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whether priority given to the dues payable by an employer under Section 11 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (for short, `the EPF Act’) is subject to Section 529A of the Companies Act, 1956 (for short, `the Companies Act’) in terms of which the workmen’s dues and debts due to secured creditors are required to be paid in priority to all other debts.= we would emphasize that in terms of Section 530(1), all revenues, taxes, cesses and rates due from the company to the Central or State Government or to a local authority, all wages or salary or any employee, in respect of the services rendered to the company and due for a period not exceeding 4 months all accrued holiday remuneration etc. and all sums due to any employee from provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees maintained by the company are payable in priority to all other debts. This provision existed when Section 11(2) was inserted in the EPF Act by Act No. 40 of 1973 and any amount due from an employer in respect of the employees’ contribution was declared first charge on the assets of the establishment and became payable in priority to all other debts. However, while inserting Section 529A in the Companies Act by Act No.35 of 1985 Parliament, in its wisdom, did not declare the workmen’s dues (this expression includes various dues including provident fund) as first charge. The effect of the amendment made in the Companies Act in 1985 is only to expand the scope of the dues of workmen and place them at par with the debts due to secured

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 IN THE SUPREME COURT OF INDIA

 CIVIL APPELLATE JURISDICTION

 CIVIL
 APPEAL NO. 
 9630

 O
 F 2011

 (Arising out of Special Leave Petition (Civil) No. 7642 of 2011)

Employees Provident Fund Commissioner ... Appellant(s)

 Versus

O.L. of Esskay Pharmaceuticals Limited ... Respondent(s)

 With

 CIVIL
 APPEAL NO. 9633 
 O
 F 2011

 (Arising out of Special Leave Petition (Civil) No.7644 of 2011)

 CIVIL
 APPEAL NO. 9632 
 O
 F 2011

 (Arising out of Special Leave Petition (Civil) No.7645 of 2011)

 CIVIL
 APPEAL NO. 
 9631

 O
 F 2011

 (Arising out of Special Leave Petition (Civil) No.7646 of 2011)

 J U D G M E N T

G. S. Singhvi, J.

1. Delay condoned.

 2

2. Leave granted.

3. The question which arises for consideration in these appeals is 

whether priority given to the dues payable by an employer under Section 11 

of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 

(for short, `the EPF Act') is subject to Section 529A of the Companies Act, 

1956 (for short, `the Companies Act') in terms of which the workmen's dues 

and debts due to secured creditors are required to be paid in priority to all 

other debts.

4. For the sake of convenience, we have culled out the facts from the 

record of the appeal arising out of SLP(C) No. 7642/2011.

5. Messrs Esskay Pharmaceuticals Limited is a company registered 

under the Companies Act. It falls within the definition of `employer' under 

Section 2(e) of the EPF Act. On account of the company's failure to pay 

the dues under the EPF Act for the periods from March 1998 to May 1999 

and June 1999 to August 2001, the competent authority passed two orders 

under Section 7A of the EPF Act and held that it was liable to pay 

Rs.14,96,751/-. The company appears to have paid a sum of Rs.4,02,126/- 

but did not pay the remaining amount despite the issue of demand notices 

dated 12.4.2001 and 19.4.2001 by the competent authority. The orders 

 3

passed under Section 8F of the EPF Act, which were communicated to the 

bankers of the company also did not yield the desired result. The competent 

authority then issued warrant for attachment of the company's property. 

This was followed by sale notice dated 20.9.2001.

6. Although, it is not clear from the record as to what happened to the 

sale notice, but this much is evident that after 2 years and about 4 months, 

the Enforcement Officer informed the appellant that the Gujarat High Court 

has passed order dated 11.3.2004 for winding up of the company and 

appointed Official Liquidator to look after its properties and clear the debts. 

The appellant then approached the Official Liquidator for payment of the 

amount determined under Section 7A of the EPF Act, but the latter did not 

give any response. 

7. Company Application No. 356/2007 filed by the appellant for issue of 

a direction to the Official Liquidator to pay the amount payable by the 

employer under the EPF Act was dismissed by the learned Company Judge 

by relying upon the order passed by the Division Bench of the High Court in 

Company Application No. 216 of 1997 in Company Petition No.205 of 1996 

and order dated 31.8.2005 passed in Company Application No.195 of 2005 - 

Regional Provident Commissioner-I v. M.A. Kuvadia, O.L. and others. 

 4

8. The appellant challenged the order of the learned Company Judge by 

filing an appeal but could not convince the Division Bench of the High 

Court to entertain his plea that the amount due from the employer is first 

charge on the assets of the company and is payable in priority to all other 

dues. The Division Bench relied upon the judgment of the co-ordinate 

Bench and held that the learned Company Judge did not commit any error 

by dismissing the application filed by the appellant.

9. Since the impugned judgment and the order passed by the learned 

Company Judge are entirely based on the order passed by another Division 

Bench in Company Application No. 216/1997 in Company Petition No. 

205/1996, it will be appropriate to notice the ratio of that order. The same is 

as under:

 "Section-530, Sub-section (1), clearly observes that in a 

 winding up matter, subject to the provisions of Section-529(A), 

 there shall be paid in priority to all other debts, dues of the 

 Government, which are in the form of revenues, tax, etc. When 

 Section-530 is made subordinate to Section-529(A), then, a 

 Court is obliged to look into the material provisions as 

 contained under Section-529(A). Section-529(A) clearly 

 provides that notwithstanding anything contained in any other 

 provision of the Companies Act or any other law for the time 

 being in force, in the winding up of a company, workmen's dues 

 and debts due to the secured creditors to the extent such debts 

 rank under clause (c) of the proviso to sub-section (1) of 

 5

 Section-529 pari passu with such dues, shall be paid in priority 

 to all other debts.

 Section-529(A) has been introduced in the year 1985. It starts 

 with a non-obstante clause. It clearly provides that 

 "notwithstanding anything contained in any other provision of 

 the Act or any other law for the time being in force". A true 

 understanding of Section-529(A) would make clear that the 

 provisions of Section-529(A) shall override the provisions 

 contained in Section-530. Not only this, the provisions 

 contained in Section-529(A) shall override the provisions 

 contained in the ESI Act because the ESI Act is an Act of 1948, 

 while the amendment in the Companies Act has been made in 

 the year 1985 and with the fullest knowledge that it was to 

 override the provisions contained in Section-530. If Section-94 

 of the ESI Act and Section-530 of the Companies Act are made 

 subordinate to Section-529(A), then, Section-529(A) shall 

 march over the rights of others to which the others are entitled 

 either under the special laws or under Section-530 of the 

 Companies Act. A combined/conjoint reading of Section-

 529(A) of the Companies Act would make clear that in a matter 

 of winding up, the workmen's dues and the debts due to the 

 secured creditors to the extent such debts rank under clause (c) 

 of the proviso to Sub-section (l) of Section-529(A) pari passu 

 with such dues, shall be paid in priority to all other debts. If 

 such dues and debts are paid in full and even thereafter, some 

 money is left with the Official Liquidator for its distribution, 

 then, such money can be distributed under Section-530 of the 

 Companies Act. When such a situation crops up, the State 

 Government or the Central Government of the Local Authority 

 may file their claim before the learned Company Judge and at 

 that point of time, they may say that in view of their preferential 

 right, either under the Local Act or under Section-530 of the 

 Companies Act, they be paid."

10. The factual matrix of the other appeals is more or less similar. In all 

the cases, applications filed by the appellant for payment of the amount due 

 6

from the employer were dismissed by the learned Company Judge and the 

appeals were dismissed by the Division Bench of the High Court.

