M/S Snl Bearing Limited vs Union Of India & Ors on 1 October, 2012

[Cites 8, Cited by 1]

Jharkhand High Court

M/S Snl Bearing Limited vs Union Of India & Ors on 1 October, 2012

Equivalent citations: 2013 (1) AJR 68

The petitioner has sought quashing of the notice dated 9th August, 2007 (Annexure-3) by which the petitioner has been asked to show cause as to why it should not be declared as deemed defaulter for non-payment of the lease rent payable to M/s. SBL Industries Limited Ranchi as outstanding liability and dues of M/s. SBL Industries Limited Ranchi to the E.P.F. Organization. The petitioner has also sought quashing of the notice of attachment dated 11 th April 2007 (Annexure-2) issued by the respondent no.4 Official Liquidator, Government of India, Ministry of Company Affairs. The petitioner is a tenant of M/s. SBL Industries Limited, whereupon it is liable to pay rent to the said Company. The E.P.F dues of SBL Industries Ltd. were outstanding against the Employees' Provident Fund Organization, for which a notice dated 6th August, 2003 was issued to the petitioner to remit the rental due to M/s. SBL Industries Limited, Ranchi in favour of E.P.F Organization (Annexure-1).

Learned counsel for the petitioner submits by referring to paragraph 6 of the writ petition that the said notice was duly served and the rental amount for the period January, 2003 to June, 2004, were deposited by the petitioner. However, it is submitted that the dues thereafter which accrued on account of rental to M/s. SBL Industries Limited would not be remitted to the E.P.F Organization for reasons explained in the writ petition.

In the meantime, the petitioner received an attachment notice dated 11th April, 2007 from the Deputy Official Liquidator, Delhi High Court, asking the petitioner to remit the rental due to M/s. SBL Industries Limited with the office of Official Liquidator in connection with the said Company which has been ordered to be wound up under order dated 23rd January, 2006, passed by the High Court of Delhi. The petitioner was informed that under Section 456 of the Companies Act, 1956 all assets, properties etc. are deemed to be in custody of the Hon'ble High Court of Delhi from the date of winding up orders and are to be delivered/remitted to the official liquidator. Since as per application no. 273 of -2- 2007, the petitioner is a tenant of the premises of M/s. SBL Industries Limited, the rent due for the period January, 2005 to till date, were directed to be remitted within 15 days of receipt of this said letter. Learned counsel for the petitioner further submits that the petitioner-company thereafter remitted the rental dues payable to M/s. SBL Industries Ltd. in favour of Deputy Official Liquidator, Delhi High Court. However, the petitioner, in the meantime, received the impugned notice dated 9th August, 2007 threatening him to be declared as deemed defaulter for failure to deposit rental of the said premises in favour of E.P.F Organization. The petitioner thereafter filed a show cause dated 13th August, 2007 before the Regional Provident Fund Commissioner and Recovery Officer, E.P.F. Organization, Ranchi, vide Annexure-5 bringing to his notice the aforesaid fact and requesting him not to treat as a deemed defaulter in the aforesaid circumstances, However, the rental for July, 2004 till December, 2004 was remitted by a Cheque in favour of E.P.F Organization. In these circumstances, learned counsel for the petitioner submits that though the Respondents-E.P.F Organization may have a valid claim of priority of payment of contribution over other debts in respect of E.P.F dues even in respect of the company under liquidation, the proper course for the Respondents-EPF Organization is to move before the concerned Company Court where the winding up proceedings are pending for disbursal of the amount of liability due from M/s. SBL Industries Limited..

Learned counsel for the Respondents E.P.F. Organization submits that under Section 11 of the Act of 1952, the organization has priority of payment of contribution over other debts even in cases where any employer is adjudicated insolvent or, being a company, an order for winding up is made. Learned counsel for the Respondents-EPF Organization also submits that the petitioner was himself in default in not making payments for the subsequent periods after June, 2004 till the notice of the Deputy Official Liquidator dated 11th April, 2007 by which the petitioner has been asked to remit the rental for the period January, 2005 onwards. The petitioner has not explained reasons for not remitting the said rental for the period before the notice dated 11th April, 2007 in favour of EPF. Organization.

