Judgment:
ORDER
R. Gururajan, J.
1. Petitioner Union Bank of India is challenging an order dated June 19, 2002 passed by the Assistant Provident Fund Commissioner and Recovery Officer in terms of Annexure F, insofar as it relates to the attachment and sale of immovable property described in the said order which is mortgaged in favour of the petitioner.
2. Facts in brief are as under:
Petitioner Bank has a branch at Bangalore, 2nd respondent Devatha Saree Mandir is one of the constituents of the petitioner. In respect of the liabilities due by the said proprietary concern represented by its proprietor Sri. D.R. Ajit Kumar, the petitioner filed O.A. No. 193/2002 before the Debts Recovery Tribunal, Bangalore, on April 12, 2002 for recovery of Rs. 67,87,619.00. 3rd respondent is one of the guarantors and also the mortgagor of the immovable property being site No. 44, BSK II stage, Bangalore. The said property was mortgaged by way of equitable mortgage by depositing the documents of title in favour of the petitioner as per the memorandum dated November 18, 1999. Petitioner obtained an interim direction in O.A. No. 193/2002 and Court ordered to maintain status quo in respect of the schedule immovable properties and that they shall not dispose of or alienate the same until further orders without the prior permission of the DRT and also not to make any material changes in the condition of the properties. The said order is still continued and it is filed at Annexure-B. Petitioner received a notice dated April 29, 2002 by the 1st respondent informing the Bank about the schedule immovable mortgage in its favour by Anjali Silks & Garments. Petitioner Bank was asked to appear before him on May 10, 2002. Petitioner bank in response to the above notice produced the document pertaining to the creation of equitable mortgage in favour of the petitioner and sought for lifting the attachment order in the matter. Petitioner also appeared personally before the 1st respondent, submitted certain documents and several contentions have been raised. Respondent according to the petitioner instead of releasing the above property by lifting the attachment, if any, served the proceedings before the Recovery Officer in terms of Annexure-F. 1st respondent in his order has rejected the claim of the petitioner of its first charge as a mortgagee and further granted permission to Sri. D.S. Radhakrishna for a private sale of the attached property for the market price. Petitioner further states that according to the 1st respondent the 4th respondent Anjali Silks and Garments is a defaulting establishment. Sri D.S. Radhakrishna is its partner. Said firm is due to the 1st respondent towards P.F. dues of Rs. 36,92,498.00 for the period from July 1996 to November 2001. Respondent No. 1 ruled that 4th respondent the defaulting establishment failed to pay the P.F. dues and as such coercive steps were initiated by the 1st respondent by issue of CP-25 and in that notice, Sri D.S. Radhakrishna, offered industrial site for attachment and sale in order to arrange the said dues. 1st respondent therefore, issued an order attaching the property in EPF CP-17 (notice for settling a sale proclamation) dated March 1, 2002. It is further stated that there appears to be a conspiracy among respondents 2, 3 and 4 to defraud the petitioner Bank by voluntarily and illegally offering the mortgaged schedule property to the 1st respondent for attachment, Petitioner questions the said order passed by the P.F. Commissioner by raising several grounds.
3. Notice was issued and respondents entered appearance. 1st respondent would say in paras 2 and 3 as under :
2. Anjali Silks and Garments, 4th respondent herein is an establishment covered under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act. The establishment is a chronic defaulter and failed to pay the provident fund dues. Two recovery certificates were issued under Section 8-C of the Act for recovery of Rs. 36,92,498/- for default committed for the period from July 1996 to November 2001. When steps were taken to recover the provident fund dues Sri D.S. Radhakrishna partner of the 4th respondent establishment offered an Industrial site for attachment and sale for realising the provident fund dues. The property was attached by issuing CP 16 on March 1, 2002 and the notice for settling the sale proclamation was also issued on the very same day calling upon the defaulter establishment to bring to the notice any encumbrance, charges etc. on the property. The defaulter informed this respondent that the original title deeds are in the custody of the petitioner-Bank. To properly adjudicate the matter, a notice was issued to the petitioner-Bank to appear before the 1st respondent-Recovery Officer.
