- 1 - NC: 2025:KHC:10059 WP No. 56684 of 2015 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 56684 OF 2015 (L-PF) BETWEEN: MR B R IRANI M/S RUSTUMJEE REALTY PVT. LTD. 702, NATRAJ , M.V. ROAD JUNCTION, WESTERN EXPRESS HIGHWAY ANDHERI(EAST) MUMBAI-400069. …PETITIONER (BY SRI.S.N. MURTHY., SENIOR ADVOCATE FOR SRI.SOMASHEKAR, ADVOCATE) AND: 1. REGIONAL PF COMMISSIONER-II OFFICE OF THE REGIONAL PROVIDENT FUND COMMISSIONER, BHAVISHYANIDHI BHAVAN, 2ND STAGE, GAYATHRIPURAM, MYSORE-570019. THE ASSISTANT PF COMMISSIONER (EPF) OFFICE OF THE REGIONAL PROVIDENT FUND COMMISSIONER, BHAVISHYANIDHI BHAVAN, 2ND STAGE, GAYATHRIPURAM, MYSORE-570019. Digitally signed by VANAMALA N Location: High Court of Karnataka - 2 - NC: 2025:KHC:10059 WP No. 56684 of 2015 3. THE RECOVERY OFFICER OFFICE OF THE REGIONAL PROVIDENT FUND COMMISSIONER, BHAVISHYANIDHI BHAVAN, 2ND STAGE, GAYATHRIPURAM, MYSORE-570019. …RESPONDENTS (BY SRI.M. PRADEEP., ADVOCATE FOR R1 TO R3) THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO.[1]QUASH THE ORDER DATED 27.7.2015 ANNEX-G PASSED BY THE R-3 UNDER SUB-SECTION 2 OF SECTION 8F OF THE EPF ACT 1952; [2]QUASH DEMAND LETTER DATED 26.6.2015 ANNEX-F CALLING UPON THE PETITIONER TO REMIT A SUM OF RS.4,09,30,773/-.[3] QUASH PROCEEDING FOR ISSUE OF WARRANT OF ARREST DATED 25.5.2015 [EPF CP-25], ANNEX-E TO THIS PETITION. [4]DIRECT THE RESPONDENTS TO PAY A SUM OF RS.25,00,000/- [RUPEES TWENTY FIVE LAKHS ONLY] AS DAMAGES AND PENALTY FOR THE HARASSMENT CAUSED TO THE PETITIONER. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE B M SHYAM PRASAD - 3 - NC: 2025:KHC:10059 WP No. 56684 of 2015 ORAL ORDER The petitioner is aggrieved by the third respondent’s order dated 27.07.2015, which is styled as an Order to the third - party to pay the dues of a defaulter. The third respondent has issued this order in exercise of powers under Section 8F[2] of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 [for short, ‘the 1952 Act'] calling upon the petitioner to pay the amount held by him for M/s Ideal Jawa [India] Limited -the Employer1 observing that an order under Section 8F [2] of the 1952 Act could be issued to any person who is holding the amount payable to an employer and such payment will discharge the liability to pay such amount to the employer. The third respondent has also observed that upon payment of the amount a Certificate of Discharge would be issued as is 1 The third respondent mentioned that M/s Ideal Jawa [India] Limited is due in a sum of Rs.4,09,30,773/-. - 4 - NC: 2025:KHC:10059 WP No. 56684 of 2015 contemplated under Section 8F [3] [viii] of the 1952 Act. 2. Sri S.N. Murthy, the learned Senior Counsel for the petitioner, without disputing that the petitioner was a director with the Employer for some time, submits that this Court must interfere with the impugned order dated 27.07.2015 both on facts and in law. The learned Senior Counsel on facts submits thus: [a] M/s Ideal Jawa [India] Limited is wound up, and a Company Application in No.32/2011 is filed in Company Petition No.76/1991 and connected petitions for recovery of the amount mentioned in the notice. This Company Application is disposed of by directing the Official Liquidator to adjudicate the claim for recovery of dues of the employees' provident funds. - 5 - NC: 2025:KHC:10059 WP No. 56684 of 2015 [b] The Recovery Officer has also applied with the Official Liquidator, but this application is not pursued. In fact, the Recovery Officer has abandoned the application, and the claim being thus abandoned, the petitioner, who is only a director, cannot be made liable to answer the claim. [c] The petitioner was on the Employer’s Board but was never in charge of the day- to-day affairs of the company. The petitioner is based in Mumbai right through and the liability, if any, would only be with the occupier as is required under law. 3. On the petitioner’s case in law, Sri.S.N.Murthy, relies upon the definition of the expressions 'employer' and 'occupier of a factory' in Sections 2 [e] and 2 [k] of the 1952 Act to canvass - 6 - NC: 2025:KHC:10059 WP No. 56684 of 2015 that in relation to an establishment which is a factory, the employer would mean the owner or the occupier of a factory, and the occupier of a factory would be the person who has ultimate control over the affairs of the factory, and that the petitioner has not been the occupier of the factory. 3.1 Sri S.N. Murthy next contends that the impugned order is in exercise of the powers under Section 8F(2) of the 1952 Act, and the Central Provident Fund Commissioner [or any person authorized by the Central Board] may require, under this provision, a person to deduct the amount due to an employer and credit it with the Commissioner or the Authorized Officer, but this is subject to the condition that such amount is due to the employer. The learned Senior Counsel argues that the third respondent is silent about any amount due from the petitioner in his individual capacity to the Employer, and unless it is established that the petitioner is in - 7 - NC: 2025:KHC:10059 WP No. 56684 of 2015 due of any amount to the Employer, the third respondent could not have assumed jurisdiction. 