11. Ms. Aparna Bhat, learned counsel for the appellant relied upon the 

judgment in Maharashtra State Cooperative Bank Ltd. v. Assistant Provident 

Fund Commissioner (2009) 10 SCC 123 and argued that the impugned 

judgment and the order of the learned Company Judge are liable to be set 

aside because the High Court's interpretation of Section 11 of the EPF Act is 

contrary to the law laid down by this Court. She submitted that even though 

Section 529A of the Companies Act also contains a non obstante clause, the 

provisions contained therein cannot override Section 11(2) of the EPF Act in 

terms of which the amount due from an employer in respect of the 

employees contribution is treated as first charge on the assets of the 

company and is payable in priority to all other debts. Ms. Bhat further 

argued that the EPF Act is a special legislation for institution of various 

types of funds and the schemes and in view of the non obstante clause 

contained in Section 11(2), priority given to the dues payable by an 

employer will prevail over the priority given under Section 529A of the 

Companies Act to the workmen's dues and debts due to secured creditors. 

 7

12. Shri Gaurav Agrawal, learned counsel for respondent No.1 supported 

the impugned judgment and argued that the statutory priority given to the 

dues of the employees under Section 11(2) of the EPF Act cannot override 

the priority given to the dues of workers and secured creditors under Section 

529A(1) of the Companies Act because Parliament had inserted that section 

in the Companies Act with effect from 24.5.1995 knowing fully well 

priority given to the dues of the employees under the EPF Act. He further 

argued that the non obstante clause contained in the subsequent legislation, 

i.e. Section 529A (1) of the Companies Act would prevail over similar 

clause contained in the earlier legislation, i.e. Section 11(2) of the EPF Act. 

In support of this argument, Shri Agrawal relied upon the judgment of this 

Court in Maharashtra Tubes Ltd. v. State Industrial and Investment 

Corporation of Maharashtra Ltd. (1993) 2 SCC 144.

13. We have considered the respective arguments. For deciding the 

question arising in these appeals, it will be useful to notice the relevant 

statutory provisions.

The EPF Act

14. Section 11 (unamended) of the EPF Act was as under:

 8

 "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 applies in respect of any contribution payable to 

 the Fund, damages recoverable under Section 14-B, 

 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 

 (b) from the employer in relation to an exempted establishment 

 in respect of any contribution to the provident fund (in so far as 

 it relates to exempted employees), under the rules of the 

 provident fund (any contribution payable by him towards the 

 Family Pension Fund under sub-section (6) of Section 17), 

 damages recoverable under Section 13-B 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, or under Section 61 of the 

 Provincial Insolvency Act, 1920 or under Section 230 of the 

 Indian Companies Act, 1913, 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."

15. The EPF Act was amended by Act Nos. 40 of 1973, 19 of 1976 and 

33 of 1988. By Act No. 40 of 1973, Section 11 was renumbered as Section 

11(1) and a new sub-section was added as Section 11(2) and it was declared 

that any amount due from an employer in respect of the employees' 

contribution shall be deemed to be the first charge on the assets of the 

 9

establishment and shall be paid in priority to all other debts. The scope of 

Section 11(2) was enlarged by Act No. 33 of 1988 by including the 

employer's contribution. 

16. The background in which Amendment Act No.33 of 1988 was passed 

is discernible from the Statement of Objects and Reasons appended to the 

Employees' Provident Funds and Miscellaneous Provisions (Amendment) 

Bill, 1988, the relevant portions of which are extracted below:

 "The Employees' Provident Funds and Miscellaneous 

 Provisions Act, 1952 provides for the institution of Compulsory 

 Provident Fund; Family Pension Fund and Deposit Linked 

 Insurance Fund, for the benefit of the employees in factories 

 and other establishments. The Act is at present applicable to 

 173 industries and classes of establishments employing twenty 

 or more persons. As on 31-3-1987, about 1.66 1akh 

 establishments with about 1.38 crore subscribers were covered 

 under the Act.

 2. The Act was last amended in 1976. The Government had set 

 up a high level Committee in April, 1980 to review the working 

 of the Employees' Provident Funds Organisation and to suggest 

 improvements. The Committee had made a number of 

 recommendations involving amendment of the Act. The Central 

 Board of Trustees, Employees' Provident Fund had also, from 

 time to time, made certain recommendations for amendment of 

 the Act. The Standing Labour Committee had at its meeting 

 held in September, 1986 considered inter alia the question of 

 enhancement of the rate of provident fund contribution and 

 recommended suitable enhancement.

 10

 3. Based on the above recommendations, it is proposed to carry 

 on certain amendments in the Act. Some of the more important 

 amendments are:--

 (i) to (v) xxxx xxxx xxxx

 (vi) a provision is being made for treating the entire amount 

 of arrears of provident fund dues as first charge on the assets of 

 an establishment in the event of its liquidation;

 xxxx xxxx xxxx"

17. Section 11, as it stands after the amendment of 1988, reads as under:

 "11. Priority of payment of contributions over other 

 debts.- (1) 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 respect 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 

 11

 Government under any provision of this Act, or under 

 any of the conditions specified under section 17,

 shall, where the liability therefore 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.

 (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 in force, be paid in priority to 

 all other debts."

18. An analysis of Section 11 of the EPF Act shows that it gives statutory 

priority to the amount payable to the employees over other debts. Section 

11(1) relates to an employer who is adjudged insolvent or being a company 

against whom an order of winding up is made. It lays down that the amount 

due from the employer in respect of any contribution payable to the Fund or, 

 12

as the case may be, the Insurance Fund, damages recoverable under Section 

14B, accumulations required to be transferred under Section 15(2) or any 

charges payable by him under any other provision of the Act or the Scheme 

or the Insurance Scheme shall 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. Section 11(2) contains a non obstante 

clause and lays down that if any amount is due from an employer whether in 

respect of the employee's contribution deducted from the wages of the 

employees or the employer's contribution, the same 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 in force, be paid in 

priority to all other debts. To put it differently, sub-section (2) of Section 11 

not only declares that the amount due from an employer towards 

contribution payable under the EPF Act shall be treated as the first charge on 

the assets of the establishment, but also lays down that notwithstanding 

anything contained in any other law, such dues shall be paid in priority to all 

other debts. 

The Companies Act

19. Part VII of the Companies Act, which consists of 5 Chapters contains 

provisions relating to winding up of a company. The provisions contained 

 13

in Chapter V (Sections 528 to 560), which deal with proof and ranking of 

claims are applicable to every mode of winding up. Section 528 lays down 

that in every winding up, all debts payable on a contingency, and all claims 

against the company, present or future, certain or contingent, ascertained or 

sounding only in damages, shall be admissible to proof against the company. 

This is subject to the rider that in the case of insolvent companies, law of 

insolvency will be applicable in accordance with the provisions of the 

Companies Act. Section 529 deals with application of insolvency rules in 

winding up of insolvent companies. Section 530, as it existed prior to the 

amendment of the Companies Act by Act No.35 of 1985, gave priority to 

revenue of the State and local authorities and various amounts payable to 

employees including the dues payable from a provident fund, a pension 

fund, a gratuity fund or any other fund maintained by the company for the 

welfare of the employees. By the Companies (Amendment) Act No.35 of 

1985, proviso was added to Section 529(1). By the same amendment, 

Sections 529(3) and 529A were inserted in the Companies Act. 

Simultaneously, the expression "subject to the provisions of Section 529A" 

was inserted in Section 530(1). Paragraph 2 of the Statement of Objects and 

Reasons contained in the Companies (Amendment) Bill, 1985 reads as 

under:

 14

 "2. Another announcement made by the Finance Minister in 

 his Budget speech relates to the decision of the Government to 

 introduce necessary legislation so that legitimate dues of 

 workers rank pari passu with secured creditors in the event of 

 closure of the company and above even the dues to 

 Government. The resources of companies constitute a major 

 segment of the material resources of the community and 

 common good demands that the ownership and control of the 

 resources of every company are so distributed that in the 

 unfortunate event of its liquidation, workers, whose labour and 

 effort constitute an invisible but easily perceivable part of the 

 capital of the company are not deprived of their legitimate right 

 to participate in the produce of their labour and effort. It is 

 accordingly proposed to amend Sections 529 and 530 of the 

 Companies Act and also to incorporate a new section in the 

 Act, namely, Section 529-A (vide clauses 4, 5 and 6 of the 

 Bill)."

