Madras High Court
Unknown vs W.J.Subramaniam (Deceased) on 29 January, 2021
LPA.No.1 of 2012
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 29.01.2021
CORAM :
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Ms.Justice R.N.MANJULA
L.P.A.No.1 of 2012
and
M.P.No.1 of 2012
The Branch Manager,
Indian Bank,
Assets Recovery Management
Branch - I,
55, Ethiraj Salai,
Egmore, Chennai - 600 008.
(impleaded as per order dated 25.7.2011
in Sub A.No.334 of 2011) ...Appellant
Vs
1. W.J.Subramaniam (Deceased)
2. Tmt.Kakarla Usha, IAS,
Collector of Chennai,
Chennai Collectorate,
Chennai - 600 001.
3. S.Narayanan
S/o. Late W.J.Subramaniam
4. S.Maheswari
D/o. Late W.J.Subramaniam
1/15
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LPA.No.1 of 2012
5. S.Uma Devi
D/o. Late W.J.Subramaniam ...Respondents
(R3 to R5 brought on record as LRs
of the deceased R1 vide order of Court
dated 19.11.2019 made in CMP.Nos.
313 to 315 of 2017 in LPA.No.1 of 2012)
APPEAL under Clause 14 of Letters Patent to set aside the order dated
08.09.2011 passed by His Lordship Hon'ble Mr.Justice K.Chandru in
Contempt Petition No.1320 of 2010.
For Appellant: Mr.Jayesh B.Dolia assisted by
Mr.V.Kalayanaraman
For Respondents: Mr.V.Elango, GP
for R2
Mr.V.B.Thirupathi Kumar
for R3 to R5
JUDGMENT
(Delivered by T.S.Sivagnanam,J)
This appeal, by the Branch Manager, Indian Bank, Assets
Recovery Management Branch - I, Chennai - 600008, is directed against the
order and direction issued in Contempt Petition No.1320 of 2010 filed by
W.J.Subramaniam, who is the first respondent in this appeal, who is since
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LPA.No.1 of 2012
deceased, and the legal heirs have been impleaded as respondents in the
place of the deceased first respondent. The second respondent in this appeal
is the Collector of Chennai.
2. We have heard Mr.Jeyash B.Dolia, assisted by
Mr.V.Kalyanaraman, learned counsel for the appellant, Mr.V.Elango, learned
Government Pleader for the second respondent and Mr.V.B.Thirupathi
Kumar, learned counsel for the respondents 3 to 5.
3. The appellant-Bank has filed this appeal on the ground that the
deceased first respondent was an employee of an individual, who borrowed
a loan from the appellant-Bank and defaulted in re-payment. Consequently,
the Bank initiated recovery proceedings and proceeded against the secured
asset of the first respondent's employer. It appears that the first respondent
had filed a computation petition before the Principal Labour Court under
Section 33-C(2) of the Industrial Disputes Act to compute the wages
payable to him by his employer. The Principal Labour Court, by order dated
28.11.1995, computed the wages payable. Since the amount could not be
recovered, the deceased first respondent approached the District Collector
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LPA.No.1 of 2012
of Chennai to initiate recovery proceedings by resorting to the provisions of
the Revenue Recovery Act.
4. The Government, vide G.O.Nos.1004 and 1005 dated
19.11.2002, directed the District Collector, Chennai to recover a sum of
Rs.39,700/- and Rs.69,240/- from the first respondent's employer. Though
such a direction was issued by the Government to the District Collector, it
appears that the amount could not be recovered, which compelled the first
respondent to file a writ petition in W.P.No.2403 of 2004, praying for a
direction to the District Collector, Chennai to recover a sum of
Rs.1,08,940/- from the Management of Southern Security Services and pay
the same to him by invoking the provisions of the Revenue Recovery Act.
The writ petition was disposed of by order dated 10.02.2004, directing the
District Collector, Chennai to recovery the amount and pay the same to the
first respondent.
5. Since this direction was not complied with by the District
Collector, the first respondent filed Contempt Petition No.1320 of 2010, in
which, the District Collector of Chennai was the sole respondent.
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LPA.No.1 of 2012
Subsequently, Sub Application No.334 of 2011 was filed seeking to implead
the appellant-Bank as the second respondent in the contempt petition. The
second respondent-Bank vehemently opposed such a prayer and submitted
that the Bank, as a secured creditor, was entitled to proceed against the
defaulter and more particularly when the appeal filed by the borrower under
the SARFAESI Act in S.A.No.51 of 2010 before the concerned Debts
Recovery Tribunal was dismissed on 16.08.2010 and parallelly, the
borrower approached the Lok Adalat on 30.08.2010 and agreed to pay the
amount to the Bank. However, without fulfilling the undertaking, the
borrower filed an application before the Debts Recovery Appellate Tribunal
in M.A.No.529 of 2010 and obtained an ex-parte order of injunction against
the appellant-Bank, which was subsequently vacated by the Appellate
Tribunal in I.A.No. 1444 of 2010. It was further submitted that the property
was brought for auction on 12.11.2010 under the provisions of the
SARFAESI Act with a reserve price of Rs.155.00 lakhs and the same was
sold in pubic auction for a sum of Rs.156.50 lakhs and the sale was
confirmed in favour of the purchaser on 15.11.2010.
