Kerala High Court
Dr. Sunil. J vs The Employees Provident Funds ... on 10 July, 2025
2025:KER:50629
WP(C).3868/25 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P.
THURSDAY, THE 10TH DAY OF JULY 2025 / 19TH ASHADHA, 1947
WP(C) NO. 3868 OF 2025
PETITIONER/S:
1 DR. SUNIL. J
AGED 54 YEARS,S/O LATE JANARDHANAN UNNITHAN, RESIDING
AT MADHAVAM, KOLLAM WEST VILLAGE, THEVALLY P.O,
KOLLAM, PIN - 691009
2 LAKSHMI. T
AGED 47 YEARS,W/O DR. SUNIL. J, RESIDING AT MADHAVAM,
KOLLAM WEST VILLAGE, THEVALLY P.O, KOLLAM, PIN -
691009
BY ADVS.
SHRI.A.JANI(KOLLAM)
SMT.NISA FASIL(KOLLAM)
SHRI.MUHAMMED KHAISE J.
RESPONDENT/S:
1 THE EMPLOYEES PROVIDENT FUNDS ORGANISATION
BHAVISHYA NIDHI BHAVAN, PATTOM, THIRUVANANTHAPURAM,
REPRESENTED BY THE REGIONAL PROVIDENT FUND
COMMISSIONER, EMPLOYEES PROVIDENT FUNDS ORGANISATION,
PATTOM, THIRUVANANTHAPURAM, PIN - 695004
2 THE VILLAGE OFFICER
SASTHAMANGALAM VILLAGE OFFICE, SASTHAMANGALAM,
THIRUVANANTHAPURAM, PIN - 695010
3 M/S HOUSING DEVELOPMENT FINANCIAL CORPORATION, HDFC
HOUSE, PB NO. 2288, VAZHUTHACAUD, SASTHAMANGALAM P.O,
THIRUVANANTHAPURAM DISTRICT REPRESENTED BY ITS SENIOR
MANAGER., PIN - 695010
2025:KER:50629
WP(C).3868/25 2
BY ADVS.
SRI.K.K.CHANDRAN PILLAI (SR.)
SHRI.V.JOHN MANI
SMT.S.AMBILY
SMT.RUPA R. NAIR
SMT.SURYA BINOY, SR.GP FOR R2
SRI.SAJEEVKUMAR K. GOPAL, SC FOR R3
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
28.05.2025, THE COURT ON 10.07.2025 DELIVERED THE FOLLOWING:
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WP(C).3868/25 3
MOHAMMED NIAS C.P., J.
......................................................
W.P(C) No. 3868 of 2025
.............................................................
Dated this the 10th day of July, 2025
JUDGMENT
The petitioners claimed title over an extent of 6.66 Ares of
property and building comprised in Re-Sy. No.2 in block No.50 in old Sy.
No.218/26-52 of Sasthamangalam Village, Thiruvananthapuram District.
The said property was held under mortgage to the third respondent
Bank, and when the debtor committed defaults, the bank proceeded
under the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (for short
'the SARFAESI Act').
2. It is stated that the third respondent auctioned the property.
The petitioners became the successful bidders, and a sale certificate
bearing No. 1027 of 2023, dated 04.04.2023, was issued, as seen from Ext.
P1. Though the sale was on 07.09.2020, the issuance of the sale certificate
was delayed due to the pendency of S.A.No.365 of 2019, which was
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dismissed as per Ext.P2 order dated 30.03.2023. A third party had also
sought to be impleaded in the securitisation proceedings, whose
application was dismissed by the Tribunal and confirmed by this Court in
O.P.(DRT) No. 426 of 2022, as seen from Ext. P2.
3. The petitioners submit that the right created after the
mortgage to the bank will not survive, going by Section 26E of the
SARFAESI Act. After acquiring the property as per Ext.P1 sale certificate,
the petitioners preferred W.P.(C) No.16251 of 2023 before this Court for a
direction to the Village Officer, Sasthamangalam, to effect mutation,
which was allowed as per Ext.P4 judgment on 22.06.2023. The petitioners
submit that after mutating the property as per the above judgment, when
they obtained a copy of the Thandapper Extract from the
Sasthamangalam Village Office, which is marked as Ext.P5, it was seen
that the said property is subject to attachment vide two civil court orders
and an order issued by the first respondent, Employees Provident Fund
Organisation. The petitioners submit that, regarding the attachment
order issued by the civil court, they have already taken steps to lift the
attachment. The prayer in this case is confined to the claim of the
Employees Provident Funds Organisation.
