[Cites 32, Cited by 0]
Kerala High Court
Kallangodan Moosa vs Sub Registrar,Office Of The Sub ... on 9 February, 2026
W.P.(C) No.3987 of 2022 1
2026:KER:13940
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE VIJU ABRAHAM
TH
MONDAY, THE 9 DAY OF FEBRUARY 2026 / 20TH MAGHA, 1947
WP(C) NO. 3987 OF 2022
PETITIONERS:
1 KALLANGODAN MOOSA,AGED 69 YEARS
S/O.LATE KUNHAMMED HAJI, RESIDING AT "WOOD" HOUSE,
PINANGODE ROAD, KALPETTA P.O., VYTHIRI TALUK,
WAYANAD DISTRICT, PIN-673 121.
2 ABDUL MAJEED, AGED 48 YEARS
RESIDING AT MALIYAKKAL HOUSE, MUNDERI,
'SANTHI NAGAR', KALPETTA P.O.,
VYTHIRI TALUK, WAYANAD DISTRICT, PIN-673 121.
BY ADVS.
SMT.GAYATHRI NARENDRANATH
SRI.B.G.BHASKAR
SMT.LALITHA A.
RESPONDENTS:
1 SUB REGISTRAR,OFFICE OF THE SUB REGISTRAR,
CIVIL STATION, MADATHUMPADI, KALPETTA,
WAYANAD DISTRICT, KERALA, PIN-673 122.
2 EMPLOYEES PROVIDENT FUND ORGANIZATION, CALICUT,
REPRESENTED BY ITS ASSISTANT COMMISSIONER,
BHAVISHYA NIDHI BHAWAN, PB NO.1806,
ERANHIPALAM P.O., KOZHIKDOE, KERALA, PIN-673 006.
3 ASSISTANT PROVIDENT FUND COMMISSIONER & RECOVERY
OFFICER,
OFFICE OF THE RECOVERY OFFICER,
EMPLOYEES' PROVIDENT FUNDS, SUB REGIONAL OFFICE,
PB NO.1806, ERANHIPALAM P.O., KOZHIKODE,
KERALA, PIN-673 006.
4 P.S.SREENIVASAN,AGED 57 YEARS
S/O.SREEDHARAN, PADIPPARAKKAL HOUSE,
NEAR BLOCK OFFICE, KURUMATHOOR AMSOM,
W.P.(C) No.3987 of 2022 2
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PANAKKAD, KARIMPAM P.O., TALIPARAMBA,
KANNUR DISTRICT, PIN-670 141.
5 THE FEDERALA BANK LIMITED,
LCRD KOZHIKODE DIVISION, 1ST FLOOR,
FEDERAL TOWERS, ARAYADATHUPALAM, MAVOOR ROAD,
KOZHIKODE-673 016, REPRESENTED BY ITS
AUTHORIZED OFFICER AND DEPUTY VICE PRESIDENT AND
DIVISION HEAD.
BY ADVS.
DR.ABRAHAM P.MEACHINKARA
SRI.V.V.SURESH
SHRI.MOHAN JACOB GEORGE
SMT.P.V.PARVATHY (P-41)
SMT.REENA THOMAS
SMT.NIGI GEORGE
OTHER PRESENT:
GP-NIMA JACOB
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
10.11.2025, THE COURT ON 09.02.2026 DELIVERED THE FOLLOWING:
W.P.(C) No.3987 of 2022 3
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"C.R."
VIJU ABRAHAM, J.
.................................................................
W.P.(C) No.3987 of 2022
.................................................................
Dated this the 9th day of February, 2026
JUDGMENT
The above writ petition is filed seeking the following reliefs:
"A. Issue a writ of Mandamus or such other appropriate writ or order
commanding the 1st Respondent to delete/efface the attachments noted in
favour of Respondents 2 to 4 in respect of the immovable property having
an extent of 0.1781 Hectares (17.81 Ares = 43.99 cents) in Re Survey
No.507/20 (Old Sy.No.1/2/2A in Kalpetta Village, Vythiri Taluk, Wayanad
District.
B. Pass an order directing the 1st Respondent to issue fresh encumbrance
certificate to the petitioners after effacing the entry of attachment noted in
favour of Respondents 2 to 4 within a time limit prescribed by this Honble
Court.
C. Grant such other reliefs as are deemed fit and proper.
D. Grant the cost of this Writ Petition."
2. Brief facts necessary for the disposal of the writ petition are as
follows: Petitioners are the successful Auction Purchasers of land having
an extent of 43.99 cents and building thereon in Re.Sy.No.507/4 of
Kalpetta Village, Vythiri Taluk, Wayanad District, which was brought for
sale by the 5th respondent as per the provisions of the Securitisation and
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Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (hereinafter referred to as "SARFAESI Act"). Ext.P1 sale
certificate was issued and registered as Deed No.1943/1/2021 of SRO,
Kalpetta. The property is stated as mortgaged by one Sri.Sushil Kumar to
the 5th respondent towards security for the financial facilities availed.
Ext.P2 is the letter dated 06.09.2014 confirming the deposit of the title
deed and creation of mortgage on 05.09.2014. Though the sale deed was
registered in favour of the petitioners, in Ext.P3 encumbrance certificate, it
is shown that an attachment over the property has been effected by
respondents 2 and 3, Employees Provident Fund Organisation and by the
4th respondent, the plaintiff in O.S. No. 246/2018 on the file of the Munsiff's
Court, Thaliparamba. On enquiry, it is found that the 2 nd respondent has
effected an attachment through the 3rd respondent for Employees
Provident Fund (EPF) dues of Kalpetta Janakshema Maruthi Chits Pvt.
