Supreme Court of India
MAHARASHTRA STATE CO-OPERATIVE BANK LTD.versusTHE ASSISTANT PROVIDENT FUND COMMISSIONER AND ORS.
- Citation
- 2009 INSC 1174
- Decided
- 8 October 2009
- Disposal
- Dismissed
- Bench
- B N AGRAWAL
Holding
Section 11(2) of the EPF Act deems any amount due from an employer to be a first charge on the establishment's assets, giving it priority over all other debts, including pledged goods, which remain assets of the establishment and may be attached for recovery of EPF dues.
Summary
The Supreme Court examined whether sugar bags pledged by two cooperative sugar mills to Maharashtra State Co‑operative Bank Ltd. could be attached and sold to satisfy the employer's liabilities under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Court held that Section 11(2) of the Act creates a statutory first charge on the assets of an establishment, giving the EPF dues priority over all other debts, including secured claims such as a pledge. It further ruled that the pledged sugar bags remained the property of the mills and therefore fell within the definition of "assets" for purposes of attachment. The Court also clarified that "any amount due" includes interest and damages under Sections 7Q and 148. Consequently, the High Court's order directing the sale of the sugar bags and the allocation of proceeds to the Assistant Provident Fund Commissioner was upheld and the appeals were dismissed.
Issues considered
- The applicability of Section 11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 to assets pledged as security.
- Whether the statutory first charge created by Section 11(2) overrides a prior pledge or mortgage over the same assets.
- Whether the sugar bags pledged to the bank constitute "assets of the establishment" within the meaning of Section 11(2).
- Whether interest under Section 7Q and damages under Section 148 are covered by the expression "any amount due" in Section 11(2).
- Whether the deeds of pledge transferred ownership of the sugar bags to the bank.
Legislation cited
- Companies Acts. 529, s. 529A
- Constitution of Indias. Article 38, s. Article 43
- Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 11, s. 148, s. 14B, s. 15(2), s. 17, s. 7A, s. 7Q, s. 8, s. 88, s. 8F
- Income Tax Act, 1961s. Third Schedule
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
- State Financial Corporations Act, 1951s. 46B
- Transfer of Property Acts. 100, s. 58
Subjects
Employees' Provident FundSection 11(2) priorityfirst chargepledgeattachment and salesecured creditorstatutory prioritysocial welfare legislationDirective Principles of State Policy
Judgment
[2009] 15 (ADDL.) S.C.R. 1
MAHARASHTRA STATE CO-OPERATIVE BANK LTD. A
t
v.
THE ASSISTANT PROVIDENT FUND COMMISSIONER
AND ORS.
(Civil Appeal No. 6893 of 2009)
OCTOBER 8, 2009 8
[B.N. AGRAWAL, G.S. SINGHVI AND AFTAS- At.AM, JJ.]
I
Employees' Provident Funds and Miscellaneous
Provisions Act, 1952: c
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 D
.>( 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 E
sugar bags to bank - Sugar bags could be attached and sold
for realization of provident fund dues of the workers -
-4,
Constitution of India, 1950 - Articles 38, 43.
Legislative intent behind enactment of the 1952 Act -
Explained. F
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.
G
--4 Contract: Pawn or pledge - Necessary ingredients. -
Discussed.
The question which .arose for consideration in these
1 H
2 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A 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
9. 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 Constitu-tion were
C 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 __
D 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.
E 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
F 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
G to minimize the inequalities in income, and endeavour to
elimin.ate inequalities. in status, facilities and .>-
opportunities, not only amongst individuals but also
amongst groups of people residing in different areas or
H
-1
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 3
../
PROVIDENT FUND COMMNR. AND ORS .
engaged in different avocations. Article 43 casts a duty A
{
'<' 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 ensuri.ng a decent
A
' standard of life and full enjoyment of leisure and social B
and cultural opportunities, and, in particular, social
opportunities. [Para 16] [19-E-H; 20-A-D]
{
Recovery Officer and Assistant Provident Fund
Commissioner v. Kera/a Financial Corporation (2002) 3 LLJ
643 Kerala; A.P. State Financial Corporation v. Official c
Liquidator (2000) SCC 291; Central Bank of India v. State of
Kera/a (2009) 4 SCC 94, referred to.
~
'II'
2.1. With a view to ensure that the employers
( religiously comply with the mandate of provisions D
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, E
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 F
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 148, accumulations required to be transferred
G
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
H
4 SUPREME COURT REPORTS (2009] 15 (ADDL.) S.C.R.
'-....
A 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 (
B 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
c 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
D sec 441, referred to.
v
)
'
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
E 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
F 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 )
G 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
H
.........
-
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 5
PROVIDENT FUND COMMNR. AND ORS.
contained in any other law for the time being in force. A
~
[Para 20] [31-8]
.. 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;
B
Recovery Officer and Assistant Provident Fund Commissioner
v. Kera/a Financial Corporation (2002) 2 KLT 723, referred
to.
·'(
3. Section 11 gives statutory priority to the amount
due from the employer tJis-a-vis all other debts. Clause (a) c
of sub-section (1) of Section 11 is applicable to cases
where an employer is adjudicated insolvent or, being a
company, an order of its winding up is made. Clause (b)
=='!: is applicable to cases where the amount is due from the
~ employer in relation to exempted establishment in respect D
of any contribution to the provident fund or any insurance
_. fund in so far it relates to exempted employees under the
rules of provident fund or any insurance fund, any
contribution payable by him towards the Pension Fund
under Section 17(6), damages recoverable under Section E
148 or any charges payable by him to the appropriate
Government under the Act or under any of the conditions
~ specified in Section 17. This sub-section then lays down
that such amount shall be paid in priority to all other
debts in the distribution of the property of the insolvent
F
or the assets of the company being wound up. Sub-
section (2) lays down that any amount due from the
employer whether in respect of the employees'
... contribution deducted from the wages of the employe~
or the employer's contribution shall be deemed to 1>$-the
first charge on the assets of the establishment, and shall G
be paid in priority to all other debts. The expression "any
a.mount due from an employer" appearing in sub-section
(2) of Section 11 has to be interpreted keeping in view the
object of the Act and other provisions contained therein
H,
••
6 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A including sub-section (1) of Section 11 and Sections 7A,
7Q, 148 and 15(2) which provide for determination of the
dues payable by the employer, liability of the employer
to pay interest in case the payment of the amount due is
delayed and also pay damages, if there is default in
B making contribution to the Fund. If any amount payable
by the employer becomes due and the same is not paid
within the stipulated time, then the employer is required
to pay interest in terms of the mandate of Section 7Q.
Likewise, default on the employer's part to pay any
C contribution to the Fund can visit him with the
consequence of levy of damages. Sub-section (2) was
inserted in Section 11 by Amendment Act No.40 of 1973
with a view to ensure that payment of provident fu~d
dues· of the workers are· not defeated by the prior claims
of the secured and/or of ths unsecured creditors. Whiie
D
enacting sub-section (2), the legislature w:~s conscious
of the fact that in terms of existing Section 11 priority has
been given fo the amount due from an employer in
relation to an establishment to which any scheme or fund
is applicable including damages recoverable under
E Section 148 and accumulations required to be
transferred under Section 15(2). The legislature was also
aware that in case of delay the employer is statutorily
responsible to pay interest in terms of Section 17.
Therefore, there is no plausible reason to give a
F restricted meaning· to the expression 'any amount due
from the employer' and confine it to the amount
determined under Section 7A or the contribution payable
under Section 8. If interest payable by the employer under
Section 7Q and damages leviable under Section 14 are
G excluded from the ambit of expression "any amount due
from an employer", every employer would conveniently
refrain from paying contribution to the Fund and other
dues and resist the efforts of the concerned authorities
to recover the dues as arrears of land revenue by
H contending that the movable or immovable property of
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 7
PROVIDENT FUND COMMNR. AND ORS.
the establishment is subject to other debts. Any such A
'(
interpretation would frustrate the object of introducing the
deeming provision and non obstante clause in Section
11(2). [Para 47] (55-A-H; 56-A-H]
"- 4. A careful reading of the deeds of pledge executed
B
by the management of Sugar Mills show that even
though the sugar bags which were available with the
Sugar Mills at the relevant time were placed in the
custody of the appellant-bank as security for repayment
of loan together with interest, the former continued to be
owner thereof. If the management of the Sugar Mills were c
to repay the dues of the appellant-bank within the time
specified in the deeds of pledge, the latter was duty
bound to lift its notional control over the sugar bags lying
in the godowns of the Sugar Mills. In case of default, the
~ appellant-bank co·uld recover its dues by selling the D
sugar bags. The very fact that except giving the symbolic
~
custody of the sugar bags to the appellant-bank by
allowing it to put lock and key on the godowns, all steps
for preserving the goods and getting the same insured
were taken by the management of the Sugar Mills which E
also agreed to take the responsibility of any shortage,
damage or shrinkage unmistakably shows that the Sugar
Mills continued to be owner of the sugar bags. [Para 31]
(42-H; 43-A-C; F-H]
F
5.1. The two ingredients of a pawn or a pledge are:
(1) that it is essential to the contract of pawn that the
property pledged should be actually or constructively
delivered to the pawnee and (2) a pawnee has only a
special property in the pledge but the general property
therein remains in the pawner and wholly reverts to him G
on discharge of the debt. A pawn therefore is a security,
where, by contract a deposit of goods is made as security
for a debt. The right to property vests in the pledgee only
so far as is necessary to secure the debt. In this sense a
H
... _
8 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A pawn or pledge is an intermediate between a simple lien
and a· mortgage which wholly passes the property in the
thing conveyed. [Para 33) [44-G-H; 45-A,.B]
Lal/an Prasad v. Rahmat Ali (1967) 2 SCR 233, referred
•
. B to.
5.2. The deeds of pledge executed by the
management of the Sugar Mills as security for repayment
of loan etc. ~id not have the effect of transferring of the
ownership of th.e sugar bags to the appellant-bank and
C the Recovery. Officer did not commit any illegality by
attaching the same and the High Court was fully justified
in directing payment of a portion of the ~ale price to the
Assistant Commissioner for being appropriated towards
the provident fund dues of the workers. (Pa~a 36) (49-D-
D E]
Karnataka Pawnbrokers' Association v. State of
Karanataka (1998) i SCC 707; Central Bank of India V.
Siriguppa Sugars & Chemicals Ltd. (2007) 8 SCC 353; Bank
E of Bihar v. s_tate of Bihar (1972) 3 SCC 196; Transcore v.
Union of India (2008) 1 SCC 125, distinguished.