20. Sections 529(1) and (3) and 529A and the relevant parts of Section 

530, as they stand after the 1985 amendments read as under: 

 "529. Application of insolvency rules in winding up of 

 insolvent companies. - (1) In the winding up of an insolvent 

 company, the same rules shall prevail and be observed with 

 regard to--

 (a) debts provable;

 (b) the valuation of annuities and future and contingent 

 liabilities; and

 (c) the respective rights of secured and unsecured creditors; as 

 are in force for the time being under the law of insolvency with 

 respect to the estates of persons adjudged insolvent:

 15

Provided that the security of every secured creditor shall be 

deemed to be subject to a pari passu charge in favour of the 

workmen to the extent of the workmen's portion therein, and, 

where a secured creditor, instead of relinquishing his security 

and proving his debt, opts to realise his security,--

(a) the liquidator shall be entitled to represent the workmen 

and enforce such charge;

(b) any amount realised by the liquidator by way of 

enforcement of such charge shall be applied rateably for the 

discharge of workmen's dues; and

(c) so much of the debt due to such secured creditor as could 

not be realised by him by virtue of the foregoing provisions of 

this proviso or the amount of the workmen's portion in his 

security, whichever is less, shall rank pari passu with the 

workmen's dues for the purposes of section 529A.

529(3). For the purposes of this section, section 529A and 

section 530,- 

(a) "workmen", in relation to a company, means the 

 employees of the company, being workmen within the 

 meaning of the Industrial Disputes Act, 1947 (14 of 

 1947);

(b) "workmen's dues", in relation to a company, means the 

 aggregate of the following sums due from the company 

 to its workmen, namely:-

 (i) all wages or salary including wages payable for 

 time or piece work and salary earned wholly or in 

 part by way of commission of any workman, in 

 respect of services rendered to the company and 

 any compensation payable to any workman under 

 any of the provisions of the Industrial Disputes 

 Act, 1947 (14 of 1947);

 (ii) all accrued holiday remuneration becoming 

 payable to any workman, or in the case of his 

 16

 death to any other person in his right, on the 

 termination of his employment before, or by the 

 effect of, the winding up order or resolution;

 (iii) unless the company is being wound up voluntarily 

 merely for the purposes of reconstruction or of 

 amalgamation with another company, or unless the 

 company has, at the commencement of the 

 winding up, under such a contract with insurers as 

 is mentioned in section 14 of the Workmen's 

 Compensation Act, 1923 (8 of 1923) rights capable 

 of being transferred to and vested in the workman, 

 all amounts due in respect of any compensation or 

 liability for compensation under the said Act in 

 respect of the death or disablement of any 

 workman of the company;

 (iv) all sums due to any workman from a provident 

 fund, a pension fund, a gratuity fund or any other 

 fund for the welfare of the workmen, maintained 

 by the company;

529A.Overridingpreferential payment.--(1) Notwithstanding 

anything contained in any other provision of this Act or any 

other law for the time being in force, in the winding up of a 

company--

 (a) workmen's dues; and

 (b) debts due to secured creditors to the extent such debts 

 rank under clause (c) of the proviso to sub-section (1) 

 of section 529 pari passu with such dues,

shall be paid in priority to all other debts.

(2) The debts payable under clause (a) and clause (b) of sub-

section (1) shall be paid in full, unless the assets are insufficient 

to meet them, in which case they shall abate in equal 

proportions.

 17

 530. Preferential payments.- (1) In a winding up subject to 

 the provisions of section 529A, there shall be paid in priority to 

 all other debts- 

 (a) all revenues taxes, cesses and rates due from the company 

 to the Central or a State Government or to a local authority 

 at the relevant date as defined in clause (c) of the sub-

 section (8), and having become due and payable within the 

 twelve months next before that date;

 (b) all wages or salary (including wages payable for time or 

 piece work and salary earned wholly or in part by way of 

 commission) of any employee, in respect of services 

 rendered to the company and due for a period not exceeding 

 four months within the twelve months next before the 

 relevant date subject to the limit specified in sub-section 

 (2);

 (f) all sums due to any employee from a provident fund, a 

 pension fund, a gratuity fund or any other fund for the 

 welfare of the employees maintained by the company; 

 (2) The sum to which priority is to be given under clause (b) of 

 sub-section (1), shall not, in the case of any one claimant, 

 exceed such sum as may be notified by the Central Government 

 in the Official Gazette."

21. By inserting proviso in Section 529(1), Parliament ensured protection 

of the interest of the workmen in winding up proceedings. The object of this 

amendment is to place the legitimate dues of workers at par with those of 

secured creditors. This is also a legislative recognition of the fact that the 

workmen contribute to the growth of the capital and industry and in the 

event of winding up of the company, they are entitled to get their legitimate 

 18

share in the assets of the company by being treated at par with other secured 

creditors. With the insertion of Section 529(3)(a), the definition of the 

term `workmen' contained in the Industrial Disputes Act, 1947 has been 

incorporated in the Companies Act for the purposes of Sections 529, 529A 

and 530. The expression "workmen's dues" has been defined in Section 

529(3)(b) to mean all wages or salary including wages payable for time or 

piece work and salary earned wholly or in part by way of commission of any 

workman in respect of services rendered to the company and any 

compensation payable to any workman under the Industrial Disputes Act, 

1947, all accrued holiday remuneration payable to any workman, or in the 

case of his death to any other person in his right upon the termination of his 

employment before the passing of winding up order and all sums due to any 

workman from a provident fund, a pension fund, a gratuity fund or any other 

fund for the welfare of the workmen, which is maintained by the company. 

The definition also takes within its fold funds capable of being transferred to 

and vested in the workman under a contract with insurers under Section 14 

of the Workmen's Compensation Act as also the amounts due in respect of 

any compensation or liability for compensation under the Workmen's 

Compensation Act in respect of the death or disablement of any workman of 

the company. By virtue of the non obstante clause contained in sub-section 

 19

(1) of Section 529A, statutory priority has been given to the workmen's dues 

and debts due to secured creditors over all other dues.

22. The EPF Act is a social welfare legislation intended to protect the 

interest of a weaker section of the society, i.e. the workers employed in 

factories and other establishments, who have made significant contribution 

in economic growth of the country. The workers and other employees 

provide services of different kinds and ensure continuous production of 

goods, which are made available to the society at large. Therefore, a 

legislation made for their benefit must receive a liberal and purposive 

interpretation keeping in view the Directive Principles of State Policy 

contained in Articles 38 and 43 of the Constitution. In Organo Chemical 

Industries v. Union of India (1979) 4 SCC 573, this Court negatived 

challenge to the constitutionality of Section 14-B of the EPF Act. In the 

main judgment delivered by him, A.P. Sen, J. referred to the Statement of 

Objects and Reasons contained in the Bill presented before Parliament, 

which led to the enactment of Amendment Act No. 40/1973 and observed:

 "Each word, phrase or sentence is to be considered in the light 

 of general purpose of the Act itself. A bare mechanical 

 interpretation of the words "devoid of-concept or purpose" will 

 reduce must of legislation to futility. It is a salutary rule, well 

 20

 established, that the intention of the legislature must be found 

 by reading the statute as a whole."

