Janta Chini Mill Mazdoor Sangh And ... vs Industrial Finance Corporation ...
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HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

                                                                                           A.F.R.                                                                                        
 
                                                                                          Court No. - 21
 
Reserved on 10.08.2016.
 
                                                                                          Delivered on 23.08.2016.
 

 
Case :- WRIT - C No. - 20805 of 2011
 
Petitioner :- Janta Chini Mill Mazdoor Sangh And Another
 
Respondent :- Industrial Finance Corporation Of India And Others
 
Counsel for Petitioner :- Manish Kumar Nigam,Arun Kumar Gupta,Ashok Kumar
 
Counsel for Respondent :- SC,Anoop Trivedi,Chandan Sharma,Gyan Prakash,O.P.Misra,Praveen Shukla,Ravindra Singh,Santosh Kumar Singh,Santosh Kumar Srivastava,Satish Chaturvedi,Vr Tiwari
 

 
Hon'ble V.K. Shukla,J.

Hon'ble Mahesh Chandra Tripathi,J.

Janta Chini Mill Mazdoor Sangh Gauri Bazar, Deoria through its Secretary is before this Court, assailing the validity of the proceedings so undertaken under SARFAESI Act, 2002 wherein steps have been undertaken for sale of two Units of the Company i.e. Gauri Bazar, District Deoria and Kathkuiyan, District Kushi Nagar in following terms:-

"(I) Issue a writ, order or direction in the nature of certiorari quashing the notice dated 13.01.2011 published in newspaper (Annexure No.4 to this writ petition), notice dated 03.03.2011 published in Hindi Daily Dainik Jagaran dated 08.03.2011 (Annexure-5 to this writ petition) and notice dated 15.03.2011 published in Hindi Daily Dainik Jagaran dated 16.03.2011 (Annexure-6 to this writ petition).

(II) Issue a writ, order or direction in the nature of mandamus commanding the respondent no.1 to restrain from proceedings under the provision of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for realization of its alleged dues against the company.

(II-A) Issue a writ, order or direction in the nature of mandamus commanding the respondent no.1 to make the payment of the worker dues which has already been quantified and adjudicated and finally decide amounting of Rs. 14.9034.

(II-B) Issue a writ, order or direction n the nature of mandamus directing the Deputy Labour Commissioner, Gorakhpur to realise (execute) and distribute the amount which has already been adjudicated by him in different cases to the workers.

(III) Issue any other suitable writ, order or direction which this Hon'ble Court may deem fit and proper in the circumstances of the case.

(IV) to award costs of the writ petition to the petitioners".

Brief background of the litigation in question is that M/s Kanpur Sugar Works Ltd was incorporated in the year 1894 as Joint Stock Company and in 1896 a Sugar Refinery Unit was also set up at Kanpur by M/s Beg Sutherland and Company Ltd. Later on M/s Beg Sutherland and Company Ltd. merged with M/s British India Corporation Ltd. on 14.08.1960 referred to hereinafter as B.I.C. B.I.C. was having control over the Company in question. M/s Kanpur Sugar Works Ltd (hereinafter referred to as the Company) was having four units viz. Marhowrah (Bihar), Padrauna, Gauri Bazar and Kathkuiyan (U.P.). The financial condition of the Company was bad and in this background company was registered with the Board for Industrial and Financial Reconstruction, New Delhi (hereinafter referred as BIFR) bearing Case No. 99/92 under Sick Industrial Companies (Special Provisions) Act 1985 (hereinafter after referred to as SICA). The BIFR in its turn proceeded to sanction 1st scheme viz. SS-98 under which the management of all the four units was to be transferred in favour of M/s Gangotri Enterprises Ltd. (GEL). On account of non-infusion of funds, SS-98 was declared as "Failed" by BIFR in the year 2000 and BIFR directed OA/MA(IFCI) to re-advertise for change of Management of the Company. Subsequently, BIFR sanctioned another revival scheme viz sanctioned scheme-2003 (SS-03) under which management of only two units viz Mahrowarh (Bihar) and Padrauna (U.P.) was transferred in the name of M/s JHV Distilleries and Sugar Mills Ltd (JDSML). Therefore, possession of these two units was handed over by M/s Gangotri Enterprises Ltd to M/s JHV Distilleries and as far as Gauri Bazar and Kathkuiyan units are concerned, BIFR directed that the assets of these units be sold for the payment of balance liabilities of company. In the year 2008, due to non -implementation of SS-03 fully, BIFR vide order dated 08.08.2008, declared the SS-03 as failed.

Petitioners are submitting that two units namely Khatkuniya and Padrauna have already been sold and given to JHVD SML and JVH and they have taken possession of the Company and dues of IFCI and other secured creditors have already been settled on OTS basis and secured creditors including IFCI have acknowledged of payment being made.

This much fact is also reflected that IFCI who was secured creditor proceeded to initiate proceeding under SARFAESI Act for sale of two units of the company i.e. Gauri Bazar and Kathkuiyan. Petitioners' at this juncture came to this Court, complaining therein that large scale workers dues is outstanding against the Company in question and their interest would be seriously prejudiced, if the amount in question fetched from the sale is permitted to be lifted, without settling the workers dues. The aforementioned writ petition was heard by this Court on 16.04.2011. Relevant extract of order passed is as follows:-

"Heard Shri Manish Kumar Nigam for the petitioners. Shri O.P. Misra appears for Industrial Finance Corporation of India (IFCI).

The petitioners are the workmen of Gauri Bazar Unit of Kanpur Sugar Works Ltd. By this writ petition they have challenged the sale of the mortgaged assets of the Gauri Bazar Unit pursued by IFCI, as secured creditor for realisation of their secured loans under SARFAESI Act, 2002.

