DEEPAK CHOUDHARY V. THE REGIONAL PROVIDENT FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANIZATION

LPA/183/2022

AI Insights

The case revolves around the appellant, Deepak Choudhary, who contested the recovery proceedings initiated against him for dues under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, related to his family's business establishment. The High Court's decision addressed the procedural aspects of how recovery should be conducted, particularly whether it should first target the 'establishment' and its assets before implicating the legal heirs of the deceased owner. The court found that the Recovery Officer had not followed the correct procedure by not first attempting to recover the dues from the 'establishment'.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 725963 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 26-07-2023
• Assessment Year: misc
• Laws Referred To: Employees' Provident Funds and Miscellaneous Provisions Act, 1952, Income Tax Act, 1961, Income Tax (Certificate Proceedings) Rules, 1962
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: D K MALTIYAR; BIBHASH SINHA
• Assessee Lawyers: NITIN PASARI; SHUBHAM CHOUDHARY
• Keywords: Employees Provident Funds; Family partition; Legal heirs; Recovery proceedings; Establishment Liability
• Section: 8; 8(b); 7(a); 7-B; 7(I); 8-G

Judgement Text

"IN THE HIGH COURT OF JHARKHAND AT RANCHI (Letters Patent Appellate Jurisdiction) L.P.A No. 183 of 2022 Deepak Choudhary, S/o Late Madan Mohan Choudhary, resident of Indira Nagar, Quarter No.3, Kanke Road, P.O. G.P.O., P.S. Gonda, District- Ranchi. . .… Appellant/Petitioner Versus 1.The Regional Provident Fund Commissioner, Employees Provident Fund Organization having its office at Bhagirathi Complex, Opp. Adivasi Hostel, Near Circuit House, Circular Road, PO & PS-Lalpur, Ranchi. 2.The Assistant Provident Fund Commissioner, Employees Provident Fund Organization having its office at Bhagirathi Complex, Opp. Adivasi Hostel, Near Circuit House, Circular Road, PO & PS-Lalpur, Ranchi. 3.The Recovery Officer, Employees Provident Fund Organization having its office at Bhagirathi Complex, Opp. Adivasi Hostel, Near Circuit House, Circular Road, PO & PS-Lalpur, Ranchi. 4.Smt. Minu Choudhary, W/o Late Vikash Kumar Choudhary, Resident of Deep Bhawan”, Sukhdeo Nagar, Ratu Road, PO-GPO & PS-Sukhdeo Nagar, Ranchi. 5.Smt. Mridula Choudhary, W/o Late Madan Mohan Chaudhary, Resident of “Deep Bhawan, Sukhdeo Nagar, Ratu Road, PO-GPO & PS-Sukhdeo Nagar, Ranchi. ............Respondents/Respondents -------------- CORAM: HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR HON'BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY For the Appellant : Mr. Nitin Kumar Pasari, Advocate Mr. Shubham Choudhary, Advocate For the Resp. Nos.1 to 3 : Mr. D.K. Maltiyar, Advocate For the Resp. No.5 : Mr. Bibhash Sinha, Advocate --------------- O R D E R No.08 Dated 26th July 2023 Per, Anubha Rawat Chaudhary, J. This appeal has been filed against the judgment dated 20th April 2022 passed in W.P(C) No.5281 of 2012 whereby the learned writ Court has refused to interfere with the order passed under the provisions of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act of 1952) and dismissed the writ petition and granted liberty to the appellant to file appeal under section 7-I of the aforesaid Act of 1952. 2. The learned writ Court has held as under: “After hearing learned counsel for the parties and having gone through the 2 materials brought on record, it appears that the demand is against the Establishment which was a proprietorship of father of the petitioner, Mr. Madan Mohan Choudhary, for the period from May, 1989 to October, 1994. Accordingly, this Court in view of the provisions of the Appeal under Section 7-I of the Act, 1952 is not inclined to entertain the prayer made in the instant Writ Petition. As such, the instant Writ Petition stands dismissed. However, the petitioner is at liberty to prefer an appeal, if so advised under Section 7-I of the Act, 1952 within a period of 30 days with an explanation that they have preferred the instant writ Petition in the year, 2012 and the concerned authority shall consider the same under Section 14 of the Limitation Act and pass a reasoned order on limitation petition as well as in appeal, in accordance with law.” 3. The foundational facts of the case are as under: - a. The family business of the appellant was being run by his father, late Madan Mohan Chaudhary. An order under section 7-A of the Act was passed by the respondent no.2 on 21st June 1995 followed by institution of recovery proceedings being Certificate Case No.1304 of 1996. Thereafter Madan Mohan Chaudhary expired. b. During the life time of Madan Mohan Chaudhary, there was an oral partition dated 5th September 1995 followed by memorandum of partition dated 13th September 1995. As per the memorandum of partition, the property of the ‘establishment’ in connection with which the dues were assessed under section 7-A of the aforesaid Act, fell in the share of the private respondent no.5(mother of the appellant) and the brother of the appellant. The brother of the appellant also expired and his wife is the respondent no.4. c. In the month of May 2005, the appellant was served with a warrant of arrest in connection with Certificate Case No.1304 of 1996 for realization of dues arising out of aforesaid order passed under section 7-A of the said Act. d. The appellant filed a petition before the Recovery Officer seeking stay of the warrant of arrest. When no action was taken, the appellant filed a writ petition before this Court being W.P(C) No.3490 of 2005. The writ petition was dismissed with an observation that if the appellant approaches the competent authority