2017 (4) TMI 630 - HC - Companies Law

EPFO ordered to refund excess amount, provident fund dues prioritized over other claims

In Re : M/s. Indian Link Chain Manufacturers Limited

The court directed the EPFO Kandivali to refund an excess amount and upheld the priority of provident fund dues over other claims. Claims for interest and ... Claim made by the Regional Provident Fund Commissioner for employer's contribution as well as towards employees' contribution from the official liquidator - Held that:- Claim thus made by the Regional Provident Fund Commissioner for employer's contribution as well as towards employees' contribution from the official liquidator is totally untenable and is rightly rejected by the official liquidator. In my view, there is thus no substance in this demand of the Regional Provident Fund Commissioner against the official liquidator and is accordingly rejected. A perusal of Ann.1 to the affidavit dated 23rd February 2017 filed by the Regional Provident Fund Commissioner, Kandivali clearly indicates that the claim of the said office included claim towards the employees as well as employers share of provident fund in respect of 350 employees and also various other claims which were dealt with by the Official Liquidator and also by this court in this judgment. The learned Official Liquidator has rightly rejected some of the claims and has rightly adjudicated the claims in the sum of ₹ 5,54,64,810/- vide report dated 31st July, 2013 under Section 529A of the Companies Act, 1956 as against the claim of ₹ 20,60,61,287/-. A perusal of paragraph 8 of the said affidavit indicates that the Regional Provident Fund Commissioner, Kandivali has settled the provident fund claims along with pension/death claims as on 19th January 2017 in respect of 298 employees for an amount of ₹ 4,82,24,677/- and has only disbursed the said amount to the respective employees out of the amount of ₹ 6,67,57,281/- paid by the Official Liquidator to the Provident Fund Authorities as against the amount of ₹ 5,54,64,810/- which was adjudicated amount in the said report dated 31st July 2013. I am thus not inclined to accept the submission of Mr.Sureshkumar, learned counsel for the Regional Provident Fund Commissioner, Kandivali that excess amount of ₹ 5,05,057/- over and above the amount of ₹ 6,67,57,281/- is to be paid by the Department to the respective employees and establishment. The said statement made in paragraph 7 of the affidavit is contrary to the other paragraphs of the said affidavit and also contrary to the details furnished in Ann.2 to the said affidavit. In my view, it is thus clear that the Official Liquidator has made excess payment of ₹ 1,12,93,011/- to the Regional Provident Fund Commissioner, Kandivali which is liable to be refunded by the Regional Provident Fund Commissioner, Kandivali to the Official Liquidator. Therefore pass the following order :- (i) Official Liquidator' Report is made absolute in terms of prayer clause (a). (ii) Statement of the learned counsel for the Provident Fund Authorities that upon receipt of payment in terms of prayer clause (a) of the Official Liquidator's Report, the amount shall be disbursed amongst the employees in accordance with law expeditiously is accepted. The Provident Fund Authorities are directed to disburse the payment to the employees as stated aforesaid expeditiously. (iii) The official liquidator's report is made absolute in terms of prayer clause (b). Employees Provident Fund Office, Kandivali is directed to deposit the said amount with the official liquidator within four weeks from today. Issues Involved:1. Provision for payment towards Employees Provident Fund.2. Payment of dividend to workers and secured creditors.3. Adjudication and payment of claims by the Employees Provident Fund Offices.4. Priority of claims under Section 11 of the EPF Act.5. Claims for interest and damages by the Provident Fund Commissioner.6. Refund of excess payment to the Provident Fund Commissioner.7. Acceptance and distribution of payments by secured creditors.Issue-Wise Detailed Analysis:1. Provision for Payment Towards Employees Provident Fund:The Official Liquidator sought permission to keep a provision of Rs. 23,40,49,334 towards payment of Employees Provident Fund (EPF) to Thane, Kandivali, Bandra, and Vadodara offices. The provision included amounts from Punjab and Maharashtra Co-operative Bank Ltd. and UCO Bank. Additionally, the Official Liquidator requested a direction for the EPFO Kandivali to deposit Rs. 1,12,93,011, which was an excess amount paid against their admitted claim of Rs. 5,54,64,810.2. Payment of Dividend to Workers and Secured Creditors:The Official Liquidator sought permission to pay a dividend of 2.504 paise per rupee on movable assets and 41.024 paise per rupee on immovable properties to 385 workers. Further permission was sought to declare a dividend to 3348 workers and Punjab and Maharashtra Co-operative Bank Ltd. for Rs. 33,89,11,654 on immovable properties and issue an advertisement for the declaration of the dividend.3. Adjudication and Payment of Claims by the Employees Provident Fund Offices:The claims of EPFO Thane, Vadodara, and Kandivali were re-adjudicated, and Bandra EPFO's claims were adjudicated through a Chartered Accountant. The total adjudicated amount for Thane, Vadodara, and Bandra was Rs. 24,80,25,844, with a balance payable of Rs. 23,40,49,334. The Kandivali office had an admitted claim of Rs. 5,54,64,810, but Rs. 6,67,57,821 was paid, leading to an excess payment of Rs. 1,12,93,011.4. Priority of Claims Under Section 11 of the EPF Act:The Regional Provident Fund Commissioner argued that their claims had priority over other dues as per Section 11 of the EPF Act. The Official Liquidator had paid 100% dividend on the admitted amount of Rs. 8,07,34,351 against the claims made by the Provident Fund Commissioner.5. Claims for Interest and Damages by the Provident Fund Commissioner:The Regional Provident Fund Commissioner, Bandra, submitted a revised claim of Rs. 3,08,58,392 towards damages and interest, which included recovery interest calculated up to 5th September 2013. The Official Liquidator rejected claims for interest beyond the liquidation date and damages not adjudicated by the authorities under Section 14B of the EPF Act. The court upheld this rejection, stating that only adjudicated claims under Section 14B could be considered.6. Refund of Excess Payment to the Provident Fund Commissioner:The Official Liquidator sought a refund of Rs. 1,12,93,011 from the EPFO Kandivali, which was paid in excess. The court directed the EPFO Kandivali to refund the excess amount within four weeks.7. Acceptance and Distribution of Payments by Secured Creditors:The Punjab and Maharashtra Cooperative Bank Ltd., a secured creditor, stood outside the winding-up proceedings and had already deposited substantial amounts with the Official Liquidator. The court noted that the bank had no objection to the Official Liquidator's request for payment towards EPFO claims.Conclusion:The court made the Official Liquidator's report absolute in terms of the requested provisions and directed the EPFO Kandivali to refund the excess amount. The claims for interest and damages by the Provident Fund Commissioner were rejected, and the priority of provident fund dues over other claims was upheld. The Official Liquidator was permitted to proceed with the payment of dividends to workers and secured creditors as per the adjudicated amounts.