A preliminary objection has been raised by Shri O. P. Misra appearing for IFCI, on the maintainability of the writ petition in view of the alternative remedy of filing an appeal under Section 17 of the SARFAESI Act. He relies upon judgments in Mardia Chemicals Ltd. Vs. Union of India, (2004) 4 SCC 311, and Union Bank of India Vs. Satyawati Tandon, (2010) 8 SCC 110. He submits that the Supreme Court had taken objection to the interference of the High Court in recoveries initiated under the SARFAESI Act, 2002 as special act for realisation of the dues from the mortgaged assets without taking recourse to the Court. It was held that any objection to the recovery under the SARFAESI Act, 2002 may be taken in appeal under Section 17. Any person interested in the mortgaged property can take recourse to the provisions of the appeal under the SARFAESI Act, 2002.

Shri Manish Kumar Nigam, learned counsel for the petitioner submits that Kanpur Sugar Works Ltd. has four units. The company fell into losses and was declared as sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985. The IFCI was appointed as operating agency. The IFCI prepared a rehabilitation scheme in terms of which two of the units of the company were rehabilitated by providing OTS of the dues of the secured creditors and also providing for the dues of the workmen and other dues. The rehabilitation scheme in respect of remaining two units namely Gauri Bazar and Kathkuiyan did not succeed. It is submitted that the proceedings are still pending in BIFR. Shri Om Prakash Misra submits that the proceedings have since abated in pursuance to the amendment in Section 51 (1) of the Sick Industrial Company (Special Provisions) Act, 1985.

The IFCI is proceeding to sell the mortgaged assets of the two remaining units under the SARFAESI Act purportedly with the consent of majority of the secured creditors.

Shri Manish Kumar Nigam submits that in none of the cases decided by the Supreme Court the question of workmen's interest in sale of assets of the company even if they are mortgaged under the SARFAESI Act has been considered in terms of Sections 529, 530, 531 and 531A of the Companies Act, 1956 by which right of the workmen to realise their dues has been recognised to be at par with secured creditors and that amount received by sale of the assets have to be shared pari pasu between the secured creditors and the workmen and thereafter the Government dues are to be realised. He submits that in the present case the workmen of two units of which dues were worked out in the Draft Rehabilitation Scheme approved in the order of BIFR dated 28.1.2003 to be Rs.483.90 lacs for Gauri Bazar Unit and 325.26 lacs for Kathkuiyan Unit, and cane arrears at Rs.161.30 lacs for Gauri Bazar Unit and Rs.569.55 lacs for Kathkuiyan unit, as against secured loans of IFCI, IDBI, ICICI of Rs.3277.20 lacs of all the four units, Rs.473 lacs of SBI and Rs.220.60 of Sugar Development Fund. Shri Manish Kumar Nigam further submits that the State Government is also under statutory liability under the U.P. Sugarcane (Supply) Act for realisation of the arrears of sugarcane dues and commission of the Cane Cooperative Unions.

The sale of the two units has been advertised and fixed for 18th April, 2011.

In this writ petition the other secured creditors, workmen of the Kathkuiyan unit and the State Government through the Cane Commissioner and the Cane Development Societies are not parties. Since there is nothing to show that they have also challenged the sale, while directing that they should be impleaded as parties, we propose to protect the interest of all the secured creditors, workmen and Government dues.

Shri O. P. Misra states that IFCI has written to Shri Rama Shankar Singh, Secretary, Janta Chini Mill Mazdoor Sangh, Gouri Bazar, Deoria, U.P. (the petitioner) on 18.3.2011 that after sale of the assets of the two units the dues of secured creditors, workmen and other statutory dues will be settled as per the provisions of law.

Shri Manish Nigam objects and states that the assurance is entirely vague, and that the secured creditors even if they are proceeding to sell two units, treating the proceedings in BIFR to have abated, must provide for workmen's dues to be paid.

Prima facie we find substance in the contention of the workmen that even after sale under the SARFAESI Act, 2002 the amount realised has to be given same treatment, which is provided under the Companies Act, 1956, which is Central Act and is the general act governing the field recognising the rights of the workers in terms of Part IV of the Constitution of India.

Section 37 of the SARFAESI Act, 2002 provides that application of other laws shall not be barred and that the provisions of the Act shall be in addition to and not in derogation to the Acts specified in Section 37 and any other laws for the time being enforced. These other laws will include the Companies Act, 1956.

Let Shri Manish Nigam implead all the concerned parties including other secured creditors, workmen of the Kathkuiyan unit and the State of U.P. through the Secretary, Sugarcane; Commissioner of Sugarcane, Government of U.P. and the concerned Cane Development Societies within ten days.

In the meantime, the sale under the SARFAESI Act, 2002 may be held; the entire amount realised from sale may be retained by IFCI, and will be kept in no lien account to be disbursed in accordance with the orders to be passed by the Court.

All the respondents will file their reply in three weeks.

List on May 10th, 2011".

Thereafter, again this Court has considered the matter on 09.05.2012 and has passed following order.

"The two units of the company, which is subsidiary of British India Corporation Ltd. have since been sold to consortium of the secured creditors with IFCI Ltd. as lead creditor for a sum of Rs.17.26 crores and Rs.7 crores and odd respectively. The entire amount under the orders of the Court passed on 16th April, 2011 has been deposited in no lien account with IFCI to await its distribution.

The impleadment application of Rajendra Ispat Pvt. Ltd., the highest bidder of both the units, which has deposited the amount is allowed.

The intervention applications of Cooperative Cane Development Union Ltd., Dudhai, Baitalpur and Katkuian, Distt. Kushi Nagar filed through Shri Ravindra Singh dated 4.8.2011 are allowed.

The application filed by Rajendra Ispat Pvt. Ltd. shows that both the units of the company at Gauri Bazar, and Kathkuiyan, Distt. Deoria are under attachment for recovery of the workmen's dues. Due to these attachment orders the sale deed of the property has not been executed in its favour.