Ltd. as per Ext.P4 order dated 09.10.2019. Similarly, the 4th respondent
has also obtained Ext.P5 attachment order dated 16.07.2018 from the
Munsiff's Court, Taliparamba in O.S.No.246 of 2018. Petitioners contend
that all the attachments are subsequent to the creation of the mortgage in
favour of the 5th respondent Bank, and the same is liable to be effaced.
Petitioners also submit that this position is covered by the decisions of this
Court in Madhan v. Sub Registrar (2014 (1) KLT 406), Ali Ashraf M.M.
and another v. Sub Registrar, Thrissur (judgment dated 24.07.2015 in
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W.A.No.612 of 2015) and the judgment in Secretary, Keechery Service
Co-operative Bank Ltd. v Sajitha Nizar alias Sajitha P.M. and others,
2020 (6) KLT 68. Thereupon, Ext.P6 representation was filed before the
1st respondent, Sub Registrar and the petitioners were informed that no
steps would be taken to efface the attachment in favour of respondents 2
to 4 unless there is a direction issued by this Court. It is in the said
circumstance that the petitioners have approached this Court.
3. A statement has been filed on behalf of respondents 2 and 3
through the learned standing counsel for EPF Organisation, wherein it is
stated that M/s. Kalpetta Janakshema Maruthi Chits Pvt. Ltd. is an
establishment covered under the provisions of the Employees' Provident
Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to "Act
1952") and the Schemes framed thereunder. The establishment has
defaulted in payment of the statutory dues within a stipulated time to the
tune of Rs.36,59,331/-. In order to recover the amount, an order of
attachment of the immovable property as per EPF CP-16 in respect of the
landed property of the establishment was sent to Sri. E. K.Sushil Kumar,
Managing Director, M/s. Kalpetta Janakshema Maruthi Chits Pvt. Ltd.,
Kalpetta, with a copy to the Sub Registrar, Kalpetta Sub Registry and
other officials. A request was also submitted to the Sub Registrar,
Kalpetta, to note the encumbrance of the EPFO on the said property and
not to allow any transaction on the property without written permission
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from the Recovery Officer. Petitioners are purchasers of the said property,
which has already been encumbered, and therefore, the purchaser should
remit the outstanding dues to the tune of Rs.36,59,331/-. It is further stated
that the action of 5th respondent in selling the property, which was under
attachment of the Employees' Provident Fund Organisation (EPFO) for
recovery of outstanding dues, without informing the organisation, is highly
illegal and unwarranted. It is also stated that the Act 1952 is a beneficial
piece of legislation for the benefit and betterment of the employees and
their families, and it is a statutory obligation of every employer to ensure
that their employees and workers are not deprived of the benefits of the
said statutory scheme. It is further contended that the EPFO has priority
over all other dues as per the provisions contained in Section 11 of the Act
1952. Learned standing counsel relies on the judgment of the Apex Court
in Employees' Provident Fund Commissioner v. O.L. of Esskay
Pharmaceuticals Limited, (2011) 10 SCC 727 and also the judgment in
Maharashtra State Co-operative Bank v. Assistant Provident Fund
Commissioner and another, (2009) 10 SCC 123, in support of his
contentions. On the basis of the same, respondents 2 and 3 sought for
dismissal of the writ petition.
4. An additional statement has been filed by the standing
counsel for respondents 2 and 3, wherein it is stated that Ext.R3(a) is for
the EPF dues for the period from July 2014 to December 2014 and from
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January 2015 to September 2015 and that the said dues arose much
before the property was mortgaged to the respondent bank. It is further
stated that Section 26-E of the SARFAESI Act, which came into force only
with prospective effect from 24.02.2020, cannot have any impact on the
proceedings initiated by the EPFO. The learned counsel would further
submit that the company in question is a chit company and the
establishment itself does not have any assets, and therefore, the EPFO
has moved against the assets of the Director, which they are legally
entitled to as per the provisions of the Act 1952.
5. A detailed reply has been filed by the petitioners, wherein it is
stated that, as evident from Ext.P2, the property is that of an individual and
not of M/s.Kalpetta Janakshema Maruthi Chits Pvt. Ltd. and that the
property does not belong to the employer or the establishment. It is further
stated that the attachment does not create an encumbrance, and the sale
was conducted by the 5th respondent bank after giving wide publicity by
publishing the same in two leading newspapers, as evident from Exts.P11
and P11(a) paper publications and therefore, sought to allow the writ
petition.
6. Learned counsel appearing for the 5th respondent bank
supported the claim of the petitioners, stating that the property sold is the
personal property of Sri. Sushil Kumar E.K., which was mortgaged to the
5th respondent bank as early as on 05.09.2014. The first charge, as per the
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provisions of the Act 1952, is on the property of the establishment, and
since the property covered by Ext.P2 is not the property of the
establishment, the provisions of Section 11(2) of the Act 1952 will not
apply in the facts of the present case. The learned counsel would submit
that it is settled law by the decisions of this Court in Madhan case and
Keechery Service Co-operative Bank Ltd. case cited supra that
attachment does not create an encumbrance. It is further submitted that
Section 26(E) of the SARFAESI Act gives priority to the secured creditors
in respect of the debts due to them, and that being so, the petitioners are
entitled to the reliefs sought for.
