Summary and Analysis of Ms Edelweiss Asset Reconstruction Limited vs Regional PF Commissioner II & Anr

1. Heading of the Judgment

The Supreme Court allowed the appeal, set aside the order of the Karnataka High Court, and remanded the matter back to the High Court for fresh consideration after impleading Axis Bank as a necessary party. The core issue involved the priority of charges between the Employees' Provident Fund Organisation (EPFO) and secured creditors under the SARFAESI Act.

Civil Appeal No. of 2025 (Arising out of SLP(C) No.11069 of 2024)
Supreme Court of India
Decided on August 26, 2025
Justices: Vikram Nath, Sanjay Karol, and Sandeep Mehta

Citation:
(2025) INSC 1045

2. Related Laws and Sections

• Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (PF Act)
  Section 11(2): Grants first charge to EPF dues over the assets of the establishment.
  Section 7A: Determination of moneys due from employers.
  Section 14B: Power to recover damages for default in payment.

• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)
  Section 35: Gives overriding effect to the SARFAESI Act over other laws, implying priority to secured creditors.

3. Basic Judgment Details

• Appellant: M/s Edelweiss Asset Reconstruction Limited (EARC)

• Respondents: Regional PF Commissioner II & Recovery Officer, Bengaluru, and Axis Bank Ltd.

• Case History:
  M/s Acropetal Technologies Pvt. Ltd. (the Establishment) defaulted on EPF payments.
  EPFO determined dues of approx. ₹1.28 crore (2015) and later raised additional demands.
  Axis Bank and EARC (assignee of SBI) auctioned properties of the Establishment.
  EPFO claimed first charge over sale proceeds under Section 11(2) of the PF Act.
  EARC challenged EPFO’s recovery actions before the Karnataka High Court, which dismissed the petition.
  Supreme Court appeal followed.

4. Explanation of the Judgment

Background Facts

The Establishment defaulted on EPF contributions from July 2013. The EPFO determined dues and initiated recovery. The Establishment’s properties were auctioned by Axis Bank (Attibele property) and EARC (Kammanahalli and Palya properties). EPFO claimed priority under Section 11(2) of the PF Act and sought recovery from both banks. EARC deposited ₹75 lakhs under interim High Court orders but argued that Axis Bank—which recovered ₹12 crores—should bear a proportionate share of the EPF liability.

Legal Issue

Whether EPF dues under Section 11(2) of the PF Act have priority over secured creditors under the SARFAESI Act, and whether recovery should be proportional to the sale proceeds received by each creditor.

Supreme Court’s Reasoning

• The Supreme Court noted that Axis Bank was not impleaded in the High Court proceedings, which was essential for a fair adjudication of charge priorities.

• The Court emphasized the need to examine the conflict between Section 11(2) of the PF Act (first charge for EPF) and Section 35 of the SARFAESI Act (priority to secured creditors).

• It observed that the EPFO had attached the Attibele property (auctioned by Axis Bank) before the auction, strengthening its claim.

• The Court refrained from deciding the merits of the priority dispute, leaving it to the High Court to examine after hearing all parties.

Conclusion

The Supreme Court set aside the High Court’s order and restored the writ petition for fresh hearing. It directed the impleadment of Axis Bank as a respondent and allowed all parties to raise contentions regarding the priority of charges. The High Court was instructed to decide the case in accordance with the law after considering all evidence and legal provisions.