Prima facie we find that as only two units of the company namely Kanpur Sugar Works Ltd., which is subsidiary of these BIC have been sold, some arrangements should be made to protect the interest of the secured creditors and workmen, who have pari passu charge, as well as the EPF Commissioner and Cane Unions, who have first charge over the assets.

We are informed that the workmen have not allowed Rajendra Ispat Pvt. Ltd. to enter the units of which sale deeds have not been executed as yet. We are also informed that the Deputy Labour Commissioner has sent orders for recovery of the workmen's dues, to the IFCI.

The amount realised from the sale of the units under the SARFAESI Act, 2002 has to be distributed in accordance with the provisions of Section 13 (9) of the Act. The distribution, however, has to be made in accordance with the principles of distributing the dividend under Companies Act, 1956 for which the dues of all stake holders have to be ascertained.

In order to pass any further orders, it is necessary to implead the British India Corporation, which is the promoter of the unit. Let the petitoner implead British India Corporation (BIC) as party respondent and take steps to serve it. Notices will be sent by registered post as well as by Dasti summons, returnable on 29th May, 2012.

In the meantime, we direct that the amount realised by the IFCI from sale under the Securitisation Act, 2002, kept in no lien account will be deposited in an interest bearing fix deposit, subject to same condition that the account will continue to be a no lien account.

List on 29.5.2012".

Matter has once again been considered by this Court on 07.09.2012 and following order has been passed.

"Shri Satish Chaturvedi has filed an application on behalf of the British India Corporation Ltd. for recalling the order dated 9.5.2012 by which the Court directed the British India Corporation Ltd. to be impleaded as party respondent as the promotor in majority shareholder in Kanpur Textile Ltd. of which two units have been sold under the SARFAESI Act giving rise to this writ petition by the workmen claiming their dues.

From the proceedings of BIFR we find that the first scheme in which British India Corporation was required to divest its shareholding failed; the second scheme also failed. In the third scheme shares were to be sold to JSV Sugar of JSL Group. The sale has not yet materialised as 38.43% of the total shares of 47.10% held by British India Corporation in Kanpur Textiles Ltd. are pledged with the State Bank of India.

From the order of BIFR dated 23rd April, 2012 filed along with the application filed by British India Corporation, we find that BIFR was unable to find out (para 12) as to who was the Chairman of the Company at the relevant period and his address. The IFCI was required to file reply within two weeks. The BIFR issued notice to the Controller of Accounts, Ministry of Textiles, New Delhi, and had fixed 9.8.2012 for hearing.

We are unable to appreciate as to why the BIFR is keeping the proceedings pending, when two schemes have already failed and that two out of four sugar units have been sold under the SARFAESI Act. Without entering into the merits of the case, we may observe that the BIFR must consider the facts stated in its orders to make up its mind and to consider to recommend the company for winding up under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 to the High Court.

In the facts and circumstances, we reject the application of British India Corporation Ltd. to recall the order dated 9.5.2012 by which it was directed to be impleaded as party respondent and direct it to file detailed counter affidavit considering that the assets of the two units, have been sold under the SARFAESI Act to IFCI.

Shri Manish Nigam appearing for the petitioner will give details of the workmen's dues. Shri Ravindra Singh appearing for the cane unions is also required to give details of the dues of the Cane Unions. We also direct the State respondents to give details of its dues vis-a-vis the two units, which have been sold.

List for orders on 8th October, 2012.

Shri Chandan Sharma representing M/s Rajindra Ispat Pvt. Ltd., the purchaser of the two units states that sale deed has not been executed by the IFCI so far, and that workmen are not allowing them to enter the premises.

We do not propose to enter into the issue with regard to the execution of the sale deed as it is the matter between the secured creditor and purchaser. We have been informed that the auction has not been challenged and that amount is still lying in no lien account with the IFCI under the interim orders passed in this writ petition.

So far as obstructions created by the workmen are concerned, we are prima facie of the opinion that at this stage, if the attachment orders have been passed on the orders of the Labour Commissioner regarding workmen's dues and the purchaser has no intention to run the sugar mills, no directions are required to be issued, regarding possession".

Before this Court, by means of amendment application, details of workers dues as quantified has been specified and further intervention application has been moved on behalf of Co-operative Cane Development Union giving therein full details of the fact in reference of outstanding cane dues i.e. required to be realised by the Company in question. This is accepted position that the property that has been put to sale under the SARFAESI Act, qua the same, sale deed has been executed and as workmen on the spot are not permitting the auction purchaser to enter into the units of which sale deeds have been executed for lifting of the scrap etc, they have moved an application for giving protection for lifting of scrap in question.

On the basis of pleadings that have come forward, present writ petition has been taken up for final hearing/disposal with the consent of the parties.

Sri Arun Kumar Gupta, learned counsel for the petitioners submitted with vehemence that in the present case interest of the workers should be protected by this Court in all eventuality and all the dues of secured creditors including IFCI and other Banks have already been paid and settled, then there is no occasion/reason for proceeding under SARFAESI Act, 2002, in this background workers interest be protected and workers be treated as secured creditor and dues should be ensured to be paid in consonance with the provision as contained under Sections 529-A of the Companies Act.

Sri Ravindra Singh, learned counsel for the Cooperative Cane Development Union Ltd. Baitalpur, Deoria submitted with vehemence that in view of the judgement of Apex Court rendered in the case State of Madhya Pradesh Vs Jaora Sugar Milkls Ltd and others ( 1996) INSC 1285 interest of sugar cane grower be protected by all means and entire outstanding sugarcane dues be ensured by asking IFCI to release the outstanding cane dues payment from the realised amount of M/S. Kanpur Sugar Works.

Sri O.P. Mishra, learned counsel for the I.F.C.I Ltd. and the Asset Reconstruction Company submitted before this Court that as far as rights of secured creditor is concerned, once there is no liquidation proceeding pending and two of the units are still in operation, then recovery in question as claimed by the petitioners as well as intervenors should be pressed and brought to its logical conclusion in accordance with law and in proceeding under SARFAESI Act prayer that has been so made, cannot be accorded and it is wrong to say that entire amount under OTS stands paid, accordingly writ petition be dismissed as it has been framed and drawn and petitioner as well as intervener should avail the remedy as is provided for under the relevant statutory forum.

