[Cites 9, Cited by 0]
Bombay High Court
Suyog Development Corporation Unit - 9 vs Union Of India And Ors on 12 March, 2026
Author: Amit Borkar
Bench: Amit Borkar
2026:BHC-AS:12071
WP-4958-2005+IA.doc
Sayali
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 4958 OF 2005
Digitally
1. Suyog Development Corporation
signed by
SAYALI Unit 9, a partnership firm having its
SAYALI DEEPAK
DEEPAK UPASANI registered office at Suyog Chambers,
UPASANI Date:
2026.03.12
11:57:12
+0530
335 Shukrawar Peth, Pune-2 through its
partner Shri. Nilesh Bharat Shah ... Petitioner
V/s.
1. Union of India.
A copy to be served on the Government
pleader Union of India, having its office
at New Marine Lines, Mumbai
(Ministry of Labour)
2. Employees Provident Fund Organisation
(Ministry of Labour), Govt. Of India,
having its sub-regional office at Pune
Cantonment Board, Golibar Maidan,
Pune-1
3. Shri R.G. Waghchaure,
Asst. Provident Fund Commissioner
(Recovery) having his office at Pune
Cantonment Board, Pune.
4. M/s Suyog Nirmitee Developers,
having its office at 8, Namjoshi Bhavan,
L.B.S. Road, Pune 411 030
5. Swastik Rubber Products Ltd.,
a company incorporated under
Company's Act having its registered
office at Chinchwad, Pune-411 019.
6. M/s Patel Goyal & Associates,
a partnership firm having its office at
1
::: Uploaded on - 12/03/2026 ::: Downloaded on - 12/03/2026 20:51:52 :::
WP-4958-2005+IA.doc
City Survey No. 1714, Bopodi, Pune
7. M/s Mahalaxmi Construction
A partnership firm, incorporated under
The Indian Partnership Act, 1932,
Having its office at City Survey No.
2447,) Bopodi, Pune- 411 003.
8. Union Bank of India,
having its branch at Agriculture, market
yarel, Otaltekadi, Produce Market
(Pune) Maharashtra ... Respondents
INTERIM APPLICATION NO.17277 OF 2022
IN
WRIT PETITION NO.4958 OF 2005
1. Sreedharan Nair M.T.,
(Employee No.0115),
Age 71 years, Ex Workman- Swastik
Rubber Products Ltd., Flat No. 2, Sai
Park, D- 14 Katurba Housing Society,
Vishrantwadi, Pune 411015
2. Shrinivasan Perumal Pillai
(Employee No.1700)
Age 67 years, Ex workman Swastik
Rubber Products Ltd., 336 Ganesh
Nagar, Bhau Patil Road, Ganesh Mandir,
Bopodi, Pune -411020.
3. Keshav Dagdushewale
(Employee No. 1317)
Age 74 years, Ex workman Swastik
Rubber Products Ltd., Chinchodi
Deshpande, Vadgaonkashimbeg, Pune-
410503 .....Applicants
In the matter Between
2
::: Uploaded on - 12/03/2026 ::: Downloaded on - 12/03/2026 20:51:52 :::
WP-4958-2005+IA.doc
Suyog Development Corporation
Unit 9, a partnership firm having its
registered office at Suyog Chambers,
335 Shukrawar Peth, Pune-2 through its
partner Shri. Nilesh Bharat Shah ... Petitioner
V/s.
1. Union of India.
A copy to be served on the Government
pleader Union of India, having its office
at New Marine Lines, Mumbai
(Ministry of Labour)
2. Employees Provident Fund Organisation
(Ministry of Labour), Govt. Of India,
having its sub-regional office at Pune
Cantonment Board, Golibar Maidan,
Pune-1
3. Shri R.G. Waghchaure,
Asst. Provident Fund Commissioner
(Recovery) having his office at Pune
Cantonment Board, Pune.
4. M/s Suyog Nirmitee Developers,
having its office at 8, Namjoshi Bhavan,
L.B.S. Road, Pune 411 030
5. Swastik Rubber Products Ltd.,
a company incorporated under
Company's Act having its registered
office at Chinchwad, Pune-411 019.