the application of the appellant shall be disposed of. 3 e. The appellant filed an application before the respondent no.2 asking for issuance of notice to his brother Vikash Kumar Choudhary but the respondent no.2 vide order dated 2nd January 2006, refused to entertain the petition by stating that the Assessing Officer was not the competent authority to entertain such a petition. f. Against the aforesaid order dated 30th December 2005/ 2nd January 2006, the appellant filed writ petition being W.P(C) No.3151 of 2006 which was ultimately disposed of by an order dated 4th July 2012 with a direction to avail the statutory remedy within a period of one week. g. Thereafter the appellant filed a review petition under section 7-B r/w section 7-A (4) and section 7-A (5) of the Act before the respondent no.2. h. The review petition filed by the appellant was dismissed vide order dated 21st August 2012 on the ground that the appellant was not disputing the liability against the ‘establishment’ and was only seeking a relief against the recovery proceeding which had commenced against him by the Recovery Officer. i. Consequently, the appellant filed another writ petition being W.P(C) No.5281 of 2012 challenging the order dated 21st August 2012 which ultimately has been dismissed by the learned writ Court vide impugned order dated 20thApril 2022. 4. It is submitted by the learned counsel for the appellant that vide petition filed before the respondent no.2, the appellant had brought the family partition on record and had also stated that it was always open for the authority to recover the dues of the ‘establishment’ from the estate and assets of the respondent no.4 and the respondent no.5, who were allocated the family property on which the ‘establishment’ was located. The appellant had requested the respondent no.2 to drop the proceedings against him and proceed against the respondent nos.4 and 5. It is the case of the appellant that the dues assessed against the ‘establishment’ are to be recovered from the ‘establishment’ and therefore the order impugned before the learned writ Court is not sustainable in the eyes of law. 4 5. It has been argued that the respondent no.2 ought to have taken steps for recovery of dues against the ‘establishment’ before proceeding against the appellant in his individual capacity. 6. The learned counsel has submitted that he has no objection if the respondent no.2/the Recovery Officer proceeds against the property of the ‘establishment’ for realization of the dues assessed under section 7-A of the aforesaid Act. 7. The learned counsel for the appellant has submitted that aforesaid aspect of the matter has not been properly considered by the learned writ Court and therefore the impugned order passed by the learned Single Judge calls for interference by this Court. 8. The learned counsel appearing on behalf of the private respondent no.5 has submitted that the petition filed by the appellant before the respondent no.2 was itself not maintainable. He submits that neither any counter-affidavit was filed by the private respondent in the writ petition nor any counter-affidavit has been filed in this appeal. However, he admits that the property of the ‘establishment’ initially fell in the share of the respondent no.5 and her second son (late husband of the respondent no.4). 9. The learned counsel appearing on behalf of the respondent no.3 has submitted that the appellant, having not disputed the assessed liability under section 7-A of the said Act, was rightly proceeded against as he is also the legal heir of the deceased owner of the ‘establishment’. 10. After hearing the learned counsels for the parties, we find that it is not in dispute that the liability against the ‘establishment’ was assessed under section 7-A of the aforesaid Act as back as on 21st June 1995 during the lifetime of the owner of the ‘establishment’, namely, Madan Mohan Chaudhary which is said to be a part of the family business. The demand became final and recovery proceedings were initiated being Certificate Case No. 1304 of 1996. There has been certain family arrangement amongst the family members and the ‘establishment’ fell in the share of the respondent no.5 and husband of the respondent no.4. Thereafter the owner, namely, Madan Mohan Chaudhary expired on 17th May 1996. 11. Later on, the appellant was served with warrant of arrest in Certificate Case No. 1304 of 1996. The appellant appeared and filed a petition denying his liability. His specific case was that the ‘establishment’ fell in the share of his mother and brother and therefore the respondent no.2 5 may proceed against his mother and brother. After filing W.P(C)No.3151 of 2006 before this Court, the appellant filed a petition before the respondent no.2 and made the following prayer: “It is therefore most humbly prayed that the recovery proceeding to the extent it relates to the petitioner be dropped and appropriate proceeding, if any, be initiated by the Organization, if the organization so chooses, against the holder of the property namely Smt. Minu Choudhary and Smt. Mridula Choudhary and pending final hearing of this application no coercive action be taken against the petitioner, till the matter is finally adjudicated upon. And For which the petitioner as in duty bound shall ever pray.” 12. However, vide order dated 30th October 2012, the respondent no.2 refused to entertain the petition on the ground that the appellant did not deny the liability against the ‘establishment’ without considering the fact that the appellant was simply insisting that the proceeding should continue against the holder of the concerned property of the ‘establishment’. The said order dated 30th October 2012 was challenged in the writ petition but the writ petition has been dismissed. 