Sri Anurag Khanna, Senior Advocate, assisted by Sri Syed Fahim Ahmad, Advocate submitted that relief as asked for cannot be accorded by this Court, the petitioners as well as intervenor for recovery of their dues will have to invoke the remedial forum provided for under the statutory provision holding the field. Apart from this he submitted that in the garb of pendency of proceedings, on the spot they are not being permitted to remove the scrap and accordingly on this aspect of the matter this Court should intervene and proceed to issue requisite directives.

After respective arguments have been advanced, issue that is engaging our attention is as to when proceeding under SARFAESI Act, 2002 have been undertaken, can in such proceeding dues of the workmen as well as sugar cane grower from debtors company can be directed to be discharged from the sale proceeds so realised under the SARFAESI Act, 2002.

Here undisputed factual situation that is so emerging in the present case is that initially company in question has been subjected to the proceeding under the provision of SICA, 1985 and thereafter scheme in question for making the company viable has been framed from time to time and as scheme in question framed was not found viable time and again, same has been dropped and ultimately this much fact is reflected that on initiation of proceedings under SARFAESI Act, 2002 in terms of the provision as contained under the proviso to Section 15 of SARFAESI Act, 2002, proceedings have abated.

Thus, situation as of now on the ground is there are no proceedings pending either under Company Act or under the provision of SICA, 1985 and proceedings under SARFAESI Act, 2002 have been undertaken by putting the property to auction wherein M/s Rajendra Ispat Pvt. Ltd. has participated in the auction proceeding and its bid has been accepted and transaction/document has also been executed in its favour. The issue as already mentioned above is that once proceedings under SARFAESI Act, 2002 have been undertaken, can in such proceeding dues claimed by the workers as well as of sugar cane grower be adjusted from the sale proceeds in question, said issues can be more conveniently answered in the light of statutory provisions, namely Recovery of Debts Due to Bank and Financial Institutions Act 1993; Companies Act 1956; SARFAESI Act, 2002, keeping in view of the fact that as far as claim of workmen is concerned, their claim have been settled by the competent authority under U.P. Industrial Peace (Timely Payment of Wages) Act, 1978 and as far as claim of Sugar Cane grower are concerned, their claim has been settled under U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 and under both the provisions, once there are dues outstanding that has been so determined, said amount can be recovered by taking recourse to coercive measures by way of arrears of land revenue. Relevant provisions are being looked into:-

DRT Act 1993

Section 2(d) of the 1993 Act, defines ''bank', which, inter alia, means a banking company. Under Section 2(e) ''banking company' has the meaning assigned to it in clause (c) of Section 5 of the Banking Regulation Act, 1949. ''Financial institution' is defined in Section 2(h). The ''tribunal' established under Section 3 is known as Debts Recovery Tribunal. Under Section 17, the tribunal (DRT) has been conferred jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. Section 18 bars the jurisdiction of all other courts and other authorities except the Supreme Court and High Court exercising jurisdiction under Articles 226 and 227 of the Constitution in relation to the matters specified in Section 17.

Section 19 provides a comprehensive procedure before the DRT for making an application where a bank or a financial institution has to recover any debt from any person. It also enables DRT to issue certificate of recovery, its execution and all such orders and directions as may be necessary to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. Section 19 is reproduced as under:

"Section 19. Application to the Tribunal.--(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction--

Where a certificate of recovery is issued against a company registered under the Companies Act, 1956 (1 of 1956) the Tribunal may order the sale proceeds of such company to be distributed among its secured creditors in accordance with the provisions of section 529A of the Companies Act, 1956 and to pay the surplus, if any, to the company.

The Presiding Officer shall issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate.

The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice."

Section 22, inter alia, empowers the DRT to regulate its own procedure. It is not bound by the procedure laid down by the Code of Civil Procedure, 1908 (''CPC') but is guided by the principles of natural justice and subject to the provisions of the 1993 Act and the rules framed thereunder. It has same powers as are vested in a civil court under the CPC in respect of the matters set out in Section 22(2).

Section 25 provides the modes of recovery of debts. The Recovery Officer on receipt of the copy of the recovery certificate is required to proceed to recover the amount of debt specified in the certificate by one or more of the modes set out in that Section which includes attachment and sale of the movable or immovable property/properties of the certificate debtor. Under Section 28, the Recovery Officer may recover the amount of debt under the certificate by one or more of the modes provided thereunder without prejudice to the modes of recovery specified in Section 25. Section 28(4) provides that the Recovery Officer may apply to the court in whose custody there is money belonging to the certificate debtor for payment to him of the entire amount of such money, or if it is more than the amount of debt due an amount sufficient to discharge the amount of debt so due.

Section 34 gives the 1993 Act overriding effect. Sub-section(1) thereof provides that the provisions of the 1993 Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law or in any instrument having effect by virtue of any law. Sub-section (2) of Section 34 provides that the provisions of the 1993 Act or the rules made thereunder shall be in addition to and not in derogation of the enactments stated therein.

Section 36 empowers the central government to make rules to carry out the provisions of the 1993 Act. In exercise of the powers conferred under Section 36, the central government has framed the Debts Recovery Tribunal (Procedure) Rules, 1993.

Companies Act, 1956

The Companies Act has undergone substantial amendments by the Companies (Second Amendment) Act 2002 (11 of 2003) but no notification has been issued so far bringing Act 11 of 2003 into effect. Though Section 441 has been substituted by Section 56 of the above Amendment Act but since it has not come into force, we reproduce Section

441 as it stood prior to amendment:

"441. Commencement of winding up by Court-( 1 ) Where, before the presentation of a petition for the winding up of a company by the Court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

( 2 ) In any other case, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up."