7. A detailed counter affidavit has been filed by the 1 st
respondent, also, wherein it is stated that the Provident Fund authorities
have issued a warrant of attachment to Sri. E K.Sushil Kumar, who is the
Managing Director of M/s.Kalpetta Janakshema Maruthi Chits Pvt. Ltd.,
attaching 0.1781 hectares of landed property in resurvey No.507/4 in
Kalpetta Village as per Ext.R1(a). Likewise, the Munsiff's Court,
Taliparamba, in I.A.No.1807 of 2018 in O.S.No.246 of 2018 has also
prohibited the respondent from alienating the schedule property until
further orders, as evident from Ext.R1(b). Later, the Provident Fund
authorities issued an order of attachment of the immovable property, as
evident from Ext.R1(c) letter. It is further stated that as per Ext.R1(d)
order, the Debt Recovery Tribunal in O.A.No.375 of 2016 filed by the 5 th
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respondent, directed the Sub Registrar to maintain status quo in respect of
the schedule property until further orders. It is in the said circumstance that
the Sub Registrar has not taken steps to efface the attachment in the
property, but the sale certificate has been registered in the office, as
evident from Ext.R1(e).
8. The 4th respondent has also filed a detailed counter affidavit,
wherein it is stated that the 4th respondent attached the property through
the Munsiff's Court, Taliparamba, for realisation of an amount of
Rs.4,34,625/-. It is also stated that various other customers of the Kalpetta
Janakshema Maruthi Chits Pvt. Ltd. have filed complaints against Sri.
Sushil Kumar, who is the Director of the said company, who had
mortgaged the property with the 5 th respondent. It is submitted that the
sale conducted by the bank while the attachments in the case filed by the
4th respondent and also by the EPFO over the subject property were in
force, is illegal and cannot be acted upon. Therefore, it is submitted that
the 1st respondent has no authority to remove the attachment by the Civil
Court and Debt Recovery Tribunal, and the bank or the purchaser has to
approach the proper forum to remove the said attachment.
9. I have heard the rival contentions on both sides.
10. The following facts are admitted from the pleadings on either
side. The equitable mortgage was created by Sushil Kumar on 06.09.2014
who is the Director of Kalpetta Janakshema Maruthi Chits Pvt. Ltd., in
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favour of the 5th respondent bank by mortgaging 43.99 cents of land
comprised in resurvey No.507/4 of Kalpetta Village. The EPF contribution
was due for the period from July 2014, as evident from Ext R3(a). The
order of attachment by the 3rd respondent, EPFO, in respect of the very
same property mortgaged by Sushil Kumar was on 04.11.2015. The
mortgage was registered by the bank with the Central Registry (CERSAI)
on 05.11.2016. The 4th respondent got an attachment in respect of the
subject property on 16.07.2018. The encumbrance certificate issued
shows two attachments, ie, the attachment on 04.11.2015 by respondents
2 and 3 and the attachment on 16.07.2018 by the 4 th respondent. The
petitioners have approached this Court seeking a direction to delete/efface
the attachment noted in favour of respondents 2 to 4 in respect of the
subject property and for the issuance of a fresh encumbrance certificate to
the petitioners after effacing the entry of attachment noted in favour of
respondents 2 to 4 within a time limit to be fixed by this Court.
11. First, let me consider the request of the petitioners for the
effacement of the attachment obtained by the 4th respondent. The
attachment of the property was as per an order of the Munsiff's Court,
Taliparamba, in O.S.No.246 of 2018 filed by the 4th respondent.
Petitioners rely on the judgments in Madhan, Ali Ashraf and Keechery
Service Co-operative Bank Ltd.'s cases cited supra in support of their
contentions. But the Full Bench of this Court in Fathima v. Canara Bank
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(2025 (3) KLT 367) has overruled the propositions of law laid down in
Madhan, Ali Ashraf and Keechery Service Co-operative Bank Ltd.'s
cases cited supra to the effect that an order directing effacement or
deletion of entry in Book No.1 maintained by a registering authority,
regarding attachment ordered by a Civil Court or a Family Court cannot be
granted under Article 226 of the Constitution of India and the Court held
that a party who wants to enter a footnote that the attachment ordered by
a Civil Court or Family Court stands extinguished or removed should
approach the court which issued the order of attachment invoking the
appropriate provision in the Civil Procedure Code. In the light of the above,
the request of the petitioners for issuance of a direction invoking the power
under Article 226 of the Constitution and in the light of the judgments relied
on by the petitioners is only to be rejected in the light of the Full Bench
judgment in Fathima's case cited supra.
12. Now let me consider the request for effacement of attachment
effected in favour of respondents 2 and 3, the EPF Organisation in the
subject property. The essential contention raised by the learned counsel
for the petitioners as well as the learned counsel appearing for the
respondent bank is that the first charge as provided in Section 11(2) of the
Act 1952 will not be available to the EPF Organisation in the facts and
circumstances of the present case, inasmuch as the proceedings have
been initiated against the property of the Director, whereas the first charge
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over the property as provided under Section 11(2) is only against the
assets of the establishment. Therefore, it is contended that since the
creation of the equitable mortgage on 05.09.2014 being much prior to the
attachment by the EPFO on 04.11.2015, the priority of the bank as
provided in Section 26-E of the SARFAESI Act will prevail. In support of
the contention, reliance is placed on the judgment of the Madurai Bench of
the Madras High Court in Manipal Sowbhagya Nidhi Limited v. The
Regional Provident Fund Commissioner (W.P.(C) No.6725 of 2007),
wherein the Madurai Bench of the Madras High Court considering the
impact of Section 11 of the Act 1952 held that the benefit of first charge as
provided under Section 11(2) of the Act 1952 will not be applicable in
respect of a property of the Director, which is proceeded against for the
dues of the EPF.
