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provident fund commissioner

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interpretation of the expression “so far as may be” has in our judgment, misinterpreted the intent and scope and the purpose of the Act.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO_655 OF 2012 (Arising out of SLP(C) No.17298/2009) Regional Provident Fund Commissioner …Appellant(s) – Versus – The Hooghly Mills Co. Ltd. & Ors. …Respondent(s) J U D G M E N T GANGULY, J. 1. Leave granted. 2. The question which falls for … Continue reading

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

REPORTABLE 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 … Continue reading

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952: S.11 – Provident funds dues payable by employer – Held: Would be first charge on assets of establishment – Such dues shall be paid in priority to all other debts – Priority clause enshrined in s.11 operate against statutory as well as non-statutory and secured as well as unsecured debts including a mortgage or pledge – On facts, held, sugar bags pledged by Sugar Mills in favour of appellant-bank as security for repayment of loan together with interest – Deeds of pledge executed did not have effect of transferring of ownership of sugar bags to bank – Sugar bags could be attached and sold for realization of provident fund dues of the workers – Constitution of India, 1950 – Articles 38, 43. Legislative intent behind enactment of the 1952 Act – Explained. Purposive interpretation – The 1952 Act is social welfare legislation – Courts to give purposive interpretation to the provisions contained therein in view of Directive Principles of State Policy – Interpretation of statutes. Contract: Pawn or pledge – Necessary ingredients – Discussed. The question which arose for consideration in these appeals was whether the sugar bags pledged by Sugar Mills in favour of the appellant-bank as security for repayment of the loan together with interest could be attached and sold for realization of the dues of provident funds etc. payable by the employer i.e., the management of the Sugar Mills under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. =Dismissing the appeals, the Court HELD: 1. The framers of Indian Constitution were alive to the plight of the working class and particularly the unorganized labour employed in factories and other establishments. They were also conscious of the fact that the goals of justice – social, economic and political and equality of status and of opportunity proposed to be incorporated in the preamble to the Constitution would remain illusory for weaker sections of society unless the State takes affirmative legislative and administrative measures for ameliorating the conditions of those sections including the workers employed in factories etc. Therefore, specific provisions were incorporated in Part IV of the Constitution with the title “Directive Principles of State Policy” casting an obligation upon the State to apply these principles in making laws. Article 38 which has been renumbered as clause (1) thereof by the Constitution (Forty-fourth Amendment) Act, 1978 declares that the State shall strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of national life. Clause (2) of Article 38 mandates the State to strive to minimize the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different avocations. Article 43 casts a duty on the State to make efforts to secure by suitable legislation or economic organization or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities, and, in particular, social opportunities. [Para 16] [19-e-h; 20-a-d] Recovery Officer and Assistant Provident Fund Commissioner v. Kerala Financial Corporation (2002) 3 LLJ 643 Kerala; A.P. State Financial Corporation v. Official Liquidator (2000) SCC 291; Central Bank of India v. State of Kerala (2009) 4 SCC 94, referred to. 2.1. With a view to ensure that the employers religiously comply with the mandate of provisions enacted for benefit of the workers, the legislature has not only provided for imposition of penalty and damages but also made comprehensive provisions for recovery of the dues by way of attachment and sale of movable or immovable property of the establishment or the employer, as the case may be. Section 11 of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 gives statutory priority to the payment of contributions over other debts. Sub-section (1) of Section 11 relates to priority qua an employer who is adjudged insolvent or being a company 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, 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. Sub-section (2) of Section 11 contains a non obstante clause and lays down that if any amount is due from the employer whether in respect of the employees’ contribution deducted from the wages of the employee 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. [Para 18] [27-g-h; 28-a-h; 29-a] Organo Chemical Industries v. Union of India (1979) 4 SCC 573: Builders Supply Corporation v. Union of India 1965(2) SCR 289; 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; State of M.P. v. State Bank of Indore (2002) 10 SCC 441, referred to. 2.2. 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. [Para 20] [31-B] UCO Bank v. Official Liquidator, High Court Bombay and another (1994) 5 SCC 1; Textile Labour Association and another v. Official Liquidator and another (2004) 9 SCC 741; Recovery Officer and Assistant Provident Fund Commissioner v. Kerala Financial Corporation (2002) 2 KLT 723, referred to. 3. Section 11 gives statutory priority to the amount due from the employer vis-

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.6893 OF 2009 (Arising out of S.L.P. (C) No.15243 of 2007) Maharashtra State Co-operative Bank Ltd. … Appellant Versus The Assistant Provident Fund Commissioner … Respondents and others WITH CIVIL APPEAL NO.6894 OF 2009 (Arising out of S.L.P. (C) No.20736 of 2007) Maharashtra … Continue reading

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