IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) MONDAY, THE TWENTY FOURTH DAY OF NOVEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE L.NARASIMHA REDDY WRIT PETITION NO : 696 of 2003 Between: P.Santhosh Reddy, S/o P.Narasimha Reddy, R/o 2-2-12/4/A, Flat No. 303, Sai Bharath Towers, Durgabai Deshmukh Colony, Hyderabad. ..... PETITIONER AND 1 The A.P.State Financial Corporation Rep. by its Managing Director, Rangareddy (East), Chirag Ali Lane, Hyderabad-13. 2 Commissioner, Provident Fund Department, Barkthpura, Hyderabad. Andhra Pradesh. 3 Syndicate Bank, Rep. by its Chief Manager, Khairathabad Branch, Hyderabad. .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue an appropriate Writ, order or directions, one more particularly in this nature of a Writ of Mandamus; a) Declaring the action of the 1st Respondent, A.P.S.F.C. in withholding and retaining with it, the sum of Rs. 5.08 Lakhs pertaining to the provident Fund contribution of the defaulting company M/s Vita Biotics Pvt. Ltd., as illegal, arbitrary and bad under law, b) Consequentially direct the 1st Respondent i.e Commissioner of Provident Fund Department towards settlement of the provident Fund claim payable by M/s. Vita Biotics Pvt. Ltd. (Defaulting Company) with interest @ 12% per annum. Counsel for the Petitioner: MR.P.VENUGOPAL Counsel for the Respondents: MR.J.PARTHASARATHY The court made the following order: THE HON'BLE MR JUSTICE L.NARASIMHA REDDY Writ Petition No.696 of 2003 ORDER: The petitioner is one of the Directors of M/s.Vita Biotics Private Limited, which was later renamed as M/s.Millennium Laboratories Limited (for short ‘the Company’). The Company secured certain amount as loan from A.P. State Financial Corporation, the first respondent. Shortly after being established, the Company ran into trouble and in fact, C.P.No.50 of 1997 was filed against it by M/s.Associates Capsules Limited, for winding up. Much before the winding up, the A.P. State Financial Corporation seized the Company’s assets due to default committed by it in payment of the instalments. The assets were ultimately brought to sale. The sale proceeds were shared by the first respondent and Syndicate Bank, the third respondent, who too advanced loan to the Company. The Company fell in arrears of Rs.5,07,615/- towards contribution to Provident Fund for the year 1995-96. When steps were initiated against the petitioner for recovery of the same in his capacity as a Director of the Company, he approached this Court by filing W.P.No.27331 of 1997. The said writ petition was disposed of granting the facility of ten equal instalments to the petitioner to pay the arrears of Provident Fund. Shortly thereafter, the petitioner filed W.P.No.35643 of 1997 stating that the A.P. State Financial Corporation is also liable to be made a party to the proceedings before the Provident Fund authorities, in view of the fact that the assets were seized by it. Through its order, dated 01.02.2000, this Court dismissed the said writ petition. This writ petition is filed for a direction to the first respondent to remit the dues of Provident Fund to the second respondent. The petitioner contends that the first respondent was aware of the responsibility to pay the arrears of Provident Fund and the same is evident from a communication, dated 31.12.1999, between respondents 1 and 3, wherein there is a clear mention about the liability to pay the arrears of Provident Fund. The first respondent filed a counter affidavit. It is admitted that the assets of the Company were seized in the year 1995 and thereafter sold for recovery of arrears. It is stated that a sum of Rs.5,08,000/- was set apart for probable liability to clear the arrears of Provident Fund and once this Court dismissed W.P.No.35643 of 1997 filed by the petitioner, the first respondent is no longer liable to pay any amount. Heard Sri P.Venugopal, learned counsel for the petitioner, and Sri J.Parthasarathy, learned counsel for the respondents. The short question that arises for consideration in this writ petition is as to whether there is any liability on the part of the first respondent to clear the arrears of Provident Fund in respect of the Company. It is not in dispute that the assets of the Company were mortgaged to the first respondent and thereafter, seized on account of the default in payment of instalments. It is apt to refer to Section 17(B) of the Employees Provident Fund Act, 1952, (for short ‘the Act’) which reads as follows. “Section 17(B):- Liability in case of transfer of establishment Where an employer in relation to an establishment, transfers that establishment in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever the employer and the person to whom the establishment is so transferred shall jointly and severally be liable to pay the contribution and other sums due from the employer under the provisions of this Act or the Scheme or the Family Pension Scheme, as the case may be, in respect of the period upto the date of such transfer. Provided that the liability of the transferee shall be limited to the value of the assets obtained by him by such transfer.” From a perusal of the same, it is found that the Parliament made the employer of an Establishment covered by the provisions of the Act as well as the transferee of the assets of the unit jointly and severally liable to pay the arrears of Provident Fund. It is not in dispute that the assets of the Company were not only mortgaged with the first respondent, but also seized and thereafter sold for recovery of the loan; thereby it answers the description of the mortgagee or the transferee under Section 17(B) of the Act. Naturally, it becomes jointly and severally liable to pay the arrears along with the employer. Therefore, the first respondent cannot escape from the liability under Section 17(B) of the Act. Hence, the writ petition is disposed of holding that the first respondent shall also be jointly and severally liable along with the employer of M/s.Millennium Laboratories Limited for payment of arrears of the Provident Fund to the second respondent. There shall be no order as to costs. ______________________ L.NARASIMHA REDDY, J Dt.24.11.2008 VGB