I
Velchand Chhaganlal v. Mussan 1-4 Som.LR. 633,
referred to.
F Black's- Law Dictionary (Eighth edition); Mu/la's Treatise
on the Transfer of Property; Law Lexicon by P. Ramanatha
Aiyar (Second edition); Law of Personal Property: Ray
Andrews Brown Second edition 1936; Salmond's
Jurisprudence, referred to.
G Case Law Reference:
(2002) 3 LLJ 643 referred to Para 13
'
(20QO') sec 291 referred to Para 13
H (1998) 7 sec 101 distinguished Paras 14, 37
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 9
PROVIDENT FUND COMMNR. AND ORS.
.(
(2001) 8 sec 353 distinguished Paras 14, 38 A
(1972) 3 sec 196 distinguished Paras 35, 38
(2008) 1 sec 125 distinguished Paras 14, 45
(2009) 4 sec 94 referred to Para 15
B
(1979) 4 sec 573 referred to Para 19
1965(2) SCR ·289 referred to Para 21
:,. -f
(1995) 2 sec 19 referred to Para 22
(2000) 5 sec 694 Para 23
c
referred to
(2002) 1o sec 441 referred to Para 24
')
(2009) 4 sec 94 referred to Para 25
~ (1994) 5 sec 1 referred to Para 26 D
(2004) 9 sec 741 referred to Para 28
(2002) 2 KLT 723 referred to Para 29
(1967) 2 SCR 233 referred to Para 34 E
14 Born.LR. 633 referred to Para 41
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6893 of 2009.
F
From the Judgment & Order dated 29.6.2007 of the High
Court of Bombay in Civil Application No. 1680 of 2007 @ Writ
Petition No. 6824 of 2005
. WITH
G
C.A. Nos. 6894 of 2009.
Ashok H. Desai Prashant Naik, Rakesh K. Sharma for the
Appellant.
Malvika Trivedi, T. Mahipal, Kuldip Singh (NP), R.C. Kalra, H
10 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A A.P. Dhamija, J.P. Singh, Sanjeev Malhotra for the
Respondents.
The Judgment of the Court was delivered by
G.S. SINGHVI, J. 1. Leave granted.
B
2. Whether the sugar bags pledged by Kannad Sahakari
Sakhar Karkhana Ltd. and Gangapur Sahakari Sakhar
Karkhana Ltd. in favour of the appellant-bank as security for
repayment of the loan together with interest could be attached
c 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 (for short 'the Act') is the question which
arises for determination in these appeals filed against order
0 dated 29.6.2007 passed by the Division Bench of the Bombay
High Court in Civil Application Nos.1680 and 1681/ of 2007 in
Writ Petition No.6824/2005 and order dated 19.7.2007 passed
in Civil Application No.245/2007 in Letters Patent Appeal
No.28/2004.
.,,
E 3. We shall first notice the facts from the record of the
appeal arising out of S.L.P.(C ) No.15243/2007.
4. During crushing season 2000-2001, the appellant.
advanced loan of Rs.4000 lacs to Kannad Sahakari Sakhar
F Karkhana Limited (hereinafter described as 'the Sugar Mill').
For securing repayment of the loan and interest, the
management of the Sugar Mill executed necessary documents
including deed of pledge dated 5.3.2001, the relevant portions
of which are extracted below:- c
G "We, the undersigned, Kannad Sahakari Sakhar Karkhana
Ltd., Tai. Kannad, Aurangabad, member of Maharashtra
State Co-operative Bank Limited (Incorporating the
Vidarbha Co-operative Bank Ltd.) hereinafter referred to
as "the said Bank" agree to take a loan from the said Bank
H on the pledge of stocks/goods/commodities on the
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 11
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
following terms and conditions. The credit limit will be A
Rs.400000000 and its period will be upto 31.10.2001.
1. The stocks/goods/commodities whiph we have at
present placed in the custody of the said Bank as security
or which we might so place from time to time will remain B
in the sole custody of the said Bank and whatever action
the said Bank will take for indicating its custody shall be
agreeable to us.
3. If it is necessary to hire a godown, we undertake to hire
the godown in the name of the said Bank and to pay the C
rent from time to time.
4. We undertake to insure the stocks/goods/commodities
for their full.value with an Insurance Company approved by
the said Bank and will get the policy issued in the name 0
of the said Bank.
5. If for any reason the godown is required to be changed
or repaired, we undertake to bear the expenses in that
connection.
E
6. We undertake to repay the principal of the loan with
interest and all expenses due by us by as stipulated
in para (2) hereof if the period, be extended by the said
Bank before the expiry of the extended period.
F
7. The loan shall bear interest at __ percent per annum.
If the rent of the godown, the expenses in connection with
insurance and other expenses if any not paid by us, the
same shall be debited to our loan account and shall bear
interest at the same rate. This interest shall be payable with
half yearly rests on 30th June and 31st December or G
earlier immediately when the stocks/goods/commodities
are relieved.
8. Over and above the aforesaid dues, if any other amount
is due to the said Bank by us exclusively or in partnership H
:
'
12 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R. ::
'·-
A with anybody else, we agree that the stocks/goods/ .,.,
commodities kept in the custody of the said Bank will also
be treated as security for such amount due by us.
·''
10. We shall not in any way hold the said Bank responsible '
-
for the weight, quality, conditions or safety of the stocks/ ..,
B
goods/commodities given into its custody. We shall hold
ourselves responsible for any shortage, damage or
shrinkage that may arise by any cause whatsoever.
13. If and when there is insecurity due to local riots or civil
~- .... >.
c commotion, etc. we undertake to insure the stocks/goods/
commodities against any damage or loss by such riots or
civil commotion. If we fail to do so, the said Bank shall so
insure the stocks/goods/commodities for and on our behalf
and shall be entitled to debit the cost thereof to our J~
D account.
)-
15. Though by this Agreement, the dale of repayment of
the loan has been fixed as aforesaid, the said Bank shall
treat the loan as demand we undertake to repay the same "
as soon as the said Bank shall make a demand or the ""
E
said Bank shall be at full liberty to recover all the dues
payable by us.
16. In the event of breach of the aforesaid conditions and ~
or if we fail to repay the loan within 24 hours, if so required
F by the said Bank, it shall have the full right to recover its
amount by sale of the stocks goods commodities by public
auction or private treaty (though the said Bank is not bound
so to sell the stocks/goods/commodities). On receipt of the
Accounf of sale under the signature of the Manager, .('
I
G Accountant or other officer of the said Bank duly authorized
we shall acknowledge its correctness. If the proceeds of ft.,
the sale do not fully meet the loan due by us interest or
other expenses, we undertake to pay the balance so
remaining with interest."
H
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSIT. 13
PROVIDENT FUND COMMNR. AND ORS. [GS. SINGHVI, J.]
•\
5. On the same day i.e., 5.3.2001, the management of the A
Sugar Mill also executed promissory note for payment of Rs.40
crores with interest @ 15.50% with half yearly rests.
6. Though, the appellant has not given the details of the
dues of provident fund payable by the employer, a reading of
8
the document marked Ex. A (pages 119-122 of the SLP paper
book) shows that the Assistant Provident Fund Commissioner,
Aurangabad (for short 'the Assistant Commissioner') passed
order dated 29.9.2003 under Section 7A of the Act whereby
he held the employer liable to pay Rs.1,75, 10,477/- towards C
EPF contributions, EPF administrative charges, EDLI
contributions, EDU lns./administrative charges and directed it
to pay the amount with interest @ 12% within 1O days. As the
employer failed to comply with that order, the Assistant
Provident Fund Commissioner and Recovery Officer,
Employees' Provident Fund, Sub-Regional Office, Aurangabad D
(hereinafter referred to as 'the Recovery Officer') issued
warrant of attachment dated 11.3.2004 under Section 88 of the
Act for recovery of Rs.3,85,21, 734/- which included 12%
interest payable in accordance with Rule 5 of the Second
Schedule (Part I) of the Income-tax Act, 1961 read with Section E
BG of the Act. The warrant of attachment was executed by the
Enforcement Officer on 26.3.2004 by preparing an inventory of
the sugar bags lying in the godowns of the Sugar Mill and
affixing paper seals on the same.
F
7. The appellant challenged the warrant of attachment and
consequential action taken by the Enforcement Officer in Writ
Petition No.6824/2005, mainly on the ground that in view of the
deed of pledge executed by the management of the Sugar Mill,
the sugar bags which were lying under its lock and key, could
not have been attached for realization of the dues of provident G
fund etc. During the pendency of the writ petition, the Assistant
Commissioner filed Civil Application No.2739/2006 for sale of
the sugar bags. At the hearing of that application, learned
H
14 SUPREME COURT REPORTS [2009) 15 (ADDL.) S.C.R.
A counsel appearing for the appellant-bank referred to the orders
passed in Writ Petition No.3413/2005 and connected cases
for conducting joint auction of the attached goods i.e., sugar
bags. After taking note of his submission, the Division Bench
ofthe High Court passed order dated 1.12.2006, the relevant )
B portions of which are as under:- ,.,·
"We accordingly allow this application and direct that the
sugar bags attached by the petitioner as well as the
Assistant Provident Fund Commissioner shall be jointly
auctioned and the sale proceeds shall be deposited with
c the Registrar of this Court. The successful bidder will draw
a Demand Draft or a Banker's Cheque in the name of the
Registrar General of this Court.
It is further ordered that the auction sale undertaken jointly, ,,,.
D shall be completed within a period of three months by
floating public tenders calling for bids and by accepting >-
tender of the highest bidder.
Once the amount is deposited with the Registrar of this ,
Court, liberty to apply for withdrawal of the said amount." 'I-
E
8. In compliance of the aforementioned order, the sugar
bags lying in the godowns of the Sugar Mill were auctioned for
a sum of Rs.9,24,08,254/-. Thereafter, the Assistant }-·
Commissioner filed Civil Application No.1680/2007 for
F permission to withdraw a sum of Rs.7,77,46,511/- towards the
dues of provident fund etc. by asserting that in additior. to
Rs.1, 75, 10,4771- payable under Section 7A with interest @
12%, the employer is liable. to pay Rs.6,02,36,03",'- in terms
of order dated 27.3.2007 passed under Section 14B read with
G Section 7Q of the Act.
9. It appears that during the pendency of the litigation, the .
Assistant Commissioner passed another order whereby he
attached the bank account and movable and immovable
H
...-
1
'
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 15
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
properties of the Sugar Mill along with 69,000 sugar bags. A
Ill' Therefore, the management of the Sugar Mill filed Civil
Application No .168112007 with the prayer that attachment
effected by the Assistant Commissioner may be vacated.
