Allahabad High Court
Mall Hotel Limited And Another vs District Magistrate And 3 Others on 29 May, 2025
Author: Prakash Padia
Bench: Prakash Padia
HIGH COURT OF JUDICATURE AT ALLAHABAD
Neutral Citation No. - 2025:AHC: 92483
Judgement Reserved on 19.05.2025
Judgement Delivered on 29.05.2025
Court No. - 33
Case :- WRIT - C No. - 13782 of 2025
Petitioner :- Mall Hotel Limited And Another
Respondent :- District Magistrate And 3 Others
Counsel for Petitioner :- Tarun Agrawal
Counsel for Respondent :- C.S.C.
Hon'ble Prakash Padia,J.
1. Heard Sri Tarun Agrawal, learned counsel for the petitioners and learned Standing Counsel for respondents.
2. The petitioners have preferred the present petition with the prayer to quash the order of attachment dated 15.01.2018 passed by the respondent No.2/Sub Divisional Magistrate, Padrauna, District Kushinagar by which the properties of the petitioners have been attached pursuant to the recovery certificates dated 30.04.2013 and 07.08.2014. The certificates were issued to recover cane arrears for the crushing seasons 1996-97, 1997-98 and 2011-12.
3. Facts in brief as contained in the writ petition that the Padrauna Sugar Unit is situated in District Kushinagar and the same is owned by Cawnpore Sugar Works (hereafter referred to as 'CSW'). In the years 1996-97 and 1997-98, the crushing of the sugarcane took place under the management of CSW but the payment has not been made, therefore, the arrears fell due for the aforesaid crushing seasons. Later CSW became sick and was accordingly referred to the BIFR for rehabilitation and reconstruction of a Board for Industrial and Financial Reconstruction sanctioned a scheme of revival on 18.06.2003 and as per the scheme of revival the management of Padrauna Sugar Unit (hereinafter 'PSU') was handed over to the respondent no. 4-JHV Distilleries and Sugar Mills Limited (hereinafter 'JHV'). It is stated in clause 12.8 of the aforesaid scheme, the respondent no. 4 was to clear all the cane arrears in six equal installments starting after two years from commencement of operation. In view of the aforesaid scheme, the respondent no. 4 was required to infuse funds for successful and continued operation of the Padrauna Sugar Unit. However, the respondent no. 4 did not comply with the terms of the scheme of revival. Consequently, BIFR cancelled the sanctioned scheme on 10.07.2008, and the respondent no. 4 ceased to be the manager/occupier of Padrauna Sugar Unit and other assets that were conveyed to it under the scheme of revival dated 18.06.2003.
4. Certain farmers approached this Court by filing Writ-C No. 37182 of 2014, Mahendra Yadav Vs. State of U.P. and others with the prayer to direct the Cane Commissioner to recover their pending cane dues and this Court vide its order dated 22.07.2014 directed the Cane Commissioner to take requisite steps for recovery of cane dues pertaining to the Padrauna Sugar Unit. In compliance of the aforesaid order, the Cane Commissioner issued the recovery certificates dated 30.04.2013 and 07.08.2014 to recover the cane dues pertaining to the Padrauna Sugar Unit. The aforesaid recovery certificate was issued against Cawnpore Sugar Works and respondent no. 4.
5. Aggrieved with the aforesaid recovery certificates, the respondent No.4 filed Writ-C No. 57277 of 2014, (M/s JHV Distilleries and Sugar Mills Limited Vs. State of U.P. and others) before this Court and this Court vide its jugement & order dated 29.10.2024 dismissed the aforesaid writ petition leaving it open to the petitioner therein (respondent no. 4 herein) to avail its remedies before BIFR making observation that respondent no. 4 could not have continued any further custody of the assets of Padrauna Sugar Unit upon cancellation of the revival scheme by BIFR on 10.07.2008.
