P.K.RAMACHANDRAN, V. REGIONAL PROVIDENT FUND COMMISSIONER-II & RECOVERY OFFICER,

WP(C)/18155/2023

AI Insights

The case involves P.K. Ramachandran, the Managing Director of a garment manufacturing company, who faced multiple recovery proceedings from the EPF Organization, ESI Corporation, and Indian Overseas Bank due to non-remittance of contributions under the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The bank and statutory authorities had attached the petitioner's properties, including the factory building and land. The EPF Organization issued a notice for the petitioner's arrest due to non-appearance and non-payment, which the petitioner contested, citing the financial strain and ongoing recovery actions by other entities. The court considered the attachments and the legal provisions under which arrest and detention could be justified, ultimately deciding to allow the petitioner an opportunity to present his case before any further action is taken.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 732536 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 12-07-2024
• Assessment Year: misc
• Other Referred Cases: Ali v. Recovery Officer, E.P.F. Organisation [2007 (1) KLT 927]
• Laws Referred To: Employees Provident Funds and Miscellaneous Provisions Act, 1952, Income Tax Act, 1961, Income Tax (Certified Proceedings) Rules, 1962
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: V MANI
• Assessee Lawyers: P RAMAKRISHNAN; PREETHI RAMAKRISHNAN; C ANILKUMAR
• Keywords: Asset Attachment; Civil Prison; Detention; Employees Provident Fund; Loan recovery; Recovery proceedings
• Section: 73(1); 8B

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE N.NAGARESH FRIDAY, THE 12TH DAY OF JULY 2024 / 21ST ASHADHA, 1946 WP(C) NO. 18155 OF 2023 PETITIONER: 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 RESPONDENT: REGIONAL PROVIDENT FUND COMMISSIONER-II & RECOVERY OFFICER, EPF ORGANIZATION, BHAVISHYANIDHI BHAVAN, KALOOR, KOCHI -682017 BY ADV SRI.V.JOHN MANI, R1 THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12.07.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) NO. 18155 OF 2023 2 N. NAGARESH, J. ---------------------------------------- W.P.(C) No.18155 of 2023 -------------------------------------------- Dated this 12th day of July, 2024 JUDGMENT 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. 2. 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. 3. The petitioner states that the Bank attempted to sell the property on two occasions. The sale could not be materialized. In W.P.(C) NO. 18155 OF 2023 3 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. 4. 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. 5. All the properties of the petitioner are under attachment by the Bank and various statutory authorities. The petitioner is not W.P.(C) NO. 18155 OF 2023 4 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. 6. 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. W.P.(C) NO. 18155 OF 2023 5 7. I have heard the learned counsel for the petitioner and the learned Standing Counsel representing the respondent. 8. 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. 9. 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. W.P.(C) NO. 18155 OF 2023 6 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. 10. 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. 11. 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. 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 W.P.(C) NO. 18155 OF 2023 7 petitioner. It is made clear that no arrest shall be made unless there exists clear proof of any of the requirements made mention in Rule 73 of the Second Schedule in Part V of the Income Tax Act, 1961 and only if the authority comes to a conclusive finding as regards existence of any of the conditions mentioned in Rule 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 APPENDIX OF WP(C) 18155/2023 PETITIONER’S EXHIBITS:- EXHIBIT P-1 TRUE COPY OF THE ORDER OF ATTACHMENT DATED 7/10/2021 ISSUED BY THE RECOVERY OFFICER OF THE ESI CORPORATION EXHIBIT P-2 TRUE COPY OF THE ORDER OF ATTACHMENT DATED 1/2/2022 ISSUED BY THE RESPONDENT. EXHIBIT P-3 TRUE COPY OF THE POSSESSION NOTICE DATED 30/3/2022 ISSUED BY THE INDIAN OVERSEAS BANK, KAKKANAD BRANCH EXHIBIT P-4 TRUE COPY OF NOTICE OF SALE OF PROPERTY DATED 27/5/2022 ISSUED BY THE INDIAN OVERSEAS BANK. EXHIBIT P-5 TRUE COPY OF NOTICE DATED 11/8/2022 ISSUED BY INDIAN OVERSEAS BANK EXHIBIT P-6 TRUE COPY OF NOTICE DATED 19/5/2023 ISSUED BY THE RESPONDENT. EXHIBIT P-7 TRUE COPY OF REPRESENTATION DATED 1/06/2023 FROM THE PETITIONER TO THE RESPONDENT RESPONDENT’S EXHIBITS:- 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 "