IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 22ND JULY 2008 / 31ST ASHADHA 1930 WP(C).No. 26004 of 2006(U) -------------------------- PETITIONER: ------------ STATE BANK OF TRAVANCORE, THALORE BRANCH THRISSUR DISTRICT REPRESENTED BY ITS BRANCH MANAGER. BY ADV. SRI.SATHISH NINAN SRI.SANTHOSH MATHEW RESPONDENTS: ------------- 1. THE EMPLOYEES' PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, 36/685A, BHAVISHYANIDHI BHAVAN, P.B.NO.1895, KALOOR, KOCHI-17 REPRESENTED BY ITS ASSISTANT PROVIDENT FUND COMMISSIONER & RECOVERY OFFICER. 2. THE EMPLOYEES STATE INSURANCE- CORPORATION, REGIONAL OFFICE (KERALA), "PANCHDEEP BHAVAN", NORTH SWARAJ ROUND, POST BAG NO.2, THRISSUR-20 REPRESENTED BY ITS DEPUTY DIRECTOR. 3. SRI.M.C.KRISHNANKUTTY, S/O.CHAPPAN, MOOTHRATHILPARAMBIL HOUSE, MANAGING PARTNER, M/S.OMKAR POTTERIES, CHITTISSERY. 4. SRI.HARRIS.M.K., MALANGATH HOUSE, MAMBRA, ERAYANKUDI P.O., THRISSUR. BY ADV. SRI.S.GOPAKUMARAN NAIR, SC, P.F. FOR R1 & R2 SRI.SOORAJ T.ELENJICKAL FOR R.4 ADV.SANKARANKUTTY NAIR, SC. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/07/2008 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P(C).No. 26004/06. APPENDIX PETITIONER'S EXHIBITS: P1. COPY OF THE DECREE IN O.S.NO.104/02 OF ADDL.SUB COURT, IRINJALAKUDA. P2. COPY OF THE PROCLAMATION OF SALE DTD.7.8.06 BY R1. P3. COPY OF THE LETTER DTD. 15.9.06 BY R1. P4. COPY OF THE -DO- DTD.18.9.06. P5. COPY OF THE LETTER DTD.2.10.06 TO R1. P6. COPY OF THE VALUATION REPORT DTD.22.8.06. RESPONDENTS' EXHIBITS: R1(A) COPY OF THE ADVERTISEMENT IN DAILY. R1(B) COPY OF THE SURVEY REPORT. R1(C) COPY OF THE VALUATION REPORT. R1(D) COPY OF THE AUCTION PROCEEDINGS. R1(E) COPY OF THE ENCUMBRANCE CERTIFICATE. Sdk+ ///True copy/// P.A. to Judge S.SIRI JAGAN, J. ================== W.P.(C).No.26004 of 2006 ================== Dated this the 22nd day of July, 2008 J U D G M E N T The petitioner is a bank, with whom certain properties belonging to the 3rd respondent have been mortgaged as security for loan amounts. The establishment of which the 3rd respondent was the Managing Director, was an establishment covered under the Employees' Provident Funds and Miscellaneous Provisions Act. Amounts were due from the establishment under the said Act to the Provident Fund Organization, viz., the 1st respondent herein. They sought to sell the properties, which were mortgaged to the bank, for realisation of the dues under the Act from the 3rd respondent. That sale is under challenge in this writ petition on various grounds. In the meanwhile, the 4th respondent purchased the property pursuant to the sale proceedings initiated by the 1st respondent. He paid a portion of the sale consideration. But in view of the pendency of this writ petition, further proceedings were stalled. The 4th respondent filed I.A.No.4927/2007 in which I passed the following order on 4.10.2007. “The petitioner in the I.A. shall deposit the balance amount due w.p.c.26004/06 2 within two weeks from today before the 1st respondent. The 1st respondent shall thereupon complete the sale proceedings and execute the necessary documents for conveying the properties to the petitioner within a period of one month from the date of receipt of the balance amount due.” Accordingly, the sale proceedings were completed in favour of the 4th respondent and he paid entire amount. In the above circumstances, the writ petition has to be finally disposed of. Although the bank would challenge the sale proceedings I am not inclined to countenance the contentions against such sale, since I am satisfied that the sale has been conducted in compliance with all formalities expected of such a sale. Therefore, the remaining question to be decided is as to what should be done with the sale consideration. 2. It is not disputed before me that the Provident Fund Organization has the first charge in respect of the properties in question as per the Provisions of the Employees' Provident Funds and Miscellaneous Provisions Act. Therefore, the sale proceeds have to be first adjusted against the dues to the Employees Provident Fund Organization. Therefore, they are entitled to deduct their dues from the sale consideration. They can do so. w.p.c.26004/06 3 3. In respect of the balance, the 2nd respondent- Employees State Insurance Corporation raises a claim for preferential payment. According to them, the dues under the Employees' State Insurance Act being workers' dues have to be given priority over the dues of the petitioner bank. I am unable to agree. Unlike in the case of the Employees' Provident Funds and Miscellaneous Provisions Act, there is no provision in the Employees State Insurance Act which gives priority of charge in respect of the dues under the Act as against a bank who holds mortgage in respect of the said property. In so far as the Bank holds a mortgage in respect of the property, they have prior charge as between themselves and the Employees' State Insurance Corporation. The E.S.I. Corporation can claim payment out of the money only if after satisfying the dues of the Bank any amount is left. In the above circumstances, I direct the 1st respondent to pay to the petitioner the balance amount remaining after deducting the amount as per the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act. w.p.c.26004/06 4 This shall be done within a period of one month from the date of receipt of a certified copy of this judgment . If any amount is left after adjusting amounts due to the petitioner, the same shall be paid to the E.S.I. Corporation. It would be open to the 2nd respondent to realise the dues form the 3rd respondent by proceeding against the properties of the 3rd respondent or taking appropriate such others proceedings as warranted by law. The writ petition is disposed of as above. Sd/- sdk+ S.SIRI JAGAN, JUDGE ///True copy/// P.A. to Judge