13. Section 2(e) of the Act 1952 defines "employer" as follows:
"(e) "employer" means-- (i) in relation to an establishment
which is a factory, the owner or occupier of the factory, including
the agent of such owner or occupier, the legal representative of a
deceased owner or occupier and, where a person has been named
as a manager of the factory under clause (f) of sub-section (1) of
section 7 of the Factories Act, 1948 (63 of 1948), the person so
named; and
(ii) in relation to any other establishment, the person who, or the
authority which, has the ultimate control over the affairs of the
establishment, and where the said affairs are entrusted to a
manager, managing director or managing agent, such manager,
managing director or managing agent"
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(underline supplied)
Going by the said definition, the employer includes the manager,
managing director or managing agent. Admittedly, the property now
proceeded against is the assets of the Director, to whom Ext.R1(a) order
of attachment and Exts.R3(a) and R3(b) proceedings were initiated. Sri.
Sushil Kumar, who is the owner of the property which is proceeded, is the
Director of the company, having ultimate control over the affairs of the
establishment and would fall within the definition of "employer". Section 8
of the Act 1952 provides the mode of recovery of money due from the
employer as arrears of land revenue. Section 8-B of the Act, 1952 reads
as follows:
"8B. Issue of certificate to the Recovery Officer.--(1) Where any
amount is in arrear under section 8, the authorised officer may
issue, to the Recovery Officer, a certificate under his signature
specifying the amount of arrears and the Recovery Officer, on
receipt of such certificate, shall proceed to recover the amount
specified therein from the establishment or, as the case may be,
the employer by one or more of the modes mentioned below:--
(a) attachment and sale of the movable or immovable property of
the establishment or, as the case may be, the employer;
(b) arrest of the employer and his detention in prison;
(c) appointing a receiver for the management of the movable or
immovable properties of the establishment or, as the case may be,
the employer:
Provided that the attachment and sale of any property under this
section shall first be effected against the proportion of the
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establishment and where such attachment and sale is insufficient
for recovering the whole of the amount of arrears specified in the
certificate, the Recovery Officer may take such proceedings against
the property of the employer for recovery of the whole or any part of
such arrears.
(2) The authorised officer may issue a certificate under sub-section
(1), notwithstanding that proceedings for recovery of the arrears by
any other mode have been taken."
(underline supplied)
Going by Section 8-B of the Act 1952, proceedings could be initiated
against the establishment or the employer for the EPF dues and the only
rider is that the attachment and sale of any property shall be first effected
against the property of the establishment and where such attachment and
sale is insufficient for recovering the whole of the amount of arrears
specified in the certificate, the Recovery Officer may take proceedings
against the property of the employer for recovery of the whole or any part
of such arrears. In this case, the specific contention raised by the learned
counsel appearing for the EPFO is that the company, being a chit
company, has no assets and therefore, proceedings were initiated against
the Director, who comes within the definition of an "employer" under
Section 2(e) of the Act 1952. Further, it is to be noted that Sri.Sushil
Kumar, who is the Director of the company, in charge of the affairs of the
company was aware of the fact that provident fund amounts are due even
at a time when he has created an equitable mortgage in favour of the
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bank. This issue has been considered by the Madras High Court in Raj
Kumar Khemka v. EPF Organisation and Others and connected cases
(W.P.(C) Nos.28490 to 28493 of 2013), and the operative portion of the
said judgment reads as follows:
"11.In the case of Harish F Shah Vs. Employees Provident
Fund Organization reported in 2011 SCC Online Guj 4849,
the Hon'ble Division Bench of the High Court of Gujarat,
relying upon the judgment of the Hon'ble Division Bench of
the Punjab and Haryana High Court rendered in the case of
Mohan Vs. Regional Provident Fund Commissioner reported
in 2002-III-LLJ 779, in which also the cases referred by the
learned Single Judge of this Court and the Hon'ble Punjab
and Haryana High Court, held that the ratio of those decisions
cannot be applied to the case in hand, because the definition
of the employer contained in Section 2(e) of EPF and MP Act
in relation to an establishment other than a factory is totally
different and the issue relating to the liability of the Manager,
Managing Director etc. would depend on the finding as to
whether he is in the control of the affairs of the establishment.