Section 443 provides for powers of Court on hearing petition which, inter alia, enables it to make an order for winding up the company and also make an interim order that it thinks fit.

The effect of the winding up order is provided in Section 447. Accordingly, an order for winding up a company operates in favour of all the creditors and all the contributories of the company as if it has been made on the joint petition, of a creditor and of a contributory.

The appointment of official liquidator so far as it relates to winding up of a company is dealt with in Section 448. Section 451 deals with general provisions as to liquidators. Inter alia, it provides that the liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the court may impose.

Section 456 provides that where a winding up order has been made or where a provisional liquidator has been appointed the liquidator or the provisional liquidator, as the case may be, shall take into his custody or under his control all the properties, effects and actionable claims to which

the company is or appears to be entitled.

Section 457 empowers the liquidator to do acts stated in

paragraphs (a) to (e) of sub-section (1) with the sanction of the court. In a winding up by the court, the liquidator has power to do all acts set out in clauses (i) to (v) of sub-section (2).

Section 529, to the extent it is relevant, reads as follows:

"Section 529 - Application of insolvency rules in winding up of insolvent companies. (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to-

(c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent:

Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,- (a) the liquidator shall be entitled to represent the workmen and enforce such charge;

(b) any amount realised by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen's dues; and

(c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of section 529A.]

(2) . . . . . . . .

(3) For the purposes of this section, section 529A and section 530.

(a) "workmen", in relation to a company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947);

(b) "workmen's dues", in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:-

(i) to (iv) . . . . . . . .

(c) "workmen's portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as

the amount of the workmen's dues bears to the aggregate

of-

(i) the amount of workmen's dues; and

(ii) the amounts of the debts due to the secured creditors.

SARFAESI Act, 2002

The SARFAESI Act, which came into force from 21.06.2002, was enacted to provide procedures to the Banks to recover their security interest from the debtors and their collateral security assets as provided under the provisions of the Act. The scope of the Act was explained by Apex Court in the case of Transcore vs. Union of India & another 2008(1) SCC 125 as under:

"12. The NPA Act, 2002 is enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and for matters connected therewith. The NPA Act enables the banks and FIs to realize long-term assets, manage problems of liquidity, asset-liability mismatch and to improve recovery of debts by exercising powers to take possession of securities, sell them and thereby reduce non-performing assets by adopting measures for recovery and reconstruction. The NPA Act further provides for setting up of asset reconstruction companies which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease; assignment or sale. The said Act also empowers the said asset reconstruction companies to take over the management of the business of the borrower....

13. Non-performing assets (NPA) are a cost to the economy. When the Act was enacted in 2002, the NPA stood at Rs1.10 lakh crores. This was a drag on the economy. Basically,NPA is an account which becomes non-viable and non-performing in terms of the guidelines given by RBI. As stated in the Statement of Objects and Reasons, NPA arises on account of mismatch between asset and liability. The NPA account is an asset in the hands of the bank or FI. It represents an amount receivable and realizable by the banks or FIs. In that sense, it is an asset in the hands of the secured creditor. Therefore, the NPA Act, 2002 was primarily enacted to reduce the nonperforming assets by adopting measures not only for recovery but also for reconstruction. Therefore, the Act provides for setting up of asset reconstruction companies, special purpose vehicles, asset management companies, etc. which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale. It also provides for realization of the secured assets. It also provides for takeover of the management of the borrower company.

24." Thus, it becomes clear that the SARFAESI Act is meant to operate as a tool for banks and ensures a smooth debt recovery process. The provisions of SARFAESI Act make its purport amply clear, specifically under the provisions of Sections 13(2) and 13(4) of the Act, which read as under:

13. Enforcement of security interest

(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under subsection (4).

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:

PROVIDED that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.

(4) In case the borrower fails to discharge his liability in full within the period specifiedin sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:--

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

(b) take over the management of the business of the borrower including the right to transfer byway of lease, assignment or sale for realising the secured asset:

PROVIDED that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:

PROVIDED FURTHER that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt.

(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.

(5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower.

(6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.

(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.

(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

(9) In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors:

PROVIDED that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956):

PROVIDED FURTHER that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of section 529A of that Act:

PROVIDED ALSO that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen's dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator:

PROVIDED ALSO that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator:

PROVIDED ALSO that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any.

Explanation : For the purposes of this sub-section,--

(a) "record date" means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date;

(b) "amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor.

(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

(11) Without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act.

(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.

(13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.

Based on these statutory provisions, the interplay of these statutory provisions vis-a-vis the workers dues has been subject matter of consideration before the Apex Court, and as there has been divergence of opinion, the Apex Court in the case of Bank of Maharashtra Vs. Pandurang Keshav Corwardkar and others (2013)7 SCC 754 has dealt with the issue and answered as follows:-

67. In light of the above discussion, we sum up our conclusions thus:

67.1 If the debtor company is not in liquidation nor any provisional liquidator has been appointed and merely winding up proceedings are pending, there is no question of distribution of sale proceeds among secured creditors in the manner

prescribed in Section 19(19) of the 1993 Act.

67.2 Where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen's portion in relation to the security held by the secured creditor of the debtor company.

67.3 The above position is equally applicable where the assets of the debtor company have been sold in execution of the recovery certificate obtained by the bank or financial institution against the debtor company when it was not in liquidation but before the proceeds realized from such sale could be fully and finally disbursed, the company had gone into liquidation. In other words, pending final disbursement of the proceeds realized from the sale of security in execution of the recovery certificate issued by the debt recovery tribunal, if debtor company becomes company in winding up, Section 529A read with Section 529(1)(c) proviso come into operation and statutory charge is created in favour of workmen in respect of their dues over such proceeds.