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4. It is seen from Ext.P5 that EPFO attached the property as per
the letter dated 19.12.2022 for the dues of an amount of Rs. 72,47,403
from M/s. Intimate Medicines Pvt Ltd, Thiruvananthapuram. The prayer
in this writ petition is to direct the second respondent to efface all entries
made in Ext.P5 Thandapper Account made at the instance of the first
respondent by declaring that the first respondent has no right or
authority to demand such endorsement.
5. The petitioners rely on the judgment of the Full Bench of this
Court in Fathima v. Canara Bank, Palakkad [2025 KHC OnLine 521],
the Full Bench of the Bombay High Court in Jalgaon Janta Sahakari
Bank Ltd. Joint Commissioner of Sales [2022 KHC OnLine 5615], apart
from Section 26E of the SARFAESI Act. The petitioners also contend that
the property in question cannot be treated as an asset of the
establishment and therefore, Section 11 of the Employees Provident Fund
and Miscellaneous Act, 1952 will not apply.
6. The first respondent, EPFO, in its counter affidavit, contends
that M/s. Intimate Medicines Pvt. Ltd. is covered under the EPF Act and
has defaulted on statutory contributions. In exercise of powers under
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Section 11(2) of the EPF Act, the first respondent attached the property
via communication dated 19.12.2022. It is submitted that the EPFO has a
statutory charge on the properties of the defaulter, which takes
precedence over all other debts under Section 11(2) of the EPF Act,
regardless of whether such debts are secured or unsecured. It is further
submitted by the first respondent that the attachment made on
19.12.2022 predates the issuance of the sale certificate to the petitioners
on 04.04.2023 and thus holds priority. The EPFO argues that Section 26E
of the SARFAESI Act does not override the EPF Act, which is a beneficial
legislation intended for the welfare of employees, and that the statutory
rights under Section 11 of the EPF Act must be given primacy. The
judgments relied on by the respondents in support of their contention
are Alchemist Asset Reconstruction Company Ltd. v. Regional
Provident Fund Commissioner-II (WPL No. 54 of 2023) and UCO Bank
v. EPFO and Ors (MANU/GJ/2537/2022: R/SPECIAL CIVIL
APPLICATION NO. 754/2019)).
7. The petitioners, in their reply affidavit, strongly deny the
contentions of the first respondent. They submit that the subject matter
of the writ petition is a residential property over which the respondents
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cannot legally claim any statutory charge. The charge contemplated
under Section 11(2) of the EPF Act is limited to the "assets of the
establishment," and the residential property in question was never
recorded as such. It is submitted that the assets of the establishment had
already been sold through proceedings under the SARFAESI Act, and any
valid charge of the EPFO should have been raised in those proceedings.
The EPFO remained silent during the auction process, despite being
aware of it. The petitioners also allege fraud and collusive litigation
between the employer and his pseudo-creditors, through which excess
funds obtained from the SARFAESI sale were misappropriated. This Court
directed the bank in Ext. P9 judgment in W.P.(C) No.31213 of 2023, dated
29.09.2023, to deposit the excess sale amount with the Sub Court in a
pending suit, but the EPFO failed to act against those funds.
8. The petitioners argue that the EPFO, instead of proceeding
against the available secured cash deposits, has mischievously sought to
attach a residential property never recorded as part of the establishment.
Even if the employer voluntarily declared it as an establishment asset
after the mortgage, such a declaration would be fraudulent and
unsustainable in law. The petitioners further submit that, as per Ext. P10
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data uploaded on the Ministry of Corporate Affairs website, the
residential plot was never registered as an asset of the establishment.
They also point out that at the time of attachment, the employer no
longer had any ownership or right over the mortgaged property, having
already lost it through the sale certificate. Therefore, the EPFO's action in
effecting attachment was unlawful and unsustainable.
9. I heard learned counsel appearing on both sides.
10. A reading of Section 26E of the SARFAESI Act shows that,
notwithstanding anything contained in any other law, once the security
interest is registered, the debts due to secured creditors shall have
priority over all other debts, including government dues. The Full Bench
of this Court in Fathima (supra), which in turn relied on the Full Bench
decision of the Bombay High Court in Jalgaon Janta Sahakari Bank Ltd.
