In a detailed order that stretched over several hours of argument, the Bombay High Court on Tuesday set aside a prohibitory order issued by the Employees’ Provident Fund Organisation (EPFO) against B.T. Kadlag Constructions. The company, which is currently operating a leased sugar factory in Nashik, had challenged the EPFO’s move freezing payments linked to the old establishment’s provident fund dues. From the tone of the court, especially midway through the hearing, it was clear that the bench was uncomfortable with how the recovery officer proceeded without giving the company a proper chance to respond.
Background
The dispute began after Niphad Sahakari Sakhar Karkhana Ltd., a cooperative sugar mill, defaulted on provident fund contributions running into crores. The Nashik District Central Cooperative Bank, which had taken possession of the mill under SARFAESI, later leased it to B.T. Kadlag Constructions for 25 years. Under that agreement, the bank was supposed to allocate a portion of the lease rent toward clearing statutory dues of the old employer.
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But in 2025, the EPFO, relying on recovery certificates, demanded that the new lessee pay around ₹4.9 crore-far higher than the initial demand raised earlier. The recovery officer then issued a prohibitory order, blocking payments from the company to the old mill and directing that the amount be redirected to EPFO instead. B.T. Kadlag Constructions,
Court’s Observations
Justice N.J. Jamadar took a deep look at how the EPFO used its powers under the Provident Fund Act. While the bench agreed that PF dues enjoy topmost priority and even a transferee can be made liable under certain situations, the manner in which the recovery officer acted came under sharp scrutiny.
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At one point, the judge noted, “The prohibitory order appears to have been issued without following the statutory steps under Section 8-F,” a remark that instantly shifted the mood in the courtroom. The court emphasised that before directing a third party (like a lessee) to pay dues, the law requires a proper notice and an opportunity for the party to file a sworn statement clarifying whether it actually owes money to the defaulting employer.
The judge reminded the lawyers that PF law, while worker-protective, still demands fairness. “The bench observed, ‘Natural justice cannot be sacrificed, even for social welfare legislation’.”
On the petitioner’s argument that it wasn’t a transferee since the lease was executed by the bank and not the defaulting employer, the court refused to accept a narrow interpretation. It said the effect of the transaction must be considered-if the establishment moves from one hand to another, workers shouldn’t be left running behind a vanished employer.
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Decision
The High Court partially allowed the writ petition and quashed the EPFO’s prohibitory order. But it didn’t let the company walk free. Instead, the court converted the flawed order into a valid notice under Section 8-F(3)(i), giving the petitioner three weeks to file a sworn statement as the law requires.
The EPFO must now conduct an enquiry, consider the company's response, and then pass a fresh, legally compliant order. The judgment ends there-without deciding PF liability conclusively but ensuring the recovery process follows the rulebook.
Case Title: B.T. Kadlag Constructions Pvt. Ltd. vs Employees Provident Fund Organization & Others
Case No.: Writ Petition No. 12754 of 2025
Case Type: Writ Petition (Civil / Article 227 Challenge)
Decision Date: 18 November 2025