3. The attached property initially belonged to a partnership firm by name Ajit Creations, 3rd respondent herein of which Sri D.S. Radhakrishna and Sri D.R. Ajith Kumar were partners. It is the case of the petitioner Bank that Sri D.R. Ajith Kumar had availed a loan of Rs. 67,87,169/-against his proprietorship firm i.e., Devatha Saree Mandir, the 2nd respondent herein and the property in question was mortgaged in favour of the petitioner Bank. The petitioner-bank also submitted that as Sri D.R. Ajit Kumar failed to repay the loan, they have filed recovery application before the Debts Recovery Tribunal vide O. A. No. 193/2002. The partnership firm Ajit Creations, 3rd respondent was subsequently dissolved and attached which came to the share of D.S. Radhakrishna who in turn contributed the same to the defaulting establishment i.e., 4th respondent herein Anjali Silks and Garments. A copy of the Deed of Dissolution dated February 10, 2002 of the 3rd respondent Ajit Creations is produced herewith as Annexure 'R1'. In view of this the attached property became the property of the defaulting establishment and as such the 1st respondent-Recovery Officer has passed an order on June 19, 2002 rejecting the objection of the petitioner-bank. Aggrieved by the same, this Writ Petition is filed. The Writ Petition is devoid of merits and the same is liable to be dismissed.'
1st respondent further says that a reasonable opportunity was given in the matter. Thereafter, they submitted certain documents and after considering the same, the order has been passed. They refer to various orders of this Court. In this regard they want the petition to be dismissed. Enquiry statement also has been filed, parties have been heard for final disposal.
4. Sri Ramanand learned Counsel would argue that the 1st respondent has no right to decide about the title involved in the case on hand. He refers to the material on record to say that the schedule property was mortgaged to the Bank and the Bank has a charge over it. In fact, they had obtained an Interim order in the matter. Learned Counsel therefore, says that the authority could not have issued an order in the circumstances.
5. Per contra, counsel for the Department would argue that there is no dispute at all with regard to title and that therefore, matter can be adjudicated by the Provident Fund Commissioner. Even otherwise, he says that case-laws support the action of the respondents. He wants the petition to be dismissed.
6. After hearing, I have carefully perused the material on record.
7. Admitted facts would reveal of an application having been filed by the Bank before the Debts Recovery Tribunal, Bangalore, in O.A. 193/2002. Admitted facts also would reveal that an interim direction was issued with regard to maintenance of status quo and with regard to no disposal or no alienation of the property in terms of the order. It is also seen from the material on record that Anjali Silks and Garments was a defaulter and proceedings were initiated by the Department in the matter of recovery of P.F. dues. On coming to know of a mortgage of the Bank, the Recovery Officer has chosen to issue a notice and pursuant to the notice, the Bank has submitted its reply. In the reply the authority after hearing has chosen to say that in terms of Section 11(2) the contention of the bank having a first charge has no basis. Even otherwise, he relied on the Court decisions to hold against the Bank.
8. Let me see as to whether the order at Annexure-F requires my interference or not. The relevant Section as applicable to the facts of the case is Section 11(2) of the Employees' Provident Funds Act. The said Section reads as under:
'Without prejudice to the provisions of Sub-section (1), if any amount is due from an employer (whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution), the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts.'
From a reading of this Section what is clear to this Court is that the P.F. dues is deemed to be the first charge on the assets of the establishment and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts. This very submission was considered by various Courts.