6. Thereafter on 15.01.2018 the respondent authorities attached the properties belonging to the petitioners for execution of the recovery certificates issued against the respondent no. 4 stating that respondent no. 4 and the petitioner no. 1 company were sister concerns having a common management. Feeling aggrieved with the aforesaid order, the petitioner no. 1 challenged the same before this Court by filing Civil Misc Writ Petition No. 5433 of 2018 and the aforesaid writ petition was dismissed by this Court vide its judgement & order dated 01.04.2019 with the liberty to the petitioner no.1 - Mall Hotels Limited to avail the remedy available under the law. It transpires from perusal of the order dated 01.04.2019 that this Court found that the question whether the liability of respondent no. 4 could be recovered from the petitioner no. 1 was a vexed question of fact which could not be adjudicated in writ jurisdiction. Significantly the Court rejected the impleadment application filed on behalf of the concerned Cooperative Cane Development Society. The judgement & order dated 01.04.2019 reads as follows:-
"The petitioner, a company incorporated under the Companies Act has preferred this petition for writ to assail validity of notice dated 15th January, 2018 issued by the Sub-Divisional Magistrate, Padrauna, District Kushinagar attaching the land situate in Khasra no.3 measuring 3.812 hectares. The attachment aforesaid is made in relation to recovery of cane dues in a tune of Rs.47297.61 lakhs against one JHV Distilleries and Sugar Mills Ltd.
The argument advanced on behalf of the petitioner is that the petitioner is having nothing to do with JHV Distilleries and Sugar Mills Ltd. and as such the notice dated 15th January, 2018 is absolutely without jurisdiction. It is asserted that the company from which recovery is to be made is neither a subsidiary nor a holding company of the petitioner company.
In the petition for writ, it is stated that the immovable property attached under the notice may have shareholding of Sri Jawahar Lal Jaiswal, Prarthana Jaiswal and Gaurav Jaiswal, who are Directors of JHV Distilleries and Sugar Mills Ltd. but they have no interest with the petitioner. It is also stated that at the most the attachment could have been made to the extent of the shareholding of above named three persons in the immovable property concerned.
Before proceeding further, it would be appropriate to state that an application is preferred on behalf of Co-operative Cane Development Society Ltd., Padrauna, District Kushinagar to join writ proceedings to oppose the petition for writ.
As per the averments contained in the application, the applicant Co-operative Cane Development Society and certain other cane societies supplied sugarcane on behalf of its registered cane growers to the JHV Distilleries and Sugar Mills Ltd. and the registered cane growers are entitled to realize their cane supply dues through the recovery proceedings which are in process and during course of that, the impugned notice has been issued.
The application is supported by an affidavit sworn in by one Sri Sriram, S/o Late Sri Deokaran, Secretary of the Co-operative Cane Development Society Ltd., Padrauna, District Kushinagar with a statement that the recovery proceedings are consequence to the directions given by this Court in certain petitions for writ and as such it would not be appropriate to interfere with the same. It is asserted that any interference in the matter would adversely affect rights of the cane growers, who are waiting for their monetary dues from last several years.
While pressing the application, it is asserted that JHV Distilleries and Sugar Mills Ltd. though is not a sister concern or subsidiary of the petitioner company but the Directors in both the companies are from same family and the Directors of JHV Distilleries and Sugar Mills Ltd. are having substantial property rights with the immovable property under attachment.
Considered the facts advanced. True it is, the applicant is raising the issue of the cane growers who are very much concerned with recovery proceedings but the argument of the petitioner is that the liability fastened is absolutely without jurisdiction and the petitioner is absolutely stranger to that, hence we are not inclined to permit the applicant to join the writ petition as a respondent. However, the applicant is allowed to participate in hearing of the case as intervenor.
While opposing the petition for writ, it is submitted by learned counsel appearing on behalf of the State of U.P. that the property under attachment is of the Directors of JHV Distilleries and Sugar Mills Ltd. and as such that has rightly been attached by respondent- Sub-Divisional Magistrate, Padrauna, District Kushinagar.
