M/S EDELWEISS ASSET RECONSTRUCTION LIMITEDversusREGIONAL PF COMMISSIONER II AND RECOVERY OFFICER, RO BENGALURU (KORAMANGALA) & ANR.

                [2025] 8 S.C.R. 2183 : 2025 INSC 1045

          M/s Edelweiss Asset Reconstruction Limited
                              v.
       Regional PF Commissioner II and Recovery Officer,
              RO Bengaluru (Koramangala) & Anr.
                      (Civil Appeal No. 11105 of 2025)
                               26 August 2025
     [Vikram Nath,* Sanjay Karol and Sandeep Mehta, JJ.]


                           Issue for Consideration
       Present appeal assails the correctness of the judgment of the
       High Court dismissing the writ petition filed by the appellant-EARC
       and further directing that the amount deposited, vide order dated
       02.02.2023, be transmitted to the account of the respondent no.1
       herein; priority of first charge amongst the EPFO and the secured
       creditors in view of s.11(2) of the Employees Provident Fund and
       Miscellaneous Provisions Act, 1952.

                                  Headnotes†
       Employees Provident Fund and Miscellaneous Provisions Act,
       1952 – s.11(2) – Securitisation and Reconstruction of Financial
       Assets and Enforcement of Security Interest Act, 2002 – s.35 –
       Default by the Establishment, covered under the ambit of EPF
       Act, 1952 in payment of provident fund dues – Axis Bank claimed
       first charge by referring to s.35, SARFESI Act – Employees’
       Provident Fund Organisation (EPFO) re-asserted its priority
       u/s.11(2) of the PF Act – Appellant-EARC contended that the
       EPFO has first charge over the property auctioned, whether by
       the appellant or by the Axis Bank – Whereas, the Axis Bank
       argued that in view of s.35 of the SARFAESI, the dues of the
       Bank being secured would have a priority over the sales taxes
       and other dues payable to the Government or local authority
       and thus, the EPFO would be entitled to recover anything from
       the Axis Bank only after its dues are fully satisfied – High Court
       dismissed the writ petition filed by the appellant:
       Held: Appellant did not implead Axis Bank as a party-respondent
       before the High Court – Admittedly, Axis Bank by sale of one of
       the property of the Establishment has realised an amount of Rs.12
       crores approximately whereas, appellant by sale of the other two
* Author
2184                                                             [2025] 8 S.C.R.

                          Supreme Court Reports


    properties has realised only Rs.7 crores approximately – Further, it
    is also admitted that the appellant had already paid Rs.75 lakhs and
    had in fact given an undertaking that it will pay Rs.78,42,579/- in
    full and final discharge of its liability – According to the appellant,
    the balance payment of Rs.1,30,52,221/- approximately may be
    recovered from the Axis Bank – It would be appropriate that the
    High Court first deals with the issues raised by Axis Bank that it
    has first charge and priority over and above the EPFO to satisfy its
    dues from the secured property in view of s.35 of the SARFAESI
    Act – High Court will examine the priority of first charge amongst
    the EPFO and the secured creditors i.e. the Axis Bank and other
    two Banks, namely, State Bank of India and the State Bank of
    Travancore (now taken over by SBI) in view of s.11(2) of the PF
    Act – Impugned order set aside – Writ Petition restored, to be
    decided afresh after impleading the Axis Bank as a respondent
    and after affording due opportunity of exchanging pleadings and
    hearing to all the parties to the said proceedings. [Paras 8, 10-12]

                               Case Law Cited
    Maharashtra State Co-operative Bank v. Assistant PF, Commissioner
    (2009) 10 SCC 123 – referred to.

                                 List of Acts
    Employees Provident Fund and Miscellaneous Provisions Act,
    1952; Securitisation and Reconstruction of Financial Assets and
    Enforcement of Security Interest Act, 2002.

                              List of Keywords
    Provident Fund; Employees’ Provident Fund Organisation (EPFO);
    Non-performing assest (NPA); Charge; Priority; Default in payment
    of provident fund dues; Priority of first charge; Priority of first charge
    amongst the EPFO and the secured creditors; First charge and priority
    over and above EPFO; Dues from secured property; First charge over
    the property auctioned; Axis Bank; Recovery proceedings; Auction;
    Auction sale; Remittance of the outstanding dues of the EPFO.

