Y. Anand Kumar v Regional Provident Fund Commissioner, Office of the Provident Fund Commissioner, Kozhikode; Assistant Provident Fund Commissioner, Provident Fund Sub Regional Office, Kannur; The Recovery Officer, Provident Fund Sub Regional Office, Kannur

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM** **WEDNESDAY, THE 1ST DAY OF OCTOBER 2014/9TH ASWINA, 1936** ## **WP(C).No. 35232 of 2004 (T)** **----------------------------** ## **PETITIONER :** **-----------------------** **MR.Y.ANAND KUMAR, JOINT MANAGING DIRECTOR, THIRUVERPATHI MILLS PRIVATE LTD.NO.90, MILL ROAD,KANNUR.** **BY ADVS. SRI.E.K.NANDAKUMAR SMT.PRIYA MAHESH SMT.PRIYA MANJOORAN** **RESPONDENT(S):** - **----------------------------** **1. REGIONAL PROVIDENT FUND COMMISSIONER, OFFICE OF THE PROVIDENT FUND COMMISSIONER, KOZHIKODE.** **2. ASSISTANT PROVIDENT FUND COMMISSIONER, PROVIDENT FUND SUB REGIONAL OFFICE, KANNUR.** **3. THE RECOVERY OFFICER, PROVIDENT FUND SUB REGIONAL OFFICE,** **KANNUR.** **BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL,SC, P.F. SRI.R.SUDHIR, SC, P.F.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 01-10-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **sts** ## **WP(C).NO.35232/2004** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1 COPY OF THE PROCEEDINGS OF THE BIFR DATED 24/10/1989** - **P2 COPY OF THE ORDER OF THE BIFR DATED 21/5/2001 IN CASE NO.6/89 (024/91)** - **P3 COPY OF THE SHOW CAUSE NOTICE DATED 02/01/2004, NO.KR/KNR.2638/RECOVERY/2002-04/3121 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.** - **P4 COPY OF THE SHOW CAUSE NOTICE DATED 06/02/2004, NO.KR/KNR.2638/RECOVERY/2002-04/3412 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.** - **P5 COPY OF THE STATEMENT DATED 20TH FEBRUARY, 2004, REF:KNR/2658/ENF/03/2370, PREPARED AND SUBMITTED BY THE COUNSEL FOR THE PETITIONER.** ## **RESPONDENT'S EXHIBITS: NIL** ## **/TRUE COPY/** **P.A.TO JUDGE** **sts** ## **C.K. ABDUL REHIM, J. --------------------------W.P.(C)No.35232 of 2004** **------------------------------Dated this the 1[st] day of October, 2014** ## **JUDGMENT** Challenge in this writ petition is against Exts.P3 and P4 show cause notices issued against the petitioner by the 3[rd] respondent requiring to show cause as to why he should not be arrested and detained in Civil Prison in exercise of power vested under Section 8-B(b) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. (hereinafter referred as the 'Act'). Even though another relief is sought for in the writ petition to the extent of declaring Section 8-B(b) as unconstitutional, learned counsel for the petitioner conceded that the said relief is not pressed. 2. The petitioner was the Director of an establishment which is an employer coming within the meaning of Section 2(e) of the Act. Petitioner's father was the Chairman of the company and his brother was the Managing Director. The establishment in question ## **W.P.(C)No.35232 of 2004 2** was closed during the month of February 1998. As on 04/02/2004 a sum of Rs.1,31,33,354.95/- is due towards contribution to the Provident Fund, with respect to the period from August 1996 to February 1998, including interest under Section 7-Q of the Act and damages. The establishment was declared as a 'Sick Industrial Company' by the BIFR through Ext.P1 proceedings issued on 24/10/1989. Subsequently by Ext.P2 Order dated 21/05/2001 the BIFR recommended winding up of the company and the matter was referred for approval of this court. The father of the petitioner as well as his brother expired on 23/03/2000 and 24/09/2000, respectively. The petitioner was appointed as Managing Director with effect from 24/09/2000. During the time when he took charge as Managing Director, proceedings before the BIFR was pending. Shortly thereafter, by virtue of Ext.P2, the winding up was recommended. It is stated that the respondents have attached all the movables and immovable ## **W.P.(C)No.35232 of 2004 3** properties of the establishment invoking Section 8-B(a). But during 2004 Exts.P3 and P4 notices were issued invoking Section 8-B(b). Even though the petitioner submitted Ext.P5 statement (explanation) against the show causes notices, he was threatened with further steps of arrest and detention. Hence this writ petition is filed. 3. Section 8-B deals with procedure for recovery of arrears due under Section 8. The Authorised Officer is entitled to issue 'recovery certificate' specifying the amount of arrears, on receipt of which the Recovery Officer should proceed to recover the amount from the establishment or from the employer by one or more of the modes mentioned therein. The modes enumerated under Section 8-B are; (a)attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer; (b) arrest of the employer and his detention in prison; (c) appointing a receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer: ## **W.P.