Statutory priority of provident fund dues and sick-company asset sales must be harmonised; completed sale to bona fide purchaser was not disturbed.

Section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 vests sale of a sick company's assets in the BIFR after a winding-up recommendation, while provident fund dues under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 carry statutory priority and first charge. The provisions were read harmoniously, so recovery should ordinarily be routed through the Board. On the facts noted, the employer remained in default, the sale had already been completed in favour of a bona fide purchaser, and the writ challenge was rejected rather than upsetting a concluded transaction. The authorities were directed to seek Board ratification and apply the sale proceeds towards the provident fund dues.

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Issues: (i) Whether the sale of the petitioner-company's properties was vitiated for non-compliance with Section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 vests the power to sell the assets of a sick industrial company, after a recommendation for winding up, in the Board for Industrial and Financial Reconstruction until a winding up order is passed. At the same time, the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is a special social welfare enactment conferring wide recovery powers on the Provident Fund authorities, and the dues under Section 11 thereof have priority and first charge. The provisions were held to require reconciliation by harmonious construction. On that basis, the Court found that although the provident fund authorities should have routed the recovery through the Board, the petitioner had remained in default, the sale had already been completed in favour of a bona fide purchaser, and setting aside the sale at that stage would perpetuate illegality rather than cure it.

Conclusion: The sale was not set aside, and the challenge based on Section 20(4) failed.

Final Conclusion: The writ petition was rejected on equitable and factual grounds, while directing the provident fund authorities to approach the Board for ratification and appropriation of the sale proceeds towards the outstanding provident fund dues.

Ratio Decidendi: Where provident fund dues enjoy statutory priority but the assets of a sick industrial company are sold without routing the recovery through the Board, a completed sale in favour of a bona fide purchaser will not be upset in writ jurisdiction if the defaulting employer seeks equitable relief after prolonged inaction.

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