Therefore, the definition of 'employer' under ESI Act is not
applicable to the decision under EPF and MP Act. Further
held that the modes of recovery specified in clauses (a), (b)
and (c) of Section 8-B(1) of the Act are alternative modes and
not exclusive of each other and it is open to the Recovery
Officer to resort to one or more of the modes. The use of the
expression "by one or more of the modes mentioned below"
in the substantive part of Section 8-B(1) makes it clear that
the legislature has, with a view to ensure that the dues
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payable under the Act are recovered, empowered the
Recovery Officer to resort to one or all the modes for recovery
of the arrears. The only rider placed on the exercise of power
by the Recovery Officer is that in the case of attachment and
sale of any property, he must first do so qua the properties of
the establishment and take proceedings against the
properties of the employer for recovery of the whole or any
part of the arrears only where the attachment and sale of
properties of the establishment is insufficient for recovery of
the whole amount specified in the certificate. However, there
is nothing in Section 8-B(1) and other provisions of the Act
from which it can be inferred that the Recovery Officer cannot
adopt the mode specified in Clause (b) of Section 8-B(1)
before exhausting other modes of recovery." Therefore, the
petitioners are being the Directors of the establishment held
liable for the attachment of their properties."
The said view was reiterated by the Punjab and Haryana High Court in
Mohan v. Regional Provident Fund Commissioner and another (2002-
III-LLJ 779). Paragraphs 18 and 19 of the said judgment read as follows:
"18. We are further of the view that the 50 modes of recovery
specified in clauses (a), (b) and (c) of Section 8-B(1) of the Act are
alternative modes and not exclusive of each other and it is open to
the Recovery Officer to resort to one or more of the modes. The use
of the expression "by one or more of the modes mentioned below"
in the substantive parts of Section 8-B(1) makes it clear that the
legislature has, with a view to ensure that the dues payable under
the Act are recovered, empowered the Recovery Officer to resort to
one or all the modes for recovery of the arrears. The only rider
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placed on the exercise of power by the Recovery Officer is that in
the case of attachment and sale of any property, he must first do so
qua the properties of the establishment and take proceedings
against the properties of the employer for recovery of the whole or
any part of the arrears only where the attachment and sale of
properties of the establishment is insufficient for recovery of the
whole amount specified in the certificate. However, there is nothing
in Section 8-B(1) and other provisions of the Act from which it can
be inferred that the Recovery Officer cannot adopt the mode
specified in Clause (b) of Section 8-B(1) before exhausting other
modes of recovery.
19. A similar question was considered by this court in Sobha Textile
Ltd v. Regional Provident Fund Commissioner, Haryana and
another. 2000(3) R.S.J. 178 and answered in the following words;
"Sub-Section (1) of Section 8-B of the 1952 Act prescribes
alternative modes of recovery of the arrears on the basis of
certificate issued by the authorised officer. Attachment on
sale of moveable or immovable property of the
establishment or, as the case may be, and arrest of the
employer and his detention in prison are two of the three
modes which can be adopted by the Recovery Officer.
Proviso appearing below clause (c) of Section 8- B(1) of the
1952 Act lays down that attachment and sale of any property
under Section 8-B shall first be effected against the
properties of the establishment and proceedings against the
property of the employer can be taken only if the amount
due cannot be recovered from the properties of the
establishment. However, there is nothing in the said proviso
from which it can be inferred that respondent No.2 is not
entitled to have recourse to the mode prescribed in clause
(b) of Section 8-B(1) before taking recourse to the sale of
property under Section 8-B(1)(a) and in the absence of any
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such embargo, it is not possible to agree with Shri Grover
that the notice issued by respondent No.2 should be
declared illegal, arbitrary and unjustified."
Therefore, it is without any doubt that the statute empowers the EPFO to
proceed against the assets of the Director. But, it is true that Section 11(2)
of the Act 1952 gives the first charge only in respect of the assets of the
establishment and the property now being proceeded against is the assets
of the Director of the company, and therefore the EPFO cannot rely on
Section 11(2) of the Act 1952 to claim first charge on the assets over the
subject property. But, an aspect to be noted is that Section 11(2) of the Act
1952 not only deals with the first charge over the property but also priority
over all other debts, which reads as follows:
"11. Priority of payment of contributions over other debts.--
(1) Where any employer is adjudicated insolvent or, being a
company, an order for winding up is made, the amount due--
(a) from the employer in relation to an establishment to which
any Scheme or the Insurance Scheme] applies in respect of any
contribution payable to the Fund 12[or, as the case may be, the
Insurance Fund], damages recoverable under section 14B,
accumulations required to be transferred under sub-section (2)
of section 15 or any charges payable by him under any other
provision of this Act or of any provision of the Scheme or the
Insurance Scheme; or
(b) from the employer in relation to an exempted establishment
in respect of any contribution to the Provident Fund or any
Insurance Fund (in so far it relates to exempted employees),
under the rules of the Provident Fund or any Insurance Fund,
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any contribution payable by him towards the Family Pension
Fund under sub-section (6) of section 17, damages recoverable
under section 14B or any charges payable by him to the
appropriate Government under any provision of this Act or under
any of the conditions specified under section 17,
shall, where the liability thereof has accrued before the order of
adjudication or winding up is made, be deemed to be included]
among the debts which under section 49 of the Presidency-
towns Insolvency Act, 1909 (3 of 1909), or under section 61 of
the Provincial Insolvency Act, 1920 (5 of 1920), or under section
530 of the Companies Act, 1956 (1 of 1956), are to be paid in
priority to all other debts in the distribution of the property of the
insolvent or the assets of the company being wound up, as the
case may be.
Explanation.--In this sub-section and in section 17, "insurance
fund" means any fund established by an employer under any
scheme for providing benefits in the nature of life insurance to
employees, whether linked to their deposits in provident fund or
not, without payment by the employees of any separate
contribution or premium in that behalf.