(supra), held as follows:
"It is relevant in the above regard to note that the
priority is based on registration. No debt, revenue,
tax, or similar payments to the Central Government,
State Government, and local authorities after the
registration of secured interest with the Central
Registry can have precedence merely because the
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SARFAESI Act by way of an amendment in the year
2016 is obviously to give precedence to secured
creditors over all other debts including revenues,
taxes, cesses etc. due to the Government. On this
proposition of law, there is no dispute for either side.
The law is thus very clear that claims of any creditor
and also the revenue claims of the Central
Government, State Government or local authorities
will have no precedence if such debts or claims have
arisen or came into existence after creation of the
mortgage and registration of secured assets by the
statutory creditor with the Central Registry. Thus,
any debt recoverable under any statutory provisions
or under any contract will be subject to priority
rights of the secured creditor, unless priority to any
other claim over the claim of the secured creditor is
given by way of statutory exception."
The Full Bench further clarified that:
"Section 26E, beginning with a non-obstante clause, is
unambiguous in terms of language, effect, scope, and
import. A 'priority' in payment over all other dues is
accorded to a secured creditor in enforcement of the
security interest, if it has a CERSAI registration.
xxx xxx xxx xxx xxx xxx
Promotion of a CERSAI registration of a security
interest being at the forefront of the legislative intent,
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the same has to be honoured."
11. Likewise, in Jainhind Spinning Mills Limited and Ors. v.
The Assistant Provident Fund Commissioner, Regional Office and
Ors. [W.P.Nos.18194 and 19301 of 2020], the Madras High Court while
considering a similar question repelled the reliance placed by the EPFO
on the judgment of the Hon'ble Supreme Court in Maharashtra State Co-
operative Bank Ltd. v. Assistant Provident Fund Commissioner [(2009) 10
SCC 123] to claim a charge over the secured property noting that the said
decision was rendered before the introduction of Section 26E of the
SARFAESI Act and Section 31B of the Recovery of Debts Act, 1993 and
observed as follows:
21. It is also pertinent to point out that the Apex Court,
in catena of cases, such as in Maharashtra Tubes Ltd. v.
State Industrial and Investment Corporation of
Maharashtra Ltd. [(1993) 2 SCC 144], Sarwan Singh v.
Kasturi Lal [(1977) 2 SCR 421], Allahabad Bank v. Canara
Bank [(2000) 4 SCC 406], etc., categorically held that the
later enactment alone will prevail and therefore, it
leaves no manner of doubt that the notification dated
26.12.2019 issued by the Ministry of Finance
(Department of Financial Services), pressing into
service the provisions of Section 26E of SARFAESI Act
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and Section 31B of the Act, 1993 by fixation of cut off
date, can only be taken into account in this case.
Moreover, as rightly contended by the Bank, priority
should be given to the secured creditors to take charge
over the properties, as laid down by a Full Bench of this
Court in the case of Assistant Commissioner (CT), Anna
Salai-III Assessment Circle v. Indian Overseas Bank
[(2016) 6 CTC 769]. By applying the ratio laid down the
Apex Court as well as this Court, if the present case on
hand is analyzed, this Court has no other option, but to
come to the rescue of the Bank and that the argument
advanced by the Bank appears to be very logical."
12. In the present case, the mortgage in favour of the bank was
created in 2012 and registered with CERSAI on 26.07.2012, long before EPF
dues began accruing in 2016 and before the EPFO's attachment dated
19.12.2022. As per Section 26E of the SARFAESI Act, which came into force
via the 2016 Amendment and became operational from 24.01.2020,
secured creditors who register their interest with CERSAI have statutory
priority over all other debts, including government dues. This is
expressly stated in both Jalgaon Janta Sahakari Bank Ltd's case (supra)
and the Full Bench ruling in Fathima's case (supra), which hold that
CERSAI registration is a mandatory precondition for priority under
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Section 26E and that statutory dues post-registration are subordinate to
secured debt. In the instant case, since the security interest was
registered long before the EPFO attachment and dues, Section 26E
undeniably prevails. The Jalgaon (supra) judgment also clarifies that
Section 26E is prospective and applies only to situations arising after
24.01.2020, and in this case, since the EPFO attachment and auction took
place after that date, the amendment is squarely applicable. The Full
Bench in Fathima's case (supra) further clarified that even attachments
ordered by public authorities post-registration cannot defeat the rights
of a secured creditor and that registering officers must act accordingly.
Although cases like UCO Bank v. EPFO (supra) and Alchemist ARC v.
