IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 28TH AUGUST 2008 / 6TH BHADRA 1930 MFA.No. 180 of 2002(D) ---------------------- AGAINST THE ORDER C.A.NO.36/2001 IN MCA.6/2001 IN C.P.NO.15/94 AND 19/94 .................... APPELLANT: 2ND RESPONDENT ------------------------- EMPLOYEES PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION, 36/685-A, BHAVISHYANIDHI BHAVAN, P.B.NO.1895, KALOOR, KOCHI-17. BY ADV. SRI.N.N. SUGUNAPALAN, SC, P.F. RESPONDENTS: APPLICANT/RESPONDENTS 1 & ADDL. RESPONDENTS 3&4 ------------------------------------------------------------ 1. P.V.JOSEPH, PUTHENPURACKAL, AJO BHAVAN, KOKKOTHAMANGALAM P.O., CHERTHALA, ALAPPUZHA. 2. THE OFFICIAL LIQUIDATOR, HIGH COURT OF KERALA, ERNAKULAM. 3. SYNDICATE BANK SHANMUGHAM ROAD, ERNAKULAM, COCHIN-682 031. 4. P.J.JOSEPH, PALATHINKAL PUTHIYA ROAD, VYTTILA P.O., ERNAKULAM DISTRICT. BY ADV. SRI.GEORGEKUTTY MATHEW SRI.K.MONI FOR R2 SRI.M.PATHROSE MATTHAI (SR.) FOR R3 SRI.RAJESH NAIR SRI.SAJI VARGHESE FOR R3 THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 28/08/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.RAMAN & T.R.RAMACHANDRAN NAIR, JJ. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ M.F.A.No.180 of 2002 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Dated this the 28th day of August, 2008 J U D G M E N T P.R.RAMAN, J. This is an appeal against an order of this Court in C.A.No.36/2001 in M.C.A No.6/2001 in C.P.No.15/1994 by the Company Judge in the matter of M/s.Pearlite Wire Products Ltd., the company in liquidation. The company application was filed for an order directing the Official Liquidator to effect payment of all amounts payable till the date of winding up order towards employees provident fund with the second respondent namely the Employees Provident Fund Commissioner or to set apart and amount of Rs.20 lakhs towards the same before disbursing any divident to the secured creditors or the workmen, and to review and modify the order dated 29/01/2001 passed in the above M.C.A. 2. The claim of the applicant was that the provident fund amount payable is the admitted amount by the Liquidator under Section 529 A of the Companies Act. The contention of the applicant was that such amount as admitted by the Official Liquidator towards the provident fund alone will get the protection M.F.A.No.180/2002 -:2:- and preference for payment as contemplated under Section 529A of the Companies Act and in view of Section 11 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (in short the 'EPF Act') first charge should go to the provident fund dues and, therefore, divident cannot be apportioned in pari passu with the secured creditors as Section 11 of the E.P.F Act will prevail over the provisions of Section 529A of the Companies Act. It is also contended that the Industrial Tribunal has in the award held that the workers are entitled to salary during lay off period. Even though salary for lay off period as directed by the Tribunal was admitted by the Official Liquidator, the provident fund dues on the salary paid during the lay off period was not admitted by him. Therefore, the question arise as to whether only such amount admitted by the Liquidator will fall under workmen's due for preference over other debts as contemplated under Section 529A of the Companies Act. It was found by the learned Single Judge that what was directed by the Tribunal was to pay the salary itself, and even though, it was not paid during the lay off period by virtue of the order by the Tribunal, it became payable since the lay off was found illegal. The fact that provident fund was not deducted since the matter was under dispute by itself is no reason to hold M.F.A.No.180/2002 -:3:- that no provident fund contribution is payable on the amount as found due and payable to the employees. After referring to Section 529 A of the Companies Act and Section 11 of the E.P.F Act, which is extracted in the judgment in the appeal, it was held that Section 529 A was enacted only in 1985 and Section 529A(1) of the Companies Act has got an overriding effect on the other provisions under this Act or any other law. Because of the over riding provisions contained in Section 529 A, whatever amount due or payable will get priority over any amount under any other law. Hence, Section 11 of the E.P.F Act cannot have any overriding effect over the provisions contained in Section 529 A of the Companies Act. When salary was payable during respective wage period, contribution also should have been remitted and contribution payable to Employees Provident Fund also is a workmen's due under Section 529(3)(b) of the Companies Act and is entitled to have preferential claim under Section 529A in pari passu with secured creditors. 3. The Commissioner for the Employees Provident Fund has filed this appeal challenging the above appeal. 4. We have heard both sides. Section 529 A of the Companies Act is overriding provision and by virtue of the said M.F.A.No.180/2002 -:4:- provision, notwithstanding anything contained in the Companies Act or any other law, workmen's due shall be paid in priority to all other debts. Workmen's due as defined under Section 529(3)(b)(i) of the Companies Act which means “all wages or salary including wages payable for time or piecework and salary earned wholly or in part by of commission of any workman, in respect of services rendered to the company and any compensation payable to the workmnn under the provisions of the Industrial Disputes Act, 1947”, and also “all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company” vide Clause (iv) thereof. 5. Since lay off has been found illegal the workmen became entitled to the salary during the period of lay off. The mere fact that it was not paid during the period of lay off itself is not a reason to deny the salary, since that dispute was adjudicated and by the award of the Tribunal, the salary became payable during the period of lay off. Once it is held that the employees are entitled to salary, whatever contribution due or payable on such salary towards provident fund also becomes payable and, therefore, the contribution is to be deducted from out of salary M.F.A.No.180/2002 -:5:- payable, becomes part of the workmen's due as defined under the Companies Act. The view taken by the learned Judge that Section 11 of the Employees Provident Fund Act cannot have any overriding effect over Section 539A of the Companies Act with which we are in full agreement with. However, we may clarify that any amount other than the amount payable to the workmen from out of the provident fund by way of contribution or otherwise will alone be treated as the workmen's due. In other words, if the Provident Fund Commissioner has got any claim for damages or penal interest, such amount will stand excluded from the word workmen's due. Subject to the above clarification we find no merit in this writ petition. Accordingly, it is dismissed. P.R.RAMAN, Judge T.R.RAMACHANDRAN NAIR, Judge ms