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LPA.No.1 of 2012
6. It is further stated that the borrower had filed S.A.No.286 of
2010 before the concerned Debts Recovery Tribunal challenging the Sale
Certificate and obtained certain interim orders. The appellant-Bank, in the
counter affidavit, which was filed in 2011 in the contempt petition, would
submit that on account of the stay obtained by the borrower, they were
unable to issue Sale Certificate in favour of the purchaser. It is not clear as
to what is the present position of the matter.
7. Be that as it may, the appellant-Bank has specifically stated that
even after appropriation of the entire sale consideration of Rs.156.50 lakhs
realized on account of sale of the property, a sum of Rs.1416.22 lakhs still
remains unpaid by the borrower as on 31.03.2011. Though such a stand was
taken by the appellant-Bank before the Contempt Court, the Bank was
impleaded as the second respondent in the Contempt Petition. The Court,
after noting all the facts, which was placed on record by the appellant-Bank,
opined that the entire amount realized from the sale could not be
appropriated towards the contractual dues of the Bank and the claim of
workmen had a priority charge over the property as against the contractual
dues to the appellant-Bank. Accordingly, in exercise of the extraordinary
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LPA.No.1 of 2012
jurisdiction of the Court, the appellant-Bank was directed to pay the first
respondent a sum of Rs.1,08,940/-. Aggrieved by such direction, the
appellant is before this Court.
8. The legal position as on date is that the secured creditor enjoys
priority over all debts including crown debts. This issue came up for
consideration before the Hon'ble Full Bench of this Court in the case of
Assistant Commissioner (CT) Vs. The Indian Overseas Bank and another
in W.P.No.2675 of 2011, etc. batch dated 10.11.2016, to which one of us
(TSSJ) was a party, wherein this Court had an occasion to consider a similar
issue, as to whether the taxes due to the Commercial Taxes Department
would have preference over the interest of the secured creditor, wherein the
Court took a view in favour of the secured creditor/Bank. The operative
portion of the order reads as follows:
"2.We are of the view that if there was at all
any doubt, the same stands resolved by view of the
Enforcement of Security Interest and Recovery of
Debts Laws and Miscellaneous Provisions
(Amendment) Act, 2016, Section 41 of the same
seeking to introduce Section 31B in the Principal
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LPA.No.1 of 2012
Act, which reads as under:-
''31B. Notwithstanding anything contained in
any other law for the time being in force, the
rights of secured creditors to realise secured
debts due and payable to them by sale of
assets over which security interest is created,
shall have priority and shall be paid in
priority over all other debts and Government
dues including revenues, taxes, cesses and
rates due to the Central Government, State
Government or local authority.
Explanation. - For the purposes of this
section, it is hereby clarified that on or after
the commencement of the Insolvency and
Bankruptcy Code, 2016, in cases where
insolvency or bankruptcy proceedings are
pending in respect of secured assets of the
borrower, priority to secured creditors in
payment of debt shall be subject to the
provisions of that Code.''
3.There is, thus, no doubt that the rights of
a secured creditor to realise secured debts due and
payable by sale of assets over which security
interest is created, would have priority over all
debts and Government dues including revenues,
taxes, cesses and rates due to the Central
Government, State Government or Local
Authority. This section introduced in the Central
Act is with ''notwithstanding'' clause and has come
into force from 01.09.2016.
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LPA.No.1 of 2012
4.The law having now come into force,
naturally it would govern the rights of the parties
in respect of even a lis pending.
5.The aforesaid would, thus, answer
question (a) in favour of the financial institution,
which is a secured creditor having the benefit of
the mortgaged property.
6.In so far as question (b) is concerned, the
same is stated to relate only to auction sales,
which may be carried out in pursuance to the
rights exercised by the secured creditor having a
mortgage of the property. This aspect is also
covered by the introduction of Section 31B, as it
includes ''secured debts due and payable to them
by sale of assets over which security interest is
created''.
7.We, thus, answer the aforesaid reference
accordingly.
8.The matters be placed before the roster
Division Bench for dealing with the individual
cases."