6. M/s Patel Goyal & Associates,
a partnership firm having its office at
City Survey No. 1714, Bopodi, Pune
7. M/s Mahalaxmi Construction
A partnership firm, incorporated under
The Indian Partnership Act, 1932,
Having its office at City Survey No.
3
::: Uploaded on - 12/03/2026 ::: Downloaded on - 12/03/2026 20:51:52 :::
WP-4958-2005+IA.doc
2447,) Bopodi, Pune- 411 003.
8. Union Bank of India,
having its branch at Agriculture, market
yarel, Otaltekadi, Produce Market
(Pune) Maharashtra ... Respondents
Mr. Kiran S. Bapat, Senior Advocate i/b Gaurav S.
Gawande, for Petitioner.
Ms. Gunjan Chaubey, for Respondent nos. 2 and 3.
Ms. Shreya Mohapatra, for Applicant in IA.
CORAM : AMIT BORKAR, J.
RESERVED ON : MARCH 5, 2026
PRONOUNCED ON : MARCH 12, 2026
JUDGMENT:
1. By the present Petition, the Petitioner challenges the legality
and validity of the order dated 15 July 2005 passed by Respondent
No. 3, purportedly in exercise of powers under Section 8F of the
Employees' Provident Funds and Miscellaneous Provisions Act,
whereby certain coercive directions have been issued against the
Petitioner.
2. The relevant facts according to petitioner are as under. The
Petitioner is engaged in the business of construction and
development and has been carrying on such activities for a
considerable period of time. In the course of its business dealings,
the Petitioner had advanced a bridge loan to Respondent No. 5 at a
time when a revival scheme concerning the said company was
under consideration. Respondent No. 1 is the Union of India.
WP-4958-2005+IA.doc
Respondent Nos. 2 and 3 represent the Employees' Provident Fund
Organisation and the concerned Provident Fund Commissioner
respectively, who proceeded to attach the bank account of the
Petitioner. Respondent No. 4, M/s Suyog Nirmittee Developers, is
the entity that subsequently purchased the land belonging to
Respondent No. 5. Respondent No. 5, namely M/s Swastik Rubbers
Products Ltd., is a company which had gone into liquidation and
had sold its land. Respondent Nos. 6 and 7 are entities who
thereafter undertook development of the said land. Respondent
No. 8 is Union Bank of India, with whom the Petitioner maintains
a bank account that came to be attached pursuant to the impugned
action.
3. On 31 March 1987, Respondent No. 5, namely M/s Swastik
Rubbers Products Ltd., was declared a sick industrial company
under Section 3(1)(o) of the Sick Industrial Companies (Special
Provisions) Act, 1985. Following such declaration, Respondent No.
5 submitted a rehabilitation scheme before the Board for Industrial
and Financial Reconstruction (BIFR) for consideration.
Subsequently, on 30 October 2003, in terms of the revival scheme,
the said company shifted its operations from Bopodi to
Chinchwad, Pune. Despite such relocation, the company continued
to exist as the same legal entity. Under the scheme sanctioned by
the BIFR, the land belonging to the company at Bopodi was to be
disposed of by sale. The funds realised from such sale were
intended to be utilised for the purpose of reconstruction and
restructuring of the company. It is also material to note that the
Provident Fund authorities were parties to the proceedings before
WP-4958-2005+IA.doc
the BIFR at the time when the rehabilitation scheme came to be
sanctioned. On 30 January 2003, while the revival scheme of
Respondent No. 5 was under active consideration, the Petitioner
advanced a loan amounting to Rs. 5,91,00,000 to Respondent No.
5. The said advance was secured by way of a mortgage created
over the land belonging to Respondent No. 5. The mortgage
arrangement was formally recorded by a Mortgage Deed dated 26
December 2002, which forms part of the record as Exhibit C.
