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TMI Blog2005 (8) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... r referred to as "the EPF Act" for short), shall stand in priority over all other statutory dues as per provisions contemplated under section 530 of the Companies Act, 1956 (hereinafter referred to as "the Act"). It has further been submitted on behalf of the applicant that in view of section 11(2) of the Act, there is a statutory deeming fiction of first charge on the assets of the establishment and the effect is with the non-obstante clause and, therefore, it has been submitted that notwithstanding anything contained in any other law for the time being in force, which may include the provisions of the Transfer of Properties Act, the dues or the amount to be recovered by the Provident Fund Commissioner, which is of the amount deducted from the wages of the employees, is to be treated as having first charge on the assets of the establishment and, therefore, it has been submitted that such dues would fall within the category of the dues under section 529A of the Act and not under section 530 of the Companies Act having priority vis-a-vis other statutory dues. It has also been submitted that out of the movable properties of the company-in-liquidation the amount has been disbursed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 205/1996 and allied matters has taken the view that after the dues under section 529A of the Act are satisfied and if the payment is to be made under section 530 of the Act, such dues may fall in priority and not at par with the dues under section 529A. Mr. Desai, learned Counsel appearing for secured creditors has also relied upon the decision of the Supreme Court in case of Dena Bank v. Bhikhabhai Prabhudas Parekh Co. [2000] 5 SCC 694 and more particularly the observations made at para 10 for contending that the dues of the crown cannot have the priority over the secured creditors, but it can have priority only qua Ordinary and Unsecured Creditors. Therefore, it is submitted that it is only after the satisfaction of the claim of the secured creditors and of the workmen, the amount to be recovered by the Provident Fund Commissioner is to be paid as per section 530 of the Act by the O.L., and at present up till now the stage has not reached and, therefore, the present application may not be granted by this Court. 6. Mr. Vasavada, learned Counsel appearing for the respondent No. 2-Union representing the workmen submitted, inter alia , that the claim as such is already l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges payable by him to the appropriate Government under any provision of this Act or under any of the conditions specified under section 17, shall, where the liability therefore has accrued before the Order of adjudication or winding-up is made, be deemed to be included among the debts which under section 49 of the Presidency-towns Insolvency Act, 1909 (3 of 1909), or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920), or under section 530 of the Companies Act, 1956 (1 of 1956) are to be paid in priority to all other debts in the distribution of the property of the insolvent or assets of the company being wound-up, as the case may be." 8. As such for interpretation of section 11(1) of the EPF Act, no further discussion may be required in view of the above referred decision of the Division Bench of this Court in Company Application No. 216 of 1997 in Company Petition No. 205 of 1996 and allied matters. Since the language of section 94 of EPF Act as considered by the Division Bench at para 4 is in substance the same for giving priority to the claim of ESI contribution in the category of payment contemplated under section 530 of the Act. It may be recorded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Companies Act. When such a situation crops up, the State Government or the Central Government or the Local Authority may file their claim before the learned Company Judge and at that point of time, they may say that in view of their preferential right, either under the Local Act or under section 530 of the Companies Act, they be paid." 9. Thereafter, at para 15, it has been concluded qua third question as under: "15. The third question referred for our answer is that the properties/assets of the Company, which have already been mortgaged or earmarked by the secured creditors and when the Company is in liquidation, whether the Liquidator would have that equity alone and whether the entire amount would be required to be paid to the secured creditors or the ESI Corporation would be entitled to priority over the said dues in this behalf. In absence of section 52A, the answers certainly could be in favour of the ESI Corporation. Since after introduction of section 529A and amendment to section 530 of the Companies Act, the legal position is changed. When the Official Liquidator acquires or possesses the securities mortgaged with the secured creditors, then, the Official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cured creditor, the secured creditor shall continue to hold the interest in such assets or the property of the company or establishment. After the realisation of the secured interest of secured creditor in the properties of the Company, the first charge by statutory deeming fiction may continue to hold good, but it cannot be read as allowing to march over the interest of the secured creditors. As observed earlier the workmen s dues would have also been in priority after the secured creditors dues, but only in view of the express provisions of section 529A of the Act, the priority for payment is treated at pari passu with the secured creditors. Therefore, the contention of Mr. Mehta that the express provision in the statute providing for the first charge on the assets of the establishment would stand at par with the other secured creditors or would stand above the secured creditors as provided under section 529A of the Act cannot be accepted. 12. Further, it deserves to be recorded that sub-section (2) of section 11 was brought into the statute book in the year 1973 by Act 40 of 1973 with effect from 1-11-1973 and at the relevant point of time, section 529A was not there in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant to disburse the amount as claimed cannot be accepted. 15. It appears that it would be in the interest of the workers concerned, if such claim, may be the claim under section 11(1) for unpaid contribution or under section 11(2) for non-deposit after deduction is included in the claim lodged as workmen s dues in the category of section 529A, but such will be at the instance of the workmen concerned or through registered Union or recognized Union representing the interest of the workmen, but such cannot be by way of enforcement of the claim at the instance of the PF Authority under section 11(2) of EPF Act. Even otherwise also, the applicant authority is supposed to Act for the larger interest of the employees concerned and should facilitate the employees for realisation of its dues in accordance with the provisions of the Act. As Mr. Vasavada has submitted on behalf of respondent No. 2 for seeking bifurcation of the amount of Rs. 42,39,803.10 towards PF contribution of the concerned workmen separately, I find that if such a direction is given to the applicant to supply such details to respondent No. 2, the same would be in the larger interest of the workmen s dues w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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