Kozhikode District Co-operative Bank Ltd. and K.V. Venugopalan, General Manager and Smt. P.V. Radha, Manager V. Asst. Provident Fund Commissioner, Employees Provident Fund Organisation and Recovery Officer, Employees Provident Fund Organisation and North Malabar District Co-operative Supply and Marketing Society Ltd.

WP(C)/18054/2006

AI Insights

The case involves the Kozhikode District Co-operative Bank Ltd. and its officials (petitioners) contesting orders issued by the Assistant Provident Fund Commissioner and the Recovery Officer of the Employees Provident Fund Organisation (respondents) under Section 8F of the Employees Provident Funds and Miscellaneous Provisions Act. The dispute centered on whether the bank was liable to pay a sum of Rs.1,16,791, which was allegedly due from the third respondent, a cooperative society, towards provident fund dues. The bank argued that the funds in question were not due to the society as the necessary loan agreements and documents were not executed, and the funds were specifically earmarked for a particular purpose under a loan scheme.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 805905 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 23-12-2011
• Assessment Year: misc
• Laws Referred To: Employees Provident Funds and Miscellaneous Provisions Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: THOMAS MATHEW NELLIMOOTTIL; K A ANGEL TREENA
• Assessee Lawyers: U K RAMAKRISHNAN; E K MADHAVAN; P V LOHITHAKSHAN
• Keywords: Deemed defaulter; Loan agreement; Special SB account; Proceedings under Section 8F
• Section: 8F; 14(2A)

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN FRIDAY, THE 23RD DECEMBER 2011 / 2ND POUSHA 1933 WP(C).No. 18054 of 2006(Y) ------------------------------------ PETITIONER(S): ---------------------- 1. THE KOZHIKODE DISTRICT CO-OP.BANK LTD., P.B.NO.503, KALLAI ROAD, KOZHIKODE-673 002, REPRESENTED BY ITS GENERAL MANAGER. 2. K.V. VENUGOPALAN, GENERAL MANAGER, KOZHIKODE DISTRICT CO-OP.BANK LTD., P.B.NO.503, KALLAI ROAD, KOZHIKODE-673 002. 3. SMT.P.V. RADHA, MANAGER, KOZHIKODE DISTRICT CO-OP.BANK LTD., CHEROOTTY ROAD BRANCH, KOZHIKODE. BY ADV. SRI.U.K.RAMAKRISHNAN, SENIOR ADVOCATE SRI.E.K.MADHAVAN SRI.P.V.LOHITHAKSHAN RESPONDENT(S): ------------------------ 1. ASST.PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION SUB REGIONAL OFFICE, P.B.NO.1806, ERANHIPALAM, KOZHIKODE-673 006. 2. RECOVERY OFFICER, EMPLOYEES PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, P.B.NO.1806, ERANHIPALAM, KOZHIKODE-673 006. 3. NORTH MALABAR DISTRICT CO-OPERATIVE SUPPLY AND MARKETING SOCIETY LTD.NO.F.1003, SILK STREET, CALICUT-32, REPRESENTED BY ITS SECRETARY. R1 AND R2 BY SRI.THOMAS MATHEW NELLIMOOTTIL. R3 BY ADV. SMT.K.A.ANGEL TREENA THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23/12/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 18054 of 2006(Y) APPENDIX PETITIONER'S EXHIBITS: P1 : COPY OF THE LETTER NO.ICDP/49273/2004 DATED 04/12/2004 OF THE REGISTRAR OF CO-OPERATIVE SOCIETIES, KERALA, THIRUVANANTHAPURAM ADDRESSED TO THE FIRST PETITIONER. P2 : COPY OF THE PROCEEDINGS ICDP/14013/2005 DATED 18/04/2005 OF THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM P3 : COPY OF THE LETTER NO.ICDP/KKD/MKTG/CD/II-1/2004-05 DATED 29/04/2005 OF THE GENERAL MANAGER, INTEGRATED CO-OPERATIVE DEVELOPMENT PROJECT, KOZHIKODE TO THE THIRD RESPONDENT. P4 : COPY OF THE ORDER NO. ICDP/36702/2004 DATED 18/04/2005 ISSUED BY THE REGISTRAR OF CO-OPERATIVE SOCIETIES SANCTIONING MARGIN MONEY OF RS.11 LAKHS TO THE 3RD RESPONDENT. P5 : COPY OF THE ORDER NO.KR/KK/1106/ENF./1(2)/2005/9877 DATED 12/08/2005 ISSUED BY THE FIRST RESPONDENT TO THE MANAGER, CHEROOTTY ROAD BRANCH OF THE FIRST PETITIONER BANK. P6 : COPY OF THE LETTER NO.CHR/05 DATED 09/12/2005 SENT BY THE MANAGER OF CHEROOTTY ROAD BRANCH OF THE FIRST PETITIONER BANK TO THE FIRST RESPONDENT. P7 : COPY OF THE ORDER NO.KR/KK/1106/ENF.1(2)/2006/11475 DATED 24/02/2006. P8 : COPY OF THE NOTICE NO.KR/KK/1106/ENF.1(02)/2005-06 DATED 10/03/2006 ISSUED BY THE 1ST RESPONDENT TO THE BRANCH MANAGER OF CHEROOTY ROAD BRANCH OF THE 1ST PETITIONER. P9 : COPY OF THE NOTICE NO.KR/KK/1106/ENF.1(2)/2006 DATED 31/03/2006 ISSUED BY THE 2ND RESPONDENT. P10 : COPY OF THE NOTICE NO.KR/KK/1106/ENF.1(2)/2006/951 DATED 22/05/2006 DECLARING THE MANAGER, CHEROOTY ROAD BRANCH OF THE 1ST PETITIONER AS 'DEEMED DEFAULTER' ISSUED BY THE SECOND RESPONDENT. P11 : COPY OF THE ORDER OF ATTACHMENT DATED 22/05/2006 ISSUED BY THE 2ND RESPONDENT TO THE GENERAL MANAGER OF THE 1ST PETITIONER. P12 : COPY OF THE LETTER DATED 15/06/2006 SENT BY THE GENERAL MANAGER OF THE 1ST PETITIONER BANK TO THE 2ND RESPONDENT. P13 : COPY OF THE NOTICE NO.KR/KK/1106/ENF.1()06/1908 DATED 30/06/2006 OF THE 2ND RESPONDENT RECEIVED BY THE 3RD PETITIONER. RESPONDENT'S EXHIBITS: NIL //TRUE COPY// STU P.A TO JUDGE. S.SIRI JAGAN - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - W.P.