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TMI Blog1999 (2) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ('Act', for short). 2. In the above background, the property hypothecated by the employer to Bank and that remained in the premises of the factory of the employer was involved in a fire accident on 9-1-1990. The property had been insured with the United India Insurance Company. There was a dispute with regard to actual loss involved on account of the fire accident insofar as cashew stored in the godown was concerned. Eventually, the employer approached the Karnataka State Consumer Disputes Redressal Commission, Bangalore, with a complaint against the United India Insurance Company wherein the Bank also was made the second respondent, and in which proceeding, the Bank fully supported the claim of the complainant-employer. By its order dated 23-1-1995, the Commission awarded a sum of ₹ 9,49,168.60 which the Insurance Company was directed to pay to the petitioner to the account of the employer. On 15-3-1995, the Insurance Company credited a sum of ₹ 13,77,624.25 in pursuance of the said order of the Commission, communication in respect of which was received by the Bank on 17- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any amount due from any person to any employer who is in arrears. In the present case, if the amount of the employer is with the Bank, then, respondent 1-the Provident Fund Commissioner could certainly ask the Bank to remit that amount in respect of the contributions payable by the employer. Employer having availed cash credit facility and himself being due to the Bank to an extent of more than ₹ 15 lakhs, not only on the day the prohibitory order was received by the Bank not a single paise of the employer was with the Bank to be sent to the Provident Fund Commissioner, but also that even the subsequent amount of ₹ 13 lakhs and odd received in terms of the award of Consumer Redressal Commission was also being liable to be adjusted towards the amount that the employer was due to the Bank. Therefore, at no point of time was any amount of the employer there with the Bank so as to comply with the demands of the Provident Fund Commissioner. Even the amount of ₹ 13 lakhs and odd since related to the amount paid in respect of the loss of goods in the fire accident which goods had been hypothecated to the Bank, the said amount needed to be applied towards the liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so taken necessary care and caution to see that the property stood insured. It was in these circumstances that on 9-9-1990, the said property was destroyed in the fire accident. As to what would have been the position had the property been still there in existence, I have referred to similar situation in an earlier case in the State Bank of Mysore, B.H. Road, Shimoga v Provident Fund Commissioner, Bangalore and Others1, Referring to the decision of the Full Bench of this Court in Chief Controlling Revenue Authority in Karnataka v The Manager (Advances), State Bank of Mysore, Bangalore , that was dealing with the effect of pledge though in a different context, I had extracted the following observations which are material for the present purpose also. 40. Similarly, by deed of hypothecation, the NGEF has pledged its machinery and plant with the Bank while retaining possession of the same. But then, at law, the owner in possession is only as bailee as the pledge and pledgee is the real owner. This becomes clear having regard to Section 172 of the Contract Act. A passage from Puget on the Law of Banking (Eighth Edition at page 566) which is as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs and odd was received by the Bank for the first time after passing of the prohibitory order. As said earlier, the property had been hypothecated much earlier, and all that happened on receipt of the award amount on 17-3-1995 was that instead of the hypothecated property, the said amount was in the Bank to be credited to the account of the employer. As we noticed earlier, even after so crediting, the employer was still due to the petitioner much a larger sum. 7. Same thing however cannot be said in respect of the interest amount of ₹ 4,25,955.65 and costs of ₹ 2,500.00. The amount of costs was awarded by the Consumer Disputes Redressal Commissioner to the employer who was the complainant before the Commission. The said amount of costs had nothing to do with the hypothecated property over which the Bank has priority. Same is the position with regard to interest amount of over ₹ 4 lakhs and odd. It could be seen that for the amount withdrawn by the employer by availing the cash credit facility and for the amount due by the employer to the Bank in respect of the principal and interest concerning the said cash credit facility, Bank would be continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and interest amount that was in excess of ₹ 4 lakhs. In view of Section 11(2) of the Act, the said sum of over ₹ 4 lakhs could not be adjusted by the Bank towards liabilities of the employer in respect of cash credit facility because the first respondent-Regional Provident Fund Commissioner had priority over that sum to the extent the employer owed to the Regional Provident Fund Commissioner. Sri Sundar Murkal, learned Counsel for the petitioner-Bank, submits that Section 11(2) of the Act would apply only to the company that is being wound up and not the case like the present one. He also refers to the statement of objections and reasons. Sri Sundar Murkal is right only if Section 11(1) is referred to. What is being referred to herein is sub-section (2) of Section 11. It does not refer to winding up of a company, but it provides that without prejudice to the provisions of Section 11(1), if any amount is due from the employer whether in respect of employees' contributions or the employer's contributions, the amount shall be deemed to be the first charge on the assets of the establishment. Therefore, on 17-3-1995 when the sum of over ₹ 4 lakhs was received ..... X X X X Extracts X X X X X X X X Extracts X X X X
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