According to learned Standing Counsel, the poor cane growers are waiting for realization of their dues from last several years but the Directors of JHV Distilleries and Sugar Mills Ltd. by one or other means avoiding the same and by the instant petition for writ also an effort is made to frustrate the recovery proceedings.
As already stated, in the body of the writ petition itself the petitioner has stated that Jawahar Lal Jaiswal, Prarthana Jaiswal and Gaurav Jaiswal are having property rights with the property under attachment and at the most the attachment could have been made upto their share in property. No material is available o record to ascertain the share of the persons named above in the property. As per learned counsel appearing on behalf of the respondent-State and the intervenor, the entire property concerned is of the Directors of the defaulting company. As per learned counsels the intention of the petitioner is to frustrate the recovery proceedings and in result to deprive the poor farmers from their rightful claim.
Be that as it may, we are of the view that this petition involves disputed questions of facts relating to share of the persons named above in the property in question and those cannot be settled in writ jurisdiction, thus, the appropriate remedy for adjudication of the dispute is by way of filing a civil suit or by approaching any other appropriate forum where evidence can be adduced and analyzed. The remedy under Article 226 of the Constitution of India, in the instant matter would not be appropriate to settle the disputed facts.
The writ petition hence, is dismissed. The petitioners are at liberty to avail appropriate remedy."
7. Meanwhile Corporate Insolvency Resolution Process (In short "CIRP") was initiated against the respondent no. 4 before National Company Law Tribunal (hereinafter referred to "NCLT"), Kolkata Bench. Initially an Interim Resolution Professional was appointed to seek successful resolution/revival of respondent no. 4. However, it transpires that later the NCLT, Kolkata Bench directed liquidation of respondent no. 4. During the liquidation proceedings, the Cooperative Cane Development Society of Kushinagar filed an application seeking to exclude the assets of Padrauna Sugar Unit from the "liquidation estate" of respondent no. 4. The contention of the cane grower's union was that the ownership of the Padrauna Sugar Unit stood vested in Cawnpore Sugar Works and thus, the respondent no. 4 was not the owner of the said unit.
8. On the aforesaid application, the NCLT, Kolkata passed an order on 16.06.2022 holding that the Padrauna Sugar Unit was not owned by the respondent no. 4 and the Padrauna Sugar Unit remained in the ownership of Cawnpore Sugar Works. The aforesaid order dated 16.06.2022 passed by the NCLT, Kolkata has attained finality. It transpires from perusal of the aforesaid order that NCLT clearly stated that the respondent no.4 is not the owner of the assets of the Padrauna Sugar Unit, therefore, the recovery certificate issued against respondent no. 4 for recovery of dues of Padrauna Sugar Unit also became vulnerable. The relief sought before the NCLT, Kolkata reads as follows:-
"(a) Delay in making this application be condoned;
(b) An order to direct the liquidator of the Corporate Debtor to disclaim the assets and properties of the Padruana Sugar Mills situated at Padrauna Kushinagar, Uttar Pradesh by setting aside the decision dated 10 January, 2020 taken by the liquidator."
9. The relevant portion of the aforesaid order dated 16.06.2022 passed by NCLT reads as follows:-
It is also relevant to mention that we also called for a Report from the District Magistrate of Kushinagar, Uttar Pradesh. From the said report dated 15 April, 2022, it is clear that management of the Padrauna Sugar Mill were given to the Corporate Debtor under the sanctioned scheme of the BIFR dated 18 June, 2003 but due to non-compliance of the terms and conditions of the scheme, the scheme sanctioned was called off. Further from the report provided by the Tehsildar to the District Magistrate and from other documentary evidences it clearly demonstrates that the ownership of the Padrauna Sugar Mill is with Cawnpore Sugar Works Limited.