67.4. The relevant date for arriving at the ratio at which the sale proceeds are to be distributed amongst workmen and secured creditors of the debtor company is the date of the winding up order and not the date of sale.

67.5. The conclusions (ii) to (iv) shall be mutatis mutandis applicable where provisional liquidator has been appointed in respect of the debtor company.

67.6 Where the winding up petition against the debtor company is pending but no order of winding up has been passed nor any provisional liquidator has been appointed in respect of such company at the time of order of sale by DRT and the properties of the debtor company have been sold in execution of the recovery certificate and proceeds of sale realized and full disbursement of the sale proceeds has been made to the concerned bank or financial institution, the subsequent event of the debtor company going into liquidation is no ground for

reopening disbursement by the DRT.

67.7. However, before full and final disbursement of sale proceeds,if the debtor company has gone into liquidation and a liquidator is appointed, disbursement of undisbursed proceeds by DRT can only be done after notice to the liquidator and after hearing him. In that situation if there is claim of workmen's dues, the DRT has two options available with it. One, the bank or financial institution which made an application before DRT for recovery of debt from the debtor company may be paid the undisbursed amount against due debt as per the recovery certificate after securing an indemnity bond of restitution of the amount to the extent of workmen's dues as may be finally determined by the liquidator of the debtor company and payable to workmen in the proportion set out in the illustration appended to Section 529(3)(c) of the Companies Act. The other, DRT may set apart tentatively portion of the undisbursed amount towards workmen's dues in the ratio as per the illustration following Section 529(3)(c) and disburse the balance amount to the applicant bank or financial institution subject to an undertaking by such bank or financial institution to restitute the amount to the extent workmen's dues as may be finally determined by the liquidator, falls short of the amount which may be distributable to the workmen as per the above illustration. The amount so set apart may be disbursed to the liquidator towards workmen's dues on ad hoc basis subject to adjustment on final determination of the workmen's dues by the liquidator.

67.8. The first option must be exercised by DRT only in a situation where no application for distribution towards workmen's dues against the debtor company has been made by the liquidator or the workmen before the DRT.

67.9. Where the sale of security has been effected in execution of recovery certificate issued by the DRT under the 1993 Act, the distribution of sale proceeds has to be made by the DRT alone in accordance with Section 529A of the Companies Act and by no other forum or authority.

67.10 The workmen of the company in winding up acquire the standing of the secured creditors on and from the date of winding up order (or where provisional liquidator has been appointed, from the date of such appointment) and they become entitled to the distribution of sale proceeds in the ratio as explained in the illustration appended to Section 529(3)(c) of the Companies Act.

67.11. Section 19(19) of the 1993 Act does not clothe DRT with jurisdiction to determine the workmen's claim against the debtor company. The adjudication of workmen's dues against the debtor company in liquidation has to be made by the liquidator. In other words, once the company is in winding up the only competent authority to determine the workmen's dues is the liquidator who obviously has to act under the supervision of the company court and by no other authority.

67.12 Section 19 (19) is attracted only where a debtor company is in winding up or a provisional liquidator has been appointed in respect of such company. If the debtor company is not in liquidation or if in respect of such company no order of appointment of provisional liquidator has been made and merely winding up proceedings are pending, the question of distribution of sale proceeds among secured creditors in the manner prescribed in Section 19(19) of the 1993 Act does not arise.

Bare perusal of the relevant para 67.1 of judgement would go to show that if the debtor company is not in liquidation nor any provisional liquidator has been appointed and merely winding up proceedings are pending, there is no question of distribution of sale proceeds among secured creditors in the manner prescribed in Section 19(19) of the 1993 Act. Para 67.2 deals with where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen's portion in relation to the security held by the secured creditor of the debtor company. Para 67.9 deals with where the sale of security has been effected in execution of recovery certificate issued by the DRT under the 1993 Act, the distribution of sale proceeds has to be made by the DRT alone in accordance with Section 529A of the Companies Act and by no other forum or authority. Para 67.10 deals with the workmen of the company in winding up acquire the standing of the secured creditors on and from the date of winding up order (or where provisional liquidator has been appointed, from the date of such appointment) and they become entitled to the distribution of sale proceeds in the ratio as explained in the illustration appended to Section 529 (3)(c) of the Companies Act. Para 67.11 deals with that Section 19(19) of the 1993 Act does not clothe DRT with jurisdiction to determine the workmen's claim against the debtor company. The adjudication of workmen's dues against the debtor company in liquidation has to be made by the liquidator. In other words, once the company is in winding up the only competent authority to determine the workmen's dues is the liquidator who obviously has to act under the supervision of the company court and by no other authority. Para 67.12 deals with that Section 19 (19) is attracted only where a debtor company is in winding up or a provisional liquidator has been appointed in respect of such company. If the debtor company is not in liquidation or if in respect of such company no order of appointment of provisional liquidator has been made and merely winding up proceedings are pending, the question of distribution of sale proceeds among secured creditors in the manner prescribed in Section 19(19) of the 1993 Act does not arise.

Apex Court once again in the case of Pegasus Assets Reconstruction Private Limited Vs. Haryana Concast Limited and another (2016) 4 SCC 47 has held that Sections 9 and 13 of the SARFAESI Act leaves no manner of doubt that for enforcement of its security interest, a secured creditor has been not only vested with powers to do so without the intervention of the Court or tribunal but detailed procedure has also been prescribed to take care of various eventualities such as when the borrower company is under liquidation. Further there is no lacuna or ambiguity in the SARFAESI Act to warrant reading something more into it. Thus, there is no plausible reason to take recourse to any provisions of the Companies Act and permit interference in proceedings under SARFAESI Act either by Company Judge or liquidator. Section 13(9) of SARFAESI Act fully protects workmen's interests by incorporating scheme of Sections 529 and 529-A of Companies Act, 1956. Relevant para 30 and 31 are extracted below:-