RPFC (supra) emphasise the social welfare intent of the EPF Act and its
first charge under Section 11(2), these were decided based on the
decisions before the introduction of S.26E and without considering the
effect of post-2016 CERSAI registration, and are thus distinguishable.
13. The intention behind the 2016 amendment was to ensure
faster recovery for financial institutions by overriding even welfare-
based dues where a security interest is duly registered. Therefore, when
read in conjunction with the facts, where the EPF dues are subsequent to
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registration, the EPFO failed to act during SARFAESI proceedings, and the
property was never recorded as an establishment asset--the overriding
effect of Section 26E must be enforced. Any contrary view would defeat
the legislative intent behind the amendment and the clear judicial
mandate laid down in Jalgaon and Fathima (supra), which recognise that
a registered security interest under Section 26E prevails over later
statutory attachments, including EPF dues.
14. Going by Section 35 of SARFAESI Act, the provisions of this
Act shall have effect, notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or any instrument
having effect by virtue of any such law, which makes it clear that even if
S.11(2) of the EPF Act creates any inconsistency as argued, the SARFAESI
Act would prevail.
15. Given the above and taking note of the factual scenario of
the present dispute, given the judgments that held that Section 26E of the
SARFAESI Act prevails over Section 11(2) of the EPF Act, the judgments
relied on by the respondents, viz., Alchemist Asset Reconstruction
Company Ltd. v. Regional Provident Fund Commissioner-II (supra)
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and UCO Bank v. EPFO and Ors (supra), cannot be treated as laying
down the correct principles of law and inapplicable to the case on hand
for the reasons stated above.
16. Accordingly, the writ petition is allowed, directing the
second respondent to efface all entries in Ext. P5 Thandapper Account,
made at the instance of the first respondent. Appropriate orders shall be
passed within one month from the date of receipt of a copy of the
judgment.
The writ petition is allowed as above.
Sd/- MOHAMMED NIAS C.P.
JUDGE
okb/
2025:KER:50629
APPENDIX OF WP(C) 3868/2025
PETITIONER EXHIBITS
Exhibit P1 THE SALE CERTIFICATE IS REGISTERED AS SALE
CERTIFICATE NO. 1027 OF 2023, DATED 04/04/2023,
WITH SASTHAMANGALAM S.R.O
Exhibit P2 THE TRUE COPY OF ORDER DATED 30/03/2023, IN O.A.
NO. 365 OF 2019 BEFORE THE DEBT RECOVERY TRIBUNAL-
II, ERNAKULAM,,
Exhibit P3 THE TRUE COPY OF JUDGMENT DATED 14/11/2022 IN O.P
(DRT) NO. 426 OF 2022 BEFORE THE HONOURABLE HIGH
COURT OF KERALA,
Exhibit P4 THE TRUE COPY OF JUDGMENT DATED 22/06/2023, IN
W.P.C NO: 16251 OF 2023 BEFORE THIS HON'BLE COURT,
Exhibit P5 THE TRUE COPY OF THE THANDAPPER ACCOUNT DATED NIL
Exhibit P6 A TRUE COPY OF THE APPLICATION DATED 28/11/2024
SUBMITTED BY THE FIRST PETITIONER TO THE FIRST
RESPONDENT UNDER THE RIGHT TO INFORMATION ACT
Exhibit P7 THE TRUE COPY OF THE PRINTOUT OF THE ONLINE
APPLICATION DATED 17/12/2024 FILED BYTHE 1ST
PEDTITIONER APPLIED TO THE FIRST RESPONDENT UNDER
THE RIGHT TO INFORMATION ACT,
Exhibit P8 THE TRUE COPY OF REPLY DATED 106.01.2025 BY THE
1ST RESPONDENT
RESPONDENT EXHIBITS
Exhibit R1(a) A true copy of the attachment order vide no.
KR/12758/Recovery/RO/TVM/2022-23/7177 dated
16.12.2022 and acknowledgment cards
Exhibit R1(b) A true copy of the Land Tax details of the K C
Sanjeev
Exhibit R1(c) A true copy of the Form No. 5A filed by K C
Sanjeev before the 1st Respondent
PETITIONER EXHIBITS
Exhibit P9 A true copy of the judgment dated 29/09/2023 in
W.P.C. NO.31213 OF 2023 before this Honourable
Court,
Exhibit P10 A true copy of the Company information dated
15/04/2025 on the website of the Ministry of
Corporate Affairs
