Kerala High Court
M/S.Southern Paper Product vs The Employees' Provident Fund on 21 August, 2008
Author: S.Siri Jagan
Bench: S.Siri Jagan
IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 10563 of 2007(G)
1. M/S.SOUTHERN PAPER PRODUCT,
... Petitioner
Vs
1. THE EMPLOYEES' PROVIDENT FUND
... Respondent
2. THE RECOVERY OFFICER, EMPLOYEES'
3. THE KERALA FINANCIAL CORPORATION,
4. M/S.PARAGON PACKS, REPRESENTED BY ITS
For Petitioner :SRI.SATHISH NINAN
For Respondent :SRI.L.MOHANAN, SC, KFC
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :21/08/2008
O R D E R
S. SIRI JAGAN, J.
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W.P.(C)No.10563 OF 2007
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Dated this the 21st day of August, 2008
JUDGMENT
The 4th respondent borrowed money from the 3rd respondent, Kerala Financial Corporation. The 4th respondent defaulted repayment of the same to the 3rd respondent. At the same time, the 4th respondent owed money to the Employees' Provident Fund Organisation, the 1st respondent herein, for dues under the Employees Provident Funds and Miscellaneous Provisions Act. The 4th respondent had mortgaged their properties in favour of the 3rd respondent as security for loan amounts taken by them from the 3rd respondent. Despite the same, the 1st respondent, under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, had priority of charge over the properties of the 4th respondent for recovery of amounts due from the 4th respondent under the Employees' Provident Funds and Miscellaneous Provisions Act. It appears that both the Provident Fund Organisation and the KFC were mutually unaware of the dues from the 4th respondent to the W.P.(c)No.10563/08 2 other. Without knowing the same, the 3rd respondent took over the mortgaged properties under Section 29 of the State Financial Corporation Act and the same was sold in public auction. The petitioner herein purchased the same and they paid the entire amount to the KFC. Now by Exts.P4 and P6, respondents 1 and 2 have initiated proceedings against the petitioner for recovery of the amounts due from the 4th respondent to the Provident Fund Organisation as dues under the Employees' Provident Funds and Miscellaneous Provisions Act. The petitioner is challenging Exts.P4 and P6.
2. According to the petitioner, what the Provident Fund Organisation has, is only a right to enforce the statutory charge on the property in question and that can still be enforced against the sale consideration paid by the petitioner to the KFC by directing the KFC to make over the proceeds of the sale to the extent to satisfy the demand of the Provident Fund Organisation. The petitioner, therefore, seeks the following reliefs:
"i) Call for the records leading to Exhibits P4 and P6 and issue a writ in the nature of certiorari quashing the same;
ii) issue a writ in the nature of mandamus or any other appropriate writ, order or direction, W.P.(c)No.10563/08 3 commanding the respondents 1 and 2 to demand the outstanding towards provident fund dues and realise the same from the Kerala Financial Corporation who has auctioned the property to the petitioner for a sum of Rs.20,30,000/-;
iii) Issue a writ in the nature of mandamus or any other appropriate writ order or direction declaring that in view of the firt charge of Employees Provident Fund Organisation on the property purchased by the petitioner, the sale conducted by the Kerala Financial Corporation is subject to the said charge and therefore only after adjusting the dues outstanding to the provident fund the balance amount loan can be appropriated by the Kerala Financial Corporation and that no proceedings can be initiated against the petitioner;".
3. The Provident Fund Organisation would contend that in so far as they have statutory charge over the properties belonging to the 4th respondent for the dues under the Employees' Provident Funds and Miscellaneous Provisions Act, the sale conducted by the KFC does not bind them and they can still proceed against the property notwithstanding the sale of the property by the KFC, to the petitioner. They would therefore, submit that there is nothing wrong in Exts.P4 and P6.
4. The learned Standing counsel for the KFC would submit that they were not at any time made aware by the W.P.(c)No.10563/08 4 Provident Fund Organisation regarding any amounts due from the 4th respondent to the Provident Fund Organisation and therefore, they are not liable to make over any money realised by them by sale of the mortgaged properties to the Provident Fund Organisation. He would further submit that the Provident Fund Organisation has to proceed against the 4th respondent for recovery of the amounts due.
After hearing all parties, I am not inclined to countenance the contentions of either the KFC or the Provident Fund Organisation. The petitioner is a bona fide purchaser of the property. He was not made aware of any charge in respect of the property in favour of the Provident Fund Organisation. In any event, the Provident Fund Organisation's claim is only for enforcing the charge over the property, which can still be enforced by proceeding against the sale consideration received by the KFC. Since as between the KFC and the Provident Fund Organisation, the Provident Fund Organisation has a better claim having statutory charge over the property, the KFC is bound to make over that part of the sale consideration sufficient to satisfy the demand of the Provident Fund Organisation for amounts due from the 4th respondent to them. W.P.(c)No.10563/08 5 Therefore, it is for the Employees Provident Fund Organisation to make a demand to the KFC to make over that much amount from the sale consideration to the Provident Fund Organisation. It would be totally inequitable to make the petitioner liable for any further amounts in respect of the property in question. Accordingly, I quash Exts.P4 and P6. I declare that the petitioner or the property purchased by them cannot now be subjected to any further proceedings by the Employees Provident Fund Organisation or the KFC in so far as they have paid the entire sale consideration to the KFC. However, I make it clear that it would be open to the Provident Fund Organisation to make their claim to the KFC for recovery of the amounts sufficient to discharge the liability of the 4th respondent from the sale consideration in the hands of the KFC obtained by them, by sale of the property belonging to the 4th respondent.
The writ petition is allowed as above.
S. SIRI JAGAN, JUDGE Acd W.P.(c)No.10563/08 6