Marathwada Gramin Bank, A ... vs The Maharashtra State ...
2006 Latest Caselaw 1226 Bom

JUDGMENT

R.M. Savant, J.

Page 0146

1. Rule in all the Petitions. Rule with the consent of the parties in all the Petitions made returnable forthwith and heard. The subject matter of the above Petitions are the assets of the Shankar Sahakari Sakhar Karkhana Ltd. Waghalwada Tq. Umari District Nanded. The said Petitions therefore raise common question of fact and law which according to us can be conveniently dealt with together and disposed of.

2. Since the interest of each of the Petitioners in the above Petitions viz-a-viz the said assets is slightly different in its content it would be necessary to narrate such of the facts which are necessary for adjudication of the issues raised in each of the said Petitions and the submissions of the learned Counsel in the said Petitions. Since in the process we would be concerned with the Maharashtra Co-operative Societies Act, 1960 and the Securitisation and Reconstructions of the Financial Assets and Enforcement of Securitisation Interest Act, 2002 and also the Recovery of Debts Due to Banks Act, 1993 it would be necessary to refer to the said Acts in their abbreviated form namely MCS Act, 1960, the Securitisation Act, 2002 and the RDB Act, 1993. It would also be necessary to refer to the said Shankar Sahakari Sakhar Karkhana Ltd. as the said Karkhana and the Respondent No. 1 i.e. Maharashtra State Co-operative Bank Ltd. as the MSCB for brevities sake.

(I) WRIT PETITION No. 5632 of 2006 AND WRIT PETITION No. 5633 of 2006

The said two Petitions are filed by the Marathwada Gramin Bank through its Branch Manager at Bhokar Dist. Nanded and Bank of Maharashtra through its Branch office at Dharmabad Tq. and District Nanded respectively. The said Petitions have been filed challenging the notice dated 28.7.2006 published in Daily Sakal by the MSCB for leasing out the premises and machineries of the said Karkhana. It is also prayed in the said two Petitions that the property both moveable and immovable of the said Karkhana should be directed to be handed over to the liquidator appointed under Section 105 of the MCS Act, 1960 and also for a declaration that the measures taken under Section 13(4) of the Securitisation Act, 2002 against properties of the said Karkhana are illegal.

Both the Petitioner Banks had disbursed loans to the harvesting labour contractors of the said Karkhana in the year 2000 for which the said Karkhana had stood guarantee. The total loan amount involved in respect of both the Banks was to the tune of about Rs. 2.40 Crores which according to the Petitioner Banks has now accumulated to about Rs. 7 Crores. It appears that Page 0147 on default committed by the said harvesting contractors and the said Karkhana the Banks proceeded against the Karkhana by way of filing Civil Suits for recovery of the amounts disbursed to the said harvesting contractors. The Bank in Writ Petition No. 5632 of 2006 filed 87 suits out of which 25 suits were decreed. The Bank in Writ Petition No. 5633 of 2006 filed 113 Suits out of which 89 Suits were decreed. The claim was directed only against the said Karkhana which had stood guarantee for the disbursed amounts. It appears that Banks have thereafter filed execution proceedings pursuant to which attachment has been levied by the execution Court vide its order dated 2.8.2006.

According to the Petitioner Banks MSCB claims to have taken possession of the assets of the said Karkhana on 18.3.2006 pursuant to the notice issued under Section 13(4) of the Securitisation Act, 2002. It is further stated by the Petitioner Banks that interim order of appointment of liquidator has been issued by the Commissioner of Sugar on 21.3.2006 and a final order of appointment of liquidator to facilitate the winding up of the said Karkhana came to be issued on 21.7.2006. According to the Banks the impugned notice in the Daily Sakal has been issued by the MSCB after the final order of liquidation came to be passed by the Commissioner of Sugar.

II) WRIT PETITION No. 6039 OF 2006

The said Writ Petition has been filed by four persons who were the employees of the said Karkhana. Main reliefs sought by them is in respect of their wages and salaries. According to the said four employees the only chance of getting their defaulted wages is if the liquidator is allowed to wind up the said Karkhana, by liquidating the assets and paying the various creditors as per their priority. According to them if the action of the MSC Bank is upheld they would stand to lose everything and would be left in the lurch.