(2) Without prejudice to the provisions of sub-section (1), if any
amount is due from an employer whether in respect of the
employee's contribution (deducted from the wages of the
employee) or the employer's contribution], the amount so due
shall be deemed to be the first charge on the assets of the
establishment, and shall, notwithstanding anything contained in
any other law for the time being in force, be paid in priority to all
other debts."
(underline supplied)
Section 11(2) of the Act 1952 gives priority for the amount due to the
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EPFO over all other debts. Admittedly, going by Ext R3(a), the amount due
towards EPFO is from July 2014. The equitable mortgage was created in
favour of the bank only on 06.09.2014, and much before the same, the
EPF amount had become due. Going by Paragraph 38 of the Employees
Provident Funds Scheme, 1952 (hereinafter referred to as 'Scheme
1952'), it is mandatory for the employer to pay the provident fund
contribution within 15 days of the close of every month. The amount held
by the employer is a statutory due, a portion of which is the employee's
contribution, which is held illegally by the employer without remitting the
same to the fund. The said default makes the director/employer even liable
to prosecution under Section 14A of the Act 1952. Therefore, the EPFO
can claim priority towards payment of contribution dues over other debts,
going by Section 11(2) of the Act 1952, though they cannot claim first
charge over the subject property since the first charge is provided only
against the assets of the establishment.
14. Now coming to the SARFAESI Act, Section 26-E is an
identical provision, which also provides for priority to secured creditors,
which reads as follows:
"26E. Priority to secured creditors.--Notwithstanding anything
contained in any other law for the time being in force, after the
registration of security interest, the debts due to any secured
creditor shall be paid in priority over all other debts and all
revenues, taxes, cesses and other rates payable to the Central
Government or State Government or local authority.
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Explanation.--For the purposes of this section, it is hereby
clarified that on or after the commencement of the Insolvency and
Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency
or bankruptcy proceedings are pending in respect of secured
assets of the borrower, priority to secured creditors in payment of
debt shall be subject to the provisions of that Code."
(underline supplied)
So, both statutes provide for a priority for recovery of the amount due
under the respective statutes. As held by the Apex Court in Jalgaon
District Central Coop. Bank Ltd. v. State of Maharashtra and others,
2025 SCC OnLine SC 2513, since the SARFAESI Act being the latter Act
giving an overriding effect over any law for the time being in force, it would
prevail. But the question is whether the respondent bank could claim
priority as provided under Section 26-E of the SARFAESI Act. Admittedly,
though the equitable mortgage was created on 05.09.2014, the mortgage
was registered with CERSAI only on 05.11.2016, whereas the EPF
amount became due in July 2014, and the attachment order in favour of
the EPFO was on 04.11.2015, much before the registration of the
mortgage with CERSAI as mandated in Section 26-E. Further, it is to be
noted that the provident fund contribution became due even prior to the
equitable mortgage created in favour of the bank. Section 26-E of the
SARFAESI Act, giving priority to secured creditors, provides that after the
registration of the security interest with the CERSAI, the debt due to any
2026:KER:13940
secured creditor shall have priority. The question is whether the bank
could claim priority as provided under Section 26E of the SARFAESI Act
since the mortgage was registered with CERSAI only on 05.11.2016, and
even the equitable mortgage in favour of the bank was much after the
amount became due towards EPF and the consequent attachment order
issued by the EPFO. Section 26-C deals with the effect of registration of
the transaction, wherein Section 26-C(2) provides that where security
interest or attachment order upon any property in favour of the secured
creditor or any other creditor are filed for the purpose of registration, the
claim of such secured creditor or other creditor holding attachment order
shall have priority over any subsequent security interest created upon
such property. The Full Bench of the Bombay High Court in Jalgaon
Janatha Sahakari Bank Ltd. v. Joint Commissioner of Sales (2022
KHC OnLine 5615) while considering the claim of the secured creditor
under Section 26-E has considered the claim of priority interest by a
secured creditor without registration of security interest with the Central
Registry and has held that unless security interest is registered, no
question of priority would arise. Paragraph 129 of the said judgment reads
as follows:
"129. The entire scheme of Chapter IVA of the SARFAESI
Act, as introduced by the Amending Act of 2016, leaves no
manner of doubt that the object for its introduction is salutary.
We have, in fact, discussed the noble objects that introduction
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of Chapter IVA of the SARFAESI Act intends to achieve. The
drastic power made available to a secured creditor by
provisions contained in section 13 and the other provisions of
the SARFAESI Act to dispossess the borrower/guarantor from
the secured asset without intervention of courts but
necessarily upon compliance with the procedural safeguards
laid down therefor has seemingly been arrested to a limited
extent by incorporation of section 26D by the 2016 Amending
Act. Section 26D, which also opens with a non obstante
clause, prohibits a secured creditor from exercising the rights
for enforcement of security interest conferred by Chapter III,
unless the secured interest created in its favour by the
borrower has been registered with the CERSAI. Not only
therefore registration with the CERSAI has been made a
mandatory pre-condition for invocation of the provisions
contained in Chapter III of the SARFAESI Act, the provisions
relating to debts that are due to any secured creditor being
payable to such creditor in priority over all other debts and
revenue, taxes, etc., is available to be invoked only after the
registration of security interest.
This being the text of section 26E, which is to be read in the
context in which it is set, leads to the irresistible and inevitable
conclusion that unless the security interest is registered,
neither can the borrower seek enforcement invoking the
provisions of Chapter III of the SARFAESI Act nor does the
question of priority in payment would arise without such
registration."
