M/S Komalapuram Spinning and Weaving Mills v. Assistant Provident Fund Commissioner, Office of the Employees' Provident Fund Organisation, Sub Regional Office, Kochi

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:-** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON** **TUESDAY, THE 19TH DAY OF DECEMBER 2017/28TH AGRAHAYANA, 1939** **W.A.No.2552 of 2017** ## **---------------------------** **AGAINST THE JUDGMENT IN WP(C).NO.33492/2017 DATED 20-11-2017 OF HIGH COURT OF KERALA.** **-----------------** ## **APPELLANT(S)/PETITIONER:-** **-------------------------** **M/S.KOMALAPURAM SPINNING AND WEAVING MILLS, NORTH ARYAD P.O., KOMALAPURAM, ALAPPUZHA - 688 538, REPRESENTED BY UNIT-IN-CHARGE, RADHAKRISHNAN.** **BY STANDING COUNSEL SRI.P.U.SHAILAJAN.** ## **RESPONDENT(S)/RESPONDENT:-** **-------------------------** **THE ASSISTANT PROVIDENT FUND COMMISSIONER OFFICE OF THE EMPLOYEES PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, KALOOR, KOCHI - 682 017.** **BY STANDING COUNSEL SRI.S.PRASANTH.** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 19-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:-** ## **jjj/vku** ## **K. VINOD CHANDRAN & ASHOK MENON, JJ.** -----------------------------------------W.A. No. 2552 of 2017 -----------------------------------------Dated: 19[th] December, 2017 ## **J U D G M E N T** ## K.Vinod Chandran.J, The appellant is aggrieved with the judgment of the learned Single Judge in the above appeal. The appellant, before the Writ Court, challenged the orders issued under Sections 14B and Section 7Q of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for brevity, 'EPF & MP Act'). The learned Single Judge found that since the Standing Counsel for the respondent had clearly submitted that there was no hearing granted to the petitioner, the petitioner should be granted a hearing with respect to Section 14B. The order under Section 14B was set aside and remanded for fresh consideration, after **-2-** ## **W.A. No. 2552/2017** affording a reasonable opportunity of hearing. With respect to the order under Section 7Q, the learned Single Judge granted instalments for payment of the same, commencing from 04.12.2017. 2. The learned Counsel for the appellant submits that, in fact, there were contentions raised against the order under Section 7Q also before the learned Single Judge, which was not considered. The first contention against Section 7Q is that the transfer, as effected of the Company, Kerala Spinners, Alappuzha to the appellant-Company was under the Kerala Spinners, Alappuzha (Acquisition and Transfer of Undertaking) Act, 2010 ('Acquisition Act' for short). It is not a transfer as contemplated under Section 17B, since only a transfer simplicitor would be covered under Section 17B. The further contention is that the Acquisition Act provides for, by Chapter VI, appointment of a ## **W.A. No. 2552/2017** **-3-** Commissioner of Payments and any claim against the earlier Company, would have to be made to the said Commissioner. The further argument is that the Company which was taken over, has been declared as 'sick' under the Sick Industrial Companies (Special Provisions) Act, 1985. An order of the Board for Industrial and Financial Reconstruction (BIFR) is also produced along with memo dated 19.12.2017. 3. The learned Counsel for the respondent Organisation submits that Section 7Q is automatic as has been held by the Hon'ble Supreme Court in **M/s. Arcot Textile Mills Ltd. v. Regional Provident Fund** **Commissioner and others - 2013 (16) SCC 1** . It is also contended that Section 17B takes in any transfer and the EPFO is not obliged to approach the Commissioner for recovering the liability under the EPF & MP Act. ## **W.A. No. 2552/2017** **-4-** 4. The learned Counsel for the appellant submits that **M/s. Arcot Textile Mills Ltd.** (supra) specifically has dealt with the issue of computation under Section 7Q and has deprecated the practice of issuing bland orders without showing the actual computation. 5. With respect to the acquisition and transfer of undertaking we are of the opinion that the same is covered under Section 17B of the Act, which reads as under: “17B **Liability in case of transfer of establishment** - Where an employer, in relation to an establishment, transfers that establishment in whole or part, by sale, gift, lease or licence or in any other manner whatsoever, the employer and the person to whom the establishment is so transferred shall jointly and severally be liable to pay the contribution and other sums due from the employer under any provision of this Act or the Scheme **-5-** ## **W.A. No. 2552/2017** or the Pension Scheme or the Insurance Scheme, as the case may be, in respect of the period up to the date of such transfer; Provided that the liability of he transferee shall be limited to the value of the assets obtained by him by such transfer.” 6. Section 17B, as is noticed above, takes in transfer of an establishment in whole or in part, by sale, lease or licence or in other manner gift, any whatsoever. Merely because the earlier establishment had been taken over by the State Government and then transferred to the appellant-Company, it would not absolve the appellant from the liabilities and it would definitely be a transfer as contemplated under Section 17B. The joint and several liability cannot hence be effaced. The further contention with respect to the Acquisition Act providing for a payment only by **-6-** ## **W.A. No. 2552/2017** approaching the Commissioner, this would be repugnant to the Central enactment- EPF & MP Act. To that extent the authorities under the EPF & MP Act would not be obliged to approach the Commissioner for settlement of the statutory liability under the EPF & MP Act. 7. Yet another contention is the declaration made by the BIFR of the Company being declared 'sick'. As of now the Sick Industrial Companies (Special Provisions) Act, 1985, has been repealed and, in any event, the has been taken over virtue of an Company by Acquisition Act. This is not in pursuance to any rehabilitation proposal or scheme and the declaration would no longer survive. 8. The damages under Section 14B has already been remanded to the authority for determination. Section 7Q has been declared by the Hon'ble Supreme ## **W.A. No. 2552/2017** **-7-** Court in **M/s. Arcot Textile Mills** Ltd., to be automatic and there cannot be any contention raised against the recovery under Section 17B. Interest under Section 7Q is compensatory in nature and takes in the interest component for the delay in payment. The appellant who has taken over the assets and liabilities of the Company which had created the default, would also be liable for the said amounts. Only in the aspect of computation, since a bland order has been issued showing the amounts levied, it is directed that the respondent Organization shall issue an order showing the computation of interest in the form of a statement within a period of two weeks and the appellant would be entitled to settle the same in six monthly instalments starting from 21.01.2018. If any objection is filed then the appellant would have to satisfy 50% of the amounts demanded within a period of three weeks, upon which ## **W.A. No. 2552/2017** **-8-** the EPFO would consider the objection and raise a fresh demand, deducting the 50% paid; which shall be paid within one month therefrom. If the directions herein are not complied with then the recovery will be proceeded with de hors any objection filed. The writ appeal is dismissed with the above observation. No Costs. Sd/K.VINOD CHANDRAN, JUDGE Sd/ASHOK MENON, JUDGE jjj 19/12/17