III) WRIT PETITION No. 6674 OF 2006

This Petition has been filed by the Union representing the employees of the said Karkhana both permanent and seasonal employees. The employees have not been paid the salaries from March 2002 to December 2003 i.e. when the period Karkhana was working and even after the closure of the Karkhana. They are entitled to be compensated. The said Union has computed the defaulted amount of wages which according to them is to the tune of Rs. 4,93,29,946/-till December 2003. The said Union is also claiming that the employees would be entitled to be compensated till the dispute is settled by the said Karkhana.

IV) WRIT PETITION No. 7020 OF 2006

The said Petition has been filed by the producer members of the said Karkhana who have registered their sugar cane for crushing by the said Karkhana for the crushing season 2005-2006. According to the Petitioners the Petitioners have cultivated the sugarcane crop upto January 2006 and which is now ready for harvesting and crushing. Petitioners having invested large amounts in cultivating and harvesting the sugarcane crop, according to the Petitioners they would be greatly prejudiced if the Karkhana is not started. The Petitioners are therefore in terms praying that the steps taken by the MSCB for leasing out of the said Karkhana should be taken to their logical conclusion.

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3. In reply to the above Petitions the MSCB has filed affidavits in Writ Petition No. 5632 of 2006, 5633 of 2006, 6039 of 2006 and 6674 of 2006 opposing the said Petitions and the reliefs stated therein. The MSCB has taken a common stand in all the said affidavits.

4. The stand of the MSCB in brief is that it is the Apex Co-operative Bank which gives loans to various Co-operative Societies and had also advanced different types of loans to the said Karkhana as follows:

-------------------------------------------------------------

Sr.    Date of     Amount      Account           Outstanding
No.   Sanction                                   Sanctioned
                                                 as on 30.6.05
                  (in Lakhs)
-------------------------------------------------------------
01.   15.1.2001  265.67     Medium Term Loan        76.01
02.   29.3.2003  933.28     Working Capital
                            Term Loan              896.74
03.   31.3.2005  3223.84    Pledge Sugar          2874.86
04.   31.3.2005    44.35    Hypothecation (stores)  44.35
05.   31.3.2005    18.03    Hypothecation
                            (Gunny bales)           18.03
----------------------------------------------------------------
     Total      4485.17                            3909.99
----------------------------------------------------------------

 

5. Being a secured creditor the MSCB issued notice under Section 13(2) of the Securitisation Act,2002 on 16.8.2005 for recovery of Rs. 40.83 Crores calling upon the said Karkhana to repay the loan amount within a period of 30 days stipulated in the said letter. Since the Karkhana did not reply nor had it filed any objections to the said notice the MSCB appointed Authorised Officer under the provisions of the said Securitisation Act, 2002 on 25.10.2005 for recovering the said loan amount. The authorised officer vide his order dated 7.12.2005 intimated to the Karkhana that he would be taking the possession of the assets on 26.12.2005, however due to unforeseen circumstances possession could not be taken by him on the said date. Thereafter by another notice dated 6.3.2006 he informed the Karkhana that possession would be taken of the properties on 18.3.2006. In pursuance to the said notice dated 6.3.2006 possession has been taken of the assets of the Karkhana on 18.3.2006. Public notice of the authorised officer having taken possession on 18.3.2006 was published in a local newspaper.

6. The MSCB thereafter has issued advertisement in Daily Lokmat dated 27.8.2006 for leasing of the said Karkhana for a period of three years. It is the said notice which is the subject matter of the above Petitions.

7. It is contended on behalf of the MSCB in the said affidavits that the transaction between the Petitioner Bank and the said Karkhana is illegal as the same is in violation of the directions of the Commissioner of Sugar. The Commissioner of Sugar has issued specific directions that the Co-operative Sugar factory has to deal with only the Co-operative Banks and that too only after obtaining the permission from his office. It is further stated in the said affidavits that the Petitioner Banks are entitled to recovery from the defaulted labour contractors and not the Karkhana. It is further stated that though it had issued notices under Section 13(2) on 16.8.2005 and under Section 13(4) on 20.3.2006 none of the Petitioners objected and the interim order of liquidation was passed on Page 0149 23.3.2006 and the final order on 21.7.2006 and the District Deputy Registrar, Co-operative Societies Parbhani came to be appointed as liquidator on 27.8.2006 which was much after the possession was taken by the authorised officer on 18.3.2006 and proclamation to that effect was given in the local newspaper.