10. By the impugned order, the High Court disposed of
8
both the applications and issued various directions including
the following:-
"(a) Out of the amount of Rs.9,24,08,254/-, the amount of
Rs.4,20,67,446/- (Principal amount Rs.1, 75, 10,477/- pltJs
interest Rs.2,45,56,969/-) be paid to the Assistant C
Provident Fund Commissioner so as to appropriate
towards the provident fund dues of the workers of the sugar
factory.
(b) Out of the remaining amount, the amount of 0
Rs.1,46,61,743/- shall be paid to the MSC Bank which
MSC Bank shall appropriate towards the dues of the Sugar
Factory.
(c) TIJe remaining amount of Rs.3,56, 79,065/- be
deposited initially' for a period of 1 'year with the MSC E
Bank in the name of the Registrar General, High Court,
Bombay for a period of 1 year. If within the period of 1
year, the appeal filed by the Petitioner with the Appellate
Tribunal under the Provident Fund Act is not disposed of,
then the Registrar General will re-deposit and/or renew the F
said amount on yearly basis with MSC Bank till final
disposal of the said appeal.
(d) The information in respect of the number, pendency or
disposal of the Appeal shall be given by the Sugar Factory G
to the Registrar General when the said Appeal is disposed
+- of.
(e) In case the said appeal filed by the Sugar Factory is
H
16 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.CR.
A dismissed by the Appellate authority, then the amount of
Rs.3,56,79,065/- will have to be transferred to the-~
Assistant Provident Fund Commissioner and the Registrar~
General is hereby directed, accordingly, to transfer it.
(f) In case the appeal is allowed and thereby the sugar
B
factory becomes entitled to the amount of Rs.3,56, 79,065/ "
-, then the MSC Bank is at liberty to appropriate the said
amount towards the dues of the Sugar Factory.
(g) In view of the above directions and the disbursement'~ """"
c of the amount, the order passed by the Assistant Provident
Fund Commissioner attaching the assets, Bank Accounts
and sugar bags etc. of the Sugar Factory is hereby
quashed and set aside and the Sugar Factory is at liberty
to deal with the said assets in accordance with their own
D Hesolution and decisions keeping in mind the directions." · c:: •
11. We may now notice some facts from the record of the ·~
n
other appeal.
.. ~-
12. The appellant advanced Rs.2000 lacs to Gangapur
E Sahakari Sakhar Karkhana Ltd. during crushing season 2002-
03. For securing the payment ofthe loan, the management of
the Sugar Mill executed three deeds on 2.1.2003, 6.2.2003 and
4.4.2003 and pledged the sugar bags lying in the godowns. ~
Simultaneously, three promissory notes were executed for
F payment of the amounts specified therein with interest at the
rate of 13.5 per cent per annum with half yearly rests. The terms
and conditions of these deeds are similar to deed of plec::ie
dated 5.3.2001 executed by the management of K~:-.nad
Sahakari Sakhar Karkhana Ltd. On account of failure of the
G employer to pay the dues of provident fund etc., the competent
authority pass~d orders under Sections 7A, 70 and 14B of the
Act and held it liable to pay total sum of Rs.9, 11, 72,892/- ,_,
towards the dues of provident fund, interest and damages. After
some time, the Assistant Commissioner issued warrant of
H attachment dated 15.9.2003 which was duly executed by the
"!
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 17
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
-
.,;
-Enforcement Officer on 22.9.2003.
13. The appellant challenged the warrant of attachment in
Writ Petition No. 3656/2003, which was dismissed by the ..
A
learned Single Judge of the High Court (Aurangabad Bench)
vide his order dated 3.10.2003 by relying upon the judgments 8
of the Kerala High Court in Recovery Officer and Assistant
Provident Fund Commissioner v. Kera/a Financial
.... Corporation (2002) 3 LLJ 643 Kerala and of this Court in A.P.
State Financial Corporation v. Official Liquidator (2000} 7
SCC 291. The letters patent appeal preferred by the appellant- C
bank was transferred to the Principal Seat of the High Court at
Mumbai. During the pendency of the letters patent appeal, the
Assistant Commissioner filed Civil Application No.21/2006 for
_. sale of the sugar bags lying in the godown of the employer. By
~ order dated 18. 7.2006, the High Court granted the prayer
of the Assistant Commissioner and directed that the sale D
amount be deposited with the Registrar General. Thereafter,
-r- · the Assistant Commissioner filed Civil Application No.245/2007
, for permission to withdraw the amount lying deposited with the
Registrar General of the High Court. The same was disposed
of by the Division Bench vide order dated 19. 7.2007, the E
operative portion of which reads as under:-
~
"In view of the fact that this Court has taken a consistent
view that the amounts recovered from sugar factories by
disposing of sugar against recovery made by co-operative F
banks for the secured creditors can be appropriated
towards payment of Provident Fund dues, we find no
reason to take a different stand, and allow the application
in terms of prayer clause (a), with no order as to costs."
+ 14. Shri Ashok H. Desai, learned senior counsel G
appearing for the appellant assailed the impugned orders and
argued that the sugar bags lying in the godowns of the Sugar
Mills could not have been attached and sold at the instance of
the Assistant Commissioner for realization of the dues of
H
18 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A provident fund etc. because the same had already been 't'
pledged with the appellant-bank. Learned senior counsel relied
upon the judgments of this Court in Kamataka Pawnbrokers'
Association v. State of Karanataka (1998) 7 SCC 707, Central
Bank of India v. Siriguppa Sugars & Chemicals Ltd. (2007) 8
B sec 353, and argued that even though under Section 11 (2)
of the Act, the amount due from an employer is treated as first
charge on the assets of the establishment, the same cannot
have priority or precedence over the dues of the appellant-bank, 't
the payment of which is secured by the deeds of pledge
c executed by the management of the Sugar Mills. Shri Desai
referred to various clauses of the deeds of pledge and
submitted that for all practical purposes, the appellant-bank had
become owner of the sugar bags and the Recovery Officer did
not have the jurisdiction, power or authority to attach the same.
0 Learned senior counsel emphasized that the term "assets" . ,.__
used in Section 11 (2) of the Act m~ans unencumbered property "
of the establishment and argued that as the sugar bags
pledged with the appellant-bank had become its property, the
Recovery Officer was not entitled to attach the same for
E realizing the dues of provident fund etc. In support of this
argument, Shri Desai placed reliance on paragraphs 67 and
73 of the judgment of this Court in Transcore v. Union of India
(2008) 1 SCC 125. Another argument of the learned senior~
counsel is that, at best, the amount determined under Section
7A can be treated as firs( charge on the assets of the
F establishment but the interest payable under Section 7Q and
damages levied under Section 148 cannot be recovered by
invoking Section 11 (2) of the Act.
15. Shri R.C. Kalra and Ms. Malvika Trivedi, learned
G counsel for the respondents argued that notwithstanding
execution of the deeds of pledge by the management of Sugar 1
Mills in favour of the appellant-bank, the sugar bags continued
to be the property of the Sugar Mills and the same could be
sold for realization of the dues of provident fund. Learned
H counsel submitted that the expression 'any amount due'
MAHARASHTRA STATE CO-OP. BANK LTD:. v. ASSTT. 19
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
appearing in Section 11 (2) includes the amount determined A
under Section 7A, interest payable on such amount in terms of
Section 7Q and damages levied under Section 148. Learned
counsel then argued that by virtue of the deeming provision and
non obstante clause contained in Section 11 (2), any amount
due from an employer in respect of the employees' contribution 8
or employer's contribution is the first charge on the assets of
the establishment and the same is required to be paid in priority
qua all other debts. Ms. Malvika Trivedi pointed out that notice
in the SLPs filed by the appellant was issued primarily in view
of the assertions contained therein that similar issue is under C
consideration in S.L.P.(C) No.95 of 2005 - Central Bank of
India v. State of Kerala and others and submitted that the
appeals are liable to be dismissed in view of the judgment titled
Central Bank of India v. State of Kera/a (2009) 4 SCC 94.
16. We have considered the respective submissions. In D
pre-independence era, some of the big industrial employers
-- ...
I
introduced schemes of provident funds for welfare of their
workers. However, the workers of small industrial
establishments did not get similar benefits because employers
of those establishments did not introduce voluntary schemes E
of provident funds. The framers of the Constitution were very
much 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 F
of status and of opportunity proposed to be incorporated in the
preamble to the Constitution will remain illusory for weaker
sections of society unless the State takes affirmative legislative
I
and administrative measures for ameliorating the conditions of
' those sections including the workers employed in factories etc. G
-\. - 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-
H
20 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R. ~/
A 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 ~
B 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
)I-
different avocations. Article 43 casts a duty on the State to
c 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. The State is also required to make special
D .,.._
endeavour to promote cottage industries on an individual or
cooperative basis in rural areas.
17. Soon after enforcement of the Constitution, the r-
' '
Government of India promulgated the Employees Provident ..
E Funds Ordinance on 15.11.1951, which was replaced by the
Act, which belongs to the family of legislatibns enacted by the
Parliament in furtherance of the mandate of Articles 38 and 43
of the Constitution and is intended to give social security to the )>·
workers employed in the factories and other establishments. I
I-
F The Act provid~s for institution of provident funds, pension fund
and deposit-linked ·insurance fund in factories and other ~
establishments. It ·requires the employers of the factories and
specified establishments to deduct certain amount from the
wages payable to the employees and also make contribution
to various funds, which are administered by the Central and )-
G
Regional Provident Fund Commissioners. Section 2(aa) of the
Act defines the term "authorized officer" to mean the Central -1-
Pr.evident Fund Commissioner, Additional Central Provident
Fund Commissioner, Deputy Provident Fund Commissioner,
Regional Provident Fund Commissioner or such other officer
H
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 21
PROVIDENT FUND COMMNR. AND ORS. [GS. SINGHVI, J.)
as may be authorised by the Central Government, by A
'( notification in the Official Gazette. The term "Fund" has been
defined in Section 2(h) to mean the providentfund established
~ under a Scheme. The term "Recovery Officer" has been defined
...
in Section 2(kd) to mean any officer of the Central Government,
State Government or the Board of Trustees constituted under B
Section 5A, who may be authorised by the Central Government,
by notification in the Official Gazette, to exercise the powers
of a Recovery Officer under the Act. Section 5(1) lays down that
-1(
the Central Government may, by notification in the Official
Gazette, frame a Scheme to be called the Employees'
Provident Funds Scheme for the establishment of provident
c
funds under this Act for employees or for any class of
( employees and specify the establishments or class of
-I. establishments to which the said Scheme shall apply. This
section further lays down that soon after framing of the Scheme,
D
-<( a Fund shall be established in accordance with the provisions
of the Act and the Scheme. Section 6 speaks of the contribution
required to be made by the employer and employees to the
Fund. Section 6A(1) postulates framing of Employees' Pension
Scheme for tne purpose of providing superannuation pension,
retiring pension or permanent total disablement pension to the E
employees of any establishment or class of establishments to
which this Act applies and widow or widower's pension,
~ children pension or orphan pension payable to the beneficiaries
of such employees. Section 6A(2) lays down that
notwithstanding anything contained in Section 6, there shall be F
established, as soon as may be after framing of the Pension
Scheme, a pension fund to which a specified sum should be
paid from the employer's contribution under Section 6. Section
- 6C(1) postulates framing of Employees' Deposit-linked
Insurance Scheme for the purpose of providing life insurance .