Thereafter, on 2 September 2003, a public advertisement came to
be issued in a newspaper inviting bids for auction sale of the
aforesaid land. In the auction conducted pursuant to the revival
scheme, the land was purchased by Respondent No. 4, namely M/s
Suyog Nirmittee Developers, for a consideration of Rs.
15,51,00,000. The said transaction was approved by the Asset Sale
Committee constituted by Respondent No. 5 under the directions
of the BIFR. A Development Agreement dated 19 October 2002
was executed between Respondent Nos. 4 and 5 in that regard.
On 21 February 2004, Respondent No. 5 repaid the entire loan
amount to the Petitioner. Consequent upon full repayment of the
loan, the Petitioner executed a Release Deed in favour of
Respondent No. 5, thereby releasing the mortgage created over the
said property. On 31 March 2004, the transaction concerning the
sale of land between Respondent Nos. 4 and 5, which had been
sanctioned under the BIFR scheme, stood completed in all respects
upon payment of the full and final consideration. Thereafter,
Respondent No. 4 proceeded to transfer the said land to
Respondent Nos. 6 and 7 for development purposes. In that
WP-4958-2005+IA.doc
regard, a Development Agreement was entered into among
Respondent Nos. 4, 5, 6 and 7.
4. On 19 April 2004, certain typographical errors were noticed
in Clause "Z" of the aforesaid agreement. In order to rectify those
errors, a Correction Deed was duly executed and registered.
Following such correction, Respondent Nos. 6 and 7 paid the
consideration amounts in terms of the agreement to Respondent
No. 4. It subsequently transpired that Respondent No. 5 had
allegedly failed to discharge provident fund dues payable to its
employees, which were stated to be in the sum of Rs. 1,19,48,500.
5. The Provident Fund authorities initiated steps to recover the
said amount and sought to fasten liability upon the Petitioner.
Respondent No. 3 issued a communication to Respondent No. 8
Bank directing that the bank account of the Petitioner be frozen
and attached. Along with the said communication, Respondent No.
3 enclosed a portion of the sanctioned rehabilitation scheme of
Respondent No. 5, in which reference was made to the loan
advanced by the Petitioner to Respondent No. 5. On 21 April 2005,
the Petitioner immediately approached Respondent No. 3 and
submitted an affidavit in terms of Section 8F(3)(vi) of the Act. In
the said affidavit, the Petitioner clearly asserted that it had no
subsisting liability or connection with Respondent No. 5 that could
justify recovery proceedings against it. On the same date, namely
21 April 2005, the Petitioner addressed a communication to
Respondent No. 8 Bank pointing out that the attachment of its
account was wholly unwarranted. The Petitioner also caused a
notice to be issued through its Advocate to the said bank
WP-4958-2005+IA.doc
explaining the factual position. The Petitioner was thereafter
informed by the bank that the account had been attached pursuant
to the directions issued by Respondent No. 3.
6. Aggrieved by the said action, the Petitioner approached this
Court by filing Writ Petition No. 2789 of 2005 on 3 May 2005
challenging the steps taken by Respondent Nos. 2 and 3. By an
order passed in the said proceedings, this Court set aside the
attachment and directed the Provident Fund authorities to grant a
hearing to the Petitioner. At the same time, the Petitioner
volunteered not to withdraw any amount from the concerned bank
account for a period of four weeks from the date of the said order.
Notwithstanding the direction issued by this Court requiring that a
hearing be granted within a period of four weeks, Respondent No.
3 neither granted nor concluded the hearing within the stipulated
period. After expiry of the said period, the Petitioner attempted to
withdraw the amount lying in its bank account, which otherwise
remained idle. However, the Provident Fund authorities allegedly
threatened the bank officials with penal consequences and thereby
prevented the Petitioner from operating its account, despite the
fact that the earlier attachment order had already been set aside
and no order had been passed after hearing within the period
specified by this Court.
