2009 (10) TMI 825 - SC - Companies Law

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 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? Held that - If interest payable by the employer under Section 7Q and damages leviable under Section 14 are excluded from the ambit of expression any amount due from an employer , every employer will 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 contending that the movable or immovable property of the establishment is subject to other debts. Any such interpretation would frustrate the object of introducing the deeming provision and non obstante clause in Section 11(2). Therefore, it is not possible to agree with the learned senior counsel for the appellant bank that the amount of interest payable under Section 7Q and damages leviable under Section 14B do not form part of the amount due from an employer for the purpose of Section 11(2) of the Act. Appeal dismissed.

Issues Involved:
1. Whether the sugar bags pledged by the sugar mills in favor of the appellant-bank could be attached and sold for the realization of provident fund dues.
2. Whether the sugar bags pledged with the appellant-bank constitute assets of the establishment.
3. Whether interest payable under Section 7Q and damages imposed under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, form part of the amount due from an employer.

Detailed Analysis:

Issue 1: Attachment and Sale of Pledged Sugar Bags
The core issue was whether the sugar bags pledged by the sugar mills to the appellant-bank as security for a loan could be attached and sold for the realization of provident fund dues under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The court noted that the sugar bags were pledged with the appellant-bank, but the ownership remained with the sugar mills. The court held that the deeds of pledge did not transfer ownership to the appellant-bank, but only provided a security interest. Therefore, the Recovery Officer was justified in attaching and selling the sugar bags to recover the provident fund dues.

Issue 2: Assets of the Establishment
The court examined whether the pledged sugar bags constituted assets of the establishment within the meaning of Section 11(2) of the Act. The court concluded that the sugar bags, despite being pledged, remained the property of the sugar mills and thus constituted assets of the establishment. Therefore, they could be attached and sold for the realization of provident fund dues.

Issue 3: Interest and Damages as Part of Amount Due
The court addressed whether the interest payable under Section 7Q and damages imposed under Section 14B of the Act could be considered part of the amount due from an employer under Section 11(2). The court held that the expression "any amount due from an employer" includes not only the principal amount determined under Section 7A but also the interest and damages. Excluding interest and damages would defeat the purpose of the Act, which aims to ensure the timely payment of provident fund dues.

Conclusion:
The appeals were dismissed, affirming that the sugar bags pledged by the sugar mills could be attached and sold for the realization of provident fund dues, that such pledged sugar bags constituted assets of the establishment, and that interest and damages form part of the amount due from an employer.

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