(underline supplied)
The Apex Court in Maharashtra State Co-operative Bank's case cited
supra was considering the claim of the Employment Provident Fund
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Organisation invoking Section 11(2) of the Act 1952 and held that Section
11 not only declares that the amount due from the employer towards
contribution under the Act shall be treated as the first charge on the assets
of the establishment but also laid down that such dues shall be paid in
priority to all other debts. Paragraph 28 of the said judgment reads as
follows:
"28. Sub-section (2), which was added to Section 11 by Act 40 of
1973 contains a non obstante clause and lays down that if any
amount is due from the employer whether in respect of the
employees' contribution deducted from the wages of the employee
or the employer's contribution, the same shall be deemed to be the
first charge on the assets of the establishment and shall,
notwithstanding anything contained in any other law for the time
being in force, be paid in priority to all other debts. To put it
differently, sub-section (2) of Section 11 not only declares that the
amount due from the employer towards contribution under the Act
shall be treated as the first charge on the assets of the
establishment, but also lays down that notwithstanding anything
contained in any other law, such dues shall be paid in priority to all
other debts."
In the said judgment, the Apex Court further held that the Act 1952, being
a social welfare legislation intended to protect the interests of a weaker
section of society, it is imperative for the Courts to give a purposive
interpretation to the provisions of the Act. Paragraph 30 of the said
judgment reads as follows:
"30. Since the Act is a social welfare legislation intended to protect
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the interest of a weaker section of the society i.e. the workers
employed in factories and other establishments, it is imperative for
the courts to give a purposive interpretation to the provisions
contained therein keeping in view the Directive Principles of State
Policy embodied in Articles 38 and 43 of the Constitution. In this
context, we may usefully notice the following
observations made by Krishna lyer, J. in Organo Chemical
Industries v. Union of India?: (SCC pp. 587 & 591-92, paras 28 &
40-41)
"28. The pragmatics of the situation is that if the stream of
contributions were frozen by employers' defaults after due
deduction from the wages and diversion for their own purposes,
the scheme would be damnified by traumatic starvation of the
Fund, public frustration from the failure of the project and psychic
demoralisation of the miserable beneficiaries when they find their
wages deducted and the employer get away with it even after
default in his own contribution and malversation of the workers'
share. 'Damages' have a wider socially. semantic connotation than
pecuniary loss of interest on non-payment when a social welfare
scheme suffers mayhem on account of the injury. Law expands
concepts to embrace social needs so as to become functionally
effectual."
The Apex Court in the said judgment also considered the priority of the
provident fund dues against debts like mortgage, pledge etc. Paragraph 31
of the said judgment reads as follows:
"31. We shall now consider the question whether the provision
contained in Section 11(2) of the Act operates against other
debts like mortgage, pledge, etc. Answer to this question is
clearly discernible from the plain language of Section 11. The
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priority given to the dues of provident fund, etc. in Section 11 is
not hedged with any limitation or condition. Rather, a bare
reading of the section makes it clear that the amount due is
required to be paid in priority to all other debts. Any doubt on the
width and scope of Section 11 qua other debts is removed by the
use of expression "all other debts" in both the sub-sections. This
would mean that the priority clause enshrined in Section 11 will
operate against statutory as well as non-statutory and secured
as well as unsecured debts including a mortgage or pledge.
Subsection (2) was designedly inserted in the Act for ensuring
that the provident fund dues of the workers are not defeated by
prior claims of secured or unsecured creditors, This is the reason
why the legislature took care to declare that irrespective of time
when a debt is created in respect of the assets of the
establishment, the dues payable under the Act would always
remain first charge and shall be paid first out of the assets of the
establishment notwithstanding anything contained in any other
law for the time being in force. It is, therefore, reasonable to take
the view that the statutory first charge created on the assets of
the establishment by sub-section (2) of Section 11 and priority
given to the payment of any amount due from an employer will
operate against all types of debts."
(underline supplied)
Paragraph 63 of the Apex Court judgment reiterates the priority and first
charge towards EPFO and held as follows:-
"63. At the cost of repetition, it is apposite to mention that Section
11 is declaratory in nature. Sub-section (2) thereof declares that
any amount due from an employer shall be deemed to be first
charge on the assets of the establishment and shall be paid in
priority to all other debts. For recovery of the amount due from an
2026:KER:13940
employer which is treated as arrear of land revenue, the Recovery
Officer or any other authorised officer has to take recourse to the
provisions contained in Section 8 read with Sections 8-B and 8-F.
The recovery can be effected by attachment or sale of the movable
or immovable property of the establishment or, as the case may
be, the employer, or by arrest of the employer and his detention in
prison or by appointing a Receiver for the management of the
movable or immovable properties of the establishment or, as the
case may be, the employer or by taking action in the manner laid
down in the Third Schedule to the Income Tax Act, 1961."
The recent judgment of the Apex Court in Jalgaon District Central Coop.
Bank Ltd. cited supra has quoted with approval the earlier judgment of the
Apex Court in Maharashtra State Co-operative Bank's case cited supra.