30. Since we have held earlier in favour of views of Delhi High Court, it is not necessary to burden this judgment with the case laws which support that view and have been noted by the High Court. We are in agreement with the submissions advanced on behalf of respondent Kotak Mahindra Bank as well as respondent No.2 that there is no lacuna or ambiguity in the SARFAESI Act to warrant reading something more into it. For the purpose it has been enacted, it is a complete code and the earlier judgments rendered in the context of SFC Act or RDB Act vis-à-vis the Companies Act, cannot be held applicable on all force to the SARFAESI Act. There is nothing lacking in the Act so as to borrow anything from the Companies Act till the stage the secured assets are sold by the secured creditors in accordance with the provisions in the SARFAESI Act and the Rules. At the post sale stage, the rights of the persons or parties having any stake in the sale proceeds are also taken care of by sub-section (9) of Section 13 and its five provisos (not numbered). It is significant that as per sub-section (9) a sort of consensus is required amongst the secured creditors, if they are more than one, for the exercise of rights available under sub-section (4). If borrower is a company in liquidation, the sale proceeds have to be distributed in accordance with the provisions of Section 529A of the Companies Act even where the company is being wound up after coming into force of the SARFAESI Act, if the secured creditor of such company opts to stand out of the winding up proceedings, it is entitled to retain the sale proceeds of its secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of Section 529A of the Company Act. The third proviso is also meant to work out the provisions of Section 529A of the Companies Act, in case the workmen's dues cannot be ascertained, by relying upon communication of estimate of such dues by the liquidator to the secured creditor, who has to deposit the amount of such estimated dues with the liquidator and then it can retain the sale proceeds of the secured assets. The other two provisos also are in aid of the liquidator to discharge his duties and obligations arising under Section 529A of the Companies Act. Thus, it is evident that the required provisions of the Companies Act have been incorporated in the SARFAESI Act for harmonizing this Act with the Companies Act in respect of dues of workmen and their protection under Section 529A of the Companies Act. In view of such exercise already done by the legislature, there is no plausible reason as to take recourse to any provisions of the Companies Act and permit interference in the proceedings under the SARFAESI Act either by the Company Judge or the liquidator. As noted earlier, the Official Liquidator as a representative of the borrower company under winding up has to be associated, not for supplying any omission in the SARFAESI Act but because of express provisions therein as well as in the Rules. Hence the exercise of harmonizing that this Court had to undertake in the context of SFC Act or the RDB Act is no longer warranted in respect of SARFAESI Act vis-à-vis the Companies Act.

31. The aforesaid view commends itself to us also because ofclear intention of the Parliament expressed in Section 13 of the SARFAESI Act that a secured creditor has the right to enforce its security interest without the intervention of the court or tribunal. At the same time, this Act takes care that in case of grievance, the borrower, which in the case of a company under liquidation would mean the liquidator, will have the right of seeking redressal under Sections 17 and 18 of the SARFAESI Act.

Apex Court in Pegasus (supra) has clarified that there is no lacuna or ambiguity in the SARFAESI Act to warrant reading something more in it, there is no plausible reason to take recourse to any provisions of Companies Act and accordingly permit interference in proceeding under SARFAESI Act either by Company Judge or by liquidator. For enforcement of security interest, a secured creditor has been vested with the authority to do so without the intervention of the Court or Tribunal but various procedure has been provided for to take care when borrower company is under liquidation and section 13(9) of SARFAESI Act fully protects workmen interest by incorporation of section 529 and 529A of Companies Act.

Once such is the preposition of law and such are the statutory provisions that hold the field wherein property that is being dealt with, has been pledged by way of secured interest, and secured creditor under the provision of SARFAESI Act has proceeded to enforce its security interest by undertaking proceedings under Section 13(4) of SARFAESI Act, 2002, and at the post sale stage, the rights of persons or parties having any stake in the sale proceeds has been taken care of by sub-section (9) of Section 13 as required provisions of Companies Act namely section 529 and Section 529-A have already been incorporated in the provisions of SARFAESI Act. Under the provisions of SARFAESI Act, 2002, in terms of Section 13(9) interest of such workmen has been protected where the Company is under liquidation and in case company is not under liquidation then workmen have no right to claim their dues by distribution of sale proceeds in proceeding under SARFAESI Act and have no right to resist the proceedings so undertaken under the provision of SARFAESI Act for their dues. Coupled with this in proceedings under the SARFAESI Act, in case challenge is to be maintained qua the validity of proceeding so undertaken, then as per the judgement of the Apex Court in the case of United Bank of India Vs. Satyawati Tandon and others, 2010 (8) SCC 110, proceedings under section 17 of SARFAESI Act will have to be undertaken, as in the present case for instance submission has been made that interest of secured creditor stood satisfied as such there was no occasion for invoking the provision of SARFAESI Act, whereas this particular situation was vehementally disputed by the secured creditor in the backdrop of the fact that scheme in question so finalised itself has failed.

Admittedly this is accepted position that till today Company in question continues to exist under the provision of Company Act and two unit of Company i.e. Marhowrah (Bihar) and Padrauna are still in possession of Company and are being run by the Company. The workmen and sugar cane grower are insisting for their dues in SARFAESI Act proceeding and in pith and substance they want legislative business to be performed by this Court by proceeding to make declaration that in reference of sale proceeds that has been so received in-spite of the fact that there is no initiation of winding up proceeding in terms of Sections 529 and 529-A of the Companies Act even then said provisions be pressed for disbursement of the amount that has been so received by way of sale proceed.

Law on the subject is clear and categorical that Court can only fill up the gap, if any, are there, but Court cannot take upon itself legislative business. Apex Court in the case of Union of India Vs. Deoki Nandan Agarwala AIR 1992 SC 96 observed as follows:-

"It is not the duty of Court either to enlarge the scope of legislation. The Court cannot rewrite, recast or re-frame the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred upon the Court".

Apex Court in the case of District Mining Officers Vs. Tata Iron & and Steel Company 2001 (7) SCC 358 has taken the view that function of Court is only to expound the law and not to legislate.

