KERALA FINANCIAL CORPORATION Vs. RECOVERY OFFICER

JUDGEMENT

(1.) M/s.Darpan Electronics (Private) Limited owes Rs. 37,150/- towards its contribution to the Employees' Provident Fund and Rs. 15,95,693/- to the Kerala State Financial Corporation (the Corporation for short). The question for consideration in this petition under Art.226 of the Constitution of India is, whether, by virtue of S.29 and 46B of the State Financial Corporations Act, 1951 ("the Act," for brevity), the Corporation has the overriding right to recover its debts from the assets of Darpan Electronics, notwithstanding the fact that under S.11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act ("The Provident Fund Act" for the sake of brevity), the amount of provident fund dues is a first charge on the assets of the employer. The facts giving rise to this question are in paragraphs No. 2 below.

(2.) On 20-2-1987 Darpan Electronics (Private) Ltd. borrowed Rs. 10.89 lakhs from the Corporation created under the State Financial Corporation Act - a Central Act. Darpan Electronics (Pvt.) Ltd. mortgaged its immovable properties and hypothecated the movables with the Corporation on 23-2-1987. On 10-10-1991 a sum of Rs. 15,95,693 was due and payable by Darpan Electronics. The Corporation initiated proceedings under S.29 of the Act and on 18-11-1991 all the property of Darpan Electronics were taken over by the Corporation. On 20-12-1993 movables were sold for realisation of the debt due to the Corporation. A sum of Rs.89,083/- is lying in its account with the South Indian Bank Ltd. the Respondent No.2.

(3.) The nature of the rights claimed by the Corporation and the Recovery Officer may be considered in the light of the relevant provisions of law. The right of the Corporation to take over the assets of its debtor is created by S.29 of the Act. The Corporation shall have the right to: