L. Mohapatra, J.
1. This Writ Application has been filed for a direction to the opposite parties 1 to 3 to allot a fresh provident fund code number and permit the petitioner to deposit provident fund dues of its employees and also direct the opposite parties 1 to 3 to exempt the petitioner from payment of penalty amount found due against Jagannath Biscuits Industries (P) Limited which was in management of the industrial unit prior to the petitioner.
2. Case of the petitioner is that the opposite party No. 4 had sanctioned and disbursed a loan of Rs. 1,04,63,876/- in favour of one M/s. Jagannath Biscuits Industries (P) Ltd. in the district of Balasore for establishment of an industrial unit. The said company having failed to pay the dues of the Orissa State Financial Corporation, possession of the same was taken over by the Corporation under Section 29 of the State Financial Corporations Act. Thereafter the industrial unit was put to public auction on 22.12.1998 and the petitioner being the highest bidder purchased the same. After purchasing the unit the petitioner changed name of the company to M/s. M. J. Food Industries (P) Limited. The petitioner purchased the assets of the industrial unit at rupees seventy five lakhs from the Orissa State Financial Corporation. In the said industrial unit the petitioner having intention to employ more than 20 employees applied to the opposite parties 1 to 3 in Form No. 5-A under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act') for allotment of a Code number. After receipt of the application the opposite party No. 3 visited the premises on 11.11.1999 and found that there were 27 number of employees and requested the petitioner to deposit provident fund contributions immediately. The petitioner was also directed to produce other relevant documents relating to the name of the employees, salary paid to them every month, etc. When the industrial unit was functioning in the name of M/s. Jagannath Biscuits (P) Limited, provident fund code, i.e., OR/4687 had been assigned to it by the opposite parties 1 to 3. The petitioner, therefore, prayed for allotment of a fresh code number so that the contribution in respect of the employees could be deposited. However, instead of allotting a new code number the outstanding dues of M/s. Jagannath Biscuits (P) Ltd. were directed to be paid by the petitioner and all representations of the petitioner in this connection having not been attended to the present Writ Application has been filed for exempting the petitioner from payment of outstanding dues against the previous owner and for allotment of a new code number.
3. Counter affidavit has been filed by the opposite parties 1 to 3. It is stated in the counter affidavit that M/s. Jagannath Biscuits (P) Limited was covered under the Act with effect from 27.2.1993. The said company was to pay provident fund dues of Rs. 34,101/-for the period from March, 1998 to May, 1998 and Rs. 55,047/-from June, 1998 to October, 1998. For non-payment of the aforesaid dues a Certificate Proceeding has also been registered against the said company and prosecution was also lodged for alleged misappropriation of employees share and for violation of the provisions of the Act and the Scheme. While the matter stood thus the Financial Corporation took over the unit on 23.10.1998 and sold it to the petitioner on 22.3.1999. After the opposite parties 1 to 3 came to know about the transfer of the unit to the petitioner, it was directed to deposit arrear dues outstanding against the previous owner. The total amount now payable as reflected in the Writ Application is Rs. 89,148/-. The opposite party No. 4 has not filed any counter-affidavit.
4. Learned Counsel for the petitioner submitted that admittedly the previous owner of the unit had not deposited the provident fund contributions and a certificate proceeding had been initiated against it for recovery of the same. After taking over the unit by the Financial Corporation the petitioner having purchased the same the liability cannot be fixed on the petitioner. It is further contended by the Learned Counsel for the petitioner that the liability of the previous owner cannot be transferred to the new owner and the opposite parties 1 to 3 can only recover the amount from the previous owner which defaulted in depositing contributions. Shri Jena, Learned Counsel appearing for the opposite parties 1 to 3, on the other hand, submitted that the industrial unit is allotted with code number and the question as to whether the petitioner is the owner of M/s. Jagannath Biscuits (P) Ltd. is immaterial. Recovery is to be made against the code number allotted to the industrial unit and therefore change of ownership does not bring any change in liability and the petitioner is liable to pay the entire amount. Shri, Sankarsan Rath, Learned Counsel appearing for the Financial Corporation submitted that the dues being against the previous owner the opposite parties 1 to 3 can recover the same from the previous owner of the petitioner and the Corporation is not liable to make any payment in this regard.