10. Section 17 of the U.P. Sugar Cane (Regulation of Supply and Purchase) Act, 1953 states that recovery of cane dues can be made from the occupier of a sugar factory. The term 'occupier' has been defined in Section 2(k) of the Act, 1953 to mean the owner of the factory or a person entrusted with the ultimate management of the affairs of the factory. In the present case, NCLT has already declared Cawnpore Sugar Works as the owner of the Padrauna Sugar Unit. From perusal of the NCLT order dated 16.06.2022 r/w Section 17 of the Act, 1953 together, it transpires that the liability to pay cane arrears lies with Cawnpore Sugar Works and not respondent no. 4. Once it is held that the respondent no. 4 is not liable to discharge the recovery certificates, the consequential attachment of the properties of the petitioners also became illegal. Pertinently the attachment was made only to discharge the liability of respondent no. 4 towards cane dues. Once it is held that the liability to discharge cane dues lies with Cawnpore Sugar Works, the attachment orders become illegal.
11. On the other hand, the respondent-State has raised the following two contentions:
(i) The recovery certificates having been issued pursuant to the orders of this Court, the order of attachment cannot be interfered with;
&
(ii) The petitioner no. 2 gave cheques of the amount pursuant to the recovery on 16.01.2018 which amounts to an admission of liability and hence the petitioners cannot be permitted to retract from their admitted liability.
12. In response to the same, it is argued by learned counsel for the petitioners that the validity of the recovery certificate is not under challenge but the manner of recovery is under challenge and by the order of NCLT dated 16.06.2022, the petitioners would have been precluded from filing the instant petition in view of the earlier order dated 01.04.2019 passed in CMWP No. 5433 of 2018. As such, there is no merit in the stand of the respondent State that the attachment proceedings cannot be held invalid as it is in pursuance of recovery certificates issued pursuant to orders of this court. It is further argued that the validity of recovery certificates is not in question in the present petition.
13. Insofar as the second argument regarding admission of petitioner no. 2 is concerned, suffice it to state that the respondent-State would be at liberty to pursue proceedings under Section 138 of Negotiable Instruments Act, 1881 for dishonor of those cheques. The petitioner no. 2 would equally be at liberty to raise all possible differences including the aspect of the debt being not legally recoverable. However, issuance of cheque on the very next day of the attachment proceedings cannot give rise to any presumption of admission of liability. Thus, the respondent-State is free to pursue proceedings under Section 138 NI Act which would remain independent of the civil proceedings of attachment under challenge in the present petition. The issue of cheque dishonor and illegal attachment under the provisions of the U.P. Revenue Code, 2006 are two entirely different aspects. In this view of the matter, it is argued that the contention of the respondents State is not tenable in the eyes of law.
14. Heard learned counsel for the parties and perused the record.
15. From perusal of the record, following points clearly emerge:
(i) The recovery certificates have been issued for recovery of cane arrears from Padrauna Sugar Unit owned by Cawnpore Sugar Works;
(ii) JHV Distilleries and Sugar Mills Limited is not the owner of Padrauna Sugar Unit as held by NCLT in its order dated 16.06.2022;
(iii) As per Section 17 r/w Section 2(k) of the Act, 1953 recovery of cane arrears has to be effected from the occupier of the factory who is defined as the owner or the person who has ultimate control over the affairs of the company. From the order of NCLT dated 16.06.2022 it clearly transpires that Cawnpore Sugar Works is the owner/occupier of Padrauna Sugar Unit. The respondent no.4 was put into temporary occupation of the factory during the subsistence of the revival scheme and not thereafter. Thus, the liability to pay cane dues is upon Cawnpore Sugar Works and not respondent no. 4;
(iv) The attachment orders have been passed pursuant to recovery of cane dues from respondent no. 4 and the same has been became illegal in view of the fact that respondent no. 4 itself is not liable to be discharge the cane arrears. The orders of attachment are thus liable to be set aside.
