter is under consideration, hence no coercive action was taken further against the M/s Oscar Industries.
Page 4 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022C/SCA/8304/2018 ORDER DATED: 14/06/2022 (3.3) From the above narrated sequence of facts it is clear that the office of the deponent has made several communications with M/s Oscar Industries (Petitioner) after knowing the property of the defaulting establishment is purchased by the Petitioner. However under section 17B of the Act, M/s Oscar Industries is liable to pay the dues of defaulting establishment and as the sale proceed is with M/s Oscar Industries, hence to recover the aforementioned PF dues, the recovery action is taken against M/s Oscar Industries under section 8B to 8G of the Act.
(4) The Court has heard learned advocates for the parties and perused the documents placed on record. The Employees' Provident Fund & Misc. provisions Act, 1952 (EPF & MP Act, 1952) is a legislation for providing social security to employees working in any establishment engaging 20 or more persons on any day. It provides for compulsory deduction of provident fund from employees and a contribution form the employer which is deposited in the worker's account in the EPF office. Similarly, the Act, also provides for providing insurance and pensionary benefits to the employees. The provident fund and other contributions have to be deposited by the employer by the 15th of the next month in which the employee has worked in the establishment and the dues become payable to him, because the worker has already performed the employment upto last day of the previous month. The contributions have to be deposited by the employer/establishment only after beneficiary worker has already worked and thus earned this amount in terms of the contract of employment and the provisions of the Act. In case of failure to deposit the legitimate dues of workers, the EPFO under section 7-A of the Act initiate recovery action for the purpose of compelling the employer to deposit the legitimate dues of the worker. Through a quasi-judicial process, the dues of the workers under section 7A of the Act is assessed and the employer/establishment is asked to deposit the amount. Subsequently, after deposit of the principal amount, action is Page 5 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022 C/SCA/8304/2018 ORDER DATED: 14/06/2022 initiated to levy penalty and damages under section 7Q and Section- 14 of the Act to provide for the interest on the delayed payment by the employer and also act as deterrence for them.
(5) M/s Mathur Micro Motors And Appliances Pvt.Ltd. (RESPONDENT No. 2) is a defaulter establishment in respect of the dues under section 14B and 7Q of the Act for the period 03/1994 to 05/2007. The said orders having not been challenged and attained finality . In the case of defaults in payments, in addition to other coercive measures, recovery measures under Section 8B to 8G of the Act are also provided by the Statute. By virtue of the Statutory Provisions under Section 8G of the Act, the Provisions of the Second and Third Schedules to the Income-Tax Act 1961 [hereinafter referred to as "IT Schedules"] and the Income-Tax (Certificate Proceedings) Rules 1962 [hereinafter referred to as "CP Rules" are also made applicable mutatis mutandis. Under the Provisions of the CP Rules, the EPFO has a right of lien on the Properties of the Establishments who defaulted the payments and to whomsoever the said Properties are transferred, the lien of EPFO also gets automatically transferred making the Transferee Person also statutorily liable for payments under default with interest, penalty and other allied costs unless the outstanding amounts are recovered in full and all the Measures of Recovery as provided under Section 8B to 8G of the Act shall be applicable to such Transferee Person.
(5.1) In the present case, the petitioner has already purchased the property of defaulting establishment and Deed of Assignment is made and entered into at Vapi on 30 th November 2007 between M/s Mathur Micro Motors and Appliances Pvt. Ltd. through It's Authorized Director Mr. Vivek Mathur and M/s Oscar Industries, hence notice under Section 17B of the Act was Issued to M/s Oscar Industries (Petitioner) and section 17B of the Act categorically provides as under "
"Liability in case of transfer of establishment-where an Page 6 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022 C/SCA/8304/2018 ORDER DATED: 14/06/2022 employer, in relation to an establishment, transfers that ( & establishment in whole or in part, by sale, gift, lease or license 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."
