Kerala High Court
Kunjeli Mathew vs The Enforcement Officer (Recovery) on 30 August, 2013
Author: Antony Dominic
Bench: Antony Dominic
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE ANTONY DOMINIC
&
THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU
TUESDAY, THE 23RD DAY OF MAY 2017/2ND JYAISHTA, 1939
WA.No. 98 of 2014 () IN WP(C).9931/2006
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AGAINST THE ORDER/JUDGMENT IN WP(C) 9931/2006 of HIGH COURT
OF KERALA DATED 30-08-2013
APPELLANT(S)/APPELLANT:
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KUNJELI MATHEW,
KARICKATHIL VEEDU, CHERUVAKKAL P.O., AYUR,
KOLLAM DISTRICT-691 533.
BY ADV. SRI.ALEX VARGHESE
RESPONDENT(S)/RESPONDENTS:-
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1. THE ENFORCEMENT OFFICER (RECOVERY),
EMPLOYEES PROVIDENT FUND ORGANISATION,
REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN, PATTOM,
THIRUVANANTHAPURAM-695 004.
2. THE RECOVERY OFFICER,
EMPLOYEES PROVIDENT FUND ORGANISATION, REGIONAL OFFICE,,
BHAVISHYANIDHI BHAVAN, PATTOM,
THIRUVANANTHAPURAM-695 004.
3. S. MUJIB REHUMAN
RAHMATH MANZIL, MUNDACKAL VILLAGE,
THEKKEVILA CHERRY, VADAKKEVILA P.O., KOLLAM-691 010.
4. SUHRABEEVI
W/O. SIRAJUDDIN, CHOWRIKAL HOUSE,
KILIKOLLOOR CHERRY, KILIKOLLOOR P.O., KOLLAM-691 004.
R1,R2 BY ADV. SRI.N.N.SUGUNAPALAN (SR.)
R1,R2 BY ADV. SMT.T.N.GIRIJA, SC,EPF ORGANISATION
R BY SRI.B.MOHANLAL
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON
23-05-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ.
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W.A. No. 98 of 2014 ( )
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Dated this the 23rd day of May, 2017.
JUDGMENT
Dama Seshadri Naidu,J.
Appellant Kunjeli Mathew filed W.P.(C) No. 9931 of 2006: she maintained that she had no obligation to pay any provident fund dues, for she leased out the cashew factory--initially owned by her husband, since deceased--to S. Mujib Rehuman and Suhrabeevi (the 3rd and the 4th respondents). She contended that any statutory liability, including that of provident fund, should be attributable to those lessees or transferees. So, she assailed the statutory demand made by the Enforcement Officer (the 1st respondent) and the Recovery Officer (the 2nd respondent) of the Employees Provident Fund Department (EPF Department). Unimpressed by Mrs. Mathew's assertions, a learned Single Judge, through a judgment dated 13.08.2013, dismissed the writ petition. Further aggrieved, Mrs. Mathew is before us.
2. Briefly stated, Mrs. Mathew's husband owned a cashew factory--Rajan Cashew Factory. After his death in 1991, Mrs. Mathew, his widow, could not run it. Accordingly, through Exts.P1 and P2 lease agreements, she transferred the management, first, to Mujib Rehuman for the years 1993-1994; later, in 1995, to Suhrabeevi. In fact, W.A No.98/2014 -2- Suhrabeevi changed the factory's name to Siraj Cashew Factory and carried on with the management.
3. In course of time, because of the provident fund arrears accumulated during the period when the Factory had been under the management of respondents 3 and 4, the EPF authorities issued Exts.P7 and P9 demand notices to Mrs. Mathew. This is despite her submitting Ext.P8 explanation informing the authorities that by the time she transferred the factory management, there had been no dues. She also informed the authorities that the dues, now demanded, were incurred only by the lessees. But, the authorities persisted with the demand.
4. As seen from the impugned judgment, the principal reason that weighed with the learned Single Judge was that the appellant could not file any material before this Court in the writ petition to establish that she had transferred the Management. In fact, Exts.P1 and P2 are the lease agreements, which have been on record.
5. Even the impugned demand notices issued by the Department i.e., Exts.P7 and P9, amply establish that the Department had been in the know of the transfer effected by Mrs. Mathew. The very demand notice records the name of the factory as had been changed by one of the lessees. Further examined, the demand notices reveal that the authorities, while interpreting Section 17B of the EPF & MP Act ('the W.A No.98/2014 -3- Act'), had been swayed by the observation that the liability is "joint and several."
