Transferee not liable for provident fund dues; court quashes orders.

Tayal Energy Limited, Goindwal Sahib, District Tarn Taran Versus Regional Provident Fund Commissioner Employees' Provident Fund Organisation, Amritsar & Others

Tayal Energy Limited, Goindwal Sahib, District Tarn Taran Versus Regional Provident Fund Commissioner Employees' Provident Fund Organisation, Amritsar & ... Issues Involved:
1. Liability of the transferee to pay provident fund dues prior to the transfer.
2. Applicability of Section 17-B of the Employees Provident Fund and Misc. Provisions Act, 1952.
3. Nature of transfer: voluntary vs. involuntary.
4. Legal precedents and interpretations of Section 17-B.

Summary:

1. Liability of the Transferee to Pay Provident Fund Dues Prior to the Transfer:
The primary issue was whether the transferee of an industrial unit is liable to pay provident fund dues for the period before the transfer. The petitioner argued that the liability should rest with the liquidator, as per the auction agreement, while the Regional Provident Fund Commissioner contended that Section 17-B of the Employees Provident Fund and Misc. Provisions Act, 1952 (the Act) imposed this liability on the transferee.

2. Applicability of Section 17-B of the Act:
Section 17-B of the Act states that both the employer and the transferee are "jointly and severally liable to pay the contribution and other sums due from the employer under any provision of this Act." However, the proviso limits the liability of the transferee to the value of the assets obtained by such transfer. The court examined whether this section applied to the petitioner, given the nature of the transfer.

3. Nature of Transfer: Voluntary vs. Involuntary:
The court noted that the transfer in this case was not voluntary but occurred through an auction conducted by a liquidator. The petitioner did not employ any of the previous employees, started a new manufacturing activity, and obtained a new provident fund code. The court referenced several precedents, including the Orissa High Court's decision in Suburban Ply and Panels (P) Ltd. and the Karnataka High Court's decision in Regional Provident Fund Commissioner, Mangalore, which held that Section 17-B does not apply to transfers by operation of law.

4. Legal Precedents and Interpretations of Section 17-B:
The court considered various judgments, including:
- M/s Driplex Water Engineering International Pvt. Ltd.: Held that a new establishment with a different identity and no staff from the previous unit is not liable for prior provident fund dues.
- The Provident Fund Inspector, Trivandrum vs. The Secretary, N.S.S. Co-operative Society: The burden of proof lies with the authority assessing the liability.
- Suburban Ply and Panels (P) Ltd. vs. Regional Provident Fund Commissioner: Section 17-B does not apply to transfers by operation of law.
- Dulgaon Agro Industries Ltd. vs. Union of India: The Full Bench of Calcutta High Court held that transferees are jointly and severally liable, but this view was not followed in the present case due to differing circumstances.

Conclusion:
The court concluded that the petitioner, being a new establishment with no connection to the previous unit, could not be held liable for the provident fund dues under Section 17-B of the Act. The writ petition was allowed, and the impugned orders were quashed. The Provident Fund Commissioner could still recover the dues from the liquidator or the original concern, M/s Goindwal Cooperative Spinning Mills Limited, in accordance with the law.