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Informist, Thursday, Jun. 18, 2026

 

NEW DELHI – The Karnataka High Court has held that the Employees' Provident Fund Organisation cannot claim first charge on a partner's property if it was not part of the partnership firm's assets. In these cases, the bank, who had auctioned the partner's property for recovering loan from dues, will have the first charge, said the high court.

 

Justice Anant Ramanath Hegde also cleared the air on who holds the first charge in case of dispute between Employees' Provident Fund Organisation and banks. The first charge under The Employees' Provident Fund and Miscellaneous Provisions Act, 1952, prevails over the security interest under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, said the court. The Employees' Provident Fund Organisation can enforce the first charge against an asset of the employer if the asset of the establishment and asset of the employer are the same. However, the first charge under The Employees’ Provident Fund and Miscellaneous Provisions Act is confined to the asset of the establishment and will not extend to the separate asset of the employer, said the court.

 

The high court rejected Employees' Provident Fund Organisation's petition seeking first charge on the property of Devki Designs' partners. Employees' Provident Fund Organisation had sought the court to direct Axis Bank to pay the dues of Devki Designs from the auction of the property of one of the partners. The Employees' Provident Fund Organisation cannot claim first charge over the property of the partner which is auctioned to recover the dues of the bank as there is no document to show that the property was part of the firm's assets, said the court. 

 

The partner of Devki Designs had mortgaged the property as security for the loan advanced to the firm by the bank, the court noted. Under law, the property in the name of the individual is presumed to be his self acquired property unless shown otherwise, said the court. Since there is no declaration the property of the partner which is auctioned was brought into the assets of the firm, the court has to hold that the property was not the property of the establishment and was the separate property of one of the partners, it said. Thus, the bank had prior claim and interest over the mortgaged property, said the high court.

 

Thursday, shares of Axis Bank ended 0.7% higher at INR 1,360.10 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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