In his concurring judgment, Krishna Iyer, J. observed:

 "The measure was enacted for the support of a weaker sector 

 viz. the working class during the superannuated winter of their 

 life. The financial reservoir for the distribution of benefits is 

 filled by the employer collecting, by deducting from the 

 workers' wages, completing it with his own equal share and 

 duly making over the gross sums to the Fund. If the employer 

 neglects to remit or diverts the moneys for alien purposes the 

 Fund gets dry and the retirees are denied the meagre support 

 when they most need it. This prospect of destitution 

 demoralises the working class and frustrates the hopes of the 

 community itself. The whole project gets stultified if employers 

 thwart contributory responsibility and this wider fall-out must 

 colour the concept of `damages' when the court seeks to define 

 its content in the special setting of the Act. For, judicial 

 interpretation must further the purpose of a statute. In a 

 different context and considering a fundamental treaty, the 

 European Court of Human Rights, in the Sunday Times Case, 

 observed:

 The Court must interpret them in a way that reconciles 

 them as far as possible and is most appropriate in order to 

 realise the aim and achieve the object of the treaty.

 A policy-oriented interpretation, when a welfare legislation 

 falls for determination, especially in the context of a developing 

 country, is sanctioned by principle and precedent and is implicit 

 in Article 37 of the Constitution since the judicial branch is, in a 

 sense, part of the State. So it is reasonable to assign to 

 `damages' a larger, fulfilling meaning."

 21

23. Section 11(2) of the EPF Act was interpreted by the Division Bench 

of the Kerala High Court in Recovery Officer and Asstt. Provident Fund 

Commissioner v. Kerala Financial Corporation, ILR (2002) 3 Kerala 4. 

Speaking for the Bench, B.N. Srikrishna, J. (as he then was) observed:

 "The F.P.F. and M.P. Act, 1952 is an Act to provide for the 

 institution of Provident Fund, Pension Fund, Deposit Linked 

 Insurance Fund etc. in factories and other establishments, to 

 carry forward the Constitutional mandate of rendering social 

 justice to the working class. It is intended to give social security 

 to industrial workers at the end of their careers. The E.P.F. and 

 M.P. Act requires every employer to deduct certain prescribed 

 amounts from the wages payable to employees along with 

 prescribed contribution by the employer and deposit such 

 contributions in the Provident Fund. The Provident |is 

 administered by the Central and Regional Provident Fund 

 Commissioners, who are statutory authorities. What is of 

 importance to us is that section 11 of E.P.F. and M.P. Act, 

 declares the priority of payment of contributions under the Act 

 over other debts. Sub-section (1) of section 11 of E.P.F. and 

 M.P. Act deals with the question of priority where an employer 

 is adjudicated insolvent or being a company subjected to an 

 order of winding up. Sub-section (2) of section 11 deals with 

 other types of priorities and reads as under:

 "11(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 in force, be paid in priority to all other 

 debts."

 22

 Sub-section (2) of section 11 of the E.P.F. and M.P. Act has 

 two facets. First, it declares that the amount due from the 

 employer towards contribution under the E.P.F. and M.P. Act 

 shall be deemed to be a first charge on the assets of the 

 establishment. Second, it also declares that notwithstanding 

 anything contained in any other law for the time being in force, 

 such debt shall be paid in priority to all other debts. Both these 

 provisions bring out the intention of Parliament to ensure the 

 social benefit as contained in the legislation. There are other 

 provisions in the Act rendering the amounts of Provident Fund 

 payable immune from attachment of Civil Court's decree, 

 which also indicate such intention of Parliament."

24. The ratio of the afore-mentioned judgment has been noticed in Central 

Bank of India v. State of Kerala (2009) 4 SCC 94 and Maharashtra State 

Cooperative Bank Ltd. v. Assistant Provident Fund Commissioner (2009) 10 

SCC 123.

25. The nature of priority given to the taxes payable to the State over 

other debts was considered by the Constitution Bench in Builders Supply 

Corporation v. Union of India (1965) 2 SCR 289. After noticing the 

judgments of the Bombay and Madras High Courts, the Constitution Bench 

held:

 "(i) The common law doctrine of the priority of Crown debts 

 had a wide sweep but the question in the present appeal was the 

 narrow one whether the Union of India was entitled to claim 

 that the recovery of the amount of tax due to it from a citizen 

 must take precedence and priority over unsecured debts due 

 23

 from the said citizen to his other private creditors. The weight 

 of authority in India was strongly in support of the priority of 

 tax dues.

 (ii) The common law doctrine on which the Union of India 

 based its claim in the present proceedings had been applied and 

 upheld in that part of India which was known as `British India' 

 prior to the Constitution. The rules of common law relating to 

 substantive rights which had been adopted by this country and 

 enforced by judicial decisions, amount to `law in force' in the 

 territory of India at the relevant time within the meaning of 

 Article 372(1). In that view of the matter, the contention of the 

 appellant that after the Constitution was adopted the position of 

 the Union of India in regard to its claim for priority in the 

 present proceedings had been alerted could not be upheld.

 (iii) The basic justification for the claim for priority of 

 government debts rests on the well-recognised principle that the 

 State is entitled to raise money by taxation, otherwise it will not 

 be able to function as a sovereign Government at all. This 

 consideration emphasises the necessity and wisdom of 

 conceding to the State the right to claim priority in respect of its 

 tax dues."

 (emphasis supplied)

26. The ratio of the judgment in Builders Supply Corporation v. Union of 

India (supra) was applied to the cases in which statutory first charge was 

created in favour of the State in the matter of recovery of tax, penalty, 

interest etc.. - State Bank of Bikaner and Jaipur v. National Iron and Steel 

Rolling Corporation (1995) 2 SCC 19, Dena Bank v. Bhikhabhai Prabhudas 

Parekh & Co. (2000) 5 SCC 694 and State of M.P. v. State Bank of Indore 

(2002) 10 SCC 441. In the last mentioned judgment, i.e. State of M.P. v. 

 24

State Bank of Indore (supra), this Court considered the question whether 

statutory first charge created under Section 33-C of the M.P. General Sales 

Tax Act, 1958 would prevail over the bank's charge and held:

 "
 Section
 33-C creates a statutory first charge that prevails over 

 any charge that may be in existence. Therefore, the charge 

 thereby created in favour of the State in respect of the sales tax 

 dues of the second respondent prevailed over the charge created 

 in favour of the Bank in respect of the loan taken by the second 

 respondent. There is no question of retrospectivity here, as, on 

 the date when it was introduced, Section 33-C operated in 

 respect of all charges that were then in force and gave sales tax 

 dues precedence over them."

 (emphasis supplied)

27. At this juncture, it will be apposite to mention that the nature of 

statutory first charge and the rule of priority of the State's dues were 

considered in Builders Supply Corporation v. Union of India (supra), State 

Bank of Bikaner and Jaipur v. National Iron and Steel Rolling Corporation 

(supra), Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. (supra) and State 

of M.P. v. State Bank of Indore (supra) in the context of contra claim made 

by unsecured creditors. The question whether first charge created by taxing 

statutes enacted by State legislatures will prevail over the debts due to 

secured creditors was considered by a three Judge Bench in Central Bank of 

India v. State of Kerala (supra) and answered in affirmative. In that case, 

this Court was called upon to consider whether the first charge created on 

 25

the property of the dealer by the legislations enacted by State legislatures for 

levy and collection of sales tax would prevail over the debts due to banks, 

financial institutions and other secured creditors, which could be recovered 

under the Recovery of Debts Due to Banks and Financial Institutions Act, 

1993 and/or the Securitisation and Reconstruction of Financial Assets and 

Enforcement of Security Interest Act, 2002. The Court referred to the 

relevant provisions contained in the DRT Act, the Securitisation Act and 

Sales Tax legislations of different States as also Section 14A of the 

Workmen's Compensation Act, 1923, Section 11 of the EPF Act, Section 74 

of the Estate Duty Act, 1953, Section 25 of the Mines and Minerals 

(Regulation and Development) Act, 1957, Section 30 of the Gift Tax Act, 

1958, Section 529A of the Companies Act, 1956, Section 46B of the State 

Financial Corporations Act, 1951 and observed:

 "Under Section 13(1) of the Securitisation Act, limited primacy 

 has been given to the right of a secured creditor to enforce 

 security interest vis-`-vis Section 69 or Section 69-A of the 

 Transfer of Property Act. In terms of that sub-section, a secured 

 creditor can enforce security interest without intervention of the 

 court or tribunal and if the borrower has created any mortgage 

 of the secured asset, the mortgagee or any person acting on his 

 behalf cannot sell the mortgaged property or appoint a Receiver 

 of the income of the mortgaged property or any part thereof in a 

 manner which may defeat the right of the secured creditor to 

 enforce security interest. This provision was enacted in the 

 backdrop of Chapter VIII of the Narasimham Committee's 

 Second Report in which specific reference was made to the 

 26

provisions relating to mortgages under the Transfer of Property 

Act.

