Edelweiss Asset Reconstruction Limited Vs Regional PF Commissioner & Recovery Officer (Supreme Court of India)
EPFO Dues vs. Secured Creditors – Supreme Court Remands Priority Dispute for Fresh Hearing
In an important ruling delivered on, the Supreme Court set aside the Karnataka High Court’s judgment and remanded the matter for fresh adjudication, directing that Axis Bank must be impleaded as a party before the High Court to determine the contentious issue of priority between statutory provident fund dues and secured creditor claims under SARFAESI Act.
The lis arose out of default by M/s Acropetal Technologies Pvt. Ltd. in remitting provident fund dues since July 2013. The Regional PF Commissioner-II determined liability of ₹1.28 crore by order dated 08.06.2015 under Section 7A of the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, cautioning that further interest u/s 7Q and damages u/s 14B would also be leviable. Meanwhile, the Establishment’s loan accounts had been classified as NPAs and Axis Bank, SBI & SBT initiated recovery by auctioning mortgaged properties.
Axis Bank auctioned the Attibele property in 2016, realising nearly ₹12 crores, but appropriated the entire sale proceeds towards its own dues. On the other hand, the appellant Edelweiss Asset Reconstruction Ltd. (EARC), acting as assignee of SBI, auctioned the Kammanahalli and Palya properties, realising only ₹7 crores. The EPFO invoked Section 11(2) of the PF Act, asserting its statutory first charge over the assets and demanded remittance of ₹2.08 crore from EARC. While litigation was pending, EARC deposited ₹75 lakhs pursuant to interim directions of the High Court and indicated willingness to pay ₹78.42 lakhs in full and final settlement of its liability. It contended that the balance liability of about ₹1.3 crore under Section 14B ought to be recovered from Axis Bank, which had realised far greater proceeds from sale.
