Disposed

P.K.Ramachandran, v. Regional Provident Fund Commissioner-Ii & Recovery Officer

Kerala HC12 Jul 2024WP(C)/18155/2023

Case brief

AI extract

What is this about?

EPF Organisation sought arrest and detention of a garment company's Managing Director in execution of a recovery certificate while his assets were already attached by banks and statutory authorities. The Court held arrest is permissible only if Rule 73 conditions are conclusively found, directed him to appear before the authority with his explanation, and barred arrest absent such findings.

What did the court decide?

Petitioner directed to appear before respondent on 29.07.2024; decision to be taken on Ext.P7 explanation; no arrest unless Rule 73 conditions are conclusively found.

P.K.Ramachandran, Vs Regional Provident Fund… — Pension and Retirement Benefits | Kerala HC (2024)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE N.NAGARESH

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FRIDAY, THE 12TH DAY OF JULY 2024 / 21ST ASHADHA, 1946
WP(C) NO. 18155 OF 2023

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PETITIONER:

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P.K.RAMACHANDRAN,
AGED 73 YEARS
S/O KRISHNAN NAIR, ARCHANA BHAVAN, PUTHIYA ROAD,
VENNALA, KOCHI-682028
BY ADVS.
SRI.P.RAMAKRISHNAN
SMT.PREETHI RAMAKRISHNAN (P-212)
SRI.C.ANIL KUMAR

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RESPONDENT:

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REGIONAL PROVIDENT FUND COMMISSIONER-II & RECOVERY
OFFICER, EPF ORGANIZATION, BHAVISHYANIDHI BHAVAN,
KALOOR, KOCHI -682017

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BY ADV
SRI.V.JOHN MANI, R1

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
12.07.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.P.(C) NO. 18155 OF 2023 2

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N. NAGARESH, J.

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W.P.(C) No.18155 of 2023

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Dated this 12^th day of July, 2024

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JUDGMENT

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The petitioner, Managing Director of a Company engaged in the manufacture of garments, was proceeded against by the EPF Organisation, alleging failure to remit contributions under the Employees Provident Funds and Miscellaneous Provisions Act, 1952.

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The petitioner submits that ESI Corporation and Indian Overseas Bank from which he had taken a loan, have also initiated recovery proceedings against the petitioner. The Bank took possession of the petitioner’s only asset, which is the Factory building and the land on which it stands.

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The petitioner states that the Bank attempted to sell the

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property on two occasions. The sale could not be materialized. In

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W.P.(C) NO. 18155 OF 2023 3

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the meanwhile, the Provident Fund Organisation has also attached the property as per Ext.P2. Dissatisfied with the attachment, the Provident Fund Organization has now issued Ext.P6 notice seeking the petitioner to show cause why he should not be committed to civil prison in execution of the recovery certificate.

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Counsel for the petitioner submits that Section 8B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 provides for modes of recovery. The recovery can be either by attachment and sale of movable property or arrest of the employer and detention in prison or by appointing a receiver for the management of the movable properties. According to the counsel for the petitioner, in view of the judgment of a Division Bench of this Court in Ali v. Recovery Officer, E.P.F. Organisation [2007 (1) KLT 927], arrest and detention can be resorted to only when there are no other methods.

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All the properties of the petitioner are under attachment

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by the Bank and various statutory authorities. The petitioner is not

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W.P.(C) NO. 18155 OF 2023 4

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in a position to make any remittances to the EPF Organization. In such circumstances, the respondent is not justified in issuing Ext.P6 notice for arrest and detention, contended the petitioner.

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Standing Counsel entered appearance and resisted the writ petition on behalf of the respondent-Employees Provident Fund Organisation. The respondent submitted that the petitioner defaulted in remittances of monthly contributions. The cheques given by the petitioner were returned as ‘Funds Insufficient’. By Ext.P6, the petitioner was required to appear before the authority on 29.05.2023 to show cause why he should not be arrested and committed to civil prison, in execution of Recovery Certificate for an amount of Rs.56,15,835/- along with Recovery cost of Rs.1600/-. The petitioner did not appear before the respondent. Ext.P6 is only a notice and the petitioner can appear in response to Ext.P6 and advance reasons against arrest and detention. The judgment in Ali (Supra) will not apply to the case because the judgment in Ali (supra), was a case where notice was not issued.