6. In the above factual background, Sri Alex Varghese, the learned counsel for the appellant, has submitted that a holistic reading of Section 17B of the Act amply establishes that the owner's liability is co- terminous with her having the ownership or management of the establishment. Once the establishment has been transferred, she ceases to have any control, so any liability.
7. In elaboration of his submissions, he has also submitted that after the transfer of the management, it is the lessee that has to pay the statutory dues, including any contribution towards provident fund. Despite the Department's knowing the fact that Mrs. Mathew had nothing to do with the establishment, they have persisted with fastening the liability on her. To support his contentions, Sri Alex Varghese has placed reliance on Neyveli Lignite Corporation Ltd., v. Regional Provident Fund Commissioner, Madras1, Annie Thomas v. Asst. Provident Fund Commissioner2, and K.C. Thomas v. Regional Director, ESI Corporation3.
8. Sri Alex Varghese has also drawn our attention to an analogous provision in the Employees State Insurance Act, 1948: Section 93A. 1 1998 (2) LLJ 977 22004(3) KLT SN 99 (Case No. 4) 31997(2) ILR 453 W.A No.98/2014 -4-
9. Heard Sri Alex Varghese, the learned counsel for the appellant and Sri N.N. Sugunapalan, the learned Standing Counsel for the Employees Provident Fund Organisation, apart from perusing the record.
10. To contextualise the controversy, we may refer to Section 17B of the Act, which reads thus:
"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 upto 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."
11. As seen from the above extract, for the liability that has been incurred before the establishment is transferred, both the employer and the transferee have been made liable jointly and severally. The same arrangement, however, could not be found for the liability that arises after the transfer is effected. In that reckoning, we may conclude that as far as the liability after the transfer is concerned, only the transferee will be liable, entirely. In Annie Thomas, a learned Division Bench of this Court has held that for the dues accrued after the date of transfer, the transferee alone has to bear the burden of paying the contribution.
12. In Neyveli Lignite Corporation Ltd., a learned single Judge of W.A No.98/2014 -5- the Madras High Court has affirmed much the same principle, as seen from paragraph 13 of the judgment. While interpreting Section 93(a) of the ESI Act, an identical provision, a learned Division Bench of this Court in K.C. Thomas has held in paragraph 9 thus:
"9. Now coming to the argument based on the provisions contained under Section 93A we note that the above section was added in the statute by way of an amendment under Employees State Insurance (Amendment) Act, 1965. Section 93 A reads as follows:-
"93A. Liability in case of transfer of establishment.-Where an employer, in relation to a factory or establishment , transfers that factory or establishment in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever, the employer and the persons to whom the factory or establishment is so transferred shall jointly and severally be liable to pay the amount due in respect of any contribution or any other amount payable under this Act in respect of the periods upto the date of such transfer."
A mere reading of the above section would clearly show that it was incorporated in the statute to rope in the transferee of a factory to bear the liability of the transferor as the employer under the Act. In the statement of object and reasons to the amendment referring to section 93 A it is stated as follows:-
"It is proposed to provided that the buyer or transferee of an establishment in respect of which dues payable under the Act are pending shall also be liable to pay those dues."
The language of the section would not in any way justify the interpretation given by the Employee's Insurance Court so as to make the transferor liable for the dues from transferee. So also the theory of retransfer on the expiry of the period of the lease and thereby making the owner/transferor a transferee for the purpose of section 93-A also cannot be accepted. When the lease is for a definite period and when the period expires the lease automatically gets terminated. There is no question of re-transfer to the owner. In view of the above, we cannot agree with the finding of the Employee's Insurance Court that the appellant will continue to be liable for the dues under the Act even when the factory was leased out to a third party and the lessees W.A No.98/2014 -6- was operating the factory as its occupier."
13. To recapitulate, we may observe that in the impugned Exts.P7 and P9 notices, the authorities have misconstrued the expression 'joint and several' without reference to 'until the date of transfer'. Further, in the impugned judgment, the learned single Judge may have been oblivious of Exts.P1 and P2, which amply establish that Mrs. Mathew has already transferred the establishment.
14. In the above facts and circumstances, given the emphatic judicial ruling by a co-ordinate Division Bench of this Court, we hold that the judgment impugned cannot be sustained. As a result, Exts.P7 and P9 are quashed, thereby the writ petition is allowed. No order on costs.
ANTONY DOMINIC, JUDGE.
DAMA SESHADRI NAIDU, JUDGE.
Rv W.A No.98/2014 -7-