(C)NO.18054 OF 2006 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 23rd day of December 2011 --------------------------------------------------- JUDGMENT The first petitioner is the Kozhikode District Co-operative Bank Ltd. The 2nd and 3rd petitioners are its general manager and branch manager respectively. The National Co-operative Development Corporation (NCDC) evolved the Integrated Co-operative Development Project for extending loans to Co-operative Societies. The Registrar of Co-operative Societies is the person responsible for disbursal of the loan amounts provided by the NCDC. The Registrar of Co-operative Societies appointed the first petitioner as the implementation agency for distribution of the loan amounts to various Co-operative Societies. By Exts. P2 and P4, the Registrar of Co- operative Societies sanctioned a total amount of Rs.21 lakhs by way of two loans of Rs.10 lakhs and 11 lakhs to the third respondent Society for installation of a copra dryer unit and as margin money loan through the first petitioner Bank under the Integrated Co-operative Development Project of NCDC. At that time, the third respondent- Society had no elected Board of Directors. The Administrative Committee which was in office up to 26/10/2005 as per Government order issued with retrospective effect on 09.09.2005 demitted office. For availing of the loan, the third respondent- society has to agree to W.P.(C)NO.18054 OF 2006 2 certain terms and conditions prescribed by the NCDC, by excuting an agreement in the prescribed form for the purpose. The administrative committee, who was in charge, also did not execute the necessary agreements. The Administrative Committee of the third respondent did not adopt any valid resolution for execution of agreements with the first petitioner. The first petitioner transferred this Rs.21 lakhs to a special Savings Bank account in the name of the third respondent which cannot be withdrawn by the third respondent without executing necessary agreements, promissory notes etc. by the third respondent- Society, which the third respondent-society was incapable of doing in the absence of a competent Board of Directors or Administrative Committee for the third respondent. While so, the first respondent initiated proceedings under Section 8F of the Employees Provident Funds and Miscellaneous Provisions Act against the Cherootty Road Branch of the first petitioner directing the Branch Manager to pay an amount of Rs.1,16,791/- to the Provident Fund Organisation. Out of the amount kept in the SB account in the name of the 3rd respondent on the assumption that the said branch of the bank is holding money belonging to the third respondent. By Ext. P6, the branch manager of the bank explained to the first respondent that the amount in the special SB account is not money which has become due to the third respondent and without orders of General Manager of ICDP and execution of necessary agreements and other documents by the third respondent, no amount becomes due to the third respondent from the special SB account opened in the name of the third respondent. Despite Ext.P6, W.P.(C)NO.18054 OF 2006 3 the first respondent issued Exts.P7 and P8 again demanding the said amount. Since the first petitioner did not pay the amount, the second respondent issued Exts.P9 and P10 orders declaring the branch manager as a deemed defaulter for having failed to pay the amount of Rs.1,16,791/- which was allegedly payable by the third respondent towards provident fund dues to the first respondent. The second respondent issued Ext.P11 order of attachment attaching the said sum from the salary of the third petitioner, who was the branch manager, at the rate of Rs.5,000/- per month. Although the third respondent submitted Ext.P12 explanation detailing the circumstances, the same was rejected by the second respondent by Ext.P13 order. Subsequently, the second respondent declared all the three petitioners as deemed defaulters under Section 8F and directed them to show cause while prosecution proceeding should not be initiated under Section 14 (2A) of the Employees Provident Fund and Miscellaneous Provisions Act. It was also threatened that other modes of recovery including arrest and detention in civil prison will be resorted to against the petitioners if the amount is not paid on or before 15.07.2006. It is under the above circumstances, the petitioners have filed this writ petition seeking the following reliefs: i. to issue a writ in the nature of certiorari or any other appropriate writ, order or direction calling for the records leading to Exts. P5, P7 and P8 orders of the 1st respondent and Ext.P9, P10, P11 and P13 orders issued by the 2nd respondent and to quash Exts.P5, P7, P8, P9, P10, P11 and P13 orders. ii. to declare that the petitioners are not liable to pay Rs.1,16,791/- to respondents 1 and 2 as deemed defaulters under the EPF Act and W.P.