                             Case Arising From
    CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11105 of 2025
    From the Judgment and Order dated 01.02.2024 of the High Court
    of Karnataka at Bengaluru in WP No. 2543 of 2023
[2025] 8 S.C.R.                                                       2185

      M/s Edelweiss Asset Reconstruction Limited v. Regional PF
Commissioner II and Recovery Officer, RO Bengaluru (Koramangala) & Anr.

                              Appearances for Parties
      Advs. for the Appellant:
      Krishnan Venugopal, Sr. Adv., Kaushik Mishra, Shivendra Singh,
      Ms. Prakriti Rastogi, Shailesh K. Rajora, Ms. Deepanshi Ishar,
      Avinash Mathews.
      Advs. for the Respondents:
      Gopal Jain, Sr. Adv., M/s. Dua Associates, Munawwar Naseem,
      Jaskaran Singh Bhatia, Dushyant Parashar, Manu Parashar,
      Praduman Kumar Aggarwal, Dinesh Pandey, Sanjay Kumar
      Aggarwal, Mrs. Neha Shanker.

                       Judgment / Order of the Supreme Court

                                    Judgment

      Vikram Nath, J.

1.    Leave granted.
2.    The present appeal assails the correctness of the judgment and order
      dated 01.02.2024 passed by the Karnataka High Court in Writ Petition
      No.2543 of 2023 (L-PF), whereby the High Court dismissed the writ
      petition filed by the present appellant and further directed that the
      amount deposited, vide order dated 02.02.2023, be transmitted to
      the account of the respondent no.1 herein, i.e., the sole respondent
      before the High Court. Brief facts giving rise to the present appeal
      are narrated hereunder:
      2.1. M/s Acropetal Technologies Pvt. Ltd. (hereinafter referred to as
           the ‘Establishment’) was covered under the ambit of Employees
           Provident Fund and Miscellaneous Provisions Act, 19521. The
           Establishment defaulted in payment of provident fund dues
           since July, 2013 and accordingly an enquiry was initiated under
           Section 7(A) of the PF Act. After due enquiry and affording
           opportunity of hearing to the Establishment, the Regional
           Provident Fund Commissioner-II, Bangalore, vide order dated
           08.06.2015, determined a liability of Rs.1,28,90,486/- against the
           Establishment and accordingly directed it to deposit the same


1    For short, “PF Act”
2186                                                         [2025] 8 S.C.R.

                              Supreme Court Reports


             within 15 days. The order further indicated that any default or
             failure may entail prosecution under Section 14/14(A) of the PF
             Act in addition to recovery proceedings under Section 8(B) to
             8(G) of the PF Act. It was also clarified that the above quoted
             amount did not include the interest and the damages under
             Sections 7(Q) and 14(B) of the PF Act.
     2.2. The Establishment, vide communication dated 29.06.2015,
          informed that all its bank loan accounts with the Bank had been
          declared NPA (Non-Performing Asset) and that the Banks had
          initiated recovery process by auctioning their property. It was also
          mentioned in the said communication that Axis Bank Ltd. had
          initiated recovery process for auction of their property at 255-B
          in Bommasandra Industrial Area, Attibele Hobli, Anekal Taluk,
          Bangalore (hereinafter referred to as the ‘Attibele property’). The
          communication further mentioned that the auction date fixed
          by the Bank was 29.07.2015 and also that they would have
          sufficient balance after settling the bank loan and accordingly
          would address the statutory dues from the sale amount.
     2.3. It further requested the Employees’ Provident Fund Organisation2
          to communicate to the Axis Bank Ltd. for making payment
          directly to them towards the dues. Upon receipt of the aforesaid
          communication, the EPFO, vide letter dated 08.07.2015,
          addressed to the Axis Bank Ltd. referring to Section 11(2) of the
          PF Act and the judgment of this Court in the case of Maharashtra
          State Co-operative Bank vs. Assistant PF, Commissioner
          asked the Bank to remit a total amount of Rs.2,96,76,656/- as
          outstanding dues on 08.07.2015 by way of Demand Draft in
          favour of Regional Provident Fund, Commissioner payable at
          Bangalore out of the sale proceeds of the auction scheduled
          on 29.07.2015.
     2.4. The Axis Bank in response, vide letter dated 20.07.2015, claimed
          first charge by referring to Section 35 of the Securitisation
          and Reconstruction of Financial Assets and Enforcement of
          Security Interest Act, 20023. Immediately, on 23.07.2015, the
          EPFO re-asserted its priority under Section 11(2) of the PF Act