6. Admittedly, M/s. Jagannath Biscuits (P) Limited was owner of the industrial unit prior to the petitioner. There is also no dispute that the said company defaulted in depositing provident fund contributions as required under the provisions of the Act, as a result of which a certificate proceeding was initiated against it for recovery of the same. When the matter stood thus the industrial unit was taken over by the Financial Corporation in exercise of powers under Section 29 of the State Financial Corporations Act and in public auction the petitioner purchased the same. The only question that requires to be determined is who is liable to pay provident fund contributions for the period as stated earlier. There is also no dispute that when the industrial unit was sold to the petitioner under an agreement the petitioner was not made aware of any such liability and there is no clause in the agreement under which the petitioner takes responsibility of payment of any such outstanding dues against the previous owner.
7. Learned Counsel for the petitioner relied upon a decision of this Court in the case of Subarban Ply and Panels (P) Ltd. v. Regional Provident Fund Commissioner, Orissa and Ors., reported in : (2004)IILLJ1069Ori . Relying on the aforesaid decision it was contended that Section 17-B of the Act has no application to the facts of the present case and this contention is supported by the above decision. Reliance was placed by the Learned Counsel for the petitioner on another decision of this Court in the case of Bansidhar Mohanty v. Orissa State Financial Corporation and Ors., reported in 2000 (I) OLR 426. Shri Jena, Learned Counsel appearing on behalf of the Provident Fund Commissioner submitted that Section 17-B of the Act has full application to the facts of the case and decision in the case of Subarban Play and Panels (P) Ltd. v. Regional Provident Fund Commissioner (supra) has not been correctly decided. Learned Counsel referred to a decision of this Court in the case of Orissa State Financial Corporation v. Commissioner of Commercial Taxes, Orissa and Ors., in O.J.C. No. 7796 of 1993 disposed of on 16.1.2002. Relying on the aforesaid decision Shri Jena contended that the Commercial Tax Department having got first charge over the property, dues towards sales tax could be collected from the subsequent owner. He also relied on few other decisions in support of his contention and the decisions are State Bank of Bikanir, Jaipur v. National Iron and Steel Rolling Corporation, reported in 96 (1995) STC 612; Rajasthan State Industrial Dev. and Investment Corporation v. State of Rajasthan, reported in ; and Suburban Ply and Panel Pvt. Ltd. v. Assistant Commissioner Central Excise and Ors., reported in Vol. 93 (2002) CLT 460.
8. Keeping in mind the submissions made by the Learned Counsel for the, parties as well as with reference to the relevant provisions of the Act and the decisions cited, I may proceed to examine the rival contentions of the parties.
Section 8 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred as the 'E.P.F. Act') prescribes mode of recovery of monies due from employers. It further provides that in case of arrears the same shall be recovered in the manner specified in Section 8B to 8G. Section 8B to 8F provide for two modes of recovery, one by issuance of certificate to the Recovery Officer and the other one by directing deduction of arrear amount. Section 17B is relevant for the purpose of this case. The said provision is quoted below :
'Liability in case of transfer of establishment: Where, an employer, in relation to an establishment, transfers that establishment in whole or in part, by sale, gift, lease, or licence or in any other manner whatsoever, the employer and the person to whom the establishment is so transferred shall jointly and severally be liable to pay the contribution and other sums due from the employer under any provision of this Act or the Scheme or the Family Pension Scheme, as the case may be, in respect of the period upto the date of such transfer:
Provided that the liability of the transferee shall be limited to the value of the assets obtained by him by such transfer.'
Much reliance was placed by the Learned Counsel for the Provident Fund Commissioner on the above provision to show that in case of transfer of establishment, the subsequent owner is liable to pay arrear dues of the previous owner though the same shall be restricted to the value of the assets obtained by the new owner by way of transfer. So far as the present case is concerned, undisputedly the previous owner has not transferred the establishment to the petitioner. The establishment was taken over by the Orissa State Finance Corporation (O.S.F.C.) in exercise of powers under Section 29 of the State Financial Corporations Act, and thereafter the petitioner purchased the same in an auction. There is no direct transfer of the establishment from the previous owner to the petitioner.