In an apparent bid to overcome the likely difficulty faced by the 

secured creditor which may include a bank or a financial 

institution, Parliament incorporated the non obstante clause in 

Section 13 and gave primacy to the right of secured creditor 

vis-`-vis other mortgagees who could exercise rights under 

Sections 69 or 69-A of the Transfer of Property Act. However, 

this primacy has not been extended to other provisions like 

Section 38-C of the Bombay Act and Section 26-B of the 

Kerala Act by which first charge has been created in favour of 

the State over the property of the dealer or any person liable to 

pay the dues of sales tax, etc. Sub-section (7) of Section 13 

which envisages application of the money received by the 

secured creditor by adopting any of the measures specified 

under sub-section (4) merely regulates distribution of money 

received by the secured creditor. It does not create first charge 

in favour of the secured creditor.

By enacting various provisos to sub-section (9) of Section 13, 

the legislature has ensured that priority given to the claim of 

workers of a company in liquidation under Section 529-A of the 

Companies Act, 1956 vis-`-vis the secured creditors like banks 

is duly respected. This is the reason why first of the five 

unnumbered provisos to Section 13(9) lays down that in the 

case of a company in liquidation, the amount realised from the 

sale of secured assets shall be distributed in accordance with the 

provisions of Section 529-A of the Companies Act, 1956. This 

and other provisos do not create first charge in favour of the 

worker of a company in liquidation for the first time but merely 

recognise the existing priority of their claim under the 

Companies Act. It is interesting to note that the provisos to sub-

section (9) of Section 13 do not deal with the companies which 

fall in the category of borrower but which are not in liquidation 

or are not being wound up.

It is thus clear that provisos referred to above are only part of 

the distribution mechanism evolved by the legislature and are 

intended to protect and preserve the right of the workers of a 

 27

 company in liquidation whose assets are subjected to the 

 provisions of the Securitisation Act and are disposed of by the 

 secured creditor in accordance with Section 13 thereof."

 (emphasis supplied)

28. The Court then referred to the earlier judgments in Builders Supply 

Corporation v. Union of India (supra), State Bank of Bikaner and Jaipur v. 

National Iron and Steel Rolling Corporation (supra), Dena Bank v. 

Bhikhabhai Prabhudas Parekh & Co. (supra), State of M.P. v. State Bank of 

Indore (supra), Allahabad Bank v. Canara Bank (2000) 4 SCC 406, the 

judgment of the Division Bench of the Kerala High Court in Recovery 

Officer and Asstt. Provident Fund Commissioner v. Kerala Financial 

Corporation (supra) and observed:

 "While enacting the DRT Act and the Securitisation Act, 

 Parliament was aware of the law laid down by this Court 

 wherein priority of the State dues was recognised. If Parliament 

 intended to create first charge in favour of banks, financial 

 institutions or other secured creditors on the property of the 

 borrower, then it would have incorporated a provision like 

 Section 529-A of the Companies Act or Section 11(2) of the 

 EPF Act and ensured that notwithstanding series of judicial 

 pronouncements, dues of banks, financial institutions and other 

 secured creditors should have priority over the State's statutory 

 first charge in the matter of recovery of the dues of sales tax, 

 etc. However, the fact of the matter is that no such provision 

 has been incorporated in either of these enactments despite 

 conferment of extraordinary power upon the secured creditors 

 to take possession and dispose of the secured assets without the 

 intervention of the court or Tribunal. The reason for this 

 28

omission appears to be that the new legal regime envisages 

transfer of secured assets to private companies.

The definition of "secured creditor" includes securitisation/ 

reconstruction company and any other trustee holding securities 

on behalf of bank/financial institution. The definition of 

"securitisation company" and "reconstruction company" in 

Sections 2(1)(za) and (v) shows that these companies may be 

private companies registered under the Companies Act, 1956 

and having a certificate of registration from Reserve Bank 

under Section 3 of the Securitisation Act. Evidently, Parliament 

did not intend to give priority to the dues of private creditors 

over sovereign debt of the State.

If the provisions of the DRT Act and the Securitisation Act are 

interpreted keeping in view the background and context in 

which these legislations were enacted and the purpose sought to 

be achieved by their enactment, it becomes clear that the two 

legislations, are intended to create a new dispensation for 

expeditious recovery of dues of banks, financial institutions and 

secured creditors and adjudication of the grievance made by 

any aggrieved person qua the procedure adopted by the banks, 

financial institutions and other secured creditors, but the 

provisions contained therein cannot be read as creating first 

charge in favour of banks, etc.

If Parliament intended to give priority to the dues of banks, 

financial institutions and other secured creditors over the first 

charge created under State legislations then provisions similar 

to those contained in Section 14-A of the Workmen's 

Compensation Act, 1923, Section 11(2) of the EPF Act, Section 

74(1) of the Estate Duty Act, 1953, Section 25(2) of the Mines 

and Minerals (Regulation and Development) Act, 1957, Section 

30 of the Gift Tax Act, and Section 529-A of the Companies 

Act, 1956 would have been incorporated in the DRT Act and 

the Securitisation Act.

Undisputedly, the two enactments do not contain provision 

similar to the Workmen's Compensation Act, etc. In the absence 

 29

 of any specific provision to that effect, it is not possible to read 

 any conflict or inconsistency or overlapping between the 

 provisions of the DRT Act and the Securitisation Act on the one 

 hand and Section 38-C of the Bombay Act and Section 26-B of 

 the Kerala Act on the other and the non obstante clauses 

 contained in Section 34(1) of the DRT Act and Section 35 of 

 the Securitisation Act cannot be invoked for declaring that the 

 first charge created under the State legislation will not operate 

 qua or affect the proceedings initiated by banks, financial 

 institutions and other secured creditors for recovery of their 

 dues or enforcement of security interest, as the case may be.

 The Court could have given effect to the non obstante clauses 

 contained in Section 34(1) of the DRT Act and Section 35 of 

 the Securitisation Act vis-`-vis Section 38-C of the Bombay 

 Act and Section 26-B of the Kerala Act and similar other State 

 legislations only if there was a specific provision in the two 

 enactments creating first charge in favour of the banks, 

 financial institutions and other secured creditors but as 

 Parliament has not made any such provision in either of the 

 enactments, the first charge created by the State legislations on 

 the property of the dealer or any other person, liable to pay 

 sales tax, etc., cannot be destroyed by implication or inference, 

 notwithstanding the fact that banks, etc. fall in the category of 

 secured creditors."

 (emphasis supplied)

29. In Maharashtra State Cooperative Bank Ltd. v. Assistant Provident 

Fund Commissioner (supra), the Court was called upon to consider whether 

dues payable by the employer under Section 11 of the EPF Act will have 

priority over debts due to the bank. The facts of that case were that Kannad 

Sahakari Sakhar Karkhana Ltd. and Gangapur Sahakari Sakhar Karkhana 

Ltd. had pledged sugar bags in favour of the appellant bank as security for 

 30

repayment of the loan and interest. The respondent initiated proceedings for 

recovery of the dues payable under the EPF Act. The appellant bank 

questioned the legality of the orders passed under the EPF Act on the ground 

that being a secured creditor, the amount due to it was payable on priority 

vis-`-vis other dues including the dues payable by the employer under the 

EPF Act. The High Court negatived the challenge. The Court referred to 

the relevant provisions of the EPF Act including Section 11, the judgments 

noticed hereinabove as also the judgments in UCO Bank v. Official 

Liquidator, High Court of Bombay (1994) 5 SCC 1, A.P. State Financial 

Corporation v. Official Liquidator (2000) 7 SCC 291, Textile Labour 

Association v. Official Liquidator (2004) 9 SCC 741 and held:

 "The priority given to the dues of provident fund, etc. in 

 Section 11 is not hedged with any limitation or condition. 