7. Thereafter, on 19 May 2005, Respondent No. 3 issued a
notice under Section 8F of the Act calling upon the Petitioner to
remain present for a hearing and to produce documentary
evidence in support of its case. On 27 May 2005, the Petitioner
appeared before the authority and produced all relevant
WP-4958-2005+IA.doc
documents along with a detailed reply to the notice. According to
the Petitioner, the documents clearly demonstrated that it had no
legal or financial liability in respect of the provident fund dues of
M/s Swastik Rubbers Products Ltd. The Petitioner further
explained that it had regular commercial dealings with Respondent
No. 4, and that in the normal course of its business transactions it
was receiving payments from Respondent No. 4. According to the
Petitioner, such transactions were independent commercial
dealings and had no nexus with the alleged provident fund liability
of Respondent No. 5. By the impugned order dated 15 July 2005,
Respondent No. 3 rejected the explanation offered by the
Petitioner. The authority further directed that an amount of Rs.
1,19,48,500 be recovered from the Petitioner's bank account and
paid over to the Provident Fund authorities towards the alleged
dues of Respondent No. 5. Being aggrieved by the said order, the
Petitioner has instituted the present Writ Petition. By an order
dated 20 October 2005 passed in the present proceedings, this
Court granted interim relief and directed the Petitioner to furnish a
bank guarantee. The Court further directed that such bank
guarantee shall be renewed from time to time. It was also
specifically recorded that the said bank guarantee shall not be
invoked without obtaining prior permission of this Court.
8. Mr. Bapat, learned Senior Counsel appearing for the
Petitioner, submitted that the statutory liability to discharge
provident fund dues was that of Respondent No. 5 alone.
According to him, the recital contained in the development
agreement indicating that Respondent No. 4 was to receive an
WP-4958-2005+IA.doc
amount of Rs. 7,50,00,000 from Respondent No. 5 was incorrectly
recorded. He submitted that the correct position was that the said
amount was payable by Respondent No. 4 to Respondent No. 6.
The said discrepancy, according to him, was subsequently rectified
through a duly registered Correction Deed. It was further
contended that the development agreement in question had been
placed before and duly considered by the BIFR at the time of
sanctioning the rehabilitation scheme, and that the scheme itself
permitted the execution of such development agreements. Learned
Senior Counsel further submitted that the amount in question was
first deposited in the account of Respondent No. 4 and was
thereafter transferred to the account of the Petitioner on the very
same day. According to the authorities, this circumstance created
suspicion that Respondent No. 4 sought to avoid its obligations
arising under the development agreement.
9. Placing reliance upon Section 8F(3)(vi) of the Employees'
Provident Funds and Miscellaneous Provisions Act, 1952, learned
Senior Counsel submitted that the Petitioner had duly filed the
affidavit contemplated under the said provision before the
Provident Fund authorities. It was contended that once such an
affidavit is submitted, the statutory consequence provided under
sub section (vi) would follow. Unless the authority is able to
establish that the statement contained in the affidavit dated 21
April 2005 is false in any material particular, the authority cannot
proceed to fasten liability upon the Petitioner under Section 8F(3)
of the Act. In support of this submission, reliance was placed upon
the judgment of the Supreme Court in Income Tax Officer, Madras
WP-4958-2005+IA.doc
and Another v. Budha Pictures, Madras, 1967 SCC Online SC 201 ,
wherein analogous provisions contained in Section 226(3) of the
Income Tax Act were considered. In the said decision, the Supreme
Court observed that a person to whom a notice is issued is only
required to state that the sum demanded is not due to the assessee
or that he does not hold any money on behalf of the assessee.
Learned Senior Counsel therefore submitted that, in the present
case, once the Petitioner had filed an affidavit asserting that no
amount was due from it to Respondent No. 5, the authority could
not have proceeded against the Petitioner without first recording a
finding that the affidavit was false in any material respect. On that
basis, it was urged that the impugned order deserves to be
quashed and set aside.
10. Per contra, learned counsel appearing for Respondent No. 2
as well as the learned advocate representing the workers opposed
the Petition. Inviting attention to the reasoning contained in the
impugned order, it was submitted that the attachment of the
Petitioner's bank account was effected on the basis of credible
information received by the Recovery Officer. According to such
information, Respondent No. 4 was to receive an amount of Rs.
