- (1.) These petitions are directed against order dated 7.4.2010 by which the Division Bench of the Bombay High Court dismissed the writ petitions filed by the petitioner for quashing the action taken by Assistant Provident Fund Commissioner and Recovery Officer under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short, 'the 1952 Act') for recovery of the provident fund dues. Shri M.Y. Deshmukh, learned Counsel for the petitioner argued that the Division Bench of the High Court committed an error by relying upon the judgment in Maharashtra State Co-operative Bank Limited v. Assistant Provident Fund Commissioner and Others, 2009 123 FLR 653 because the subject-matter of that case was an interlocutory order passed by the High Court permitting joint auction of the sugar bags which had been attached by the Provident Fund authorities. Learned Counsel emphasised that this Court should not have decided the issue relating to priority of the dues of the workers under Section 11(2) of the 1952 Act because the main petition was pending before the High Court. He then argued that the judgment in Maharashtra State Cooperative Bank Limited v. Assistant Provident Fund Commissioner and Others should be treated as per incuriam because while deciding the matter this Court did not consider the provisions of Sections 33D and 3E of the Essential Commodities Act, 1955 (for short, 'the 1955 Act') and various clauses of the Sugarcane (Control) Order, 1966, which cast a duty upon the producer to pay price of sugarcane to the growers. He lastly argued that the petitioner is a scheduled bank and, therefore, its dues are recoverable in preference to the dues of provident fund. 1. In our opinion, there is no merit in the arguments of the learned Counsel and the special leave petitions are liable to be dismissed. It is true that the subject-matter of the judgment in Maharashtra State Cooperative Bank Limited v. Assistant Provident Fund Commissioner and Others was an interlocutory order passed by the High Court. Shri Ashok H. Desai, learned Senior Counsel, who appeared on behalf of the petitioner made detailed arguments on the entitlement of the Assistant Provident Fund Commissioner to realize the dues of provident fund, etc., by disposing of the sugar bags pledged with the petitioner. This is evinced from paragraphs 13 and 14 of the judgment, which are extracted below: 13. Shri Ashok H. Desai, learned Senior Counsel appearing for the appellant assailed the impugned orders and argued that the sugar bags lying in the godowns of the Sugar Mills could not have been attached and sold at the instance of the Assistant Commissioner for realization of the dues of provident fund, etc. because the same had already been pledged with the appellant-Bank. Learned Senior Counsel relied upon the judgments of this Court in Karnataka Pawnbrokers Asstt. v. State of Karnataka and Central Bank of India v. Siriguppa Sugars & Chemicals Ltd, 1965 2 SCR 289. and argued that even though under Section 11(2) of the Act, the amount due from an employer is treated as first charge on the assets of the establishment, the same cannot have priority or precedence over the dues of the appellant-Bank, the payment of which is secured by the deeds of pledge executed by the management of the Sugar Mills. 14. Shri Desai referred to various clauses of the deeds of pledge and submitted that for all practical purposes, the appellant-Bank had become the owner of the sugar bags and the Recovery Officer did not have the jurisdiction, power or authority to attach the same. Learned Senior Counsel emphasised that the term "assets" used in Section 11(2) of the Act means unencumbered property of the establishment and argued that as the sugar bags pledged with the appellant-Bank had become its property, the Recovery Officer was not entitled to attach the same for realising the dues of provident fund, etc. In support of this argument, Shri Desai placed reliance or paras 67 and 73 of the judgment of this Court in Transcore v. Union of India Another, argument of the learned Senior Counsel is that, at best, the amount determined under Section 7A can be treated as first charge on the assets of the establishment but the interest payable under Section 7Q and damages levied under Section 14B cannot be recovered by invoking Section 11(2) of the Act.
(2.) This Court extensively referred to the provisions of the 1952 Act (paragraphs 19 to 24) and judgments in Builders Supply Corporation v. Union of India UCO Bank v. Official Liquidator, 1994 5 SCC 1, State Bank of Bikaner and Jaipur v. National Iron and Steel Rolling Corporation, 1995 2 SCC 19, Dena Bank v. Bhikhabhai Prabhudas Parekh and Company, 2000 5 SCC 694, A.P. State Financial Corporation v. Official Liquidator, 2000 7 SCC 291Recovery Officer and Assistant Provident Fund Commissioner v. Kerala Financial Corporation, 2002 95 FLR 1024, Kerala High Court), State of M.P. v. State Bank of Indore, 2002 10 SCC 441, Textile Labour Association v. Official Liquidator, 2004 101 FLR 627, Central Bank of India v. State of Kerala, 2009 4 SCC 94and observed: A careful reading of the deed of pledge dated 5.3.2001 executed by the management of Kannad Sahakari Sakhar Karkhana Ltd. (the terms of three deeds dated 2.1.2003, 6.2.2003 and 4.4.2003 executed by the management of the other Sugar Mill are substantially similar) shows that even though the sugar bags which were available with the Sugar Mills at the relevant time were placed in the custody of the appellant-bank as security for repayment of loan together with interest, the former continued to be owner thereof. To put it differently, title of the property remained with the Sugar Mills and only limited interest therein was passed on to the appellant-bank as security for repayment of the loan etc. If the management of the Sugar Mills were to repay the dues of the appellant-bank within the time specified in the deeds of pledge, the latter was duty bound to lift its notional control over the sugar bags lying in the godowns of the Sugar Mills. In case of default, the appellant-bank could recover its dues by selling the sugar bags. If the price of the sugar bags was less than the amount due, the appellant-bank could resort to other appropriate adjudicatory mechanism for recovery of the balance amount. If the sugar bags had become property of the appellant-bank simply because the same were pledged by the management of the Sugar Mills for securing repayment of the loan etc., there was no occasion for the latter to take the responsibility of hiring godowns on behalf of the appellant-bank, pay rent thereof and get the goods insured. Equally, there was no reason for the management of the Sugar Mills to take the responsibility of changing or repairing the godowns and bear its cost or confer immunity upon the bank in the matter of weight, quality, conditions or safety of the goods and take upon itself the responsibility for any shortage, damage or shrinkage and insure the goods against any damage or loss or riots or civil commotion. In our considered view, the very fact that except giving the symbolic custody of the sugar bags to the appellant-bank by allowing it to put lock and key on the godowns, all steps for preserving the goods and getting the same insured were taken by the management of the Sugar Mills which also agreed to take the responsibility of any shortage, damage or shrinkage unmistakably shows that the Sugar Mills continued to be owner of the sugar bags.
(3.) The Court then referred to the judgments Lallan Prasad v. Rahmat Ali, 1967 2 SCR 233 and Bank of Bihar v. State of Bihar, 1972 3 SCC 196 and observed: The ratio of the above noted two judgments is that in a contract of pawn the property pledged should be actually or constructively delivered to the pawnee and pawnee has only a special property in the pledge but the general property remains with the pawner and wholly reverts to him on discharge of debt. The right to property vests in the pledge only so far as necessary to secure his debt. We, therefore, hold that the deeds of pledge executed by the management of the Sugar Mills as security for repayment of loan etc. did not have the effect of transferring of the ownership of the sugar bags to the appellant-bank and the Recovery Officer did not commit any illegality by attaching the same and the High Court was fully justified in directing payment of a portion of the sale price to the Assistant Commissioner for being, appropriated towards the provident fund dues of the workers.;