.,__ benefits to the employees of any establishment or class of
G
establishments to which the Act applies. Section 6C(2)
provides for establishment of a Deposit-linked Insurance Fund
into which the employer is required to ;iay a specified amount
in respect of every employee. Section ?A empowers the H
...
22 SUPREME COURT REPORTS [2009] 15 (ADDL:) S.C.R.
A competent authority to decide dispute regarding applicability of r
the Act to an establishment as also the amount due from any
employer under the provisions of the Act, the Scheme or the
Pension Scheme or the Insurance Scheme, as the case may >-
be. Section 7Q declares that the employer shall be liable to pay
B simple interest at the rate of twelve per cent per annum or at
such higher rate as may be specified in the Scheme on any
amount due from him under the Act from the date on which·the
amount has become so due till the date of its actual payment. )I-
Proviso to this Section lays down that higher rate of interest
specified in the Scheme· shall not exceed the lending rate of
c
interest charged by any scheduled bank. Section, 8 specifies
the mode of recovery of moneys due from employers. Section
88 lays down that where any amount is in arrear under Section
8, the authorized officer may issue a certificate to the Recovery
Officer specifying therein the amount of arrears and on receipt )'--
D
of the certificate, the Recovery Officer shall proceed to recover
the particular amount from the establishment or the employer
by adopting one or more at the modes specified in that section.
Section BF specifies other modes of recovery. Section 11
speaks of priority of payment of contributions over other debts.
E Section 148 provides for re<:overy of damages. Some of these
provisions which have direct bearing on the decision of these
appeals are reproduced below: ~
8. Mode of recovery of moneys due from employer - Any
F 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
G under section 148, accumulations required to be
transferred under sub-section (2) of section 15 or under
+
sub-section (5) oLsection 17 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
H
_. MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 23
PROVIDENT-FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
(b) from the employer in relation to an exempted A
establishment in respect of any damages recoverable
under section 148 or any charges payable by him to the
appropriate Government under any provisi9n of this Act or
under any of the conditions specified under section 17 or
in respect of the contribution payable by him towards the B
Pension Scheme under the said section 17.
) may, if the amount is in arrear, be recovered in the manner
1
specified in sections 88 to 8G.
BB. Issue of certificate to the Recovery Officer. c
(1) Where any amount is in arrear under section 8, the
authorised officer may issue, to the Recovery Officer, a
'., certificate under his signature specifying the amount of
-'\ arrears and the Recovery Officer, on receipt of such D
certificate, shall proceed to recover the amount specified
therein from the establishment or, as the case may be, the
employer by one or more of the modes mentioned
below:-
(a) attachment and sale of the mov~ble or immovable E
property of the establishment or, as the case may be, the
employer;
(b) arrest of the employer and his detention in prison;
F
(c) appointing a receiver for the management of the
movable or immovable properties of the establishment or,
as the case may be, the employer:
Provided that the attachment and sale of any property
under this section shall first be effected against the G
properties of the establishment and where such attachment
and sale is insufficient for recovering the whole of the
amount of arrears specified in the certificate, the Recovery
Officer may take such proceedings against the property
of the employer for recovery of the whole or any part of such H
24 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A arrears.
(2) The authorised officer may issue a certificate under
sub-section (1), notwithstanding that proceedings for
recovery of the arrears by any other mode have ·been
taken.
8
BF. Other modes of recovery.
';
(1) Notwithstanding the issue of a pertificate to the
Recovery Officer under section 88, the Central Provident
c Fund Commissioner or any other officer authorised by the
Central Boa(d may recover the amount by any one .or more
of the modes provided in this section.
(2) xxx xxx )()()( xxx
)"---
•D (3)(i) to (ix) xxx xxx ~
(x) If the person to whom anotice under this sub-section
is sent fails to make paymentin pursuance thereof to the
Central Provident Fund Commissioner or the officer so
e authorized. he· shall be deemed to be an employer io
default in r~spect of'the amount specified in the notice and
further proceedings may be taken against him for the
realization Of the amount as if it were an arrear due from
him, in the manner provided in sections 88 to BE and the
"
-. notice shall have the same effect as an attachment of a
debt by the Recovery Officer in exercise of his powers
under section 88.
(4) xxx xxx xxx xxx
..
-:7 (5) ·The Central Provident Fund Commissioner or any
officer· not below the rank of Assistant Provident Fund
Commissioner may, if so authorised by the Central
Government by general or special order,- recover -
any
arrears of amount due from an employer or, as the case
If may be, from the establishment by distraint and sale of his
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 25
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
or its movable property in the manner laid down in the Third A
Schedule to the Income-tax Act, 1961 (43 of 1961).
BG. Application of certain provisions of Income-tax Act -
The provisions of the Second and Third Schedules to the
Income-tax Act, 1961 (43 of 1961) and the Income-tax
8
(Certificate Proceedings) Rules, 1962, as in force from
time to time, shall apply with n~cessary modifications as
if the said provisions and the rules referred to the arrears
of the amount mentioned in section 8 of this Act instead
of to the Income-tax;
c
Provided that any reference in the said provisions and the
rules to the "assessee" shall be construed as a reference
to an employer as defined in this Act.
,,.. 11. Priority of payment of contributions over other debts. D
-4
(I) 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 E
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,
'1
damages recoverable under section 148,
accumulations required to be transferred under sub- F
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 e~empted G
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
H
26 SUPREME COURT REPORTS [2009] 15 (AIJDL.) S.C.R.
~
A contribution payable by him towards the Pension
Fund under sub-section (6) of section 17, damages
recoverable under section 148 or any charges
payable by him to the appropriate Government
under any provision of this Act or under any of the
B 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 (3 of 1909), or
c 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.
D "'
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 oflife insurance to employees, whether linked to their
deposits in provident fund or not, without payment by the
E
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
F of the employees' 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
~
G paid in priority t~ all other debts.
148. Power to recover damages.
Where an employer makes default in the payment of any
contribution to the Fund, the Pension Fund or the Insurance
H Fund 'or in the transfer of accumulations required to be
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 27
'.°"'
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
transferred by him under sub-section (2) of section 15 or A
sub-section (5) of section 17 or in the payment of any
charges payable under any other provision of this Act or
of any Scheme or Insurance Scheme or under any of the
conditions specified under section 17, the Central
Provident Fund Commissioner or such other officer as B
may be authorised by the Central Government, by
notification in the Official Gazette, in this behalf may
/
recover from the employer such damages, not exceeding
~ the amount of arrears, as may be specified in the scheme:
Provided that before levying and recovering such damages,
c
the employer shall be given a reasonable opportunity of
being heard:
... Provided further that the Central Board may reduce or
waive the damages levied under this section in relation to D
.J.
an establishment which is a sick industrial company and
in respect of which a scheme for rehabilitation has been
sanctioned by the Board for Industrial and Financial
/
Reconstruction established under section 4 of the Sick
Industrial Companies (Special Provisions) Act, 1985 (1 of E
1986), subject to such terms and conditions as may be
specified in the Scheme.
\(
18. An analysis of the above provisions shows that for
providing financial benefits to the workers who contribute to the
growth of the industries and industrialization of the country, the F
' _Jegislature has made provision for framing of various schemes
under Sections 5(1), 6A(1) and 6C(1) and establishment of
Funds under Sections 5(1 ), 6A(2) and 6C(2). With a view to
ensure that the employers religiously comply with the mandate
of provisions enacted for benefit of the workers, the legislature G
has not only provided for imposition of penalty under Sections
' 14, 14A, 14AA and damages under Section 14B, but also made
comprehensive provisions for recovery of the dues by way of
attachment and sale of movable or immovable property of the
H
,,
28 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A establishment or the employer, as the case may be. Section 8 .,.
lays down that if the amount is in arrear, the same can be
recovered in the manner specified in Sections 88 to G. Section
88 provides for issue of certificate by the authorised officer in
respect of the ·amount due to the Recovery Officer so as to
B enable him to recover the amount specified therein by
attachment and sale of movable or immovable property of the
establishment or the employer or by arrest of the employer and
his detention in prison or by appointing a receiver for the
management of the movable or immovable properties of the
}'
"
c establishment or the employer, as the case may be. Section
SF specifies other modes of recovery of any amount due from
the establishment or the employer. By Section BG some of the
provisions contained in Income-tax Act, 1961 and the Income-
tax (Certificate Proceedings) Rules, 1962 have been made ,.,:
D applicable to the arrears .of the amount mentioned in Section- )..
8. Section 11 gives statutory priority to the payment of
contributions over other debts. The original Section 11 was
renumbered as sub-section (1) by an amendment made vide
Act No.40 of 1973. This sub-section relates to priority qua an "J
employer who is adjudged insolvent or being a company an
E 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 }I
recoverable under Section 148, accumulations required to be
transferred under Section 15(2) or any charges payable by him
F 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), which was added to Section 11 by Act No.40 of 1973
..,
G contains a non obstante clause and lays down that if any ·
amount is due from the employer whether in respect of the f-
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
H establishment and shall, notwithstanding anything contained in
I
. MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 29
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
.f any other law for the time being in force, be paid in priority to A
all other debts. To put it differently, sub-section (2) of Section
11 not only declares that the amount due from the employer
towards contribution under the 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 B
dues shall be paid in priority to all other debts. Section 14B
/
~,
empowers the Central Provident Fund Commissioner or such
other officer as may be authorized by the Central Government,
by notification in the Official Gazette to recover from the
defaulting employer damages which shall not exceed the c
arrears. First proviso to this section casts a duty on the
concerned officer to give the employer reasonable opportunity
of hearing before imposing and recovering damages. Second
proviso thereto empowers the Central Board to reduce or
4: waive damages levied in relation to establishment which is a
D
sick industrial company and in respect of which a scheme for
rehabilitation has been sanctioned by the Board of Financial
-- and Industrial Reconstruction.