 Rather, a bare reading of the section makes it clear that the 

 amount due is required to be paid in priority to all other debts. 

 Any doubt on the width and scope of Section 11 qua other debts 

 is removed by the use of expression "all other debts" in both the 

 sub-sections. This would mean that the priority clause 

 enshrined in Section 11 will operate against statutory as well as 

 non-statutory and secured as well as unsecured debts including 

 a mortgage or pledge. Sub-section (2) was designedly inserted 

 in the Act for ensuring that the provident fund dues of the 

 workers are not defeated by prior claims of secured or 

 unsecured creditors. This is the reason why the legislature took 

 care to declare that irrespective of time when a debt is created 

 in respect of the assets of the establishment, the dues payable 

 under the Act would always remain first charge and shall be 

 paid first out of the assets of the establishment notwithstanding 

 anything contained in any other law for the time being in force. 

 31

 It is, therefore, reasonable to take the view that the statutory 

 first charge created on the assets of the establishment by sub-

 section (2) of Section 11 and priority given to the payment of 

 any amount due from an employer will operate against all types 

 of debts."

 (emphasis supplied)

30. The ratio for the last mentioned judgment is that by virtue of the non 

obstante clause contained in Section 11(2) of the EPF Act, any amount due 

from an employer shall be deemed to be first charge on the assets of the 

establishment and is payable in priority to all other debts including the debts 

due to a bank, which falls in the category of secured creditor. 

31. We may now notice some judgments which have bearing on the 

interpretation of Sections 529 or 529A of the Companies Act. The scope of 

proviso to sub-section (1) of Section 529 (as inserted by Amendment Act 

No.35 of 1985) was examined in UCO Bank v. Official Liquidator, High 

Court, Bombay (1994) 5 SCC 1. The facts of that case were that in 

Company Petition No.27 of 1971, the learned Company Judge of the 

Bombay High Court made an order dated 15.11.1972 for winding up of M/s. 

Glass Carboys and Pressedwares Limited. The Official Liquidator took 

possession of the assets of the company. Appellant - UCO Bank, which was 

a secured creditor of the company obtained a decree on 22.4.1976 for 

recovery of its debt. Thereafter, the High Court's Commissioner for taking 

 32

accounts was directed to sell certain movables of the company. In the 

meantime, the Companies Act was amended by Act No.35 of 1985 and 

Sections 529 and 530 were amended and Section 529A was inserted. It was 

argued on behalf of the appellant that the amendment was not applicable to 

its case because the decree had been passed before the amendment and being 

a secured creditor, it was entitled to realize its debt in priority to other dues. 

The learned Company Judge accepted the argument but he was overruled by 

the Division Bench. While dealing with the argument, which found favour 

with the learned Company Judge, this Court referred to the Statement of 

Objects and Reasons contained in the Bill and observed: 

 "The proviso to sub-section (1) of Section 529 inserted by the 

 Amending Act clearly provides that "the security of every 

 secured creditor shall be deemed to be subject to a pari passu 

 charge in favour of the workmen". The effect of the proviso is 

 to create, by statute, a charge pari passu in favour of the 

 workmen on every security available to the secured creditors of 

 the employer company for recovery of their debts at the time 

 when the amendment came into force. This expression is wide 

 enough to apply to the security of every secured creditor which 

 remained unrealised on the date of the amendment. The clear 

 object of the amendment is that the legitimate dues of workers 

 must rank pari passu with those of secured creditors and above 

 even the dues of the Government. This literal construction of 

 the proviso is in consonance with, and promotes, the avowed 

 object of the amendment made. On the contrary, the 

 construction of the proviso suggested by the learned counsel for 

 the appellant, apart from being in conflict with the plain 

 language of the proviso also defeats the object of the 

 legislation.

 33

 A debt due to a secured creditor, when recovered by realisation 

 of the security after commencement of the winding up 

 proceedings, results in depletion of the assets in the hands of 

 the Official Liquidator. This provision is intended to protect the 

 interests of the workmen in proceedings for winding up. In 

 view of the nature of workmen's dues being similar to those of 

 secured creditors, the purpose of this provision is to place the 

 workmen on a par with the secured creditors and create a 

 statutory charge in their favour on all available securities 

 forming part of the assets of the company in liquidation so that 

 the workmen also share the securities pari passu with the 

 secured creditors. The workmen contribute to the growth of the 

 capital and must get their legitimate share in the assets of the 

 company when the situation arises for its closure and 

 distribution of its assets first among the secured creditors due to 

 winding up of the company. The aforesaid amendment made in 

 the Act is a statutory recognition of this principle equating the 

 legitimate dues of the workmen with the debts of the secured 

 creditors of the company. To achieve this purpose, it is 

 necessary that the amended provision must apply to all 

 available securities which form part of the assets of the 

 company in liquidation on the date of the amendment. The 

 conclusion reached by the Division Bench of the High Court is 

 supported by this reason."

 (emphasis supplied)

32. In Allahabad Bank v. Canara Bank (supra), a two-Judge Bench was 

called upon to consider the question whether an application can be filed 

under the Companies Act, 1956 during the pendency of proceedings under 

the DRT Act. The facts of that case show that Allahabad Bank filed an OA 

before the Delhi Bench of the DRT under Section 19. The same was decreed 

on 13.1.1998. The debtor company filed an appeal before DRAT, Allahabad. 

 34

Canara Bank also filed application under Section 19 before DRT, Delhi. 

During the pendency of its application, Canara Bank filed an interlocutory 

application before the Recovery Officer for impleadment in the proceedings 

arising out of the OA filed by Allahabad Bank. That application was 

dismissed on 28.9.1998. In the auction conducted by the Recovery Officer, 

the property of the debtor company was auctioned and the sale was 

confirmed. Thereupon, Canara Bank filed applications under Section 22 of 

the DRT Act. During the pendency of applications, Canara Bank filed 

company application in Company Petition No. 141 of 1995 filed by Ranbaxy 

Ltd. against M.S. Shoes Company under Sections 442 and 537 of the 

Companies Act for stay of the proceedings of Recovery Case No. 9 of 1998 

instituted by Allahabad Bank. By an order dated 9.3.1999, the learned 

Company Judge stayed further sale of the assets of the company. The 

Allahabad Bank challenged the order of the learned Company Judge and 

pleaded that in view of the amendment made in Section 19(19) of the DRT 

Act, Section 529A is attracted for a limited purpose, i.e. recovery of the dues 

of workmen. While dealing with this plea, the Court observed as under:

 "The respondent's contention that Section 19(19) gives 

 priority to all `secured creditors' to share in the sale 

 proceeds before the Tribuna1/ Recovery Officer cannot, 

 in our opinion, be accepted. The said words are qualified 

 by the words `in accordance with the provision of Section 

 529-A'. Hence, it is necessary to identify the above 

 35

limited class of secured creditors who have priority over 

all others in accordance with Section 529-A.

Secured creditors fall under two categories. Those who 

desire to go before the Company Court and those who 

like to stand outside the winding up.

The first category of secured creditors mentioned above 

are those who go before the Company Court for dividend 

by relinquishing their security in accordance with the 

insolvency rules mentioned in Section 529. The 

insolvency rules are those contained in Sections 45 to 50 

of the Provincial Insolvency Act. Section 47(2) of that 

Act states that a secured creditor who wishes to come 

before the Official Liquidator has to prove his debt and 

he can prove his debt only if he relinquishes his security 

for the benefit of the general body of creditors. In that 

event, he will rank with the unsecured creditors and has 

to take his dividend as provided in Section 529(2). Till 

today, Canara Bank has not made it clear whether it 

wants to come under this category.