Hence In light of provision of section 17B of the Act, M/S Oscar Industries ( Petitioner) is liable to pay the pending dues. The Revenue Recovery Certificate (RRC) dated 12.04.2017 for Rs.34,37,697/- under section 14B & 7Q of the Act for the period 03/1994 to 05/2007 was received by the recovery sanction of the deponent's office.
(6) As per section 8F (3) (i) & (ii) of the EPF & MP Act, 1952 the dues assessed can be recovered from any person who holds or may subsequently hold any money for or on account of the defaulter establishment/employer jointly with any other person and for the purposes of this sub section, the shares of the joint holders in such account shall be presumed. As per the Act, M/s Oscar Industries has became the owner of all the Assets & Liabilities of M/s Mathur Mirco Motors and Appliances Pvt.Ltd. On purchase of their Assets. Therefore, the sole responsibility to pay the PF dues has shifted from Mathur Mirco Motors and Appliances Pvt.Ltd to M/s Oscar Industries. The respondent has issued the attachment order against the assets of original defaulter now with M/s Oscar Industries (petitioner). By Virtue of purchase of properties of the defaulter Establishment, the Petitioner has become the Transferee who also is therefore, statutorily duty bound to pay the amounts defaulted by the Establishment with damages and penal interest. The Full bench of Calcutta High Court were pleased to discuss this issue in detail in similar matter, in the case filed by Dalgaon Agro Industries Ltd. vs Union of India, reported in (2006) 1 CALLT 32 (HC), "A transferee would be liable for the damages jointly and severally Page 7 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022 C/SCA/8304/2018 ORDER DATED: 14/06/2022 in respect of defaults committed prior to the date of transfer by reason of Section 17B" and "In terms of the provisions contained in Section 17B, the amount recoverable under Section 14B is a sum due under the provisions of the 1952 Act." and the same has been affirmed by Hon'ble Supreme Court of India vide order dated 02.07.2014 in Civil Appeal No. 927 of 2014 filed by M/S Mcleod Russel India Limited Vs. Regional Provident Fund Commissioner, Jalpaiguri & Ors.
(7) The main contention has been that the predecessor of the petitioner is responsible for the dues of the EPF and that the petitioner has only purchased the property and hence cannot be held responsible for liability.
(7.1) For examining this contention, it is necessary to examine the document of of transfer between the petitioner and other respondent at Annexure-"B Colly". The property is entirely is described in the Schedule, which according to this Court, is a substantially large property. However, the consideration is filed at only Rs.7,00,000/-. Over and above this, in the conveyance deed on page-6, it is clearly mentioned that property which is conveyed with all rights, title and interest will also carry with itself all easment rights, liabilities, privileges etc, meaning thereby, any liability attached to the property will not also travel with it.
(8) Learned advocate for the petitioner has placed reliance on the decision in case of Ganesh Trading Company v/s. Employees Provident Fund Organization reported in 2015 (o) AIJEL 233104. This may not help the petitioner as in the facts of the case the department had not taken any steps of recovery even from the erstwhile owners at the relevant time prior to the conveyance or thereafter. In the facts of the present case, the statutory steps against the erstwhile owner were taken and the litigation had reached till this Court which is to the knowledge of the present petitioner.
Page 8 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022C/SCA/8304/2018 ORDER DATED: 14/06/2022 (9) In a subsequent decision of the very party viz. Shree Ganesh
Trading Company v/s. Gujarat State Employees Provident Fund Organization, the Division Bench has rendered a decision in Letters Patent Appeal No.9 of 2016 in Special Civil Application No.3230 of 2014 while considering scope and applicability of Section 93A of the ESI Act and has held that the transaction of loan would be covered in the transaction by which the liability stood transferred as, such is in the term of ESI Act.
(10) In view of the aforesaid, reasonings, the Court is not inclined to interfere. However, this order may not come in way of this petitioner in any other statutory remedy that the petitioner may avail in accordance with law. The present reasons are only to justify the non interference of this Court in exercise of power under Article 226 of the Constitution of India. The petition stands dismissed.
(A.Y. KOGJE, J) SIDDHARTH Page 9 of 9 Downloaded on : Sat Dec 24 18:47:54 IST 2022