3.2 Sri S.N. Murthy lastly underscores that this would be the position even if the impugned order is treated as a notice issued under Section 8F [3] [i] of the 1952 Act because it would be necessary to show that the petitioner is in due [or holds any amount payable] to the Employer and that in the absence of any material to justify that the petitioner owes any amount to the Employer, or he holds an amount for the Employer, the continuation of the proceedings will not be justified. 4. Sri M. Pradeep, in response, proposes to rely upon Regulation 36A of the Employees Provident Funds Scheme, 1952 to contend that every employer in relation to a factory [or other establishment to which the Act applies] is under the obligation to furnish to the Regional Commissioner in the prescribed form the details of all the branches, - 8 - NC: 2025:KHC:10059 WP No. 56684 of 2015 departments, owners, occupiers, directors, partners, managers or any other person or persons who control the affairs of an employer, and that in compliance with these requirements, certain details have been filed and the details demonstrate that the petitioner is a director of the Employer and that the merits of the impugned order must be examined in the light of the afore. 5. In reply, Sri S.N. Murthy invites this Court's attention to a Memo dated 22.07.2016 filed by the Official Liquidator in OLR No.343/2015 in Company Petition Nos.76/1991 and connected petitions to emphasize that about Rs.26,94,95,057/- has been disbursed in terms of the different orders and that the Regional Provident Fund Commissioner has failed to furnish documentary proof of the claim for Rs.10,68,14,505/- The learned Senior Counsel submits that if a report is filed in the year 2016 with the Company Court, no action could be initiated - 9 - NC: 2025:KHC:10059 WP No. 56684 of 2015 unless this Report and the acceptance thereof are disturbed in the appropriate proceedings. 6. 6. Be this as it may, the merits of the petitioner’s grievance with the initiation of the proceedings must be examined based on the requirements under Section 8F of the 1952 Act, and the question for consideration is: Whether the third respondent could have assumed jurisdiction to issue notice to the petitioner under Section 8F[2] of the 1952 Act calling upon the petitioner to pay a sum of Rs.4,09,30,773/- without even stating that the petitioner is either due in some amount to the Employer or holds some amount for this entity. 7. The provisions of Section 8F [1] and [2] and the material part of Section 8F [3] read as under: "8F. Other modes of recovery.— [1] Notwithstanding the issue of a certificate to the Recovery Officer under section 8B, - 10 - NC: 2025:KHC:10059 WP No. 56684 of 2015 the Central Provident Fund Commissioner or any other officer authorized by the Central Board may recover the amount by any one or more of the modes provided in this section. [2] If any amount is due from any person to any employer who is in arrears, the Central Provident Fund Commissioner or any other officer authorized by the Central Board in this behalf may require such person to deduct from the said amount the arrears due from such employer under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Central Provident Fund Commissioner or the officer so authorized, as the case may be: Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 [5 of 1908]. [3][i] The Central Provident Fund Commissioner or any other officer - 11 - NC: 2025:KHC:10059 WP No. 56684 of 2015 authorized by the Central Board in this behalf may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the employer or, as the case may be, the establishment or any person who holds or may subsequently hold money for or on account of the employer or as the case may be, the establishment, to pay to the Central Provident Fund Commissioner either forthwith upon the money becoming due or being held or at or within the time specified in the notice [not being before the money becomes due or is held] so much of the money as is sufficient to pay the amount due from the employer in respect of arrears or the whole of the money when it is equal to or less than that amount. [ii] A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the employer jointly with any other person and for the purposes of this sub-section, the shares of the joint-holders in such - 12 - NC: 2025:KHC:10059 WP No. 56684 of 2015 account shall be presumed. Until the contrary is proved, to be equal. [iii] A copy of the notice shall be forwarded to the employer at his last address known to the Central Provident Fund Commissioner or, as the case may be, the