13. Section 8 of the aforesaid Act deals with mode of recovery of money due from employers. By virtue of section 8-G of the aforesaid Act, the provisions of Second and Third Schedules of the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time to time is applicable with necessary modifications for recovery of the dues under section 8 of the aforesaid Act of 1952. Section 8-G of the aforesaid Act of 1952 and Rule 85 of the Second Schedule of the Income Tax Act,1961 dealing with the procedure for recovery of dues on account of death of a defaulter are quoted as under: - “8-G. Application of certain provisions of Income Tax Act.—The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961) and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount mentioned in Section 8 of this Act instead of to the income tax: Provided that any reference in the said provisions and the rules to the “assessee” shall be construed as a reference to an employer as defined in this Act.” “85. Procedure on death of defaulter: - If at any time after the certificate is drawn up by the Tax Recovery Officer the defaulter dies, the proceedings under this Schedule (except arrest and detention) may be continued against the legal representative of the defaulter, and the provisions of this Schedule shall apply as if the legal representative were the defaulter.” 14. In view of aforesaid Rule 85 of the Second Schedule of the Income Tax Act, 1961, the respondent no.2 can certainly proceed against the 6 legal representatives of late father of the appellant, who was a defaulter. However, this Rule has to be read with section 8-B of the aforesaid Act of 1952 which provides that the attachment and sale of any property for realization of dues shall first be effected against the properties of the ‘establishment’ and when such attachment and sale is insufficient for recovery of the whole amount, the Recovery Officer may take such steps against the property of the employer for recovery of the whole or any part of such arrears. Section 8-B of the aforesaid Act of 1952 is quoted as under: - “8-B. Issue of certificate to the Recovery Officer.— (1) Where any amount is in arrear under Section 8, the authorised officer may issue, to the Recovery Officer, a certificate under his signature specifying the amount of arrears and the Recovery Officer, on receipt of such certificate, shall proceed to recover the amount specified therein from the establishment or, as the case may be, the employer by one or more of the modes mentioned below:— (a) attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer; (b) arrest of the employer and his detention in prison; (c) appointing a receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer: Provided that the attachment and sale of any property under this section shall first be effected against the properties of the establishment and where such attachment and sale is insufficient for recovering the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such proceedings against the property of the employer for recovery of the whole or any part of such arrears. (2) The authorised officer may issue a certificate under sub-section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken.” 15. This Court is of the considered view that the respondent no.2/Recovery Officer ought to have first proceeded against the ‘establishment’ and if the assets of the ‘establishment’ were insufficient to satisfy the dues, then only the respondent no.2/Recovery Officer could have proceeded for attachment and sale of other properties of the deceased employer or his legal heirs as the case may be. 16. In the present case, instead of proceeding against the ‘establishment’ the Recovery Officer proceeded only against the appellant although the appellant had no objection to attachment and sale of the properties of the ‘establishment’ for recovery of the dues under the Act. 17. In the aforesaid circumstances, the respondent no.2 ought to have accepted the prayer of the appellant to drop the proceedings against him and to proceed against the ‘establishment’ being owned and possessed by the private respondents. 18. Accordingly, the order impugned in the writ petition dated 30th 7 August 2012, refusing to issue notice to the private respondents and consequently refusing to proceed against the ‘establishment’, on the sole ground that the liability against the ‘establishment’ is not in dispute, cannot be sustained in the eyes of law, which is, accordingly, set aside. 19. This Court is of the considered view that the matter is to be considered afresh by the respondent no.2 and also the Recovery Officer who shall have the liberty to proceed for recovery of the dues in terms of section 8-B read with section 8-G of the aforesaid Act of 1952. 20. This Court also finds that in the impugned order, the learned writ Court duly observed that the demand is against the ‘establishment’ which was a proprietorship of father of the appellant, but refused to entertain the writ petition on account of the provision of the Appeal under section 7-I of the Act, 1952. 21. However, in view of the aforesaid provisions of law read with the facts and circumstances of this case, the impugned order dated 20th April 2022 refusing to entertain the writ petition on account of the provision of the Appeal under section 7-I of the Act, 1952, is also set aside. 22. W.P(C) No.5281 of 2012 is allowed to the extent that the application dated 9th May 2005 filed by the appellant before the Recovery Officer (Annexure-2 to the writ petition) stands revived. 23. L.P.A No.183 of 2022 is allowed, to the above extent. (Shree Chandrashekhar, J.) (Anubha Rawat Choudhary, J.) Jharkhand High Court, Ranchi Dated : 26th July 2023 sudhir/N.A.F.R. "