Case Note & Summary
The petitioner, Vibhu Drinks Private Limited, purchased a property from the Official Liquidator of M/s Niranjan Ayurved Bhavan Limited (a company in liquidation) for a total consideration of Rs. 50,00,000/- by a deed of conveyance dated 7th April 2006. Subsequently, the Employees Provident Fund Organisation (EPFO) issued show cause notices dated 12th January 2015, 12th May 2015, and 15th June 2015, calling upon the petitioner to pay provident fund dues of Rs. 17,76,828/- outstanding against the company in liquidation, invoking Section 17B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The petitioner challenged these notices before the Bombay High Court. The core legal issue was whether Section 17B of the EPF Act, which imposes joint and several liability on the transferor and transferee of an establishment for provident fund dues, applies when the transfer is made by the Official Liquidator in the course of liquidation proceedings. The court examined the language of Section 17B, which applies when 'an employer, in relation to an establishment, transfers that establishment'. The court held that the Official Liquidator is not the 'employer' of the company in liquidation; the employer is the company itself. The transfer by the Official Liquidator is a court-ordered sale under the supervision of the High Court, not a voluntary transfer by the employer. Therefore, Section 17B is not attracted. The court quashed the show cause notices and held that the petitioner cannot be held liable for the provident fund dues of the company in liquidation. The petition was allowed with no order as to costs.
Headnote
A) Employees' Provident Fund - Section 17B - Transfer of Establishment - Liability of Transferee - Section 17B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 - The provision imposes joint and several liability on the transferor and transferee for provident fund dues only when the transfer is made by the employer voluntarily. It does not apply when the transfer is effected by the Official Liquidator under the supervision of the High Court in the process of liquidation of a company. The court held that the Official Liquidator is not the 'employer' within the meaning of Section 17B, and the sale by him is not a transfer by the employer. Hence, the purchaser cannot be held liable for the prior dues of the company in liquidation. (Paras 4-6) B) Company Law - Liquidation - Sale by Official Liquidator - Liability for Provident Fund Dues - The sale of assets of a company in liquidation by the Official Liquidator appointed by the High Court is a court-ordered sale and not a voluntary transfer by the employer. The purchaser from the Official Liquidator acquires the property free from all encumbrances, including provident fund dues, unless specifically provided otherwise. The court held that the EPF Organisation cannot recover the dues of the company in liquidation from the purchaser under Section 17B of the EPF Act. (Paras 5-6)
Issue of Consideration
Whether the provisions of Section 17B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 are attracted in a case where the establishment is transferred by the Official Liquidator appointed by the High Court over a company in liquidation, and whether the purchaser can be held liable for the provident fund dues of the transferor company.
Final Decision
The court allowed the writ petition and quashed the show cause notices dated 12/1/2015, 12/5/2015, and 15/6/2015. Rule made absolute. No order as to costs.
Law Points
- Section 17B of the Employees' Provident Funds and Miscellaneous Provisions Act
- 1952 applies only to voluntary transfers by employer
- not to court-ordered sales by Official Liquidator
- Transfer of establishment by Official Liquidator under Companies Act does not attract joint liability under Section 17B
- Purchaser from Official Liquidator is not liable for prior provident fund dues of the company in liquidation