2   In short, “EPFO”
3   In short “SARFAESI Act”
[2025] 8 S.C.R.                                                     2187

      M/s Edelweiss Asset Reconstruction Limited v. Regional PF
Commissioner II and Recovery Officer, RO Bengaluru (Koramangala) & Anr.

           and further issued an order of attachment of the immovable
           property i.e. the ‘Attibele property’.
     2.5. The EPFO issued a reminder dated 06.08.2015 to the Axis Bank
          which in response issued a communication informing that the
          auction could not take place as the same was stayed by an
          order of status quo passed by the High Court of Karnataka. The
          EPFO demanded a copy of the stay order, vide its communication
          dated 14.08.2015. Again, vide communication dated 02.09.2015,
          the EPFO requested for copy of the stay order.
     2.6. The writ petition apparently was disposed of some time in
          October/November 2015 whereafter, again communications
          started flowing between EPFO and Axis Bank regarding the
          outcome of the auction sale and remittance of the outstanding
          dues of the EPFO. It appears that Axis Bank sold the property
          in auction held in March, 2016 and it appropriated the sale
          proceeds against its outstanding dues and informed the EPFO
          that the Bank had no amount in the account of the Establishment
          as it still had outstanding dues against the Establishment.
3.   The EPFO, in the meantime, was informed by the Establishment
     that another property was being auctioned by State Bank of India
     through its assignee, the appellant-EARC. This property was situated
     at Kammanahalli (hereinafter referred to as the “Kammanahalli
     property”). The Establishment further informed the EPFO that
     another property at N.S. Palya (hereinafter referred to as the ‘Palya
     property’) was being auctioned by State Bank of Travancore (now
     taken over by SBI). Accordingly, the EPFO communicated with
     EARC and State Bank of India to remit the outstanding dues, vide
     communication dated 23.04.2021. The EPFO demanded an amount
     of Rs.2,08,94,800/- from EARC as per priority under Section 11(2)
     of the PF Act. EARC filed a writ petition before the Karnataka High
     Court, in which an interim order was granted staying the operation
     of order dated 15.06.2016 passed under Section 14(B) of the PF
     Act raising demand for an amount of Rs.1,30,52,221/-. In view of
     the same, the EPFO demanded EARC to remit the balance amount
     of Rs.78,42,579/- and also issued an order of attachment dated
     24.11.2022 against EARC. In response, EARC, vide letter dated
     27.01.2023, expressed its willingness to remit Rs.78,43,629/-, which
     included Rs.1050/- as recovery charges also subject to confirmation
2188                                                       [2025] 8 S.C.R.

                        Supreme Court Reports


     that the said amount would be towards full and final settlement and
     EPFO would not raise any further demands from EARC with respect
     to provident fund dues of the Establishment. EARC challenged the
     order of attachment dated 24.11.2022 and also the recovery certificate
     of January 2023 before the High Court. The High Court, vide order
     dated 02.02.2023, directed the EARC to deposit Rs.75 lakhs as an
     interim measure and subject to such deposit stayed further recovery.
     By the impugned order, the said writ petition has been dismissed
     with the further direction that the amount of Rs.75 lakhs deposited
     by EARC be transmitted to the account of EPFO.
4.   Aggrieved by the same, EARC has preferred the present appeal.
     The appellant in the appeal has admitted that the dues of EPFO
     have a first charge. However, the objection taken by the appellant is
     to the effect that the Axis Bank has sold one property for 12 crores
     approximately whereas, appellant has sold two properties for total
     consideration of Rs.7 crores. Further, submission is that the balance
     amount of EPFO may be recovered from the Axis Bank as EARC
     has already paid an amount of Rs.75 lakhs which is proportionate
     to the sale consideration received by it and the balance amount
     due to the EPFO which apparently has been stayed by the High
     Court of Karnataka for the amount quantified under Section 14(B)
     of the PF Act amounting to Rs.1.3 crores approximately would fall in
     proportionate share of the Axis Bank. The recovery for the balance
     amount if ultimately EPFO succeeds before the High Court for its
     demand under Section 14(B) of the PF Act should be made from
     Axis Bank and not from the appellant.
5.   The stand of the EPFO is that the High Court has rightly dismissed
     the petition of the appellant and, therefore, it is entitled to recover
     the balance amount of Rs.3,43,629/- and the amount of Rs.1.3
     crores approximately quantified under Section 14(B) of the PF Act,
     as and when, the EPFO succeeds before the High Court. It is further
     submitted that the appellant had not impleaded Axis Bank before
     the High Court and, therefore, the contention of the appellant that
     balance recovery may be made from Axis Bank with respect to the
     amount quantified under Section 14(B) of the PF Act cannot be
     sustained. It has therefore prayed that the appeal may be dismissed.
6.   The stand of the Axis Bank is based upon Section 35 of the SARFAESI.
     According to the Axis Bank in view of the provisions contained in
[2025] 8 S.C.R.                                                        2189

