MR RAKESH SHARMA V. REGIONAL PROVIDENTFUND COMMISSIONER II AND RECOVERY OFFICER

WP/30679/2024

AI Insights

The case involves Mr. Rakesh Sharma, a director of Asarva Chips and Technologies Pvt. Ltd., who challenged a Prohibitory Order issued by the EPFO for the recovery of provident fund dues from the company. The EPFO had attached a bank account, which the petitioner claimed was his personal account, not the company's. The court examined whether the EPFO's actions were justified and whether the Prohibitory Order violated principles of natural justice. The court concluded that the petitioner had ample opportunity to contest the recovery process but failed to do so, thus upholding the Prohibitory Order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 725819 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-12-2024
• Assessment Year: misc
• Other Referred Cases: MANIPAL SOWBHAGYA NIDHI LIMITED Vs. THE REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANIZATION AND ORS.
• Laws Referred To: Employees Provident Funds and Miscellaneous Provisions Act, 1952, Employees Fund Scheme 1952, Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: B V VIDYULATHA
• Assessee Lawyers: HEMANTH RAO
• Keywords: Natural Justice; Prohibitory order; Provident Fund Dues; Recovery Certificate
• Section: 226; 7A; 227

Judgement Text

" - 1 - NC: 2024:KHC:50247 WP No. 30679 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF DECEMBER, 2024 BEFORE THE HON'BLE MS. JUSTICE JYOTI MULIMANI WRIT PETITION NO. 30679 OF 2024 (L-PF) BETWEEN: MR. RAKESH SHARMA S/O C.B.SHARMA, AGED ABOUT 66 YEARS, DIRECTOR OF ASARVA CHIPS AND TECHNOLOGIES PVT., LTD., RESIDING AT DELPHI-II 605, HOSUR ROAD, NO.20, BANGALORE-560 029. …PETITIONER (BY SRI. HEMANTH.R.RAO., ADVOCATE) AND: REGIONAL PROVIDENT FUND COMMISSIONER-II AND RECOVERY OFFICER, HAVING ITS OFFICE AT: EMPLOYEES' PROVIDENT FUND ORGANIZATION, BHAVISHYANIDHI BHAVAN, 13, RAJA RAM MOHAN ROY ROAD, BENGALURU-560 025. …RESPONDENT (BY SMT. B.V.VIDYULATHA., ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS. THIS WRIT PETITION IS LISTED FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, AN ORDER IS MADE AS UNDER: Digitally signed by PREMCHANDRA M R Location: High Court of Karnataka - 2 - NC: 2024:KHC:50247 WP No. 30679 of 2024 ORAL ORDER Sri. Hemanth R. Rao., counsel for the petitioner and Smt. B.V. Vidyulatha., counsel for the respondent appeared in person. 2. The short facts are these: It is stated that the petitioner is a Director of Asarva Chips and Technologies Private Limited (\"Company\"). The Company is a covered establishment under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (for short 'the Act') and the Employees Fund Scheme 1952 (for short 'the Scheme'). It is the case of the respondent that the Company has failed to pay provident fund dues of Rs.9,22,523/-. To recover the said amount, the respondent issued a Prohibitory Order dated 24.09.2024 to the Branch Manager, HDFC Bank stating that the Company is maintaining Account bearing No.50200014451604 with the Bank and attached the said account of the Company for recovery of the provident fund dues. Pursuant thereto, HDFC Bank has debited a sum of Rs.9,22,523/- and credited it to the respondent's account on 16.10.2024. - 3 - NC: 2024:KHC:50247 WP No. 30679 of 2024 It is contended that the Bank Account bearing No. 50200014451604 is the personal account of the petitioner. The petitioner being one of the Directors has assailed the Prohibitory Order in this Writ Petition on several grounds as set out in the Memorandum of Writ Petition. 3. Counsel for the respective parties urged several contentions. Counsel Sri. Hemanth Rao, in presenting his arguments submits that the Prohibitory Order is misconceived, illegal, and arbitrary and the same has been passed without application of mind by the respondent. Next, he submits that the Prohibitory Order mentions account No.50200014451604 as the account of the Company maintained in the HDFC Bank. However, the said account is not at all the Company's account, but the personal account of the petitioner who is one of the Directors of the Company. A further submission is made that the liability of the Company is distinct from the liability of the Directors of the Company. - 4 - NC: 2024:KHC:50247 WP No. 30679 of 2024 Counsel for the petitioner vehemently contended that under Rule 26 of II Schedule of the Income Tax Act, the respondent can only pass an order prohibiting the Bank from releasing the amount in favor of the petitioner. However, there is no provision for recovering the amount without notice to the debtor. Counsel, therefore, submits that the Prohibitory Order is liable to be set aside on this ground alone. To substantiate the said contention, counsel placed reliance on the decision in MANIPAL SOWBHAGYA NIDHI LIMITED Vs. THE REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANIZATION AND ORS. reported in MANU/TN/3920/2011. Lastly, he submits that viewed from any angle, the Prohibitory Order is in violation of the principles of natural justice and the petitioner was not heard before passing the Prohibitory Order. Counsel, therefore, submits that the Prohibitory order is liable