TaxTMI 
TaxTMI 
TaxTMI 
1999 (2) TMI 703
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....he Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ('Act', for short). 2. In the above background, the property hypothecated by the employer to Bank and that remained in the premises of the factory of the employer was involved in a fire accident on 9-1-1990. The property had been insured with the United India Insurance Company. There was a dispute with regard to actual loss involved on account of the fire accident insofar as cashew stored in the godown was concerned. Eventually, the employer approached the Karnataka State Consumer Disputes Redressal Commission, Bangalore, with a complaint against the United India Insurance Company wherein the Bank also was made the second respondent, and in which proceeding, the Bank fully supported the claim of the complainant-employer. By its order dated 23-1-1995, the Commission awarded a sum of ₹ 9,49,168.60 which the Insurance Company was directed to pay to the petitioner to the account of the employer. On 15-3-1995, the Insurance Company credited a sum of ₹ 13,77,624.25 in pursuance of the said order of the Commission, communication in respect of which was received by the Bank on 17-3-1995. The said ....
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.... to any employer who is in arrears. In the present case, if the amount of the employer is with the Bank, then, respondent 1-the Provident Fund Commissioner could certainly ask the Bank to remit that amount in respect of the contributions payable by the employer. Employer having availed cash credit facility and himself being due to the Bank to an extent of more than ₹ 15 lakhs, not only on the day the prohibitory order was received by the Bank not a single paise of the employer was with the Bank to be sent to the Provident Fund Commissioner, but also that even the subsequent amount of ₹ 13 lakhs and odd received in terms of the award of Consumer Redressal Commission was also being liable to be adjusted towards the amount that the employer was due to the Bank. Therefore, at no point of time was any amount of the employer there with the Bank so as to comply with the demands of the Provident Fund Commissioner. Even the amount of ₹ 13 lakhs and odd since related to the amount paid in respect of the loss of goods in the fire accident which goods had been hypothecated to the Bank, the said amount needed to be applied towards the liabilities due from the employer to the B....
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....d. It was in these circumstances that on 9-9-1990, the said property was destroyed in the fire accident. As to what would have been the position had the property been still there in existence, I have referred to similar situation in an earlier case in the State Bank of Mysore, B.H. Road, Shimoga v Provident Fund Commissioner, Bangalore and Others1, Referring to the decision of the Full Bench of this Court in Chief Controlling Revenue Authority in Karnataka v The Manager (Advances), State Bank of Mysore, Bangalore , that was dealing with the effect of pledge though in a different context, I had extracted the following observations which are material for the present purpose also. "40. Similarly, by deed of hypothecation, the NGEF has pledged its machinery and plant with the Bank while retaining possession of the same. But then, at law, the owner in possession is only as bailee as the pledge and pledgee is the real owner. This becomes clear having regard to Section 172 of the Contract Act. A passage from Puget on the "Law of Banking" (Eighth Edition at page 566) which is as follows: "This difficulty in the way of the owner's being in a position to pledge go....
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....rlier, the property had been hypothecated much earlier, and all that happened on receipt of the award amount on 17-3-1995 was that instead of the hypothecated property, the said amount was in the Bank to be credited to the account of the employer. As we noticed earlier, even after so crediting, the employer was still due to the petitioner much a larger sum. 7. Same thing however cannot be said in respect of the interest amount of ₹ 4,25,955.65 and costs of ₹ 2,500.00. The amount of costs was awarded by the Consumer Disputes Redressal Commissioner to the employer who was the complainant before the Commission. The said amount of costs had nothing to do with the hypothecated property over which the Bank has priority. Same is the position with regard to interest amount of over ₹ 4 lakhs and odd. It could be seen that for the amount withdrawn by the employer by availing the cash credit facility and for the amount due by the employer to the Bank in respect of the principal and interest concerning the said cash credit facility, Bank would be continuing to levy interest so long as the amount did not stand credited. For example, interest is awarded by the Commission for t....