8. It is contended that the MSCB is a secured creditor and the debts and loans are advanced by creating secured interest and whereas action has been taken by it under the Securitisation Act, 2002, the Commissioner of Sugar could never have exercised the powers under the MCS Act 1960 by appointing a liquidator.

9. An additional affidavit is also filed by MSCB interalia pointing out that the mortgage of the properties was created for the first time in the year 2002 and reference is made to the said mortgage deed in the said affidavit.

10. SUBMISSIONS ON BEHALF OF PETITIONER BANKS IN W.P. No. 5632 OF 2006 AND 5633 OF 2006

It is the submission of the learned Counsel Shri Adwant for the Petitioner Banks that a prior charge has been created on the properties in favour of the Petitioner Banks, the pledge, hypothecation etc. created in favour of the Petitioner Banks was to subsist upto 31.10.2005. According to Shri Adwant the charge on the properties in favour of the MSCB came much later in point of time i.e. on 27.10.2004 by mortgage. Therefore according to Shri Adwant the Petitioner Banks have a right over the said assets to get their dues realised. Shri Adwant further submitted that in view of the decrees passed and the execution proceedings in which attachment has been levied the MSCB cannot deal with assets in question as otherwise the decrees in favour of the Petitioner Banks would be mere paper decrees. The learned Counsel further submitted that once liquidator is appointed winding up has to be as per the said provisions and all the creditors including Respondent No. 1 will get their dues from the liquidator as per the priorities fixed. According to Shri Adwant all the creditors would therefore have to stand in queue including the MSCB. The learned Counsel further submitted that in taking over the possession of the properties of Karkhana the authorised officer has violated Section 31(b) of the Securitisation Act, 2002 by taking over the agricultural properties also which was impermissible.

11. The learned Counsel also submitted that there were infirmities in the action of the authorised officer of taking over the properties. It was the submission of the learned Counsel that the said authorised officer was not duly appointed and that there was a breach of Securitisation rules and specially Rule 4 thereof. It was further submitted by the learned Counsel that in view of the legal issues raised the alternate remedy available by way of Appeal under Section 17 of the Securitisation Act, 2002 is not an efficacious remedy and the remedy by way of above Petition is the only remedy available to the Petitioner against the ultra vires act of the MSCB. It was lastly submitted by Shri Adwant the learned Counsel appearing on behalf of the Petitioners that once the final order of liquidation is passed then it is imperative in view of the provisions of the MCS Act, 1960 that the said proceeding for winding up of the Karkhana would prevail and no creditor can Page 0150 stand outside the winding up proceedings. Shri Adwant the learned Counsel for the Petitioner relied on the following judgments:

(i) 1988(1) Bank CLR 312 Mysore Surgical Cotton Pvt. Ltd. v. Karnataka State Financial Corporation and (ii) Allahabad Bank and Ors. v. Bengal Paper Mills Co. Ltd. and Ors. This was in support of his submission that once the official liquidator was appointed all the assets of the Karkhana vest in the said liquidator and therefore all the creditors had to stand in queue and would be paid by the liquidator as per the priority fixed.

12. Submissions of Shri P.M. Shah, Senior Counsel appearing on behalf of the Petitioner in Writ Petition No. 6039 of 2006:- The principal contention of Shri P.M. Shah the learned Senior Counsel appearing on behalf of the Petitioners in the Petition filed on behalf of the two employees is that the winding up proceedings under the MCS Act, 1960 is a superior efficacious remedy. The learned Senior Counsel placed reliance on entry No. 32 list II of the VII Schedule which covers the winding up of Cooperative Societies. In juxtaposition according to the learned Senior Counsel, Co-operative Societies are specifically and distinctly excluded from the entry No. 43 list 1 of the VII schedule therefore according to the learned Senior Counsel the winding up of the Co-operative Society is therefore covered by the said legislation and no entrenchment is therefore permissible in the said field. It was submitted by the learned Senior Counsel that in case of conflict between two legislation i.e. the State legislation namely the MCS Act, 1960 covering the field of winding up of Co-operative Societies and the Securitisation Act, 2002, which is the Central Act relating to banking, the State Act would prevail. It was further submitted by the learned Senior Counsel that once the assets stand vested in the liquidator, MSCB has no jurisdiction or power to deal with such assets which stand vested as such. It was further submitted by the learned Senior Counsel that MSCB may be a secured creditor but once the liquidation proceedings have been initiated the MSCB must yield to the statutory power and jurisdiction of the liquidator. MSCB like all other creditors may lodge its claims for seeking priority or pro-rata distribution amongst the creditors. If the MSCB is allowed to deal with the properties independent of the liquidation proceedings the said liquidation proceedings would be illusory and nothing would be left for distribution amongst other creditors.