      M/s Edelweiss Asset Reconstruction Limited v. Regional PF
Commissioner II and Recovery Officer, RO Bengaluru (Koramangala) & Anr.

     Section 35 of the SARFAESI, the dues of the Bank being secured
     would have a priority over the sales taxes and other dues payable
     to the Government or local authority and, therefore, no recovery can
     be made from Axis Bank till such time its entire dues are liquidated
     and satisfied.
7.   We have heard Shri Krishnan Venugopal, learned Senior Counsel
     appearing for the appellant, Shri Gopal Jain, learned Senior Counsel
     appearing for the Axis Bank and Shri Dushyant Parashar, learned
     counsel appearing for the EPFO and have also perused the material
     on record.
8.   It is true that the appellant did not implead Axis Bank as a party-
     respondent before the High Court. However, before this Court, Axis
     Bank was impleaded and is now represented and duly heard.
9.   According to the appellant, the EPFO had first charge over the property
     auctioned, whether by the appellant or by the Axis Bank. Whereas
     the contention of the Axis Bank is that it has the first charge and
     priority over the sales tax and other dues payable to the Government
     and local authority. Therefore, EPFO would be entitled to recover
     anything from the Axis Bank only after its dues are fully satisfied.
10. It is an admitted position that Axis Bank by sale of Attibele property has
    realised an amount of Rs. 12 crores approximately whereas, appellant
    by sale of the other two properties namely Kammanahalli property
    and Palya property has realised only Rs.7 crores approximately.
    Further, it is an admitted position that the appellant had already paid
    Rs. 75 lakhs and had in fact given an undertaking that it will pay
    Rs.78,42,579/- in full and final discharge of its liability. According to
    the appellant, the balance payment of Rs.1,30,52,221/- approximately
    may be recovered from the Axis Bank. This is precisely the case
    canvassed before us by the appellant.
11. In our considered opinion, it would be appropriate that the High Court
    first deals with the issues raised by Axis Bank that it has first charge
    and priority over and above the EPFO to satisfy its dues from the
    secured property in view of Section 35 of the SARFAESI Act. The
    High Court will examine the priority of first charge amongst the EPFO
    and the secured creditors i.e. the Axis Bank and other two Banks,
    namely, State Bank of India and the State Bank of Travancore (now
    taken over by SBI) in view of Section 11(2) of the PF Act.
2190                                                      [2025] 8 S.C.R.

                            Supreme Court Reports


12. In view of the above, we set aside the impugned order and restore
    the Writ Petition No.2543 of 2023 (L-PF) to be decided afresh after
    impleading the Axis Bank as a respondent and after affording due
    opportunity of exchanging pleadings and hearing to all the parties
    to the said proceedings. The High Court will take into consideration,
    the relevant fact relating to the charge having been created by the
    EPFO over the properties to be auctioned by the Axis Bank prior
    to the auction. Material in this regard has been placed before us.
    Since we are not entering into the merits of that issue relating to
    first charge and priority, we are not dealing with the same in detail.
    All the parties to the writ petition as it would stand now after remand
    would be at liberty to raise all contentions before the High Court.
13. The appeal stands accordingly allowed. The impugned order is set
    aside, and the writ petition is restored to its original number before
    the High Court. Further, the High Court to proceed and decide the
    writ petition in accordance with law in the light of the observations
    made above after impleading the Axis Bank as a party-respondent.

     Result of the case: Appeal allowed.




     †
         Headnotes prepared by: Divya Pandey