16. Insofar as the contention of the respondent State regarding the earlier order dated 29.10.2014 passed in WRIC No. 57227 of 2014 filed by the respondent no. 4 is concerned, the aforesaid petition was filed by the respondent no.4 on the ground that it was not liable to discharge the cane dues of the Padrauna Sugar Unit. However, this contention was not accepted by this Court although there appears to be no binding adjudication on this point and liberty was granted to respondent no. 4 to approach BIFR for redressal of its grievances against auction. From perusal of the order, it is clear that the issue of liability of respondent no.4 was not finally adjudicated by this Court in the said petition. For this purpose, the petitioner therein (respondent no.4) was permitted to raise all possible grievances before BIFR.
17. It is admitted fact that crushing during 1996-97 and 1997-98 was carried by CSW and between 2011-12 it was carried out by the respondent no.4 as the occupier of Padrauna Sugar Unit. Now, under the scheme of the Act, 1953 recovery has to be made from the "occupier" of the factory. Liability for 1996-97 and 1997-98 remains that of CSW, which cannot be fastened upon the respondent no.4 in the wake of the cancellation of the scheme by BIFR. However, the liability for the period 2011-12 needs to be ascertained as admittedly crushing for the said period was carried out by the respondent no.4. The question that falls for consideration is whether the liability of Padrauna Sugar Unit can be recovered from the assets of respondent no.4?
18. Section 17(4) of the Sugarcane Act, 1953 provides for recovery of cane arrears from the occupier of any factory. Indisputably, CSW is the owner of the sugar manufacturing unit and the respondent no. 4 was the occupier during the season 2011-12 but making responsible of respondent no.4 for payment of dues of post-cancellation of the scheme was itself illegal. It did not have any legitimate authority to run the sugar mill. In such circumstances it must be held that CSW continued to be the legitimate occupier of the sugar mill being its owner. This conclusion also draws its basis from the order of NCLT dated 16.06.2022.
19. Section 36 of the Insolvency and Bankruptcy Code, 2016 defines "liquidation estate" to inter alia include assets in the ownership of the corporate debtor (respondent no. 4 in this case). The application of the Cane Growers Cooperative Society was allowed by NCLT. The proceedings before NCLT also established that the cane growers did not think themselves as creditors of respondent no.4 (which is now under liquidation before NCLT) and for the purpose of recovery of cane arrears, CSW is the occupier and respondent no.4 has no liability for payment of cane arrears. The respondent-State is free to recover cane arrears from the assets of CSW including but not limited to the Padrauna Sugar Unit. In this view of the matter, it would be difficult to hold respondent no.4 as the occupier of the PSU for the following reasons:
(i) CSW is the owner of the PSU as affirmed by NCLT. CSW being the owner would fall within the definition of occupier. Further;
(ii) Respondent no.4's authority to manage and run the PSU ceased upon cancellation of the scheme by BIFR. Thus, the crushing operations carried out by Respondent no.4 would not confer upon it the status of occupier. The custody itself was unauthorized on account of cancellation of the scheme.
20. In view of the above, it can be said that CSW remains the sole occupier of PSU and is liable to discharge the cane dues, therefore, recovery of arrears from respondent no.4 becomes illegal. Once it is held that respondent no.4 is not liable to discharge cane dues, no attachment could have been carried out of the properties of the petitioners in discharge of liability of respondent no.4. The order of attachment dated 15.01.2018 passed by the respondent No.2/Sub Divisional Magistrate, Padrauna, District Kushinagar is liable to be quashed and the same is hereby quashed.
21. There is no material brought on record that as to why no recovery has been made from the assets of CSW so far and the respondent-State has also not brought anything on record to show why the assets of PSU have not been put to auction till date and the respondent State should take all necessary measures to recover the dues of the farmers from the assets of the PSU.
22. With the aforesaid observations, the writ petition is allowed.
Order Date :- 29.05.2025 saqlain