19. Since the Act is a social welfare legislation intended
to protect the interest of a weaker section of the society, i.e., E
the workers employed in factories and other establishments, it
is imperative for the courts to give a purposive interpretation
to the provisions contained therein keeping in view the
Directive Principles of State Policy embodied in Articles 38 and
43 of the Constitution. In this context, we may usefully notice F
the following observations made by Krishna Iyer, J. in Organo
Chemical Industries v. Union of India (1979) 4 SCC 573:
~
"The pragmatics of the situation is that if the stream of
contributions were frozen by employers' defaults after due
G
deduction from the wa_ges and diversion for their own
purposes, the scheme would be damnified by traumatic
starvation of the Fund, public frustration from the failure of
the project and psychic demoralisation of the miserable
beneficiaries whey they find their wages deducted and the
H
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 31
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
(
~ since the judicial branch is, in a sense, part of the State. A
.., So it is reasonable to assign to "damages" a larger,
fulfilling meaning."
r 20. We shall now consider the question whether the
I provision contained in Section 11 (2) of the Act operates
8
... against other debts like mortgage, pledge, etc. Answer to this
question is clearly discernible from the plain language of
". Section 11. 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.
c
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 D
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 E
a debt is created in respect of the assets of the establishment,
1he 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. It is, therefore, reasonable to take the view that F
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.
"\ G
21. The view we have taken on the interpretation of Section
11 (2) is in tune with a series of decisions of this Court in which
the provisions contained in different statutes giving priority to
the dues of the State and workers have been interpreted. In the
first place, we may refer to some decisions relating to dues of
H
'""("
32 SUPREME COURT REPORTS (2009] 15 (ADDL.) S.C.R.
'
A the State. In Builders Supply Corporation v. Union of India} .,
1965(2) SCR 289, the Constitution Bench considered the
question whether tax payable to the Union of India has priority
over other debts. After making reference to some judgments
of the Bombay and Madras High Courts, the Constitution
B Bench laid down the following propositions:
1. There is a consensus of judicial opinion that the arrears
of tax due to the State can claim priority over private debts. ,..
2. The common law doctrine about priority of Crown debts
c which was recognised by Indian High Courts prior to 1950
constitutes "law in force" within the meaning of Article
372(1) and continues to be in force. 'I.
·3. The basic justification for the claim for priority of State
D debts is the rule of necessity and the wisdom of conceding ,_
to the State the right to claim priority in respect of its tax
dues.
4. The doctrine may not apply in respect of debts due to
the State if they are contracted by citizens in relation to
E commercial activities which may be undertaken by the
State for achieving socio-economic good. In other words,
where the welfare State enters into commercial fields<
which cannot be regarded as an essential and integral part
of the basic government functions of the State and seeks )
F to recover debts from its debtors arising out of such
commercial activities the applicability of the doctrir.c of
priority shall be open for consideration.
22. In State Bank of Bikaner and Jmµur v. National Iron
G and Steel Rolling Corporation (1995) 2 SCC 19, a three-
Judge Bench considered whether statutory first charge createdJ.
by Section 11-AAM of the Rajasthan Sales Tax Act, 1954 in
favour of the State will have priority over the debts of the bank
which had been secured by the borrower by creating mortgage
of its factory and answered the same in affirmative by making
H
<
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 33
" PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
the following observations: A
-
-:I'
-(
r "Section 100 of the Transfer of Property Act deals with
charges on an immoveable property which can be created
either by an act of parties or by operation of law. It provides
that where immoveable property of one person is made B
~.
security for the payment of money to another, and the
transaction does not amount to a mortgage, a charge is
created on the property and all the provisions in the
,'
Transfer of Property Act which apply to a simple mortgage
" shall, so far as may be, apply to such charge. A mortgage
c
on the other hand, is defined under Section 58 of the
Transfer of Property Act as a transfer of an interest in
specific immoveable property for the purpose of securing
the payment of money advanced or to be advanced as set
out therein. The distinction between a mortgage and a
charge was considered by this Court in the case of D
-4 r Dattatreya Shanker Mote v. Anand Chintaman Datar
(1974) 2 SCC 799. The Court has observed (at pages
806-807) that a charge is a wider term as it includes also
a mortgage, in that, every mortgage is a charge, but every
charge is not a mortgage. The Court has then considered E
the application of the second part of Section 100 of the
Transfer of Property Act which inter alia deals with a
charge not being enforceable against a bona fide
~:
transferee of the property for value without notice of the
charge. It has held that the phrase "transferee of property" F
refers to the transferee of entire interest in the property and
it does not cover the transfer of only an interest in the
property by way of a mortgage.
In the present case we have to consider whether the
G
statutory first charge which is created under Section 11- .
AMA of the Rajasthan Sales Tax Act over the property of
'r the dealer or a person liable to pay sales tax and/or other
dues under the Rajasthan Sales Tax Act, is created in
respect of the entire interest in the property or only the
H
34 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A mortgagor's interest in the property when the dealer has
created a mortgage on the property. In other words, will the
)-
statutory first charge have priority over an earlier mortgage. ~
It was urged by Mr. Tarkunde, learned counsel for the
appellant-bank that at the time when the statutory first ""='
B charge came into existence, there was already a mortgage
in respect of the same property. Therefore, the only ..
property which was possessed by the dealer and/or person
liable to pay tax or other dues under the Rajasthan Sales
Tax Act, was equity of redemption in respect of that )'
c property. The first charge would operate, therefore, only on
the equity of redemption. The argument though ingenious,
will have to be rejected. Where a mortgage is created in
respect of any property, undoubtedly, an interest in the
properly is carved out in favour of the mortgagee. The
D mortgagor is entitled to redeem his property on payment
of the mortgage dues. This does not, however, mean that
)--
the property ceases to be the property of the mortgagor.
The title to the property remains with the mortgagor.
Therefore, when a statutory first charge is created on the ...
property of the dealer, the property subjected to the first
• E charge is the entire property of the dealer. The interest
of the mortgagee is not excluded from the first charge.
The first charge, therefore, which is created under Section
11-AAAA of the Rajasthan Sales Tax Act will operate on ·.,t
the property as a whole and not only on the equity of
F redemption as urged by Mr. Tarkunde.
In the present case, the section creates a first charge on
the property, thus clearly giving priority to the statutory
charge over all other charges on the property including
G a mortgage. The submission, therefore, that the statutory
first charge created by Section 11-AAAA of the Rajasthan
Sales Tax Act can operate only over the equity of
+
redemption, cannot be accepted. The charge operates on
the entire property of the dealer including the. interest of
H the mortgagee therein.
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 35
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
Looked at a little differently, the statute has created a first A
i
charge on the property of the dealer. What is meant by a
"first charge"? Does it have precedence over an earlier
mortgage? Now, as set out in Dattatreya Shanker Mote
case (1974) 2 sec 799 a charge is a wider term than a
.... mortgage. It would cover within its ambit a mortgage also. B
Therefore, when a first charge is created by operation of
law over any property, that charge will have precedence
---,>'
' i_.
over an existing mortgage."
(emphasis supplied)
c
23. In Dena Bank v. Bhikhabhai Prabhudas Parekh & Co.
(2000) 5 SCC 694, a two-Judge Bench reiterated the principles
enunciated in Builders Supply Corporation v. Union of India
--- -i
(supra) and proceeded to observe that Section 158(1) of the
Karnataka Land Revenue Act not only gives a statutory
recognition to the doctrine of State's priority for recovery of
D
debts, but also extends its applicability over private debts
h
forming the subject matter of mortgage, judgment, decree,
execution or attachment of the like.
24. In State of M.P. v. State Bank of Indore (2002) 10 SCC E
441, this Court considered 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. The facts of that
case were that for securing repayment of the loan obtained from
the State Bank of Indore, the borrower executed a promissory F
note and pledged certain machinery. The bank sued the
borrower for recovery of its dues. During the pendency of the
case instituted by the bank, Section 33-C was inserted In the
(
State Act. Thereafter, the State claimed priority in the matter
of recovery of dues of sales tax vis-a-vis the dues of the bank. G
~ The trial Court and the High Court rejected the plea of the State.
The High Court observed that the bank's charge on the
machinery was prior to the insertion of Section 33-C in the State
Act and the subsequent loans taken in 1979 do not alter the
H
·~
36 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A position in favour of the State. The High Court then proceeded
to hold that the charge created in favour of the Bank remains
valid and operative till repayment of the loan. This Court
reversed the judgments of the trial Court and the High Court
and held:
B
"Section 33-C creates a statutory first charge that prevails
ovet 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 prevail
over the charg~reated in favour of the Bank in respect
c 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."
D
25. Recently, in Central Bank of India v. State of Kera/a ;. . .
2009(4) sec 94, the issue was considered in a slightly
different perspective. The appellant-bank had challenged the
vires of Section 26-B of the Kerala General Sales Tax Act, 1963,
E whereby first charge was created on the property of the dealer
or the person liable to pay tax by contending that the same was
beyond the legislative competence of the State and was also
inconsistent with the provisions contained in the Recovery of
Debts Due to Banks and Financial Institutions Act, 1963 and
F the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002. In the connected
appeals, vires of Section 38C of the Bombay Sales Tax Act,
1959 was challenged on similar grounds. This Court
considered various facets of the challenge and held that the
provisions contained in the Sales Tax Act were not beyond the
G legislative competence of the State. The Court further held that
there is no inconsistency between the provisions of the State
and Central Acts and the non obstante clauses contained in
the Central legislations will not override the provisions of the
State legislations by which first charge was created in favour
H
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 37
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
of the State in the matter of recovery of the dues of sales tax. A
{
_, 26. We shall now notice some decisions in which statutes
giving parity or priority to the workers claim have been
interpreted. In UCO Bank v. Official Liquidator, High Court
Bombay and another (1994) 5 sec 1, this Court considered B
the scope of proviso to Section 529(1) of the Companies Act
as inserted by the Companies (Amendment) Act, 1985. The
Court noted that the object of the amendment was to protect
,I the interest of the workers and to place them at par with
· secured creditors and held: c
"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 D
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 E
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 F
with, and promotes, the avowed object of the amendment
I' 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 objecf of the legislation. G
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
H
38 SUPREME ·.COURT
. :I
REPORTS [2009] 15 (ADDL.) S.C.R.