The second class of secured creditors referred to above 

are those who come under Section 529-A(1)(b) read with 

proviso (c) to Section 529(1). These are those who opt to 

stand outside the winding up to realise their security. 

Inasmuch as Section 19(19) permits distribution to 

secured creditors only in accordance with Section 529-A, 

the said category is the one consisting of creditors who 

stand outside the winding up. These secured creditors in 

certain circumstances can come before the Company 

Court (here, the Tribunal) and claim priority over all 

other creditors for release of amounts out of the other 

monies lying in the Company Court (here, the Tribunal). 

This limited priority is declared in Section 529-A(1) but 

it is restricted only to the extent specified in clause (b) of 

Section 529-A(1). The said provision refers to clause (c) 

of the proviso to Section 529(1) and it is necessary to 

understand the scope of the said provision."

 36

33. The judgment in Allabahad Bank v. Canara Bank (supra) was 

distinguished by a two-Judge Bench judgment in ICICI Bank Ltd. v. SIDCO 

Leathers Ltd. (2006) 10 SCC 452. In that case, the appellant and Punjab 

National Bank had advanced loans to respondent No. 1 for setting up a plant 

for manufacture of leather boards and for providing working capital funds 

respectively. Respondent No.1 created first charge in favour of the appellant 

along with other financial institutions, i.e. IFCI and IDBI by way of 

equitable mortgage by deposit of title deeds of its immovable property. A 

second charge was created in favour of Punjab National Bank by way of 

constructive delivery of title deeds, clearly indicating therein that the charge 

in favour of the latter was subject to and subservient to charges in favour of 

IFCI, IDBI and ICICI. On an application filed by respondent No.1, the 

Allahabad High Court passed winding up order and appointed Official 

Liquidator. Thereafter, the appellant filed a suit for recovery of the amount 

credited to respondent. In due course, the suit was transferred to Debts 

Recovery Tribunal, Bombay. During the pendency of the proceedings 

before the Tribunal, the Official Liquidator was granted permission to 

continue the proceedings of the suit. Civil Judge, Fatehpur before whom the 

suit was pending, ordered sale of the assets of the company. At that stage, 

 37

the appellants, IFCI and IDBI jointly filed an application before the 

Company Judge for considering their claim on pro rata basis and also for 

exclusion of the claim of the Punjab National Bank. The learned Company 

Judge accepted the first prayer of the appellant but rejected the second one 

by relying upon the judgment in Allahabad Bank v. Canara Bank (supra). 

The intra Court appeal was dismissed by the Division Bench by relying upon 

Section 529A of the Companies Act. On further appeal, this Court 

distinguished the judgment in Allahabad Bank v. Canara Bank by relying 

upon an earlier judgment in Rajasthan State Financial Corporation v. 

Official Liquidator (2005) 8 SCC 190 and observed:

 "In fact in Allahabad Bank it was categorically held that 

 the adjudication officer would have such powers to 

 distribute the sale proceeds to the banks and financial 

 institutions, being secured creditors, in accordance with 

 inter se agreement/arrangement between them and to the 

 other persons entitled thereto in accordance with the 

 priority in law.

 Section 529-A of the Companies Act no doubt contains a 

 non obstante clause but in construing the provisions 

 thereof, it is necessary to determine the purport and 

 object for which the same was enacted.

 In terms of Section 529 of the Companies Act, as it stood 

 prior to its amendment, the dues of the workmen were 

 not treated pari passu with the secured creditors as a 

 result whereof innumerable instances came to the notice 

 of the Court that the workers may not get anything after 

 discharging the debts of the secured creditors. It is only 

 38

 with a view to bring the workmen's dues pari passu with 

 the secured creditors, that Section 529-A was enacted.

 The non obstante nature of a provision although may be 

 of wide amplitude, the interpretative process thereof must 

 be kept confined to the legislative policy. Only because 

 the dues of the workmen and the debts due to the secured 

 creditors are treated pari passu with each other, the same 

 by itself, in our considered view, would not lead to the 

 conclusion that the concept of inter se priorities amongst 

 the secured creditors had thereby been intended to be 

 given a total go-by.

 A non obstante clause must be given effect to, to the 

 extent Parliament intended and not beyond the same.

 Section 529-A of the Companies Act does not ex facie 

 contain a provision (on the aspect of priority) amongst 

 the secured creditors and, hence, it would not be proper 

 to read there into things, which Parliament did not 

 comprehend."

34. In A.P. State Financial Corporation v. Official Liquidator (supra), the 

Court rejected the argument that the proceedings initiated by the Financial 

Corporation under Section 29 of the State Financial Corporations Act, 1951 

will not be affected by the non obstante clause contained in Section 529A of 

the Companies Act and observed:

 "The Act of 1951 is a special Act for grant of financial 

 assistance to industrial concerns with a view to boost up 

 industrialisation and also recovery of such financial assistance 

 if it becomes bad and similarly the Companies Act deals with 

 companies including winding up of such companies. The 

 proviso to sub-section (1) of Section 529 and Section 529-A 

 39

 being a subsequent enactment, the non obstante clause in 

 Section 529-A prevails over Section 29 of the Act of 1951 in 

 view of the settled position of law. We are, therefore, of the 

 opinion that the above proviso to sub-section (1) of Section 529 

 and Section 529-A will control Section 29 of the Act of 1951. 

 In other words the statutory right to sell the property under 

 Section 29 of the Act of 1951 has to be exercised with the rights 

 of pari passu charge to the workmen created by the proviso to 

 Section 529 of the Companies Act. Under the proviso to sub-

 section (1) of Section 529, the liquidator shall be entitled to 

 represent the workmen and force (sic enforce) the above pari 

 passu charge. Therefore, the Company Court was fully justified 

 in imposing the above conditions to enable the Official 

 Liquidator to discharge his function properly under the 

 supervision of the Company Court as the new Section 529-A of 

 the Companies Act confers upon a Company Court the duty to 

 ensure that the workmen's dues are paid in priority to all other 

 debts in accordance with the provisions of the above section. 

 The legislature has amended the Companies Act in 1985 with a 

 social purpose viz. to protect dues of the workmen. If 

 conditions are not imposed to protect the right of the workmen 

 there is every possibility that the secured creditor may frustrate 

 the above pari passu right of the workmen."

 (emphasis supplied)

35. We have referred to these judgments only for the purpose of showing 

that the object of the amendments made in the Companies Act by Act No. 35 

of 1985 was to ensure that the legitimate dues of workers should rank pari 

passu with those of secured creditors. In other words, these amendments are 

intended to protect the interest of the workmen in winding up proceedings 

by placing them at par with secured creditors and a statutory charge is 

created qua their dues on all available securities forming part of the assets of 

 40

the company in liquidation. However, the propositions laid down in these 

judgments are of little assistance in deciding the question raised in these 

appeals because in none of the cases the Court considered the so called 

conflict in the non obstante clauses contained in Section 11(2) of the EPF 

Act and Section 529A of the Companies Act.

36. The argument of Shri Gaurav Agrawal that the non obstante clause 

contained in the subsequent legislation, i.e. Section 529A(1) of the 

Companies Act should prevail over similar clause contained in an earlier 

legislation, i.e. Section 11(2) of the EPF Act sounds attractive, but if the two 

provisions are read in the light of the objects sought to be achieved by the 

legislature by enacting the same, it is not possible to agree with the learned 

counsel. As noted earlier, the object of the amendment made in the EPF 

Act by Act No.40 of 1973 was to treat the dues payable by the employer as 

first charge on the assets of the establishment and to ensure that the same are 

recovered in priority to other debts. As against this, the amendments made 

in the Companies Act in 1985 are intended to create a charge pari passu in 

favour of the workmen on every security available to the secured creditors of 

the company for recovery of their debts. There is nothing in the language of 

Section 529A which may give an indication that legislature wanted to create 

 41

first charge in respect of the workmen's dues, as defined in Sections 

529(3)(b) and 529A and debts due to the secured creditors. 

