Gujarat High Court
Gujarat Kamgar Panchayat Through ... vs Gujarat Industrial Investment ... on 30 July, 2025
Author: A.S. Supehia
Bench: A.S. Supehia
NEUTRAL CITATION
C/LPA/861/2012 ORDER DATED: 30/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 861 of 2012
In R/SPECIAL CIVIL APPLICATION NO. 13525 of 2008
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GUJARAT KAMGAR PANCHAYAT THROUGH SECRETARY-RAMUBHAI S
Versus
GUJARAT INDUSTRIAL INVESTMENT CORPORATION LTD & ORS.
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Appearance:
MR TR MISHRA(483) for the Appellant(s) No. 1
MS SHRUTI DHRUVE AGP for the Respondent(s) No. 7
HL PATEL ADVOCATES(2034) for the Respondent(s) No. 3,3.1,3.2,4,5,6
MR DEVANG D TRIVEDI(2503) for the Respondent(s) No. 1
RULE SERVED for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR.JUSTICE R. T. VACHHANI
Date : 30/07/2025
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. We have heard learned advocate Mr. T.R Mishra for the
appellant and learned advocate Mr. Rishin R Patel for respondent
nos. 3 to 6. Though served, none appears on behalf of respondent
no.2.
2. Pursuant to the order passed by us on 11.06.2025, the
respondent no.1- Gujarat Industrial Investment Corporation Ltd,
(GIIC) has filed an affidavit, by placing on record the relevant
documents showing the assets of respondent no.2- Company.
3. At the outset, learned advocate Mr. Rishin R Patel appearing
for respondent nos. 3 to 6, has submitted that in fact the
appropriate remedy for the appellant would be to approach the
Controlling Authority and obtain the certificate of recovery issued
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C/LPA/861/2012 ORDER DATED: 30/07/2025
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in their favour for non payment of gratuity by the respondent no.2 -
Company, in which they were serving. It is submitted that the
learned Single Judge, has rightly observed that the provisions of
Sections 529 and 529 (A) of the Companies Act, 1956 will not yet
be invoked as the Company is not under liquidation and it is a
going concern.
4. Learned Single Judge, while rejecting the writ petition vide
order dated 02.09.2009, has observed thus:
"9.1. In the case of Rajasthan State Financial Corporation and Anr. v. Officiel
Liquidation and Anr. (supra) their lordships while summing up legal position In para
18 held as under:
"18. (1) A Debts Recovery Tribunal acting under the Recovery of Debts Due
to Banks and Financial Institutions Act, 1993 would be entitled to company-
In-liquidation, through Its Recovery Officer but only after notice to the
Official Liquidator or the liquidator appointed by the Company Court and
after hearing him (II) A District Court entertaining an application under
Section 31 of the SFC Act will have the power to order sale of the assets of a
borrower company-In-liquidation, but only after notice to tho Official
Liquidator or the Liquidator appointed by the Company Court and after
hearing him. (III) If a financial corporation acting under Section 29 of the
SFC Act seeks to sell or otherwise transfer the assets of a borrower company-
in-Liquidation, the said power could be exercised by It only after obtaining
the appropriate permission from the Company Court and acting in terms of
the directions Issued by that court as regards associating the Official
Liquidator with the sale. the fixing of the upset price or the reserve price,
confirmation of the sale, holding of the sale proceeds and the distribution
thereof among the creditors in terms of Section 529-A and Section 529 of the
Companies Act.
(iv) In a case where proceedings under the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the
creditor concerned is to approach the Company Court for appropriate
directions regarding the realisation of its securities consistent with the
relevant provisions of the Companies Act regarding distribution of the assets
of the company-In-liquidation."
9.2. Therefore, the above conclusion (III) of para 18 cast duty on a Financial
Corporation acting under Section 29 of SFC Act who seeks to sell or otherwise
transfer the assets of a debtor company-In-liquidation, then such power can be
exercised by financial corporation only after obtaining the appropriate permission
from the Company Court and as per the directions Issued by the Court as regards
associating the Official Liquidator with the sale, fixing of upset price, confirmation of
the sale and the distribution thereto among creditors in terms of Section 529A and
Section 529 of the Companies Act. So when members of the petitioner Corporation in
oxercise of powers under Section 29 of SFC Act, 1951 ipso facto do not get any legal
right to recover their dues since the Industrial concern in the case on hand is not
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C/LPA/861/2012 ORDER DATED: 30/07/2025
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under liquidation or no proceedings of liquidation are pending before Company
Court.