13. It was lastly submitted by the learned Senior Counsel Shri Shah that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act 1993) or the Securitisation Act, 2002 are special acts relating due to the Banks however so far as MCS Act, 1960 is concerned it is not the special enactment for winding up of Co-operative societies and therefore the MCS Act, 1960 will apply with full force and would prevail over the proceedings initiated and not the Securitisation Act, 2002.

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14. Submission of the Petitioner in Writ Petition No. 6674 of 2006 and Writ Petition No. 7020 of 2006:

Shri Murar Deshpande the learned Counsel appearing on behalf of the Petitioner in Writ Petition No. 6674 of 2006 adopted the arguments of Shri Adwant and Shri Shah and contended that the liquidation proceedings should be allowed to be taken to their logical conclusion. On being queried by us as to the interest of the Union, the learned Counsel fairly conceded that the Union would be interested in only getting the amounts of arrears of salary due from the year 2002 which according to the Union amounts to Rs. 4,93,29,946/-.

15. WRIT PETITION No. 7020 OF 2006:

Shri Choudhari the learned Counsel appearing on behalf of the Petitioners who have filed the above Petition submitted that the Petitioners are interested in getting the sugarcane crushed as otherwise they would be put to a great loss as they have already invested huge amount in cultivation of the said sugarcane and in fact have taken loans from the Banks for the said cultivation. The Petitioners in the said Petition according to Shri Choudhari the learned Counsel appearing for them were therefore interested in the sugar factory being started at the earliest.

16. Submissions on behalf of the MSCB by Shri Dhorde in reply to the submissions made on behalf of the Petitioners in all the aforesaid Petitions On behalf of the MSCB, the learned Counsel at the outset took us through the chronology of events as they transpired. The events which have a significant bearing on the issue raised according to Shri Dhorde are as follows:

14.8.2002 -Registered Mortgage deed has been executed mortgaging entire plant and machinery and moveable and immovable properties.

27.10.2004 -Second Mortgage deed which mentions about the mortgage deed dated 14.8.2002.

16.8.2005 -Notice under Section 13(2) of the Securitisation Act, 2002.

25.10.2005 - Authorised Officer has been appointed by MSC Bank.

18.3.2006 -Possession taken and Panchanama effected.

20.3.2006 - 13(4) Notice published in the newspaper

28.7.2006 - Advertisement for giving the Karkhana on lease The relevant dates in respect of the liquidation proceedings according to Shri Dhorde are as follows:

23.3.2006 - Interim order of liquidation.

29.3.2006 - Corrigendum issued

21.7.2006 - Final order of liquidation appointing the DDR as liquidator.

Based on the aforesaid chronology of events it is the first submission of Shri Dhorde that only after the possession was taken on 18.3.2006 and thereafter the public notice issued in the local newspaper inviting offers for Page 0152 the lease of the Karkhana on 29.7.2006 that all the aforesaid Writ Petitions came to be filed. According to Shri Dhorde it is pertinent to note that none of the Petitioners ever objected to the 13(2) notice or 13(4) notice issued by the MSCB. Therefore according to Shri Dhorde the Petitions have been filed only with a view to stall the leasing of the said Karkhana.

17. In sofar as the two Banks are concerned according to the learned Counsel Shri Dhorde they had no business to advance any loans as the MSC Bank has a registered mortgage deed of the year 2002 in its favour followed by second registered mortgage deed of the year 2004. The said mortgages according to the learned Counsel created an all encompassing charge on the assets with all the powers vested in the MSCB which includes the powers of even taking over the management of the Karkhana. Shri Dhorde referred to the various covenants of the said mortgage deed to demonstrate the all encompassing rights of the MSC Bank over the secured assets.