A intended to protect the interests of the workmen in
proceedings for winding up. ln 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
B 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 orthe capital and must get their
c 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
D
secured creditors of the company. To achieve this
. purpose, it is necessary that the amended provisionmust
apply to all availab!1: securities which form part of the
assets of the company in liquidation on the date of the
amendment. The conclusion reached by the Division
E Bench of the High Court is supported by this reason."
(emphasis supplied)
· 27. In A.P. State Financial Corporation v. Official
F Liquidator (supra), this Court considered the .inter-play of
Section 29(1) of the State. Financial Corporations Act, 1951
and Section 529A of the. Companies Act, 1956, which is pari
materia-to Section 1-1(2) of the Act, 'and held:
"The Act of 1951 is a special Act for grant of financial
G 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
H and Section 529-A being a subsequent enactment, the
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 39
;·•
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI. J.]
non obstante clause in Section 529-A prevails over A
-f Section 29 of the Act of 1951 in view of the settled
position of Jaw. 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 B
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 c
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
D
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 E
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 wor-kmen."
(emphasis supplied) F
28. In Textile Labour Association and another v. Official
Liquidator and another (2004) 9 sec 741, this .court again
interpreted the scope of Sectiorr 529-A of the Companies Act,
-ao. 1956 and held:
G
"The effect of Sections 529 and 529-A is that the workmen
of the company become secured creditors by operation
of law to the extent of the workmen's dues provided there
exists secured creditor by contract If there is no secured
creditor then the workmen of the company become H
40 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R. -,
I
A unsecured preferential creditors under Section 529-A to
the extent of the workmen's dues. The purpose of Section
529-A is to ensure that the workmen should not be
deprived of their legitimate claims in the event of the
liquidation of the company and the assets of the company
B would remain charged for the payment of the workers'
dues and such charge will be pari passu with the charge
of the secured creditors. There is no other statutory
provision overriding the claim of the secured creditors
except Section 529-A. This section overrides preferential
c claims under Section 530 also. Under Section 529-A the
dues of the workers and debts due to the secured creditors
are to be treated pari passu and have, to be treated as
prior to all ot/ler dues."
29. The primacy of first charge created under Section 11 (i)
D of the Act was considered by a Division Bench of the Kera.la
High Court in Recovery Officer and Assistant Provident Fund
Commissioner v. · Kera/a Financial Corporation (2002) 2 KLT
723, in the backdrop of the argument that the provision
contained in ~ection 46-B of the State Financial Corporations
E Act, 1951 which also contairts a non obstante clause, will
override. the provisions of the Act. In that case, the f3ecovery
Officer appointed under the Act made an application for
recovery of the dues of provident fund payable by the employer-
company. He also attached 37 cents of land which the company
F had' mortgaged to the State Financial Corporation. The latter
challenged the action of the Recovery Officer by filing writ
petition under Article 226 of the Constitution. A learned Single
Judge of the High Court allowed the writ petition and declared
that the company's land could not have been attached.' for
G recovery of dues payable under the Act because the s,~me
stood mortgaged in favour of the State Financial Corporation.
The Division Bench reversed the order of the learned Single
Judge and h~ld: ·
"... Sub-section (2) of Section 11 of the EPF and MP Act
H
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 41
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
has two facets. First, it declares that the amount due from A
the employer towards contribution under the EPF and MP
Act shall be deemed to be the 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 s
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 immune from
attachment of civil court's decree, which also indicate such c
intention of Parliament."
The Division Bench of the High Court then considered the
argument that the non obstante clause contained in Section 46-·
B of the State Financial Corporations Act has overriding effect
qua Section 11 (2) of the Act and negatived the same by D
making the following observations:
"The contention of the first respondent based on the
overriding effect of Section 46-B of the SFC Act has no
substance in our judgment. Undoubtedly, the intention of E
Parliament in enacting Section 46-8 in the year 1956 was
to ensure that a State Financial Corporation could quickly
and effectively recover the amounts due by taking
possession of the property of the defaulter instead of
having resort to the cumbersome method of recovery F
through a court of law. While this was the law, Parliament
amended Section 11 of the EPF and MP Act by
specifically enacting sub-section (2) thereof, declaring that
the amount dl,le as contribution to the employees provident
fund has first charge on the assets of the establishment
and that. notwithstanding anything contained in any other G
law for the time b~ng in force, it shall be paid in priority
against all other debts. In fact, the second facet of Section
11 (2) of the EPF and MP Act goes one step further than
what is provided in Section 46-B of the SFC Act. The
H
-
42 SUPREME COURT REPORTS [2009] 15 (ADDL.) $.C.R.
)
-
I
A reason for this is obvious. While the State Financial
Corporation would have to be helped to recover the debts
due to it from a defaulting debtor, the provident fund
payable to workers is of greater moment, since it is a ·
matter of terminal social security benefit made available
B by statute to the working class. Taking into consideration
that the EPF and MP Act is a social benefit legislation, and
the evil consequences of provident fund dues being ..,
defeated by prior claims of secured or unsecured creditors,
the legislature took care to declare that irrespective of when '>
c a debt is created, the dues under the EPF and MP Act
would always remain first charge and shall be paid first out
of the assets of the esta61ishment. We are also not
impressed by the contention of the first respondent that
upon usage of non obstante clause in Section 46-B of the
SFC Act. Sub-section (2) of Section 11 of the EPF Act is
D
of subsequent date. No doubt, both Sectioi:i 46-8 of the
SFC Act and Section 11(2) of the EPF.and MP-Act declare
their intent by usage of the non obstante clause. But, since
E
Section 11 (2) of the EPF and MP Act has been enacted
later, we must ascribe to Parliament the intention to
..
override the earlier legislation also. It is, therefore, clear
that Section 11 (2) of the EPF and MP Act overrides all
provisions of other enactments including Section 46-8 of
the SFC Act."
F 30. In the light of the above analysis of the relevant
provisions of the Act and precedents, we shall now examine the
tenability or otherwise of the argument of the learned senior
counsel appearing on behalf of the appellant-bank that by virtue
of the deeds of pledge executed by the Sugar·Mills, his client
G had become owner of the sugar bags and the same could not ...
have been attached and sold for realization of the amount due
under the Act.
31. A careful reading of the deed of pledge dated 5.3.2001
executed by the management of Kannad Sahakari Sakhar
H Karkhana Ltd. (the terms of three deeds dated 2.1.2003,
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 43
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.}
6.2.2003 and 4.4.2003 executed by the management of the A
f
other Sugar Mill are substantially similar) shows that even
though the sugar bags which were available with the Sugar
• Mills at the relevant time were placed in the custody of the
appellant-bank as security for repayment of loan together with
interest, the former continued to be owner thereof. To put it B
differently, title of the property remained with the Sugar Mills and
only limited interest therein was passed on to the appellant-bank
as security for repayment of the loan etc. If the management of
'f
the Sugar Mills were to repay the ·dues of the appellant-bank
within the time specified in the deeds of pledge, the latter was c
duty bound to lift its notional control over the sugar bags lying
in the godowns of the Sugar Mills. In case of default, the
appellant-bank could recover its dues by selling the sugar bags.
If the price of the sugar bags was less than the amount due,
the appellant-bank could resort to other appropriate adjudicatory
D
mechanism for recovery of the balance amount. If the sugar
"" bags had become property of the· appellant-bank simply
because the same were pledged by the management of the
Sugar Mills for securing repayment of the loan etc., there was
no occasion for the latter to take the responsibility of hiring
godowns on behalf of the appellant-bank, pay rent thereof and E
get the goods insured. Equally, there was no reason for the
management of the Sugar Mills to take the responsibility of
-\<
changing or repairing the godowns and bear its cost or confer
immunity upon the bank in the matter of weight, quality,
conditions or safety of the goods and take upon itself the F
responsibility for any shortage, damage or shrinkage and
insure the goods against any damage or loss or riots or civil
commotion. In our considered view, the very fact that except
giving the symbolic custody of the sugar bags to the appellant-
bank by allowing it to put lock and key on the godowns, all steps G
~ for preserving the goods and getting the same insured were
taken by the management of the Sugar Mills which also agreed
to take the responsibility of any shortage, damage or shrinkage
unmistakably shows that the Sugar Mills continued to be owner
of the sugar bags. H
f
I
. ""-
44 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A 32. As per Black's Law Dictionary (Eighth edition},
"pledge" is a formal promise or undertaking; the act of providing
something as security for a debt or obligation; a bailment or
other deposit of personal property to a creditor as security for
debt or obligation. In the "Law of Personal Property" by Ray
s Andrews Brown (Second edition 1936), the term "pledge" has
been described in the following words:
"A pledge is a bailment bf personal property to secure an
obligation of the bailer. If the purpose of the transaction is
to transfer property for security only, then the Courts will
c hold the transaction a pfedge, even though in form it may
be a sale or other out-and-out transfer."
In Mulla's Tr-eaties on the Transfer of Property, the following
description has been given to the term "pledge":
D
"A pledge is a bailment of movable property by way of
security. Possession is given and the transaction involves
a transfer of special property in the subject of the security .. ';-
A Pawnee has no right of foreclosure since he never had
absolute ownership at Jaw and his equitable title cannot
E
exceed what is specifically granted by law. In a pledge the
pledge is in possession of and has a special property in
the goods which he is entitled to detain to secure
repayment." :
F (underlining is ours)
33. Under the common' law a pawn or a pledge is a
bailment of personal property as a security for some debt or
engagement. A pawner is one who being liable to an
G engagement gives fo the person to whom he is liable a thing·
to be held as security for payment of 1his debt or the fulfilment f..
of his liability. The two ingredients of a pawn. or a pledge are:
( 1) that it is essential to the contract of pawn that the property
pledged should be actually or constructively delivered to the
H pawnee and (2) a pawnee has only a special property in the
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 45
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
ipledge but the general property therein remains in the pawner A
and wholly reverts to him on discharge of the debt. A pawn
therefore is a security, where, by contract a deposit of goods
is made as security for a debt. The right to property vests in
the pledgee only so far as is necessary to secure the debt. In
this sense a pawn or pledge is an intermediate between a 8
simple lien and a mortgage which wholly passes the property
..... in the thing conveyed .
....