Now coming to the relevant provisions of the State Financial Corporations Act, 1951, it appears that when the Corporation exercises power under Section 29 of the Act it takes over an establishment and shall have the right to take over management or possession or both of the industrial concern as well as the right to transfer by way of lease or sale. Sub-section (4) of Section 29 of the Act prescribes that where any action has been taken against an industrial concern under Section 29 all costs, charges an expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto. From the aforesaid provision, it appears that once an industrial unit is taken over by Financial Corporation it shall have first charge on assets of the industrial unit.
It is worthwhile to refer to another decision of this Court in this regard, i.e., the case of Bansidhar Mohanty v. Orissa State Financial Corporation and Ors. (supra). In the aforesaid case referred to above the petitioner therein purchased a vehicle in an auction held by O.S.F.C. after the same was taken over under Section 29 of the State Financial Corporations Act from the previous owner. At the time of purchase an agreement was entered into between the petitioner therein and the O.S.F.C. and under the agreement the Corporation was not liable to pay any statutory dues, such as M.V. Tax, Road Tax, etc. The agreement further provided that the purchaser (petitioner therein) shall also not be liable to pay such dues occurred prior to sale. When the petitioner applied for change of ownership and road permit the authorities did not grant on the ground that there was arrear road tax payable by the previous owner. Under such facts and circumstances of the case, this Court held that arrear tax is to be first recovered from the previous owner by issuing a certificate and if the amount is not recovered the same be recovered from the O.S.F.C. and only thereafter the subsequent purchaser can be proceeded against. Shri Jena, Learned Counsel appearing for the Provident Fund Commissioner relied on a decision of this Court in the case of O.S.F.C. v. Commissioner of Commercial Taxes (supra). In the aforesaid case, reliance was placed on a decision of the Apex Court in the case of State Bank of Bikanir, Jaipur v. National Iron and Steel Rolling Corporation, : [1995]212ITR428(SC) as well as the case of Rajasthan State Industrial Development and Investment Corporation v. State of Rajasthan (supra). Both the cases involve applicability of Rajasthan Sales Tax Act. Under Section 11-AAAA of the Rajasthan Sales Tax Act, Crown has the first charge over the properties and therefore following the aforesaid two decisions, this Court held as follows :
'By selling the undertaking, the Corporation has converted into money the assets over which the Crown has a first charge. The Sales Tax Officer has called upon the Corporation to satisfy the Sales Tax dues first. Even going by general principle that on conversion of the assets the liability would fasten on the converted form of asset, the demand appears to be justified in view of the first charge over the original asset.'
Shri Jena also relied upon another decision of this Court in the case of Suburban Ply and Panel Pvt.. Ltd. v. Assistant Commissioner Central Excise and Ors. (supra) and submitted that the Central Excise and Customs Act has similar provisions and while interpreting the said provision this Court in the aforesaid case also held that Crown has the first charge over the property.
9. From the discussions made earlier, I am of the view that under Section 29 of the State Financial Corporations Act, Orissa State Financial Corporation has the first charge over the property and therefore on the face of such provisions contained in the State Financial Corporations Act it is difficult to accept the contentions of the Learned Counsel for the Provident Fund Commissioner that the decisions cited by him have any application, more so when OSFC is a State owned Corporation. Moreover, Section 17-B of the Act as discussed earlier has no application to the facts of the present case. There being no direct transfer from the previous owner to the petitioner, I am of the view that the dues of the Provident Fund Commissioner cannot be recovered from the petitioner. And apart from it under the agreement with OSFC the petitioner did not take any liability of the previous owner and was kept in dark about any such liability. Had he been made aware of such liability he might not have purchased the Unit. There being no dispute that the Provident Fund Commissioner is legally entitled to recover arrear dues, it may proceed against the previous owners for recovery of the dues.
The Writ Application is disposed of accordingly.