37. It is a well recognized rule of interpretation that every part of the 

statute must be interpreted keeping in view the context in which it appears 

and the purpose of legislation. In RBI v. Peerless General Finance and 

Investment Co. Ltd. (1987) 1 SCC 424, Chinnappa Reddy, J. highlighted the 

importance of the rule of contextual interpretation in the following words :

 "Interpretation must depend on the text and the context. 

 They are the bases of interpretation. One may well say if 

 the text is the texture, context is what gives the colour. 

 Neither can be ignored. Both are important. That 

 interpretation is best which makes the textual 

 interpretation match the contextual. A statute is best 

 interpreted when we know why it was enacted. With this 

 knowledge, the statute must be read, first as a whole and 

 then section by section, clause by clause, phrase by 

 phrase and word by word. If a statute is looked at, in the 

 context of its enactment, with the glasses of the statute-

 maker, provided by such context, its scheme, the 

 sections, clauses, phrases and words may take colour and 

 appear different than when the statute is looked at 

 without the glasses provided by the context. With these 

 glasses we must look at the Act as a whole and discover 

 what each section, each clause, each phrase and each 

 word is meant and designed to say as to fit into the 

 scheme of the entire Act. No part of a statute and no 

 word of a statute can be construed in isolation. Statutes 

 have to be construed so that every word has a place and 

 everything is in its place."

 42

38. Another rule of interpretation of Statutes is that if two special enactments 

contain provisions which give overriding effect to the provisions contained 

therein, then the Court is required to consider the purpose and the policy 

underlying the two Acts and the clear intendment conveyed by the language of 

the relevant provisions. 

39. In Shri Ram Narain v. Simla Banking and Industrial Co. Ltd. 1956 SCR 

603, this Court was considering the provisions contained in the Banking 

Companies Act, 1949 and the Displaced Persons (Debts Adjustment) Act, 1951. 

Both the enactments contained provisions giving overriding effect to the 

provisions of the enactment over any other law. After noticing the relevant 

provisions, the Court observed: 

 "Each enactment being a special Act, the ordinary principle that 

 a special law overrides a general law does not afford any clear 

 solution in this case."

 "It is, therefore, desirable to determine the overriding effect of 

 one or the other of the relevant provisions in these two Acts, in 

 a given case, on much broader considerations of the purpose 

 and policy underlying the two Acts and the clear intendment 

 conveyed by the language of the relevant provisions therein."

40. In Kumaon Motor Owners' Union Ltd. v. State of Uttar Pradesh (1966) 2 

SCR 121, there was conflict between the provisions contained in Rule 131(2) 

(g) and (i) of the Defence of India Rules, 1962 and Chapter IV-A of the Motor 

 43

Vehicles Act, 1939. Section 68-B gave overriding effect to the provisions of 

Chapter IV-A of the Motor Vehicles Act whereas Section 43 of the Defence of 

India Act, 1962, gave overriding effect to the provisions contained in the 

Defence of India Rules. This Court held that the Defence of India Act was later 

than the Motor Vehicles Act and, therefore, if there was anything repugnant, the 

provisions of the later Act should prevail. This Court also looked into object 

behind the two statutes, namely, Defence of India Act and Motor Vehicles Act 

and on that basis also it was held that the provisions contained in the Defence of 

India Rules would have an overriding effect over the provisions of the Motor 

Vehicles Act.

41. In Ashok Marketing Limited v. Punjab National Bank (1990) 4 SCC 

406, the Constitution Bench considered some of the precedents on the 

interpretation of statutes and observed :

 "The principle which emerges from these decisions is that in 

 the case of inconsistency between the provisions of two 

 enactments, both of which can be regarded as special in nature, 

 the conflict has to be resolved by reference to the purpose and 

 policy underlying the two enactments and the clear intendment 

 conveyed by the language of the relevant provisions therein."

 (emphasis supplied)

 44

42. It is also important to bear in mind that even before the insertion of 

proviso to Sections 529(1), 529(3) and Section 529A and amendment of 

Section 530(1), all sums due to any employee from a provident fund, a 

pension fund, a gratuity fund or any other fund established for welfare of the 

employees were payable in priority to all other debts in a winding up 

proceedings [Section 530(1)(f)]. Even the wages, salary and other dues 

payable to the workers and employees were payable in priority to all other 

debts. What Parliament has done by these amendments is to define the term 

"workmen's dues" and to place them at par with debts due to secured 

creditors to the extent such debts rank under clause (c) of the proviso to 

Section 529(1). However, these amendments, though subsequent in point of 

time, cannot be interpreted in a manner which would result in diluting the 

mandate of Section 11 of the EPF Act, sub-section (2) whereof declares that 

the amount due from an employer shall be the first charge on the assets of 

the establishment and shall be paid in priority to all other debts. The words 

"all other debts" used in Section 11(2) would necessarily include the debts 

due to secured creditors like banks, financial institutions etc. The mere 

ranking of the dues of workers at par with debts due to secured creditors 

cannot lead to an inference that Parliament intended to create first charge in 

 45

favour of the secured creditors and give priority to the debts due to secured 

creditors over the amount due from the employer under the EPF Act.

43. At the cost of repetition, we would emphasize that in terms of Section 

530(1), all revenues, taxes, cesses and rates due from the company to the 

Central or State Government or to a local authority, all wages or salary or 

any employee, in respect of the services rendered to the company and due 

for a period not exceeding 4 months all accrued holiday remuneration etc. 

and all sums due to any employee from provident fund, a pension fund, a 

gratuity fund or any other fund for the welfare of the employees maintained 

by the company are payable in priority to all other debts. This provision 

existed when Section 11(2) was inserted in the EPF Act by Act No. 40 of 

1973 and any amount due from an employer in respect of the employees' 

contribution was declared first charge on the assets of the establishment and 

became payable in priority to all other debts. However, while inserting 

Section 529A in the Companies Act by Act No.35 of 1985 Parliament, in its 

wisdom, did not declare the workmen's dues (this expression includes 

various dues including provident fund) as first charge. The effect of the 

amendment made in the Companies Act in 1985 is only to expand the scope 

of the dues of workmen and place them at par with the debts due to secured 

 46

creditors and there is no reason to interpret this amendment as giving 

priority to the debts due to secured creditor over the dues of provident fund 

payable by an employer. Of course, after the amount due from an employer 

under the EPF Act is paid, the other dues of the workers will be treated at 

par with the debts due to secured creditors and payment thereof will be 

regulated by the provisions contained in Section 529(1) read with Section 

529(3), 529A and 530 of the Companies Act.

44. In view of what we have observed above on the interpretation of 

Section 11 of the EPF Act and Sections 529, 529A and 530 of the 

Companies Act, the judgment of the Division Bench of the Gujarat High 

Court, which turned on the interpretation of Section 94 of the Employees' 

State Insurance Act and Sections 529A and 530 of the Companies Act and 

on which reliance has been placed by the learned Company Judge and the 

Division Bench of the High Court while dismissing the applications filed by 

the appellant, cannot be treated as laying down the correct law.

45. In the result, the appeals are allowed. The impugned judgment as also 

the order of the learned Company Judge are set aside and the applications 

filed by the appellant are allowed in terms of the prayer made. The Official 

Liquidator appointed by the High Court shall deposit the dues of provident 

 47

fund payable by the employer within a period of 3 months. The parties are 

left to bear their own costs.

 .............................J.

 [G. S. Singhvi]

 ..............................J.

 [H. L. Dattu]

New DelhiNovember 8, 2011.

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