18. The learned Counsel further submitted that the MSC is a secured creditor and therefore entitled to proceed under the Securitisation Act, 2002 whereas the Petitioner banks are unsecured creditors who has obtained decrees against the said Karkhana. The said decrees in his submission were merely paper decrees in view of the provisions of the Central Act.

19. As regards the invocation of the writ jurisdiction of this Court under Article 226 of the Constitution by the Petitioner Banks it was the submission of Shri Dhorde that the Petitioner Banks as well as the Petitioners in other Petitions have an alternate efficacious remedy by way of an Appeal under Section 17 of the Securitisation Act, 2002. All the contentions factual as well as legal sought to be raised by them in the present Petition can be raised in the said Appeal. Shri Dhorde the learned Counsel also submitted that the writ Petition would not be maintainable against the MSCB as it is neither a State nor an instrumentality of the State within the meaning of Article 12 of the Constitution of India. Shri Dhorde relied upon the following judgments:

(i) 1993 Mh.L.J. 1 Shamrao Vithal Co-operative Bank Ltd. and anr. v. Padubidri Pattabhiram Bhat and Anr.

(ii) 2004(4) Mh.L.J. 994 Madhusudan Waman Desai v. Ratnagiri District Central Co-operative Bank Ltd. and Anr.

(iii) 2005 AIR SCW 4779 U.P.S.E.B. and Anr. v. Sant Kabir Sahakari Katai Mills Ltd.

(iv) 2006(2) Mh.L.J. 726 Sudhir S/o Chatarpal Kedar v. Chairman, Maharashtra State Co-operative Bank and Anr.

The learned Counsel also relied upon certain provisions of the Securitisation Act, 2002 and specially Section 34 and 35 of the said Act and submitted that the said Act would have a overriding effect viz-a-viz the provisions of the MCS Act, 1960. It was further submitted by the learned Counsel on behalf of the MSCB that the action of the appointment of a liquidator was also malafide as it was only after the notice under Section 13(4) and possession being taken of the secured assets on 18.3.2006 that the interim order of appointment of liquidator came to be issued on 21.3.2006. It was therefore submitted by Shri Dhorde the learned Counsel that appointment Page 0153 of liquidator has no effect as the MSCB has already taken possession and notice to the said effect under Section 13(4) of the Securitisation Act, 2002 was already issued prior to the liquidator being appointed.

20. As regards Writ Petition No. 6039 of 2006 filed by four employees according to Shri Dhorde the said Petition is nothing but a collusive Petition filed by the said Petitioners in support of the Petitioner Banks. By reference to the chronology of dates and events Shri Dhorde submitted that the said chronology supports the case of the MSCB that the said Petition is a collusive Petition. Shri Dhorde submitted that pertinently the Petitioners filed the said Writ Petition No. 6039 of 2006 on 28.8.2006 only after the Petitioner Banks had filed their Petitions on 4.8.2006. The learned Counsel questions the bonafide of the said four employees who according to him had kept quiet from the year 2002 when the Karkhana was closed on account of loss and had not taken any steps to assert their rights to get employment or the defaulted wages till the filing of the said Petition. The learned Counsel also drew our attention to the averments made in the said Petition and the reliefs sought. According to Shri Dhorde it should have been natural for the employees to see that they get employment and the defaulted wages however in the instant case they were more interested in the liquidation of the assets of the Karkhana. This according to Shri Dhorde speaks volumes of their real intention in filing the said Petition. It was further submitted by the learned Counsel that the fact that hair splitting arguments are advanced as regards efficacy of the proceedings under the Securitisation Act, 2002 viz-a-viz the proceedings under the MCS Act, 1960 belies the character of the Petitioners, being the four ex-employees of the Karkhana. The said fact is also a pointer according to Shri Dhorde as regards the real intention of the Petitioners in filing the said Writ Petition No. 6039 of 2006.