9. This Court in W.P. 20855 of 2002 State Bank of India Asst. Provident Fund Commissioner & Recovery Officer has ruled that an aggrieved person is entitled to adjudicate in the matter of establishment of rights which he claims before the Civil Court by filing a suit in that regard as provided under Rule 11(6) in Schedule II to the Income-tax Act. This judgment was challenged in writ appeal in W.A. 5513 of 2003. The Division Bench confirmed the said judgment and the Division Bench has ruled in unmistakable terms in para 10 reading as under:
'Learned Counsel for the appellant relied on the decision of the Supreme Court in Allahabad Bank v. Canara Bank : [2000]2SCR1102 wherein it was held that jurisdiction of Debts Recovery Tribunals under Section 17 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ('Debts Recovery Act' for short) to decide the liability of the defendants in applications for recovery of debts due to Banks and Financial Institutions, is exclusive and there can be no interference by the Company Court under Section 442 read with Section 537 or Section 446 of the Companies Act, 1956. The said decision is of no assistance to the appellant. There is nothing in the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 which is inconsistent with the provisions of the Debts Recovery Act, 1993, Any action taken under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 to recover the P.F. dues which constitutes a first charge on the assets of the employer does not come in the way of the appellant Bank pursuing its remedies under the Debts Recovery Act, 1993. There is nothing in Debts Recovery Act which overrides the provisions of the Provident Funds Act. We fail to see why the process of recovery as per law (P.F. Act) should be suspended merely because the property to be sold is also mortgaged to a Bank and is the subject matter of a proceedings under the Debts Recovery Act. Neither Section 17 nor Section 18 of Debts Recovery Act is a bar to the sale proceeding under the P.F. Act. If according to the appellant Bank the powers of Civil Court, are now vested in a Debts Recovery Tribunal, insofar as claims of Banks are concerned, it is open to the Bank to approach the Tribunal for appropriate interim relief, if permissible in law.'
The Division Bench has ruled that there is nothing in Debts Recovery Act which overrides the provisions of the P.F. Act. The Court has also ruled that they failed to see why the process of recovery as per law (P.F. Act) should be suspended merely because the property to be sold is also mortgaged to a Bank and is the subject matter of a proceeding under the Debts Recovery Act. The Court notices Sections 17 and 18 of the Act and after noticing Court ruled that neither Section 17 nor 18 is a bar to the sale proceedings under the P.F. Act. The said judgment is squarely applicable to the facts of this case. However, the petitioner relies on Tax Recovery Officer II, Sadar, Nagpur v. Gangadhar Vishwanath Ranade : [1998]234ITR188(SC) . A reading of the said judgment would show that the said judgment is clearly distinguishable on facts. That was a case in which the Court was considering defrauding in the matter. Allahabad Bank v. Canara Bank : [2000]2SCR1102 is also not applicable and the Court was considering Companies Act vis-a-vis the Tribunal's order. In fact, in that very judgment, the Supreme Court has ruled as under:
'The next question is whether the amounts realised under the RBD Act at the instance of the appellant can be straightway released in its favour. Now, even if Section 19(19) read with Section 529-A of the Companies Act does not help the respondent- Canara Bank, the said provisions can still have an impact on the appellant-Allahabad Bank which has no doubt a decree in its favour passed by the Tribunal. Its dues are unsecured. The workmen's 'dues' have priority over all other creditors secured and unsecured because of Section 529-A(i)(a). There is no material before us to hold that workmen's dues of the defendant company have all been paid. In view of the general principles laid down in National Textile Workers' Union v. P.R. Ramakrishnan : (1983)ILLJ45SC there is an obligation resting on this Court to see that no secured or unsecured creditors including Banks or financial institutions are paid before the workmen's dues are paid. We are, therefore, unable to release any amounts in favour of the appellant Bank straightway.'
From all these Judgments what is clear to me is that Section 11 would come in the way of the petitioner. In fact in this case, there is also no dispute with regard to title. In fact, the other respondents have never disputed the title in the case on hand. Under these circumstances, I do not find any acceptable grounds to accept this petition.
10. No grounds. Petition stands dismissed.