(C)NO.18054 OF 2006 4 proceeded against on account of the statutory liability of the 3rd respondent society, whose money is not at all held by the petitioners. iii. to grant any other appropriate writ, order or direction which this Hon'ble Court may deem fit and necessary in the facts and circumstances of the case.” 2. A counter affidavit has been filed by the respondents 1 and 2 taking the stand that once the amount has been credited into the SB account in the name of the third respondent, the amount has become amount due to the third respondent and consequently against that amount the respondents 1 and 2 are entitled to invoke Section 8F. Since the petitioners have refused to comply with the directions issued by respondents 1 and 2 under Section 8F, the petitioners have become liable to the consequences thereof is the contention raised. 3. I have considered the rival contentions in detail. 4. Section 8F of the Employees Provident Funds and Miscellaneous Provisions Act reads as follows: “Other Modes of recovery 1. Notwithstanding the issue of a certificate to the Recovery Officer under Section 8B, the Central Provident Fund Commissioner or any other officer authorised by the Central Board may recover the amount by any one or more of the modes provided in this section. 2. If any amount is due from any person to any employer who is in arrears, the Central Provident Fund Commissioner or any other officer authorised by the Central Board in this behalf may require such person to deduct from the said amount the arrears due from such employer under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Central Provident Fund Commissioner or the officer so authorised, as the case may be: W.P.(C)NO.18054 OF 2006 5 Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908). 3. (i) The Central Provident Fund Commissioner or any other officer authorised by the Central Board in this behalf may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the employer or, as the case may be, the establishment or any person who holds or may subsequently hold money for or on account of the employer or as the case may be, the establishment, to pay to the Central Provident Fund Commissioner either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due from the employer in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the employer jointly with any other person and for the purposes of this sub-section, the shares of the joint-holders in such account shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the employer at his last address known to the Central Provident Fund Commissioner or, as the case may be, the officer so authorised and in the case of a joint account to all the joint-holders at their last addresses known to the Central Provident Fund Commissioner or the officer so authorised. (iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding any rule, practice or requirement to the contrary. (v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the W.P.(C)NO.18054 OF 2006 6 notice shall be void as against any demand contained in the notice. (vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the employer or that he does not hold any money for or on account of the employer, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false is any material particular, such person shall be personally liable to the Central Provident Fund Commissioner or the officer so authorised to the extent of his own liability to the employer on the date of the notice, or to the extent of the employer's liability for any sum due under this Act, whichever is less. (vii) The Central Provident Fund Commissioner or the officer so authorised may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend the time for making any payment in pursuance of such notice. (viii) The Central Provident Fund Commissioner or the officer so authorised shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the employer to the extent of the amount so paid. (ix) Any person discharging any liability to the employer after the receipt of a notice under this sub-section shall be personally liable to the Central Provident Fund Commissioner or the officer so authorised to the extent of his own liability to the employer so discharged or to the extent of the employer's liability for any sum due under this Act, whichever is less. (x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Central Provident Fund Commissioner or the officer so authorised he shall be deemed to be an employer in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear due from him, in the manner provided in sections 8B to 8E and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 8B. W.P.