EPF dues to get priority in liquidation process – Supreme Court

Dear Friends





Sub: EPF dues to get priority in liquidation process – Supreme Court



Hon’ble Supreme Court of India in the matter of EPF Commissioner –vs- Official Liquidator of Esskay Pharmaceuticals Limited comprising of the Bench of Hon’ble Mr.Justice G.S.Singhvi and H.L.Dattu J.J. dated 8.11.2011, have held that in the Liquidation process of a Company, in terms of Section 530(1) of Companies Act, all revenues, taxes, cesses and rates due from the company to the Central or State Government or to a local authority, all wages or salary or any employee, in respect of the services rendered to the company and due for a period not exceeding 4 months all accrued holiday remuneration etc. and all sums due to any employee from provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees maintained by the company are payable in priority to all other debts.



Further as per Section 11 (2) of the EPF Act, the amount due from the Employer on account of Employees contribution was declared as First Charge on the assets and became payable on priority to all other debts. But there was a problem with Section 529-A of the Companies Act, insertion provision did not declare workmen’s dues or dues to provident fund as First charge.



The Hon’ble Supreme Court has resolved the issue and summed up its findings as follows:



“43. At the cost of repetition, we would emphasize that in terms of Section 530(1), all revenues, taxes, cesses and rates due from the company to the Central or State Government or to a local authority, all wages or salary or any employee, in respect of the services rendered to the company and due for a period not exceeding 4 months all accrued holiday remuneration etc. and all sums due to any employee from provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees maintained by the company are payable in priority to all other debts.



This provision existed when Section 11(2) was inserted in the EPF Act by Act No. 40 of 1973 and any amount due from an employer in respect of the employees’ contribution was declared first charge on the assets of the establishment and became payable in priority to all other debts. However, while inserting Section 529A in the Companies Act by Act No.35 of 1985 Parliament, in its wisdom, did not declare the workmen’s dues (this expression includes various dues including provident fund) as first charge.



The effect of the amendment made in the Companies Act in 1985 is only to expand the scope of the dues of workmen and place them at par with the debts due to secured creditors and there is no reason to interpret this amendment as giving priority to the debts due to secured creditor over the dues of provident fund payable by an employer.



Of course, after the amount due from an employer under the EPF Act is paid, the other dues of the workers will be treated at par with the debts due to secured creditors and payment thereof will be regulated by the provisions contained in Section 529(1) read with Section 529(3), 529A and 530 of the Companies Act.”





By the Judgment of the Apex Court many pending Court matters involving EPF dues would be settled in favour of the Department and consequently the same would flow into the EPF Account of Employees.A good development which will protect the scores of such affected workers.

With Regards



V.Sounder Rajan

VS Rajan Associates,

Advocates & Notaries & Legal Consultants

Comments
If you want a lawyer to advise you, Ask for Legal Advice .
The space below is only for comments on the story published on this page.

Hi Sir,

I was working in Telecomone Pvt Ltd Bangalore and out source for Nokia siemens but after 2year of work and service with them i left telecomone in July -2011 but now telecomone is not releasing my amount 66000 which is belong to my salary and some other clams ...i applied for my EPF reimbursement but even they haven't updated on their status.
Now it is 7th month
And if i go for FIR than again they will ask some part and all stuff also I am afraid of loosing my current job i go for FIR, file a case and spending time for attending it.
Even i don't want to lose my amount also...!!
Please Help me...
What to do...???

Dear Abhijeet,

Thanks for showing trust in LawIsGreek to solve your query.

We request you to enter your query by using the "Ask for Legal Advice" section on the site. That will help us direct this to the most relevant lawyers.

Legally yours,
LawIsGreek team.

Post new comment

The content of this field is kept private and will not be shown publicly.