Statutory first charge under provident fund law prevails over secured creditor priority in asset sale proceeds.

A statutory first charge created by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 prevails over a later non obstante priority clause under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The secured creditor may proceed with sale of the mortgaged assets, but the sale proceeds must first satisfy provident fund dues, including contribution-related liability for interest and damages, before any balance is applied to the secured debt. The workmen's unpaid wage claims were not quantified and had been rejected on delay, leaving them to seek determination before the appropriate forum.

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Issues: Whether the dues under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 have priority over the secured creditor's claim under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and whether the workmen's unpaid wages could override the secured creditor's right to realise the mortgaged assets.

Analysis: The secured creditor had registered the security interest and invoked the priority conferred by Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which gives a secured creditor priority over other debts after registration. The workmen's claims, however, had not been quantified and were in any event rejected by the Industrial Court on delay. The controlling distinction drawn was between a mere statutory priority and a first charge. Section 11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 creates a first charge on the assets of the establishment for amounts due from the employer, including contribution and the attendant liability for interest and damages. A first charge prevails over a later enacted priority clause under the security enforcement statute, so the non obstante language in Section 26E cannot displace the statutory first charge created by the provident fund law.

Conclusion: The secured creditor was permitted to proceed with the sale, but the sale proceeds were to be applied first towards satisfaction of provident fund dues under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and only thereafter towards the bank's secured debt. The workmen were left at liberty to pursue determination of their claims before the appropriate forum.

Ratio Decidendi: Where a welfare statute creates a statutory first charge, that charge prevails over a later non obstante priority clause in a secured creditors' enforcement statute.

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