(C)NO.18054 OF 2006 7 4. The Central Provident Fund Commissioner or the officer authorised by the Central Board in this behalf may apply to the court in whose custody there is money belonging to the employer for payment to him of the entire amount of such money, or if it is more than the amount due, an amount sufficient to discharge the amount due. 5. The Central Provident Fund Commissioner or any officer not below the rank of Assistant Provident Fund Commissioner may, if so authorised by the Central Government by general or special order, recover any arrears of amount due from an employer or, as the case may be, from the establishment by distraint and sale of his or its movable property in the manner laid down in the Third Schedule to the Income-tax Act, 1961(43 to 1961).” The said provision can be invoked only if any amount is due from the first petitioner to the third respondent who is in arrears of payment of amounts under the Employees Provident Funds and Miscellaneous Provision Act. Therefore, the question that should be considered in this writ petition is as to whether any amount has become due to the third respondent from the Cherootty Road Branch of the first respondent-bank. It is not denied by the respondents 1 and 2 that the amount credited in the SB account in the name of the third respondent is the loan amount sanctioned by the Registrar of Co-operative Societies under the Integrated Co-operative Development Project under the National Co-operative Development Corporation. That loan is sanctioned on specific terms and conditions. Before the 3rd respondent becoming eligible to withdraw that amount as a loan, the third respondent has to agree to the terms and conditions of the said loan. For that they have to certainly execute a loan agreement agreeing to the terms and conditions. Other loan documents also have to be executed. The respondents 1 and 2 have no case that the third W.P.(C)NO.18054 OF 2006 8 respondent have so executed a loan agreement and other loan documents. Unless and until those documents are executed by the third respondent, the loan amount does not become due to the third respondent, notwithstanding the fact that loan amount has been separately kept by the 1st respondent in a special SB account in the name of the third respondent. Therefore, I am satisfied that the amount standing in the SB account in the name of the third respondent with Cherootty branch of the 1st respondent has not become amount due to the third respondent so that the respondents 1 and 2 can proceed under Section 8F against the amount. 5. Even apart from the same, the loan amount has been specifically ear-marked for a specific purpose, which is for installation of a copra dryer unit by the third respondent. The 3rd respondent cannot use that loan amount for any other purpose than to install the copra dryer unit. That being so, by no stretch of imagination can it be held that the amount separately kept in the SB account in the name of the third respondent has become money due to the third respondent, which can be proceeded against under section 8F of the Employees Provident Funds and Miscellaneous Provisions Act. Therefore, the proceedings initiated by the respondents 1 and 2 against the petitioners under Section 8F is totally without jurisdiction. In view of the above findings, the petitioners are entitled to succeed in this writ petition. Accordingly, Exts.P5, P7, and P8 orders of the first respondent and Exts.P9, P10, P11 and P13 orders of the 2nd respondent are hereby quashed. It is declared that the petitioners are not liable to pay the W.P.(C)NO.18054 OF 2006 9 amount of Rs.1,16,791/- to respondents 1 and 2 as deemed defaulters under the Employees Provident Fund and Miscellaneous Provisions Act. Consequently, no further proceedings whatsoever shall be initiated against the petitioners for non-compliance with the directions issued by the respondents 1 and 2 under Section 8F of the Employees Provident Funds and Miscellaneous Provisions Act. The writ petition is allowed as above. S.SIRI JAGAN, JUDGE STU W.P.(C)NO.18054 OF 2006 10 "