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LPA.No.1 of 2012
9. Thus, the legal position having been settled in the
aforementioned decision of the Hon'ble Full Bench of this Court, the view
expressed in the impugned order does not lay down the correct legal
principle. Furthermore, there is no privity between the appellant-Bank and
the deceased first respondent, who was admittedly an employee under the
Management of Southern Security Services, which was the borrower of the
loan from the appellant-Bank. Thus, we have no hesitation to interfere with
the order and direction issued in the impugned order directing the appellant-
Bank to pay the sum of Rs.1,08,940/- to the first respondent (since
deceased). Therefore, the appeal needs to be allowed in favour of the
appellant-Bank.
10. When the appeal came up before us earlier on 07.01.2021, we
directed the learned Government Pleader to verify the financial position and
assets held by the said M/s.Southern Security Services and directed the
office of the District Collector to file a report in that regard. The District
Collector, Chennai has filed a status report dated 25.01.2021, wherein it has
been stated that the property, which was earlier held by the said
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LPA.No.1 of 2012
M/s.Southern Security Services, was auctioned by the appellant-Bank and
the property now belongs to one Mr.Kamala Kannan. Further, the report
states that on a field enquiry done by Tahsildar, Egmore, whereabouts of the
Company are not known and despite sincere efforts, it could not be traced
and therefore, the financial status and assets could not be ascertained.
11. Given the present factual position, we are constrained to
consider as to how best the claim made by the first respondent, since
deceased, can be met. His legal heirs were brought on record by order dated
19.11.2019 and they have been patiently waiting all these years despite their
father having been successful before the Principal Labour Court as early as
on 29.11.1992. Thus, we are of the view that while sustaining the arguments
of the appellant-Bank and holding that the legal position stands in favour of
the appellant-Bank, we are inclined to exercise discretion and compassion in
favour of the legal heirs of the deceased first respondent. What prompted us
to do so is because of the interim order issued by the Hon'ble Division
Bench on 02.02.2012, when the appeal was entertained, which order reads
as follows:
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LPA.No.1 of 2012
"Heard the learned counsel for the
petitioner/appellant.
2. There shall be an order of interim
Suspension of the Order dated 8.9.2011 made in
Contempt Petition No.1320 of 2010 on condition
that the petitioner/appellant invests a sum of
Rs.1,08,940/- (Rupees One lakh eight thousand
nine hundred and forty only) in a Fixed Deposit by
way of Re-Investment Plan, in the Indian Bank,
High Court Branch, Chennai in the name of
Registrar General, High Court, Madras initially
for a period of one year and hand-over the Fixed
Deposit Receipt to the Registrar General under
acknowledgment and such deposit is to be made
on or before 15.2.2012, failing which, interim
suspension granted shall stand vacated
automatically without any further reference to this
Court. Notice to the respondents, returnable in
two weeks. Private notice is also permitted."
12. In terms of the above direction issued in the miscellaneous
petition while entertaining the appeal, the appellant-Bank has invested
Rs.1,08,940/- in a fixed deposit by way of Re-investment Plan in the Indian
Bank, High Court Branch, Chennai in the name of Registrar General, High
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LPA.No.1 of 2012
Court of Madras, initially for a period of one year and handed over the fixed
deposit receipt to the Registrar General under acknowledgment. This
amount is still lying in deposit and since it was directed to be invested as a
Re-investment Plan, the interest would have accrued. Therefore, by
exercising discretion, we are inclined to direct that the amount, which is
lying in deposit in the name of Registrar General, High Court of Madras, in
terms of the above direction, to be paid over to the legal heirs of the first
respondent, namely Mr.S.Narayanan (son), Ms.S.Maheswari and Ms.S.Uma
Devi (daughters of the said late Mr.W.J.Subramaniam).
13. In the light of the above, the appeal filed by the appellant-
Bank is allowed and the direction issued by the learned Single Bench is set
aside. However, for reasons assigned in the preceding paragraph, we
exercise discretion and direct that the entire amount lying in deposit
together with accrued interest shall be paid over to the three legal heirs
mentioned above in equal apportionment. This order shall be implemented
by the Registrar General, as expeditiously as possible. In the light of the
above direction, it is made clear that there are no more claims against the
appellant-Bank by the first respondent namely the said late
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LPA.No.1 of 2012
Mr.W.J.Subramaniam or his legal heirs, in so far as this litigation is
concerned. No costs. Consequently, connected miscellaneous petition is
closed.
(T.S.S.,J.) (R.N.M.,J.)
29.01.2021
Index: Yes/No
Internet:Yes/No
Speaking Judgment/Non-speaking judgment
hvk
To
Tmt.Kakarla Usha, IAS,
Collector of Chennai,
Chennai Collectorate,
Chennai - 600 001.
Copy to
The Registrar General,
High Court of Madras.
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LPA.No.1 of 2012
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
hvk
L.P.A.No.1 of 2012
and
M.P.No.1 of 2012
29.01.2021
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