34. In Lal/an Prasad v. Rahmat Ali (1967) 2 SCR 233,
this Court referred to the above noted common law principles C
and observed:
" ........ A contract to pawn a chattel even though money is
... advanced on the faith of it is not sufficient in itself to pass
special property in the chattel to the pawnee. Delivery of
the chattel pawned is a necessary element\ in the making D
of a pawn. But delivery and advance need not be
simultaneous and a pledge may be perfected by delivery
after the advance is made. Satisfaction of the debt or
engagement extinguishes the pawn and the pawnee on
such satisfaction is bound to redeliver the property. The E
pawner has an absolute right to redeem the property
~ pledged upon tender of the amount advanced but that
· right would be lost if the pawnee has in the meantime
lawfully sold the property pledged. A contract of pawn thus
carries with it an implication that the security is available F
to satisfy the debt and under this implication the pawnee
has the power of sale on default in payment where time is
fixed for payment and where there is no such stipulated
time on demand for payment and on notice of his intention
to sell after default. The pawner however has a right to G
-+: redeem the property pledged until the sale. If the pawnee
sells, he must appropriate the proceeds of the .sale
towards the pawner's debt, for, the ~ale proceeds are the
pawner's monies to be so applied and the pawnee must
pay to the pawner any surplus after sat/stying the debt.
H
I
46 SUPREME COURT REPORTS (2009] 15 (ADDL.) S.C.R.
A The pawnee's right of sale is derived from an implied )
authority from the pawner and such a sale is for the benefit ·
of both the parties. He has a right of action for his debt
notwithstanding possession by him of the goods pledged.
But if the pawner tenders payment of the debt the pawnee
B has to return the property pledged. If by his default the
pawnee is unable to return the security against payment
of the debt, the pawner has a good defence to the action. . ,-
\
This being the position under the common law, it was f- >
I
observed in Trustees of the Property of Ellis & Co. v.
c Dixon-Johnson that if a creditor holding security sues for
the debt, he is under an obligation on payment of the debt
to hand over the security, and that if, having improperly
made away with the security he is unable to retym it to the
debtor he cannot have judgment for the debt."
D (underlining is ours) ,.._
The Court further observed that there is no difference between
Common Law of England and the law with regard to the pledge,
as codified in Sections 172 to 176 of the Contract Act and held:
E
"Under Section 172'0 pledge is a bailment of the goods
as security for payment of a debt or performance of a
promise. Section 173 entitles a pawnee to retain the good~
pledged as security for payment of a debt and under
Section 175 he is entitled to receive from the pawner any
F extraordinary expenses he incurs for the preservation of
the goods pledged with him. Section 176 deals vvith the
rights of a pawnee and provides that in case of :.iefault by
the pawner the pawnee has ( 1) the right to sue upon the
debt and to retain the goods as collateral security and (2)
G to sell the goods after reasonable notice of the intended~
sale to the pawner. Once the pawnee by virtue of his right
under Section 176 sells the goods the right of the pawner
to redeem them is of course extinguished. But as
aforesaid the pawnee is bound to apply the sale proceeds
H · towards satisfaction of the debt and pay the surplus, if any,
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 47
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
- -( to the pawner. So long, however, as the sale does nm take
place the pawner is entitled to redeem the goods on
payment of the debt. It follows therefore that where a
A
pawnee files a suit for recovery of debt, though he is
entitled to retain the goods he is bound to return them on
payment of the debt. The right to sue on the debt assumes B
that he is in a position to redeliver the goods on payment
_.,. /
of the debt and therefore if he has put himself in a position
~ where he is not able to redeliver the goods he cannot obtain
a decree. If it were otherwise, the result would be that he
would recover the debt and also retain the goods pledged c
and the pawner in such a case would be placed in a
... position where he incurs a greater liability than he
bargained for under the contract of pledge. The pawnee
.. therefore can sue on the debt retaining the pledged goods
-4 as collateral security. If the debt is ordered to be paid he
D
has to return the goods or if the goods are sold with or
without the assistance of the court appropriate the sale
proceeds towards the debt. But if he sues on the debt
denying the pledge, and it is found that he was given
possession of the goods pledged and had retained the
same, the pawner has the right to redeem the goods so E
pledged by payment of the debt. If the pawnee is not in a
~e position to redeliver the goods he cannot have both the
payment of the debt and also the goods. Where the value
)
of the pledged property is less than the debt and in a suit
for recovery of debt by the plec_:lgee, the pledgee denies F
the pledge or is otherwise not in a position to return the
( pledged goods he has to give credit for the value of the
(
goods and would be entitled then to recover only the
balance ....... "
G
-f 35. In Bank of Bihar v. State of Bihar (1972) 3 SCC 196,
this Court considered the question whether the Cane
Commissioner, who was an unsecured creditor of the Sugar
Mill named Jagdishpur Zamindari Company Limited and did
not have any right of priority over other creditors and in particular H
48 SUPREME COURT REPORTS [2009] 15 (ADDL.) $.C.R.
A the secured creditors of the company, could seize and sell the
sugar which was already pledged with the appellant-bank as t
I
security for the advances made by it to the company. The
appellant-bank sued the State of Bihar and others including the
Cane Commissioner and the company for return of 1818 bags
B of 270 quality of sugar and, in the alternative, for recovery of
Rs.1,81,700.93 with interest by way of damages or illegal
removal and detention of sugar or price thereof. The trial Court
decreed the suit. It held that even though the order of seizure
of the stock of sugar was valid, the plaintiffs right as pledgee
}- -----
c could not be extinguished by such seizure. The High Court
allowed the appeal filed by the State of Bihar and others and
held that the plaintiff-bank had not been wrongfully deprived of
the sugar. In para 4 of the judgment, this Court noted that the
Cane Commissioner did not have any right of priority over the
other creditors of the company and, in particular, the secured
D
creditors and reversed the judgment of the High Court by ).-.
recording the following observations.
"The pawnee has special property and a lien which is not
of ordinary nature on the goods and so long as his claim
E is not satisfied no other creditor of the pawner has any
right to take away the goods or its price. After the goods
had been seized by the Government it was bound to pay
the amount due to the plaintiff and the balance could have
been made available to satisfy the claim of other creditors
F of the pawner. But by a mere act of lawful seizure the
Government could not deprive the plaintiff of the amount
which was secured by the pledge of the goods to it. As
the act of the Government resulted in deprivatior of the
amount to which the plaintiff was e~titled it wo.-s bound to
G reimburse the plaintiff for such amour .t which the plaintiff
in ordinary course would have realized by sale of the goods
pledged with it on the pawner making a default in payment f·
of debt.
The approach of the trial court Nas unexceptionable. The
H
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 49
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
~
plaintiff's right as a pawnee could not be extinguished by A
the seizure of the goods in its possession inasmuch as the
pledge of the goods was not meant to replace the liability
under the cash credit agreement. It was intended to give
the plaintiff a primary right to s~ll the goods in satisfaction
of the liability of the pawnor. The Cane Commissioner who B
was an unsecured creditor could not have any higher rights
than the pawnor and was entitled only to the surplus money
~
1 after satisfaction of the plaintiff's dues."
36. The ratio of the above noted two judgments is that in
a contract of pawn the property pledged should be actually or
c
constructively delivered to the pawnee and pawnee has only a
special property in the pledge but the general property remains
with the pawner and wholly reverts to him on discharge of debt.
~
The right to property vests in the pledgee only so far as
necessary to secure his debt. We, therefore, hold that the deeds D
_,,.
of pledge executed by the management of the Sugar Mills as
security for repayment of loan etc. did not have the effect of
transferring of the ownership of the sugar bags to the appellant-
bank and the Recovery Officer did not commit any illegality by
attaching the same and the High Court was fully justified in E
directing payment of a portion of the sale price to the Assistant
... Commissioner for being appropriated towards the provident
fund dues of the workers.
~
37. Before leaving this issue, we may refer to the judgments F
\. on which reliance has been placed by the learned senior
counsel appearing for the appellant-bank. The question which
fell for consideration in Kamataka Pawnbrokers' Association
v. State of Kamataka (supra), was whether pawnbroker is a
dealer and carries on business within the meaning of Tamil
G
Nadu General Sales Tax Act, 1959 read with the Tamil Nadu
+ Pawnbrokers Act, 1943 and Rules as also the Karnataka Sales
Tax Act, .1957 read with Karnataka Pawnbrokers Act, 1961 and
Rules, when it caused sale of unredeemed goods occasioned
by the default of the pawnor. The Court referred to the decisions
H
50 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A of the Division Benches of Karnataka and Madras High Courts
and held: "' -,.
"It cannot be and it is not disputed that the pawnbroker has
special property rights in the goods pledged, a right higher
than a mere right of detention of goods but a right lesser
B
than general property right in the goods. To put it differently,
the pawner at the time of the pledge not only transfers to
the pawnee, the special right in the pledge but also passes
on his right to transfer the general property right in the
pledge in the event of the pledge remaining unredeemed
c resulting in the sale of the pledge by public auction
through an approved auctioneer. The position being what
is stated above, the natural consequence will be that it is
the pawnee who holds not only the absolute special
property right in the pledge but also the conditional
D general property interest in the pledge, the condition being
that he can pass on that general property only in the event
of the pledge being brought to sale by public auction in
accordance with the Act and the Rules framed thereunder."
E (underlining is ours)
38. In Central Bank of India v. Siriguppa Sugars &
Chemicals Ltd. (supra), an interim order passed by the Division
Bench of Karnataka High Court, directing disbursement of
certain amount realized from sale of stocks of sugar owned by
F respondent no.1 - company, which was held under pledge by
the appellant-bank, came up for consideration before this
Court. The Labour Commissioner had passed an order under
Section 33-C of the Industrial Disputes Act in respect of the
dues of the workmen. The same was challenged by respondent
G no.1, by filing a writ petition. The Cane Commissioner also
passed orders for recovery of the amount due from respondent
no.1 - company for being paid to the sugarcane growers for +-
the cane supplied by them. During the pendency of the writ
petition, the concerned authority took possession of the stock
H of sugar which was pledged with the appellant-bank. The
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 51
PROVIDENT FUND COMMNR. AND ORS. [G.S: SINGHVI, J.]
appellant-bank got itself impleaded as party to the writ petition. A
~ As the stock of sugar was likely to lose its value by being stored
-.t,,.
indefinitely, the High Court directed sale thereof. The writ
'· petition was finally dismissed by the learned Single Judge.
During the pendency of the appeal, the Division Bench made
an interim order directing disbursement of a portion of the sale B
. proceeds to the Labour Commissioner and Cane
Commissioner for being paid to the employees of the .company
........