So, from the facts and circumstances stated above and the
judgments relied on, it is without any doubt that EPFO as well as the
respondent bank will have a priority over all other dues and the SARFAESI
Act being the latter Act, the provisions of the said Act will prevail. But, the
bank could get priority as mandated in Section 26-E of the SARFAESI Act
only after the registration with the CERSAI, which happened only on
05.11.2016, and the provident fund became due much prior to that, and
the attachment by the EPFO was also before such registration. Even the
mortgage in favour of the bank was after the provident fund amount had
become due. As per Section 11(2) of the Act 1952, any amount due from
an employer with respect to Provident Fund contribution shall have priority
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over all debts. Admittedly, the amount towards provident fund contribution
became due in July 2014, much prior to the mortgage created in favour of
the bank. I have already held that the bank would get priority only after
registration with CERSAI, which was a subsequent act after the provident
fund amount became due and after the attachment by the EPF
Organisation has come into force. Therefore, in the above facts and
circumstances, the bank cannot claim priority on the strength of Section
26-E of the SARFAESI Act, and the EPF Organisation enjoys priority over
other debts as provided under Section 11(2) of the Act 1952 since the
amount became due towards the EPF arrears much prior to the mortgage
created in favour of the bank. Therefore, I am of the view that the claim of
the bank on the ground of priority over the debts relying on Section 26-E of
the SARFAESI Act cannot be accepted. Consequently, no direction could
be issued to the 1st respondent to delete/efface the attachment noted in
favour of respondents 2 and 3 in this writ petition. In view of the above, no
relief could be granted to the petitioners and the writ petition is accordingly
dismissed.
Sd/-
VIJU ABRAHAM
JUDGE
cks
2026:KER:13940
APPENDIX OF WP(C) NO. 3987 OF 2022
PETITIONER EXHIBITS
Exhibit P1 DEED NO.1943/1/2021 DATED 30.07.2021 OF
KALPETTA SRO.
Exhibit P2 COPY OF THE LETTER DATED 06.09.2014
CONFIRMING THE DEPOSIT OF TITLE DEED
AND CREATION OF MORTGAGE ON 05.09.2014
(PERTAINING TO EXT.P1 PROPERTY) TOWARDS
SECURITY IN FAVOUR O THE 5TH
RESPONDENT.
Exhibit P3 COPY OF THE ENCUMBRANCE CERTIFICATE
DATED 22.03.2021 ISSUED BY THE 1ST
RESPONDENT IN RESPECT OF THE PROPERTY
COVERED BY EXT.P1.
Exhibit P4 COPY OF THE ORDER OF ATTACHMENT DATED
09;10.2019 MADE BY THE 3RD RESPONDENT
OBTAINED FROM THE OFFICE OF THE 1ST
RESPONDENT.
Exhibit P5 COPY OF THE ACHIEVEMENT ORDER
16.07.2018 COMMUNICATED TO THE 1ST
RESPONDENT (IN OS NO.246/2018 OF THE
MUNSIFF'S COURT, TALIPARAMBA).
Exhibit P6 COPY OF THE LETTER DATED 01.02.2022 OF
THE PETITIONERS ADDRESSED TO THE 1ST
RESPONDENT.
Exhibit P11 COPY OF THE PAPER PUBLICATION MADE IN
THE NEW INDIAN EXPRESS DAILY (KOZHIKODE
EDITION) DATED 02.02.2021.
Exhibit P11(a) COPY OF THE PAPER PUBLICATION MADE IN
THE MATHRUBHUMI MALAYALAM DAILY DATED
02.02.2021.
RESPONDENT EXHIBITS
Exhibit R5(a) COPY OF THE JENMOM ASSIGNMENT DEED
DATED 14.03.212 DULY REGISTERED AS
DOCUMENT NO.1112/2012 AT KALPETTA SRO
Exhibit R5(b) COPY OF THE TAX RECEIPT DATED
18.03.2012
Exhibit R5(c) COPY OF THE TAX RECEIPT DATED
12.06.2014
Exhibit R5(c) COPY OF THE TAX RECEIPT DATED 20-09-
Exhibit R5(d) COPY OF THE TAX RECEIPT DATED
22.05.2014
Exhibit R5(e) COPY OF THE TAX RECEIPT DATED
W.P.(C) No.3987 of 2022 30
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12.06.2014
Exhibit R5(f) COPY OF THE TAX RECEIPT DATED
25.06.2021
Exhibit R5(g) COPY OF THE THANDAPPER ACCOUNT DATED
25.06.2021
Exhibit R5(h) COPY OF THE CERSAI REGISTRATION .
EXHIBIT R1(a) TRUE COPY OFTHE LETTER
NO.KR/KKD/23106/ENF2[4]/Recovery/2015
dated 04/11/2015
EXHIBIT R1(b) TRUE COPY OF THE IA 1807/2018 DATED
EXHIBIT R1(c) TRUE COPY OF THE LTR
NO.KR/KK/23106/REC/Enf 02[03]/2019
DATED 09.10.2019
EXHIBIT R1(d) A TRUE COPY OF THE ORDER NO. DRC No
313/2018 IN OA 375/2016 DATED
14.07.2020
EXHIBIT R1(e) A true copy of the Document no.
1943/01/2021 on 02/08/2021
Annexure R3(A) True copy of the order
No.KR/KK/23106/Enf II(4)/2014-2015/365
dated 23-04-2015 issued by the Regional
Provident fund Commisioner, Calicut
Annexure R3(B) True copy of the order
No.KR/KK/23106/Enf II(4)/2015-
2016/10403 dated 22-02-2016 issued by
Assistant provident fund Commissioner,
Calicut
