Jalgaon District Central Coop. Bank Ltd. Vs State of Maharashtra and Ors. (Supreme Court of India)
Provident Fund First, Bank Next —EPF First Charge Prevails Over SARFAESI Priority; Workmen’s Dues Not Prior to Secured Creditor
The Supreme Court dealt with a long-pending dispute between Jalgaon District Central Cooperative Bank (a secured creditor) & workmen of a sugar factory owned by a Cooperative Society whose assets had been mortgaged & later taken over under the SARFAESI Act.
The Bank argued that after registering its security interest under Section 23 & Section 26E of SARFAESI, it had absolute statutory priority over all other dues, including workmen’s dues & Provident Fund arrears. The workmen argued that EPF dues enjoy a statutory first charge under Section 11(2) of the EPF & MP Act, overriding other debts.
The Court examined the statutory framework & precedents, including PNB v. Union of India, Maharashtra State Cooperative Bank, SICOM, & Central Bank of India. It held that Section 26E SARFAESI gives only “priority of payment”, whereas Section 11(2) EPF Act creates a “first charge” on the establishment’s assets, which is a stronger legal right than mere priority. A statutory first charge prevails even against later non-obstante clauses such as those introduced in SARFAESI in 2020.
