The Supreme Court remanded the matter to the High Court to determine the priority of charges between the EPFO, under Section 11(2) of the Employees’ Provident Fund Act, 1952, and secured creditors, including Axis Bank, under Section 35 of the SARFAESI Act, 2002. The core legal issue for fresh adjudication is the conflict between the statutory first charge of EPFO dues and the primacy claimed by secured creditors.
Facts Of The Case:
M/s Acropetal Technologies Pvt. Ltd. defaulted on its Employees’ Provident Fund (EPF) dues from July 2013. The EPFO determined a liability and, upon learning the company’s properties were to be auctioned by various banks, invoked its priority under the EPF Act. The EPFO specifically asserted a first charge over the ‘Attibele property’ being auctioned by Axis Bank in 2015, but the bank sold the property in 2016 and appropriated the entire proceeds, citing priority under the SARFAESI Act. Later, the EPFO pursued the appellant, Edelweiss ARC, which had auctioned two other properties of the company. Challenging the EPFO’s recovery certificate and attachment order, Edelweiss deposited ₹75 lakhs under a High Court order but argued its liability was proportionate to the sale proceeds it realized, contending the balance EPF dues should be recovered from Axis Bank. The Karnataka High Court dismissed Edelweiss’s petition and directed the deposited amount be released to the EPFO, leading to the present appeal before the Supreme Court.
Procedural History:
The procedural history of this case commenced with the Karnataka High Court’s dismissal of a writ petition filed by Edelweiss ARC, which challenged the EPFO’s recovery certificate and an attachment order. The High Court, via its order dated February 1, 2024, not only dismissed the petition but also directed that an amount of ₹75 lakhs, which Edelweiss had deposited pursuant to an interim court order, be transferred to the EPFO. Aggrieved by this decision, Edelweiss ARC appealed to the Supreme Court by way of a Special Leave Petition (SLP). The Supreme Court, after granting leave, set aside the impugned High Court judgment and remanded the writ petition back to the High Court for a fresh decision, with a specific direction to implead Axis Bank as a necessary party to adjudicate the core legal dispute.
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Court Observation:
The Supreme Court observed that the core legal dispute regarding the priority of charges between the EPFO and the secured creditors, particularly Axis Bank, was not conclusively adjudicated by the High Court. It noted that the EPFO had asserted its first charge under the EPF Act over the properties prior to their auction. The Court further observed that the High Court had not examined the conflicting claims in light of Section 11(2) of the EPF Act and Section 35 of the SARFAESI Act. Consequently, it held that this substantive legal issue required a fresh determination by the High Court after affording all concerned parties, including the newly impleaded Axis Bank, a complete opportunity to be heard.
Final Decision & Judgement:
The Supreme Court allowed the appeal, set aside the impugned order of the High Court, and restored the writ petition for a fresh hearing. The Court directed the impleadment of Axis Bank as a necessary respondent and mandated the High Court to decide the case afresh. The core issue to be determined is the priority of the statutory first charge of the EPFO under Section 11(2) of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, versus the primacy claimed by secured creditors under Section 35 of the SARFAESI Act, 2002. All parties were granted liberty to raise all contentions on this legal question before the High Court.
Case Details:
Case Title: M/S Edelweiss Asset Reconstruction Limited vs. Regional PF Commissioner II and Recovery Officer, RO Bengaluru (Koramangala) & Anr. Appeal Number: Civil Appeal No. .... of 2025 (@SLP(C) No.11069 of 2024) Date of Judgement: August 26, 2025 Judges/Justice Name: Justice Vikram Nath & Justice Sanjay Karol, and Justice Sandeep Mehta
Download The Judgement Here