1,48,00,000 from Respondent No. 5. It was further alleged that
immediately upon receipt of the said amount, Respondent No. 4
transferred the very same amount to the account of the Petitioner
on the same day. According to the authorities, this sequence of
transactions clearly indicated an attempt to evade the statutory
liability arising under Section 8F of the EPF Act. It was further
submitted that though an opportunity was granted to the
WP-4958-2005+IA.doc
Petitioner to explain the said transaction, the Petitioner failed to
provide any satisfactory explanation regarding the transfer of the
amount by Respondent No. 4 to the Petitioner. The only
explanation offered by the Petitioner was that it was a sister
concern of Respondent No. 4 and that the transfer represented
internal financial adjustments between the two entities.
11. Learned counsel further submitted that under the
rehabilitation scheme sanctioned by the BIFR, Respondent No. 5
was permitted to dispose of its land by transferring development
rights to Respondent No. 4 under the agreement dated 19 October
2002. Subsequently, Respondent Nos. 4 and 5 entered into another
agreement dated 3 April 2004 with Respondent No. 6 for the sale
of the said land along with development rights. According to the
respondents, the final consideration under the said transaction had
already been received as part of the plot consideration. In that
context, it was contended that the transfer of the amount into the
account of the Petitioner was a device adopted to avoid the liability
of Respondent No. 4 in respect of the provident fund dues. It was
therefore submitted that the Provident Fund authorities were
justified in attaching the amount lying in the Petitioner's account,
and consequently the present Petition deserves to be dismissed.
REASONS AND ANALYSIS:
12. I have considered the papers, the statute, and the oral
submissions of senior counsel for the Petitioner and of counsel for
the Provident Fund authorities and for the workers.
WP-4958-2005+IA.doc
13. The statutory scheme contained in Section 8F of the
Employees' Provident Funds and Miscellaneous Provisions Act
guides the resolution of the present controversy. The provision
creates a special mode of recovery which permits the Provident
Fund authorities to proceed not only against the defaulting
employer but also against third parties. The said provision allows
the authority to issue a notice to a person who either owes money
to the employer or who is holding money on behalf of the
employer. If such money is available, the authority may direct that
the amount be paid to the Provident Fund authorities towards the
arrears due from the employer. The provision recognises that the
person to whom such a notice is issued may not be responsible for
the employer's default and therefore cannot automatically be made
liable.
14. For this reason the legislature has incorporated an important
safeguard. When a notice under Section 8F is issued to a third
party, that person is entitled to object to the notice by filing a
statement on oath. In that statement the person may say that no
money is due from him to the employer, or that he is not holding
any money for or on account of the employer. Once such a sworn
statement is made, the law does not permit the authority to
compel payment merely on assumption. The third party can be
made liable only if the authority subsequently discovers that the
statement made on oath was false in some material respect.
15. The interpretation of such provisions has also been
considered by the Supreme Court. In ITO v. Budha Pictures, the
Court examined a similar provision under the Income Tax Act
WP-4958-2005+IA.doc
which authorises the Income Tax Officer to recover tax arrears
from third parties. Though the statute involved in that case was
different, the nature of the recovery power was substantially
similar. The Supreme Court therefore examined how such
provisions should be understood and applied.
16. The Court observed that the provision operates in the nature
of what is known in law as a garnishee proceeding. In other words,
the authority can proceed against a third party only where that
third party is under an existing obligation to the defaulter. The
relationship must be real and identifiable. For example, the third
party may be a debtor who owes money to the defaulter, a banker
holding deposits of the defaulter, or some person who is required
to pay money to the defaulter under an existing arrangement. The
power is therefore directed at funds which are already connected
to the defaulter through a legal relationship.
17. The Supreme Court further clarified that when such a notice
is received, the person concerned is required only to state whether
he owes money to the defaulter or holds money for him. If he
truthfully states on oath that no such money is due or held, the
statute does not compel him to make payment. The Supreme Court
also warned that if the provision were interpreted in an excessively
wide manner, it would produce unreasonable consequences. The
authorities could then send notices to a large number of persons
who may never have had any dealings with the defaulter. The
Court therefore held that the provision must be confined to cases
where there exists a clear relationship between the defaulter and
the person to whom the notice is issued.
WP-4958-2005+IA.doc
18. The reasoning of the Supreme Court in that decision is of
relevance while interpreting Section 8F. Though the statutory
language differs slightly, the principle remains the same. The
recovery power against third parties cannot be exercised on mere
suspicion. The authority must demonstrate that the person
concerned either owes money to the employer or is holding money
on behalf of the employer. In the absence of such a nexus, the
statutory conditions for invoking Section 8F are not satisfied.
19. Thus, when the provisions of Section 8F are read carefully
along with the interpretation placed by the Supreme Court in
Budha Pictures, the legal position is that the authority may
proceed against a third party only when there is a real connection
between that person and the employer in default. If the person to
whom notice is issued files a statement on oath denying such
liability, the authority must then examine whether that statement
is false in any material respect. Only upon recording such a finding
can the third party be compelled to make payment.
20. The documents show that the Petitioner advanced a loan to
Respondent No. 5 in January 2003 secured by mortgage. The loan
was repaid and a Release Deed was executed on 21 February 2004.
The BIFR scheme and subsequent sale of the land are on record.
Later dealings involve Respondent No. 4, Respondent Nos. 6 and 7,
and various development agreements. These facts do not by
themselves establish that the Petitioner then held money for or was
continuing to owe money to Respondent No. 5 after repayment
and release. The record before this Court does not disclose a
continuing legal relationship between the Petitioner and
WP-4958-2005+IA.doc
Respondent No. 5 after the Release Deed. The alleged same-day
transfer from Respondent No. 4 to the Petitioner does raise
suspicion. But suspicion alone is not enough. Section 8F requires
either a legal relationship under which the third party is in fact
holding money for the employer; or, if the third party files a sworn
objection, it requires that the objection be shown to be false in a
material particular.
21. The Petitioner did file the affidavit prescribed by Section
8F(3)(vi) on 21 April 2005. The Petitioner then furnished
documents on 27 May 2005. The statutory protection is given to
filing of such an affidavit. Once the person objects on oath, the
authority cannot make him pay unless it discovers that the sworn
statement was false in a material particular. The burden of proof to
make that discovery rests upon the authority. The impugned order
of 15 July 2005 does not set out any clear and specific finding of
material falsity. The order records the sequence of transactions and
notes the suspicion. It does not state documentary proof that the
Petitioner's sworn statement was false in any material respect. The
authority appears to have relied primarily upon the fact that
money moved from Respondent No. 4 to the Petitioner on the
same day that Respondent No. 4 received funds from Respondent
No. 5. That fact without anything more does not demonstrate that
the Petitioner held money for Respondent No. 5.
22. In view of the foregoing discussion and the reasons recorded
in the preceding paragraphs, the following order is passed.
(i) The Writ Petition succeeds.
WP-4958-2005+IA.doc
(ii) The order dated 15 July 2005 passed by Respondent
No. 3 purportedly under Section 8F of the Employees'
Provident Funds and Miscellaneous Provisions Act is quashed
and set aside.
(iii) Consequently, the direction issued by Respondent No. 3
for recovery of an amount of Rs. 1,19,48,500 from the bank
account of the Petitioner stands set aside. Respondent No. 8
Bank shall forthwith lift the attachment placed on the
Petitioner's account pursuant to the impugned order.
(iv) The Provident Fund authorities are at liberty to
proceed against the employer concerned in accordance with
law for recovery of the provident fund dues.
(v) Insofar as the bank guarantee furnished pursuant to
the interim order dated 20 October 2005 is concerned, the
same shall stand discharged upon lifting of the attachment,
unless otherwise required in any independent proceedings
initiated in accordance with law.
(vi) Rule is made absolute in the above terms. There shall
be no order as to costs.
(AMIT BORKAR, J.)
