2018 (5) TMI 2173 - HC - Indian Laws

Seeking a direction in favour of the applicant for payment of dues under the Employees Provident Fund Miscellaneous Provisions Act 1952 - priority of dues against the statutory as well non-statutory secured and non-secured debts including on assets subject to mortgage or pledge - HELD THAT - In the present case as already noted by this court the OL invited claims on 23.01.2004. Thereafter the claims were processed and payments were released in favour of those whose claims were accepted by order dated 27.09.2005. Reference may be had to the said order dated 27.09.2005. The said order noted that there are 770 workmen who have lodged their claims before the OL. Total of these claims add up to Rs.5.04 crores. The court accepted that the claims of the worker would to the tune of Rs.3.40 crores. There were claims of three secured creditors namely Canara Bank HFC and Essenda Finanze Pvt. Ltd. which were for Rs.374 lacs Rs.120 lacs and Rs.4 lacs. Noting that the OL has Rs.3.86 crores the court ordered distribution of the fund to the secured creditors and workers on pari passu basis in terms of Sections 529 and 529A of the Act. In the rejoinder that was filed by the applicant to the reply of the OL the applicant has attached a copy of a communication dated 18.06.2004 which was allegedly sent to the OL. Unfortunately this document has been filed alongwith the rejoinder and the OL has not been able to respond to the same. There is also nothing to show that this document was served on the OL. It is further stated in the letter that the dues are likely to the tune of Rs.50 lacs which are pending and are not deposited by the respondent company. As already noted this letter was not in response to claims invited by the OL. Even if such a letter had been received by the OL it cannot be a substitute for the statutory procedure which exist for inviting claims from the creditors of the respondent company. A liquidator has to give notice inviting creditors who have not proved their debts. As per Rule 151 the affidavit proving a debt shall contain or refer to a statement of account and shall be in Form 66. The applicant is only entitled to the amount that is now left with the OL namely a sum of Rs. 5, 76, 162/- or about. The applicant cannot be permitted to disturb the position/steps which have been taken by this court way back in 2005. The applicant has merrily taken five years to file its first application attempting to prove its dues. Thereafter the applicant had withdrawn the said application and has now filed the present application in 2015. In view of the settled legal position the applicant would be entitled to only the amount now remaining with the OL. Application allowed.

Summary

Issues Involved:
1. Priority of EPF dues under Section 11(2) of the EPF & MP Act, 1952.
2. Procedural compliance for proving debts under Section 474 of the Companies Act, 1956 and Rule 178 of the Companies (Court) Rules, 1959.
3. Entitlement to remaining funds with the Official Liquidator (OL).

Issue-Wise Detailed Analysis:

1. Priority of EPF Dues under Section 11(2) of the EPF & MP Act, 1952:
The application by the Employees Provident Fund Organisation (EPFO) sought a direction for payment of dues amounting to Rs.1,41,81,446/- from Kamla Syntex Ltd. under the EPF & MP Act, 1952. The applicant argued that under Section 11(2) of the Act, EPF dues have priority over all other debts, including secured and unsecured debts. The Supreme Court's judgment in Maharashtra State Co-operative Bank Ltd. v. The Assistant P.F. Commissioner was cited to support this claim, emphasizing that the priority given to provident fund dues is not limited by any condition and operates against all other debts, including those secured by mortgage or pledge.

2. Procedural Compliance for Proving Debts under Section 474 of the Companies Act, 1956 and Rule 178 of the Companies (Court) Rules, 1959:
The OL argued that the EPFO did not file a claim within the stipulated period after the winding-up order was passed. According to Section 474 of the Companies Act, 1956, and Rule 178 of the Companies (Court) Rules, creditors who fail to prove their debts within the specified time are excluded from benefiting from any distribution made before their debts are proved. The court noted that while creditors may prove their debts at any time before the final distribution of assets, they cannot disturb any dividends already declared. The Rajasthan, Patna, and Madras High Courts have upheld this principle, allowing creditors to claim from remaining funds without disrupting prior distributions.

3. Entitlement to Remaining Funds with the Official Liquidator (OL):
The court observed that the EPFO had delayed in filing its claim, first approaching the OL in 2010/2011, well after the initial distribution of funds to secured creditors and workmen in 2005. Despite a communication dated 18.06.2004 allegedly sent to the OL, the court found no evidence that this met the statutory requirements for proving debts. Consequently, the EPFO was entitled only to the remaining funds with the OL, amounting to Rs.5,76,162.65. The court emphasized that the EPFO could not disturb the distributions made in 2005 due to its delayed claim.

Conclusion:
The court allowed the application to the extent that the EPFO was entitled to the remaining funds with the OL, amounting to Rs.5,76,162.65. The court reiterated that the EPFO could not disturb the distributions made in 2005 due to its delayed claim. The application was allowed accordingly, and the entire amount available with the OL pertaining to the respondent company was directed to be paid to the EPFO. The case was listed for further proceedings on 27.09.2018.