Case Note & Summary
The Central Board of Trustees, Employees Provident Fund (Petitioner) filed a writ petition seeking auction of the property of Respondent No.2 (the employer) for recovery of provident fund dues under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act). The property in question consisted of six flats located in a cooperative housing society. Respondent No.1, IndusInd Bank Ltd., had a mortgage over the same property and had initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) for recovery of its own dues. The Petitioner sought to restrain the bank and other respondents from taking possession of the flats. The court heard the advocates for the Petitioner, Respondent No.1 (bank), and Respondent No.6 (another party). The court noted that Section 11(2) of the EPF Act contains a non-obstante clause which gives priority to EPF dues over all other debts, including secured debts. The court held that the EPF Authority has the power to auction the property for recovery of dues, and such auction cannot be restrained by the bank's proceedings under the SARFAESI Act. The court allowed the petition, directing the auction of the property as per the valuation done by the Petitioner and restraining the respondents from taking possession of the flats until the EPF dues are satisfied.
Headnote
A) Employees Provident Fund - Priority of Dues - Section 11(2) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 - Non-obstante clause - The EPF Act contains a non-obstante clause in Section 11(2) which gives priority to EPF dues over all other debts, including secured debts of banks. The court held that the EPF Authority has the power to auction the property of the defaulting employer for recovery of dues, and such auction cannot be restrained by the bank's proceedings under the SARFAESI Act. (Paras 2-5) B) SARFAESI Act - Applicability - Section 35 of the SARFAESI Act - The SARFAESI Act does not override the EPF Act because the EPF Act is a special statute for social security and contains a non-obstante clause. The court held that the bank's secured interest cannot prevail over the statutory priority of EPF dues. (Paras 3-5) C) Recovery of EPF Dues - Auction of Property - The EPF Authority is entitled to auction the property of the defaulting employer as per the valuation done by the Authority, and the bank is restrained from taking possession of the flats in question until the EPF dues are satisfied. (Paras 2, 5)
Issue of Consideration
Whether the Employees Provident Fund Organisation (EPFO) can auction the property of a defaulting employer for recovery of provident fund dues, despite the property being mortgaged to a bank which has initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Final Decision
The court allowed the petition, directing the auction of the property as per the valuation done by the Petitioner under the EPF Act, and restrained Respondent Nos.1 to 6 from taking possession of the flats until the EPF dues are satisfied.
Law Points
- Priority of EPF dues over secured creditors
- Section 11(2) EPF Act
- Non-obstante clause
- SARFAESI Act not applicable to EPF recovery
- EPF Authority's power to auction property