' and sugarcane cultivators. The bank challenged the interim
{ order by contending that as the sugar was pledged with it, the
High Court could not have ordered disbursement of a portion c
of the price. After making reference to various judgments
including Bank of Bihar v. State of Bihar (supra) and
Kamataka Pawnbrokers' Association v. State of Karnataka
(supra), this Court held:
"Thus, going by the principles governing the matter D
propounded by this Court, there cannot be any doubt that
the rights of the appellant Bank over the pawned sugar had
p precedence over the claims of the Cane Commissioner
~ and that of the workmen. The High Court was, therefore,
s in error in passing an interim order to pay parts of the E
~ proceeds to the Cane Commissioner and to the Labour
Commissioner for disbursal to the cane growers and to the
employees. There is no dispute that the sugar was
pledged with the appellant Bank for securing a loan of the
first respondent and the loan had not been repaid. The F
goods were forcibly taken possession of at the instance
of the revenue recovery authority from the custody of the
pawnee, the appellant Bank. In view of the fact that the
goods were validly pawned to the appellant Bank, the
rights of the appellant Bank as pawnee cannot be affected G
by the orders of the Cane Commissioner or the demands
made by him or the demands made on behalf of the
workmen. Both the Cane Commissioner and the workmen
in the absence of a liquidation, stand only as unsecured
creditors and their rights cannot prevail over the rights of H
52 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A the pawnee of the goods."
(underlining is ours) '
39. The above referred judgments do not have any bearing
on these appeals because in both the cases, the Court dealt
8 with the right of unsecured creditors vis-a-vis secured creditors
i.e., the bank in whose favour the goods had been pledged/
mortgaged. Moreover, in neither of the cases, a provision
analogous to Section 11 of the Act was considered by the
. Court.
·-
'
c
40. The next point which requires consideration is whether
the sugar bags pledged with the appellant-bank constitute
assets of the establishment within the meaning of Section 11 (2)
of the Act.
D 41. As per Black's Law Dictionar:y (Eighth edition), the
word 'asset' means, an item that is owned and has value; the >--
entries on a balance sheet showing the items of property
owned, including cash, inventory, eqµipment, real estate, ·
accounts receivable and goodwill; all the property of a person
E available for paying debts or for distribution. In Law Lexicon by
P. Ramanatha Aiyar (Second edition), the word 'assets' has
been described as the property in the hands of an heir, an
executor, administrator or trustee which is legally or equitably .;-
. chargeable with the obligations with such heir, executor,
F e1dministrator or trustee is, as such, required to discharge.
Everything which can be made available for the payment of
. debts, whether belonging to the estate of a deceased person
or not; property in general all that one owns, considered as
applicable to the payment of his debts; as, his assets are much
G - greater than his_ liabilities. In Velchand Chhaganlal v. Mµssan
14 Born.LR. 633, it was held thattheword 'assets' means, a
man's property of whatever kind which may be used to satisfy +
debts or demands existing against him.
-· -
42. As per Salmond's Jurisprudence, the word "property"
H
..Jf
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 53
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
means - in its widest sense, property includes a person's legal A
1 rights, of whatever description. A man's property is all that is
his in law. This usage however, is obsolete at the present day,
/
.. though it is common enough in the older books. In a second
and narrower sense, property includes not all a person's rights,
but only his proprietary as opposed to his personal rights. The B
former constitutes his estate or property, while the latter
constitute his status or personal condition. In this sense a man's
land, chattel. shares and the debts due to him are his property;
but not his life or liberty or reputation .... In a third application,
which is that adopted (here) the terms includes not even all c
proprietary rights but only those which are both proprietary and
in rem. The law of property is the right of proprietary rights in
rem, the law-of proprietary rights in personam being
~
distinguished from it as the law of obligations. According to this
usage a freehold or leasehold estate in land, or.a patent or D
-'. copyright, is p_roperty; but a debt or the benefit or a contract is
not. Finally, in the narrowest use of the term, it includes nothing
more than corporeal property - that is to say, the right of
' ownership in a material object, or that object itself.
43. In the light of the above dictionary Find legal meanings E
.of the word 'assets' and jurisprudential concept of the word
'property', it has to be seen whether the $Ugar.bags pledged
with the appellant-bank constituted assets of the establishment
for the purpose of Section 11 (2) of the Act. We have already
held that even though symbolic custody of the sugar bags was F
given to the appellant-bank as security for repayment of loan ·
etc., the Sugar Mills continued to be owner thereof. In other
words, the sugar bags pledged with ~he appellant-bank
continued to be movable property Le. assets of the
establishment, which could be attached 1and sold by the G
Recovery Officer in terms of Section 88 or by adopting
alternative modes of recovery enumerated in Section 8F. .
44. At the cost of repetition, it is apposite to mention that
Section 11 is declaratory in nature. Sub-section· (2) thereof
H
I
54 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A declares that any amount due from an employer shall be
deemed to be firs~ charge on the assets of the establishment l
and shall be paid in priority to all other debts. For recovery of
the amount due from an employer which is treated as arrear of ~--
land revenue, the Recovery Officer or any other authorized
B officer has to take recourse to the provisions contained in
Section 8 read with Sections 88 and SF. The recovery can be
effected by attachment or sale of the movable or immovable
property of the establishment or, as the case may be, the
employer, or by arrest of the employer and his detention in
c prison or by appointing a receiver for the management of the
movable or immovable properties of the establishment or, as
the case may be, the employer or by taking action in the
manner laid down in the Third Schedule to the Income-tax Act,
1961.
...
D 45. The judgment in Transcore v. Union of India (supra)
on which reliance has been placed by Shri Desai, does not >-·
have any bearing on any of the facets of the question raised in
these appeals. In pc_1ragraph 62 of that judgment, the Court
merely referred to Snell's Principles of Equity. In paragraph 73,
E the Court explained t~e distinction between symbolic and
physical posses~ion and observed that the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 basically deals with the securities by which ~
the creditor obt_ains ownership of or interest in the property
F concerned i.e., mortgages and the securities under which the
secured creditor, namely, the Bank/Financial Institution obtains
interest in the.property concerned.
46. We shall now deal with the last argument of the learned
senior counsel for the appellant:-bank that the interest payable
G
in terms of Section 7Q and damages imposed under Section
148 of the Act cannot be treated as first charge on the assets
o..f the establishment payable in priority to all other debts within
the meaning of Section 1_ 1(2).
H
.}'
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 55
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
47. Section 11 gives statutory priority to the amount due A
~
4--'
~
' from the employer vis-a-vis all other debts. Clause (a) of sub-
section (1) of Section 11 is applicable to cases where an
employer is adjudicated insolvent or, being a company, an order
of its winding up is made. In that situation, the amount due from
the employer in relation to an establishment to which any B
', 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 148,
--{ accumulations required to be transferred under Section 15(2)
or any other charges payable by him under any other provision c
of this Act or of any provision of the Scheme or the Insurance
Scheme. Clause (b) is applicable to cases where the amount
is due from the employer in relation to exempted establishment
....... in respect of any contribution to the provident fund or any
insurance fund in so far it relates to exempted employees under
D
---( the rules of provident fund or any insurance fund, any
contribution payable by him towards the Pension Fund under
Section 17(6), damages recoverable under Section 148 or any
charges payable by him to the appropriate Government under
the Act or under any of the conditions specified in Section 17.
This sub-section then lays down that such amount shall be paid
E
in priority to all other debts in the distribution of the property of
the insolvent or the assets of the company being wound up. Sub-
~ section (2) lays down that any amount dye from the employer
whether in respect of the employees' contribution deducted from
the wages of the employee or the employer's contribution shall F
be deemed to be the first charge on the assets of the
establishment, and shall be paid in priority to all other debts.
The expression "any amount due from an employer" appearing
! in sub-section (2) of Section 11 has to be interpreted keeping
in view the object of the Act and other provisions contained G
therein including sub-section (1) of Section 11 and Sections 7A,
~
7Q, 148 and 15(2) which provide for determination of the dues
payable by the employer, liability of the employer to pay interest
in case the payment of the amount due is delayed and also pay
damages, if there is default in making contribution to the Fund. H
56 SUPREME COt..;RT REPORTS [2009] 15 (ADDL.} S.C.R
A If any amount payable by the employer becomes due and the
same is not paid within the stipulated time, then the employer
is required to pay interest in terms of the mandate of Section
70. Likewise, default on the employer's part to pay any
contribution to the Fund can visit him with the consequence of
B levy of damages. As mentioned earlier, sub-section (2) was
inserted in Section 11 by Amendment Act No.40 of 1973 with
a view to ensure that payment of provident fund dues of the
workers are not defeated by the prior claims of the secured
and/or of the· unsecured creditOrs. While enacting sub-section
c (2), the legislature was conscious of the fact that in terms of
existing Section ·11 priority has been given to the amount due
from an employer in relation to an establishment to which any
scheme or fund is applicable including damages recoverable
under Section 148 and accumulations required to be
O transferred under Section 15(2). The legislature was also '>--
aware that in case of delay the employer is statutorily
responsible to pay interest in terms of Section 17. Therefore,
there is no plausible realion to give a. restricted meaning to the
expression 'any amount due from the employer' and confine it
to the amount determined under Section 7A or the contribution
E payable. under Section 8. If interest payable by the employer
under Section 70 and damages leviable under Section 14 are
excluded from the ambit of expression "any amount due from
an employer'', every employer will conveniently refrain frqm
paying c()ntribution to the Funcj and other dues and resist the
F efforts of the .concerned authormes_ to recover. the .dues as
arrears of land. revenue by conte_nding that the movable. or
immovable .
property
. . .
of "the . establishment
. . . .
is. subject to other
I
- debts. Any such interpretatiory. would frustrate the object of
introducing the deeming provision and non obstante clause in
G Section 1.1(2). T~erefore, it i~ not possible to agree with .the.
learned senior counsel f()r th'e appellant-bank that the amount
of interest payable tmqer Sectio·n '.?a .and damages leviable
under Section 148 do not form part of.the amount due from an
employer for the purpose. of Section 11 (~) of the Act.
H
MAHARASHTRA STATE CO-OP. BANK LTD. v. ASSTT. 57
PROVIDENT FUND COMMNR. AND ORS. [G.S. SINGHVI, J.]
48. In the result, the appea.ls are dismissed. A
I
49. Although, while issuing notice in the special leave
petitions and passing order of status quo, the Court had made
it clear that in the event of dismissal of the special leave
petitions, the amount shall be paid by the petitioner (appellant 8
herein) with interest at the rate which may be fixed by the Court,
we do not consider it just and proper to saddle the appellant-
bank with the liability of interest because price of the sugar sold
pursuant to the High Court's order remained deposited with its
Registrar General and the appellant-bank did not have the C
benefit of utilizing the same.
D.G. Appeals dismissed.
':°'I
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