21. As regards the legal issue raised by the Petitioners about the efficacy of the proceedings under the Securitisation Act, 2002 adopted by the MSCB the learned Counsel Shri Dhorde submitted that the Securitisation Act, 2002 has the sole objective to expeditiously enable the Banks to realise the secured assets towards recovery of their dues. According to Shri Dhorde the said Act is relatable to entry "Banking" in entry 43 list I of the VII schedule. The learned Counsel submitted that there is absolutely no question of conflict between the Securitisation Act, 2002 and the MCS Act, 1960 as both the statute operate in different fields. The learned Counsel submitted that in view of the fact that proceedings under the Securitisation Act, 2002 having commenced much prior to the appointment of the liquidator the said proceedings could not be interdicted by the appointment of the liquidator. The learned Counsel further submitted that in view of the overriding effect given to the statute by Section 35 of the said Securitisation Act, the said Act would have pre-eminence over all other statutes. It was also submitted by Shri Dhorde that the MSCB being a secured creditor stands apart from other creditors and is entitled to proceed under the provisions of the Securitisation Act, 2002.

22. In support of his submission of the pre-eminence of the Securitisation Act, 2002 over other enactments the learned Counsel relied upon the following judgments:

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i) The judgment of the Division Bench of this Court reported in 2005(2) All.M.R. 721 in the matter of Asha Oil Foods Pvt. Ltd. V. The Jalgaon Janta Sahakari Bank Ltd. and Ors.

ii) The order passed by the Division Bench of this Court in Writ Petition No. 6082 of 2006 dated 20.9.2006 in the matter of Natural Sugar and Allied Industries Ltd. Sainagar v. The State of Maharashtra and ors. and

iii) The judgment of the Apex Court reported in AIR 1993 SCW 991 in the matter of Maharashtra Tubes Ltd. v. State Investment Corporation of Mahatashtra Ltd. and Anr.

23. We have heard all the learned Counsel at length and have given our anxious consideration to the rival submissions. At the outset it would be relevant to reproduce the objects and reasons of the Securitisation Act, 2002. "Statements of Objects and Reasons:

The financial sector has been one of the key drivers in Indias efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the level system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and do sell them without the intervention of the Court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction.

It would also be relevant at this stage to reproduce the relevant provisions of the Securitisation Act, 2002 which read as follows:

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17. Right to appeal-

(1) Any person (including borrower), aggrieved by any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken. Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Explanation-For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.

(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under Sub-section (4) of Section 13.

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under Sub-section (4) of Section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under Sub-section (4) of Section 13 to recover his secured debt.

(5) Any application made under Sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:

Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under Sub-section (1).

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(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in Sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder:

18. AppealAppealAppeal tototo Appellate Tribunal-Appellate Tribunal-Appellate Tribunal-(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under Section 17, may prefer an appeal to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.

34. Civil Court not to have jurisdiction-Civil Court not to have jurisdiction-Civil Court not to have jurisdiction-No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)

35. The provisions of this Act provisions of this Act to override other laws-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. What emerges from reading of the objects and reasons in enacting the said Securitisation Act, 2002 is that the said Act has been passed to enable the Banks to take possession of the securities and to sell them to recover the dues as it was found that the existing mechanism was not enough. The said Act according to us is therefore referable to entry 42 list I in schedule VII which entry covers "banking". The legislation in respect of the said entry is therefore the exclusive domain of Parliament. In sofar as the winding up of Co-operative Societies is concerned it is covered by entry 33 of list II of the VII Schedule where the State legislature is competent to prescribe the mode provided for such winding up. Both the statutes therefore according to us operate in distinct and separate fields. As adverted by us hereinabove the Securitisation Act, 2002 is referable to the entry "Banking" whereas the MCS Act is referable to entry 33 of list 2 of VII Schedule. In our view therefore there is absolutely no conflict between the said two enactments. What is to be seen in the instant case is as to whether the MSCB could have proceeded under the Securitisation Act, 2002. It is admitted position that the notice under Section 13(2) was issued in the year 2005 more specifically on 16.8.2005 and 13(4) notice came to be issued on 18.4.2006 and once the said steps were taken the legal consequences of the same Page 0157 that no Court/authority could pass an order in respect of the assets or property of the said Karkhana in view of Section 34 of the Securitisation Act, 2002. Therefore in our view the Commissioner of Sugar could not have passed the interim order appointing the liquidator on 20.3.2006. It is also significant that neither at Section 13(2) stage nor at Section 13(4) stage any objection was raised by the two Petitioner banks or the employees or unions concerned. The action taken by the MSCB in realising assets in our view therefore cannot be faulted with. If the submissions advanced by the Petitioners are to be countenanced the same would amount to making a mockery of the proceedings under the Securitisation Act, 2002 and would frustrate the attempts of the secured creditors to recover their dues. Though the said two statutes have been enacted by the respective legislatures in their allotted sphere and operate in different and separate fields, in the context of the appointment of the liquidator under the MCS Act 1960 on the Karkhana a overlap or conflict has arisen. In such a situation by virtue of the non-obstante clause in Article 246(1) the Central Act will predominate. Therefore in our view the Securitisation Act, 2002 has overriding effect over the MCS Act, 1960 and we are also fortified in our view by the Division Bench judgment of this Court reported in 2005(2) All.M.R. 721 (supra). The issue in the said case was whether in view of the certificate issued under Section 101 of the MCS Act, 1960 the bank can resort to the provisions of the Securitisation Act, 2002. The Division Bench held that the Securitisation Act, 2002 will override the provisions of MCS Act. The relevant paragraph of the said judgment is reproduced hereinunder:

16. Petitioners submission that Section 37 of the Securitisation Act creates a non obstante clause only qua the provisions of Transfer of Property Act and not as against any other law, is not based on any foundation whatsoever. Section 37 is amply clear while it says that the provisions of this Act (Securitisation Act) or the Rules made therein shall be in addition and not in derogation to various laws named therein as well "any other law for the time being in force". The phraseology "any other law for the time being in force" renders the interpretation of various provisions of the Securitisation Act to have overriding effect over the Debt Recovery Act as well as MCS Act. The term "any other law for the time being in force" appearing in Section 37 of Securitisation Act essentially comprehends numerous statutes one amongst which has to be the Maharashtra Co-operative Societies Act, 1960 alongwith Section 91 or Section 101 thereof or other provisions whatsoever contained therein.

Reference could also be made to the order passed in Writ Petition No. 6082 of 2002 dated 20.9.2006 (supra) of the Division Bench of this Court. Though it is an order passed at the admission stage what is of importance that the Division Bench has accepted the position that the consent of the secured creditor would be required for an auction of leasing out of sugar factory. The Division Bench while dismissing the Petition held that the Securitisation Act would have overriding effect. Excerpts from paragraph 3 are reproduced hereinbelow:

Page 0158 Reading of the policy decision, and to be more precise Clause 12 thereof, in the light of the provisions of Section 13 of the Securitisation Act, it is obvious that unless and until the secured creditor gives his consent in writing, neither the debtor, nor the liquidator, can deal with the property in any manner, whatsoever. Securitisation Act has an overriding effect as is clear from Section 35. The provisions of Maharashtra Cooperative Societies Act to the extent it is inconsistent with Section 13 of the Securitisation Act, must yield to it.

24. Another aspect to be noted is that the policy of the State Government in the matter of leasing of sugar factories as contained in the circular dated 21.11.2005 also recognises the right of the secured creditors under the Securitisation Act, 2002 and therefore vide Clause 12 of the said circular imposes a condition that NOC should be obtained from the secured creditor for leasing a Karkhana pursuant to the said policy. As regards the judgment reported in AIR 1993 SCW 991 (supra) the said judgment has been cited by Shri Dhorde in support of his submission that the Securitisation Act being a special Act in sofar as realisation of assets is concerned the said Act would prevail. The said case involved the BIFR and the State Financial Corporation Act. The Supreme Court in the said circumstances held that since both the acts were special acts relating to the same subject matter, the act enacted later would prevail. We are in respectful agreement with the view expressed by the Division Bench of this Court in the judgment reported in 2005(2)All.M.R.721(supra).

25. In sofar as the two banks are concerned we are of the view that the Petitions filed by them are not maintainable as they have an alternate efficacious remedy by way of an Appeal under Section 17 of the said Securitisation Act, 2002 and the judgments cited by the learned Counsel Shri Adwant for the said Banks in our view do not come to his aid. The said judgments lay down a well settled dictum that the rule of alternate remedy before a writ is granted is a rule of self imposed limitation, a rule of policy and discretion than a rule of law. However in the instant case in view of the fact that the Petitioners have an alternate efficacious remedy and also in view of the fact that no special circumstances have been made out by the Petitioners for us to exercise writ jurisdiction under Article 226 of the Constitution of India we are of the view that since the Petitioners banks have raised various factual disputes and alleged various infirmities in the action of the MSCB, it would be appropriate if the Petitioner banks are relegated to the remedy of Appeal provided under Section 17 of the Securitisation Act, 2002. As can be seen from a reading of Section 17 of the Securitisation Act, it is precisely for the type of disputes that the Petitioners seek to raise in the present Petitions that the said statutory remedy by way of Appeal is provided. Thereafter a further Appeal to the Debts Recovery Appellate Tribunal is provided under Section 18 of the said Act. After answering the main issue as regards the overriding effect of the Securitisation, Act over the proceedings under the MCS Act, 1960 the Petitions filed by the Petitioner banks are dismissed on the ground that they have an alternate remedy by way of an appeal under the said Securitisation Act, 2002.

