2013 (9) TMI 1225 - HC - Companies Law

Summary

Issues Involved:
1. Financial crisis and statutory dues of Mahalakshmi Textile Mills Limited (MTML).
2. Attachment and sale of MTML's properties by EPFO.
3. Validity of sale deeds executed by MTML's power agent during attachment.
4. Jurisdiction of civil courts and applicability of writ petitions for cancellation of sale deeds.

Summary:

Financial Crisis and Statutory Dues:
Mahalakshmi Textile Mills Limited (MTML) faced severe financial crises from 1985, leading to substantial dues to statutory bodies including EPFO, ESI, Commercial Taxes Department, and various banks. The company owned significant properties in Madurai and Kodaikanal, which were subject to attachment and sale to recover the dues.

Attachment and Sale of Properties:
The EPFO issued a Sale Proclamation dated 04.06.2010 for the sale of MTML's land measuring 1 acre and 25.46 cents in Kodaikanal. The property was attached by the Recovery Officer of EPFO in 2003. The auction held on 07.07.2010 declared Sheik Dawood as the highest bidder, but he failed to pay the balance amount, necessitating a fresh auction.

Validity of Sale Deeds Executed by Power Agent:
MTML's power agent, Vaigai Durai, executed sale deeds for portions of the attached property in favor of his wife, despite the attachment. The court held that the sale deeds executed by the power agent were void u/s 8-B, 8-C, and 8-G of the EPF Act read with Rule 16(2) of the Second Schedule to the Income Tax Act, 1961.

Jurisdiction and Writ Petitions:
The court rejected the argument that the EPFO should approach a civil court for cancellation of the sale deeds, citing a general bar to civil court jurisdiction in matters of statutory attachment and sale under Rule 9 of the Second Schedule to the Income Tax Act. The court declared the sale deeds void and directed EPFO to conduct a fresh auction.

Directions Issued:
1. The sale deed executed by the power agent in Document No.2441 of 2009 is declared void.
2. The Recovery Officer, EPFO, is directed to conduct a fresh auction sale of the property measuring 125.46 cents in Kodaikanal.
3. The balance amount after adjusting dues payable to EPFO is to be deposited with the Joint Commissioner of Labour, Madurai, for disbursement to the workmen.
4. The Additional Central Provident Fund Commissioner is instructed to inform Recovery Officers that sales made by defaulter establishments after issuance of certificates are void and to proceed with property sales accordingly.

No costs were awarded, and connected miscellaneous petitions were closed.