to be set aside and the writ petition may be allowed. By way of reply, counsel Smt.B.V.Vidyulatha., submits that the recovery dues about 7A are for the period 2016-17 - 5 - NC: 2024:KHC:50247 WP No. 30679 of 2024 which remains undisputed. The recovery certification was issued on 05.10.2020. She argued by saying that either the Company or the Directors of the Company have challenged the 7A order or the recovery certificate. Counsel further submits that pursuant to the recovery certificate dated 05.10.2020, several notices were issued and the petitioner was aware of the recovery certificate. However, there was no reply, hence the EPF Organization was compelled to issue a Prohibitory Order and she submits that it has spent itself. Counsel drew the attention of the Court to Annexure-A to contend that the Bank had intimated to the petitioner about the prohibitory order. However, the petitioner has not taken any steps either by approaching EPF Organization or the Bank or taking any steps to challenge the order. Counsel submits that according to the Organization, the account bearing No.50200014451604 is the account of the Company. Counsel, therefore, submits that the organization is justified in its action and hence a suitable order may be passed. 4. Heard the arguments and perused the Writ papers with care. - 6 - NC: 2024:KHC:50247 WP No. 30679 of 2024 5. The short point that arises for consideration is whether the respondent is justified in its action. 6. The facts are sufficiently said and they do not require reiteration. The issue revolves around a narrow compass and relates to a challenge of the prohibitory order by one of the Directors of the Company. It is not in dispute that the Company was in due of the PF contributions for the period 2016-17. It is also not in dispute that the dues were to an extent of amount of Rs.9,22,523/-. It is pivotal to note that the 7A order was passed and it was not challenged either by the company or by the petitioner. Pursuant to the 7A order, the recovery certificate was also issued back in the year 2020 i.e., on 05.10.2020. The recovery certificate was also not challenged either by the Company or by the Directors of the Company. After the issuance of the recovery certificate, the organization issued several notices, but in vain. Hence, the EPF Organization was left with no other option, except to issue a Prohibitory order for the recovery of the PF dues in the year 2024. - 7 - NC: 2024:KHC:50247 WP No. 30679 of 2024 A careful perusal of the Writ papers reveals that the Prohibitory order was communicated to the Branch Manager, HDFC Bank, wherein the Company has maintained its account. If one reads the prohibitory order, it is noticeably clear that the organization made it clear to the Bank that the prohibitory order will be in force till it is specifically withdrawn by the organization or till it is recovered fully. It is pivotal to note that on the fourth day of October 2024, the Bank intimated to the petitioner about the prohibitory order and requested the petitioner to do the needful. The communication dated 04.10.2024 is furnished along with the writ petition. A careful perusal of the same would reflect that the Bank had allowed the petitioner to take appropriate order to revoke the direction on or before 11.10.2024. The Bank also made it noticeably clear that in the absence of not acting, they have no other alternative except to debit the amount from the account for compliance with the statutory direction. It is significant to note that neither the company nor the petitioner tried to challenge the 7A order and the recovery certificate. It is also noticed that the petitioner did not take steps to do the needful in the matter as requested by the bank. - 8 - NC: 2024:KHC:50247 WP No. 30679 of 2024 Hence, the bank debited the amount from the previously mentioned account for compliance with the statutory direction. Therefore, the petitioner being one of the Directors cannot have a grievance about the action of the organization. One of the contention of the petitioner is that the order is in violation of the principles of natural justice. This cannot be accepted. The reason is simple. The Company or the petitioner have not questioned the 7A order and the Recovery certificate. Moreover, the Bank also intimated to the petitioner about the Prohibitory order and requested to do the needful, however, the petitioner has not taken any steps. Therefore, the contention that the order is opposed to the principles of natural justice is satisfactorily hopeless. Needless to say that the prohibitory order has spent itself and the amount has already been recovered by the organization. I find no grounds to interfere with the Prohibitory order. The Writ Petition is devoid of merits and the same is liable to be rejected. Counsel for the petitioner placed reliance on the decision referred to supra, but I do not think that the law is in doubt. - 9 - NC: 2024:KHC:50247 WP No. 30679 of 2024 Each decision turns on its own facts. The present case is also tested in the light of the aforesaid decision. 7. Resultantly, the Writ Petition is rejected. Sd/- (JYOTI MULIMANI) JUDGE MRP List No.: 1 Sl No.: 50 "