9.3. Therefore, the claim of the petitioner as prayed for in this petition cannot be
accepted and no direction can be given to respondent In exercise of powers under
Article 226 of the Constitution of India.
10. So far as order passed by Controlling Authority exercising powers under Payment
of Gratuity Act, 1972, Inbuilt provisions are there under the Act to enforce the above
order. At the same time perusal of Section 13 of the above Act provided protection of
gratuity and Section 14 of the Act to override other onactments in case If anything
inconsistent therewith contained in any enactment other than the Payment of Gratuity
Act and as provided In Section 11(2) of the Employees Provident Funds and
Miscellaneous Provisions Act, 1952, where unpaid dues from employer towards
contribution of the employee or employer is to be treated as first charge on the assets
of the establishment and such unpaid amount to be paid in priority to all other debts,
notwithstanding anything contained in any other law for time being in force, no such
provisions is made in Payment of Gratuity Act and therefore also claim of priority of
workmen dues vis-a-vis powers under Section 29 of SFC Act, cannot be accepted."
5. During the pendency of the writ petition, the respondent
no.1-GIIC has filed the affidavit stating as under:
"2. At the outset, I deny and dispute the entire contents of the petition being
misconceived and pre-matured and said objection has been duly dealt with by by the
Learned Single Judge in the Judgment of writ petition being Special Civil Application
No. 13525 of 2008. I also state that, the respondent corporation had sanctioned a
loan to the borrower mortgagee company namely Microprecision Pumps and Gears
(the debtor company) Limited and in view of default the present respondent had
initiated an exercise its power under section 29 of the State Financial Corporation
Act. I also state that by following due process of law as per the statutory rights giving
to the respondent Corporation had auctioned the mortgaged properties i.e. land,
building and plant machineries etc. and sold their said to M/s. Paras Enterprise for
Rs.50,00,000/-. I also state that at present the respondent Corporation is not having
any security under the possession and that, while taking search with the Ministry of
Corporate Affairs website ROC it is found that, the Status of the company shows
"Acting". The copy of the said status showing the current position of the company
namely Microprecision Pumps and Gears Limited at ANNEXURE: I with this
additional affidavit. I state that, the respondent Corporation is not having any further
movable or immovable properties available to recover use outstanding dues still
remains. As per the norms of the corporation and as per the interest act and
accounting standards followed from the system since beginning the interest
continuous to be run until the account either settled, closed or return of. I also state
that, the accounts of the defaulter debtor company Microprecisions Pumps and Gears
Limited is still running and the over dues outstanding amount today comes to crores
of Rupees. I also state that as the company's no other assets has been available to
recover the outstanding dues and therefore, being a Commercial wisdom a
Corporation has not initiated any further legal recourse. I state that, as on 31st
March, 2021 respondent Corporation is required to recover Rs. 140,46,07,636/-from
the Borrower company.
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3. I further state that, Corporation has just received Rs.50,00,000 from the sale of the
mortgage and hypothecated securities of the borrower debtors company against the
heavy dues. I state that, the legal position is that, the debtor said borrower company
Microprecisions Pumps and Gears Limited is active as per search report of ROC and
that, there is no order whatsoever has been passed by this Honoruable Court under
winding up proceedings. I respectfully submits that since there is no order of winding
up has been passed in respect of the defaulter debtor company and therefore,
question of operating section 529 or 529(A) under the Companies Act does not arise
and therefore, this Honourable Court/ Learned Single Judge was pleased to hold that
the petition is not maintainable. I also state and submit that, the prayers prayed for in
the writ petition cannot be granted as being prematured and misconceived because
the respondent Corporation had exercised its power under Section 29 of the State
Financial Corporation Act, and sold out the mortgage and hypothecated properties
and that, there is no provisions in the State Financial Corporation Act, nor payment
of Gratuity Act supersedes or prevail over the State Financial Corporation Act. On
this count the present Letters Patent Appeal may kindly be rejected in the interest of
justice."
6. In view of the aforesaid facts and looking to the status of
respondent no.2- Company, which has not yet undergone any
liquidation process and remains as a going concern, we find that
the observations recorded by the learned Single Judge are
appropriate. However, we reserve liberty in favour of the appellant
to file appropriate proceedings before the Controlling Authority for
claiming the gratuity benefits from the concerned Company, in
which they were serving.
With the aforesaid observations, the Letters Patent Appeal
stands disposed of.
(A. S. SUPEHIA, J)
(R. T. VACHHANI, J)
Radhika/sb-2