Page 0159

26. As regards the Petition filed by the two workers namely Writ Petition No. 6039 of 2006 in view of our finding that the MSCB was entitled to proceed under the Securitisation Act, 2002 and that the said proceedings would have an overriding effect we are of the view that the submission of the learned Senior counsel Shri P.M. Shah as regards the overriding effect of the liquidation proceedings would stand rejected.

27. We also find considerable merit in the submission of Shri Dhorde that Writ Petition No. 6039 of 2006 filed by the four employees was not a bonafide attempt by the Petitioners to protect their interests. It was filed only with a view to support the two Petitioner banks from the side flanks. What is pertinent to note in respect of the said Petitioners was that they have kept quite all along from the year 2002 till filing of the present Petition. If the Petitioners were so concerned about the interest of the workers and especially in getting the defaulted dues it would have been natural for such employees to adopt some proceeding or the other since the year 2002 when the Karkhana was virtually closed down. The said Petitioners never objected to the notices issued Under Section 13(2) or Section 13(4) of the Securitisation Act, 2002. It is also pertinent to note that the said employees never invoked any of the provisions of the labour enactments to assert their rights. The timing of filing of the said Petition as well as the averments made and the reliefs claimed also lends support to the allegations of Shri Dhorde, the conduct of the Petitioners begs the question whether it is natural for two employees to say that the assets of the Karkhana be liquidated, the answer to the same can only be in the negative as it is expected of employees that they would only be interested in securing employment and getting their dues. Be that as it may in the said circumstances we refuse to exercise our writ jurisdiction in such a case. As indicated above in view of our finding of the overriding effect of the Securitisation Act, 2002 we do not find any merit in the submissions made on behalf of the Petitioners in the said Writ Petition No. 6039 of 2006 and we therefore dismiss the said Petition.

28. As regards Writ Petition No. 6674 of 2006 we are of the view that the said union can invoke the forums provided under the labour enactments for recovery of the amounts of the defaulted wages which according to it is to the tune of Rs. 4,93,29,946/-by adopting appropriate proceedings under the said labour enactments; one of which is a proceeding under Section 33(C)(2) of the Industrial Disputes Act. The Petitioners in both the Petition No. 6039 of 2006 and 6674 of 2006 can therefor file appropriate proceedings under the labour enactments to get their defaulted wages. This would be in addition to the forum provided under the Securitisation Act, 2002. In sofar as Writ petition No. 7020 of 2006 since we have dismissed the four Petitions the logical corollary would be that the MSC Bank would be leasing the Karkhana as per the tender notice issued by it, if the Karkhana is so leased to the offerer whose offer the MSCB finds fit, the grievance of the Petitioners in the said Petition No. 7020 of 2006 would not survive as on leasing of the said Karkhana the same would start functioning and sugar cane contracted by the Petitioners would be crushed. The said Petition is therefore disposed of accordingly.

29. Though Shri Dhorde has questioned the maintainability of the Petitions on the ground that the MSCB is neither a State or an instrumentality of the Page 0160 State under Article 12 of the Constitution of India, we are of the view that the said issue need not be decided by us in view of the fact that all the Petitioners have alternate efficacious remedies under the Securitisation Act, 2002 as well as the Labour legislations. We therefore do not express any opinion on the said issue.

30. In the result in the light of what we have held hereinabove Writ Petitions nos. 5632 of 2006, 5633 of 2006, 6039 of 2006 and 6674 of 2006 stand dismissed and rule discharged.

31. Writ Petition No. 7020 of 2006 stands disposed of accordingly.

32. At this stage prayer is made for continuation of the interim order passed by this Court on 29.8.2006. Prayer for continuation of stay rejected.