(C)No.35232 of 2004 4** Proviso to Section 8-B says that, the attachment and sale of any property under this section shall first be effected against the properties of the establishment and where such attachment and sale is insufficient for recovery, the Recovery Officer may take such proceedings against the property of the employer for recovery whole or any part. 4. Contention in the case is that, after attaching properties of the establishment, the respondents have not taken any effective steps to conduct sale of such properties in order to recover the arrears. The proceedings initiated under Section 8-B(b) cannot be sustained because no effective steps to recover the amount from the properties of the establishment is taken, is the contention. Further it is contended that the petitioner cannot be termed as an employer coming within the purview of Section 2(e) against whom proceedings under Section 8-B(b) can be initiated. 5. The legal position no more remains as _res_ ## **W.P.(C)No.35232 of 2004 5** _gestae._ A Division Bench of this court in **Ali v. Recovery Officer, E.P.F Organisation [2007 LLR 469]** held that when other modes of recovery as provided are possible, arrest and detention of defaulter on the requisition of authorised officer is impermissible. Referring to Section 8-G of the Act this court observed that provisions of Second, and Third Schedules of the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 shall apply with necessary modifications with respect to arrears mentioned in Section 8 of the Act. Therefore Sections 8-B and 8-G have to be read together, which will reveal that provisions of the Second and Third Schedules of the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 will apply. Referring to Rule 73 of the Second Schedule this court held that arrest as contemplated under Section 8-B(b) can be invoked only if the defaulter with the object or effect of obstructing execution of the certificate, has after the drawing up of ## **W.P.(C)No.35232 of 2004 6** the Certificate by the Tax Recovery Officer, dishonestly transferred, concealed or removed any part of his property, or the defaulter had since the drawing up of the certificate has the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same. This court held that unless there is no finding to the effect that any of the above said situations exists, issuance of warrant of arrest cannot be sustained. 6. A learned Judge of this court had followed the dictum contained in **Ali's case** (cited supra) in the decision in W.P(C) No. 25182/2009 and connected cases dated 06/11/2013. 7. Learned counsel for the petitioner had also pointed out another decision of the High Court of Andhra Pradesh in **D.R.Venkatesh v. The Regional Provident Fund Commissioner, Hyderabad and others (2004 LAB.I.C. 3606)** . The dictum is to the effect that proceedings for arrest of the employer cannot be ## **W.P.(C)No.35232 of 2004 7** initiated simultaneously along with attachment and sale of property. It is held that proceedings under Section 8- B(b) can be initiated only if the Recovery Officer fails to realise the arrears through attachment and sale of the property. 8. Considering the legal position remaining settled as mentioned above, this court is of the considered opinion that the proceedings now initiated by the virtue of Exts.P3 and P4 against the petitioner invoking Section 8-B(b) cannot be sustained. Learned senior counsel appearing for the petitioner had submitted that winding up of the establishment was approved by this court and the liquidation proceedings is going on. It is further submitted that there will be sufficient assets for the company to realise the arrears due under Section 8 of the Act. This being the position it is left open to the respondents to take appropriate proceedings subject to provisions contained in the Sick Industries Act as well as the Companies Act, for realising arrears from the ## **W.P.(C)No.35232 of 2004 8** assets of the company. Of course, if circumstances warrants, after making such attempts to realise the amount from the assets of the company, the respondents will be free to initiate such steps under Section 8-B(b), subject to legal principles remaining settled as above. The writ petition is allowed subject to the above said observations, and Exts.P3 and P4 are hereby quashed. Sd/- **C.K. ABDUL REHIM JUDGE** MJL