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W.P.(C) NO. 18155 OF 2023 5

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I have heard the learned counsel for the petitioner and

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the learned Standing Counsel representing the respondent.

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It is an admitted position that the petitioner’s Establishment stands closed with effect from 07.05.2021. The dues claimed by the E.P.F. Organisation relates to the years 2009 to 2017. Ext.P1 would show that the petitioner’s property is attached by ESI Corporation. Ext.P2 would indicate that the Provident Fund Organisation has also effected attachment. Ext.P3 would indicate that the Bank has attached the petitioner's property. Exts.P4 and P5 are sale notices.

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As the petitioner's assets are attached by various Banks and statutory authorities, arrest and detention of the petitioner can be resorted to only when the conditions mentioned in Rule 73 (1) of the Second Schedule in Part V to the Income Tax Act, 1961 and the Income Tax (Certified Proceedings) Rules, 1962 are satisfied. Rule 73 would indicate that a notice can be issued calling upon the defaulter to appear before the authority and show cause why he should not be committed to civil prison.

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W.P.(C) NO. 18155 OF 2023 6

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For ordering detention, the authority must be satisfied that the defaulter with the object of obstructing the execution of the Certificate, has after the drawing up of the Certificate by the Tax Recovery Officer, dishonestly transferred, concealed, or removed any part of his property, or the defaulter has the means to pay the arrears or substantial part thereof and refuses or neglects, or has refused or neglected to pay the same.

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The counsel for the petitioner would submit that even if there is a likelihood of the defaulter being absconding or has failed to appear before the authorities, then, arrest and detention can be effected.

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Taking into consideration the facts of the case and taking into consideration the fact that the petitioner's properties are attached, the writ petition is disposed of with the following directions.

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The petitioner shall appear before the respondent on 29.07.2024. After hearing the petitioner, the respondent shall take a decision, taking note of Ext.P7 explanation submitted by the

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W.P.(C) NO. 18155 OF 2023 7

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petitioner. It is made clear that no arrest shall be made unless there exists clear proof of any of the requirements made mention

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in Rule 73 of the Second Schedule in Part V of the Income Tax

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Act, 1961 and only if the authority comes to a conclusive finding as regards existence of any of the conditions mentioned in Rule

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73 of the Income Tax Act, 1961. The petitioner may also submit supplementary representation / explanation on 29.07.2024.

Sd/-

N.NAGARESH

JUDGE

vnk/-

W.P.(C) NO. 18155 OF 2023 8

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APPENDIX OF WP(C) 18155/2023

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PETITIONER’S EXHIBITS:-

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EXHIBIT P-1TRUE COPY OF THE ORDER OF ATTACHMENT
DATED 7/10/2021 ISSUED BY THE RECOVERY
OFFICER OF THE ESI CORPORATION
EXHIBIT P-2TRUE COPY OF THE ORDER OF ATTACHMENT
DATED 1/2/2022 ISSUED BY THE RESPONDENT.
EXHIBIT P-3TRUE COPY OF THE POSSESSION NOTICE DATED
30/3/2022 ISSUED BY THE INDIAN OVERSEAS
BANK, KAKKANAD BRANCH
EXHIBIT P-4TRUE COPY OF NOTICE OF SALE OF PROPERTY
DATED 27/5/2022 ISSUED BY THE INDIAN
OVERSEAS BANK.
EXHIBIT P-5TRUE COPY OF NOTICE DATED 11/8/2022
ISSUED BY INDIAN OVERSEAS BANK
EXHIBIT P-6TRUE COPY OF NOTICE DATED 19/5/2023
ISSUED BY THE RESPONDENT.
EXHIBIT P-7TRUE COPY OF REPRESENTATION DATED
1/06/2023 FROM THE PETITIONER TO THE
RESPONDENT

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RESPONDENT’S EXHIBITS:-

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EXHIBIT R (a)A TRUE COPY OF ENFORCEMENT OFFICERS
REPORT DATED 12.01.2022
EXHIBIT R (b)A TRUE COPY OF ACKNOWLEDGMENT CARD
EXHIBIT R (c)A TRUE COPY OF LETTER FROM PETITIONER
DATED 10.01.2022

P.K.Ramachandran, v. Regional Provident Fund Commissioner-Ii & Recovery Officer

Case brief

What is this about?

What did the court decide?

P.K.Ramachandran, v. Regional Provident Fund Commissioner-Ii & Recovery Officer

Case brief

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What did the court decide?

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