In this backdrop once from the statutory provisions in question, it is clear that in proceedings under SARFAESI Act, at the post sale stage, the rights of person or parties having any stake in the sale proceeds due care has been taken under section 13(9) of Act and its five proviso. Once required provisions of Company Act have been incorporated under SARFAESI Act, then but for the contingency mentioned in Section 13(9) of the Act, there is no question of distribution of sale proceeds amongst the creditors. Wish of petitioners and cane growers is that even through winding up proceedings are not there, even then the principle of Section 529 and 529-A be pressed in SARFAESI proceeding. We at our level cannot enlarge the scope of proceedings and proceed to provide forum i.e. not otherwise provided for specially in the backdrop that is so emerging before us that provision of Section 529 and 529-A of the Companies Act cannot be invoked for the simple reason that Company is not at all for winding up and no proceedings have been undertaken for liquidation, then in case there are any dues that are outstanding towards company then such amount has to be recovered from the Company as per proceeding that has been so prescribed. Both under the provisions of U.P. Industrial Peace (Timely Payment of Wages) Act, 1978 as well as under U.P. Sugar Cane (Regulation of Supply and Purchase) Act 1953, full fledged mechanism has been provided for effectuating recovery of workmen's due as well as sugar cane dues respectively and as such the respective forum provided for under both the aforesaid Act can be invoked for realisation of the dues as arrears of land revenue on the principle that where there is a right there is a remedy.

Apex Court in the case of Central Bank of India Vs. Siriguppa Chemicals Ltd 2007(8) SCC 353, wherein directives were issued by the High Court for disbursement of amount realised on sale of stocks of sugar owned by company and pledged to the Bank for satisfying claimed of workmen dues as well as dues of cane growers, took the view that such a directive could not have been issued for satisfying the order passed by Labour Commissioner under Section 33-C of Industrial Disputes Act, and for ensuring compliance of order passed by Cane Commissioner for recovery of sugar cane dues as the goods were validity pawned to the Bank, the right of the Bank cannot be effected by the orders of Cane Commissioner or on the demands made by workmen. Both the Cane Commissioner and the Workmen, in the absence of liquidation, stand only as unsecured creditors and their rights cannot prevail over the rights of the pawnee of goods. Petitioner and Cane growers accordingly in the absence of winding up proceedings in terms of Section 529 and 529-A of the Companies Act, cannot claim as a matter of right for distribution of sale proceeds received on invocation of security interest and as per the principle mentioned above their status would be of unsecured creditor and the amount due could be realised by invoking the statutory forum provided for under the respective statutory provision wherein liability has been determined and is enforceable in law on the legal principle that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other method of performance are necessarily forbidden.

Apex Court in the case of Vishal N. Kalsaria Vs. Bank of India 2016(3) SCC 762 in the context of the provisions of Rent Control Act, has ruled that interest of tenant would be intact in proceedings under SARFAESI Act and eviction would take place as per the provisions of Rent Control Act. Said judgement has to be read in the context it has been delivered and it would be difficult to extend any benefit to the petitioner out of the said judgement, decided and interpreted in fact and situation. Said judgement is also suggestive of the fact that other laws don't get automatically obliterated unless provided for.

In view of this, prayer that has been so made to quash the sale proceedings in question that has been so undertaken under SARFAESI Act,2002 cannot be accorded by us in the facts of case and further to distribute sale proceeds in consonance with the provision of Section 529 and 529-A of the Companies Act also cannot be accorded by us as same would tantamount to creating a statutory provision that otherwise does not exist in the absence of winding up proceeding. No impediment can be created by us in use of sale proceeds by the secured creditor. However, in the peculiar fact of the case, as amount has already been so directed by this Court to be retained and to be kept in no lien account and as of now said amount is still lying, as such we proceed to pass order that secured creditor would be free to utilize the said amount as statutory charge could be created only when company is in winding/liquidation and here there is no such contingency in existence. Coupled with this, as mention has been made in the earlier order passed by this Court that dues would be settled in accordance with law the company in question is directed to consider the request of petitioners and intervenor in accordance with law by coming up with the scheme as to in what way and manner dues would be ensured to workmen and cane growers in question preferably within next three months. In case within three months such scheme is not formulated then it is always open to petitioner/intervenor to go ahead with for recovery of dues as per law. We further proceed to pass order that as far as incumbents who have proceeded to purchase the unit in question in proceeding undertaken under SARFAESI Act, their request for providing adequate , protection for lifting of scrap be considered by the Authority concerned and possible assistance as admissible in law be rendered to them by the respondents.

With the above observation/direction present writ petition stands disposed of accordingly.

Order Date :- 23.08.2016

T.S.

Case :- WRIT - C No. - 20805 of 2011

Petitioner :- Janta Chini Mill Mazdoor Sangh And Another

Respondent :- Industrial Finance Corporation Of India And Others

Counsel for Petitioner :- Manish Kumar Nigam,Arun Kumar Gupta,Ashok Kumar

Counsel for Respondent :- SC,Anoop Trivedi,Chandan Sharma,Gyan Prakash,O.P.Misra,Praveen Shukla,Ravindra Singh,Santosh Kumar Singh,Santosh Kumar Srivastava,Satish Chaturvedi,Vr Tiwari

On Substitution Application No. 245157/2014

Hon'ble V.K. Shukla,J.

Hon'ble Mahesh Chandra Tripathi,J.

For the reasons disclosed in the affidavit filed in

support of substitution application, same constitutes

sufficient cause.

Consequently, substitution application is allowed.

Sri Om Prakash Mishra, Advocate is permitted to substitute International Asset Reconstruction Company Pvt. Ltd in place of ICICI Bank Ltd as (Respondent no. 15) and be permitted to prosecute its claim for recovery of its due.

Order Date :- 23.08.2016

T.S.