officer so authorized and in the case of a joint account to all the joint-holders at their last addresses known to the Central Provident Fund Commissioner or the officer so authorized. [iv] Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding any rule, practice or requirement to the contrary. - 13 - NC: 2025:KHC:10059 WP No. 56684 of 2015 [v] Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice. [vi] Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the employer or that he does not hold any money for or on account of the employer, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false is any material particular, such person shall be personally liable to the Central Provident Fund Commissioner or the officer so authorized to the extent of his own liability to the employer on the date of the notice, or to the extent of the employer’s liability for any sum due under this Act, whichever is less. - 14 - NC: 2025:KHC:10059 WP No. 56684 of 2015 [vii] The Central Provident Fund Commissioner or the officer so authored may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend the time for making any payment in pursuance of such notice. [viii] The Central Provident Fund Commissioner or the officer so authorized shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the employer to the extent of the amount so paid. [ix] Any person discharging any liability to the employer after the receipt of a notice under this sub-section shall be personally liable to the Central Provident Fund Commissioner or the officer so authorised to the extent of his own liability to the employer so discharged or to the extent of the employer’s liability for any sum due under this Act, whichever is less. - 15 - NC: 2025:KHC:10059 WP No. 56684 of 2015 (x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Central Provident Fund Commissioner or the officer so authorised he shall be deemed to be an employer in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear due from him, in the manner provided in sections 8B to 8E and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 8B. 8. The scheme under this Section is to recover the amount due from an employer but in the hands of another without initiating proceedings against the other separately, and the jurisdiction for this will be available, given Section 8F[2], if it could be shown that the Noticee is in due [or may become due] of any amount to the employer or that the Noticee holds [or may come to hold] any money for or - 16 - NC: 2025:KHC:10059 WP No. 56684 of 2015 on account of the employer. Therefore, it would be incumbent upon the officers exercising jurisdiction under this Section to state that some amount is due from the Noticee to the employer, or that the Noticee holds or may come to hold some money on account for such employer. This is a jurisdictional fact which confers jurisdiction, and if this is not even stated, the jurisdiction cannot be assumed to cause any notice. 9. The scheme under Section 8F [3] is materially very similar to the scheme under Section 226[3] of the Income Tax Act, 1961. Under Section 226[3] of the Income Tax Act, 1961, notice can be issued to a third person who holds money for or on the account of the assessee-in-default with the rights and obligations as under Section 8F of the 1952 Act. The provisions under Section 226 [3] [vi] and [x] and under Section 8F [3] [vi] and [x] are similar in object and effect. The Apex Court in Surinder Nath Kapoor - 17 - NC: 2025:KHC:10059 WP No. 56684 of 2015 v. Union of India and other2, referring to the requirements and the consequences under Section 226[3] of the Income Tax Act and the fact that the Revenue did not mention the amount in the Garnishee Order, has declared such order void. 10. It cannot be gainsaid that the provisions of Section 8F of the 1952 Act would be available against a third-party, and the third respondent's decision to issue the impugned Notice to the petitioner is because he is such a third-party and not a Director and is without the statement on the jurisdictional fact that the petitioner is due to the Employer or holds some money on its account. As such, the reliance upon the details furnished under Regulation 36A of the Employees' Provident Fund Scheme, 1952 to show that the petitioner is a Director will not be relevant. Hence, this Court, in the light of this opinion, answers the question for 2 1988 [Supp] Supreme Court Cases 626 - 18 - NC: 2025:KHC:10059 WP No. 56684 of 2015 consideration in favour of the petitioner and quashes the impugned order. It would be needless to observe that this Court's conclusion as aforesaid is on the jurisdiction to invoke under Section 8F of the 1952 Act and does not in any manner foreclose any other proceedings. ORDER The petition is allowed and the third respondent's impugned order [Notice] dated 27.07.2015 [Annexure-G] is quashed. SD/- [B M SHYAM PRASAD] JUDGE NV