A counter affidavit has been filed on behalf of the Official Liquidator in which the stand has been taken that M/s. SBL Industries Ltd. is under liquidation by the order of the Hon'ble High Court of Delhi dated 23rd January, 2006 in Company Petition No. 321 of 2001 and the official liquidator has been appointed as its liquidator of the aforesaid company. It has been stated in the said affidavit that no suit or other legal proceedings shall be commenced, or if pending at the -3- date of winding up order, shall be proceeded with against the company except by leave of the court and subject to the terms imposed. It is also submitted that the E.P.F. Organization has no right to attach the rent of the company in liquidation as once an order of winding up is passed, all the assets and properties of the company are vested with the official liquidator and all claims arising against the company in liquidation are to be dealt with in accordance with the provisions of Section 529, 529A and 530 of the Companies Act, 1956. However, it is stated in the affidavit of the official liquidator that the dues of the Provident Fund Organization if any are preferential in nature and the said respondent have to file their claim in form no. 66 provided in the Companies (Court) Rules 1959 as and when the claims are invited by the Hon'ble High Court of Delhi. In these circumstances it has been stated in affidavit that the EPF organization is not empowered to attach the rent payable to the company in liquidation.

I have heard learned counsel for the petitioner as well as EPF Organization and gone through the relevant materials including the affidavit of the Official Liquidator. The contention of the learned counsel appearing on behalf of EPF Organization is not in dispute in respect of section 11 of the Act, 1952, which is quoted hereinbelow:

Section 11. Priority of payment of contributions over other debts.- Where any employer is adjudicated insolvent or, being a company, an order for winding up is made, the amount due-

(a) 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 14B, accumulations required to be transferred under sub-section (2) of section 15 or any charges payable by him under any other provision of this Act or of any provision of the [Scheme or the Insurance Scheme]; or

(b) From the employer in relation to an exempted [establishment] in report of any contribution to [the provident fund or any insurance fund] (in so far it relates to exempted employees), under the rules of [the provident fund or any insurance fund], [any contribution payable by him towards the [Pension] fund under sub-section (6) of Section 17,] damages recoverable under section 14B or any charges payable by him to the appropriate Government under any provision of this Act or under any of the conditions specified under section 17, shall, where the liability therefor has accrued before the order of adjudication or winding up is made, be deemed to be included] among the debts which under section 49 of the Presidency-towns Insolvency Act, 1909 (3 of 1909), or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920), or under [section 530 of the Companies Act, 1956 (1 of 1956] are to 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, as the case may be.

[Explanation.- In this sub -section and in section 17, "insurance fund" means any fund established by an employer under any scheme for providing benefits in the nature of life insurance to employees, whether linked to their deposits in provident fund or not, without payment by the employees of any separate contribution or premium in that behalf] -4- (2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer [whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution], the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being force, be paid in priority to all other debts.] However, from perusal of the said provision itself it appears that for dues which have accrued before the order of adjudication or winding up, the EPF dues have a priority to all other debts in the distribution of the property of the company being wound up. But in terms of provisions of the Companies Act when a winding up order has already been made the proper course for the organization is to file a claim before the concerned company court in the prescribed format for seeking disbursement of the providing fund dues on a preferential basis in terms of the provisions of the Act 1952.

In the present case, after the winding up order by the Companies Court dated 23rd January, 2006, notices have been served upon the petitioner- company for remittance of the rental payable to the company in winding i.e. M/s. SBL Industries Ltd. in favour of the Deputy Official Liquidator which has been appointed its liquidator of the Company under liquidator. The petitioner in due deference to aforesaid, deposited the demanded dues for the period January 2005 onwards totaling Rs. 449052/- till the date of filing of the writ petition. Notices dated 9th August, 2007 impugned herein have been issued against the petitioner thereafter by EPF Organization directing it to deposit the rental of the same premises payable to the Company in liquidation to which the petitioner is aggrieved.

From the aforesaid facts and circumstances, and the provisions of law as quoted hereinabove including the relevant provisions of the Companies Act, it is apparent that the EPF dues have a priority over all other debts, but for seeking payment of the aforesaid debts a proper claim application is required to be filed by the Organization before the Company Court where the winding up operation of the company in liquidation are pending. In these circumstances, the notices dated 9th August, 2007 issued against the petitioner, appear to be misconceived and cannot be sustained in law. The petitioner admittedly cannot be made liable to pay the same rental twice to two different authorities.

In view of the aforesaid facts and the discussions made hereinabove and the provisions of law the impugned notices are set aside. However, the Respondents-EPF organization is at liberty to approach the competent court -5- where the said winding up operation in company petition no. 321 of 2001 are pending for realization of the EPF dues.

With the aforesaid observations/directions, this writ application is allowed.



                                                   (Aparesh Kumar Singh, J)
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      IN THE HIGH COURT OF JHARKHAND AT RANCHI
                   W.P. (C) No. 5261 of 2007
      Parikshit Mahanty               ...Petitioner

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