Jammu & Kashmir High Court
Bank Of Baroda vs . Jammu & Kashmir State Industrial ... on 16 April, 2019
Equivalent citations: AIR 2019 JAMMU AND KASHMIR 146, AIRONLINE 2019 J AND K 371
Author: Sindhu Sharma
Bench: Sindhu Sharma
HIGH COURT OF JAMMU AND KASHMIR
AT JAMMU
OWP No.323/2008
Date of order: 16.04.2019
Bank of Baroda vs. Jammu & Kashmir State Industrial Corporation & ors.
Coram:
Hon'ble Mrs. Justice Sindhu Sharma, Judge.
Appearance:
For the Petitioner/Appellant(s) : Mr. Parveen Kapahi, Advocate
For the complainant(s)/respondents : Mr.Aseem Sawhney, AAG
Mr.KDS Kotwal, GA Mr.Vishal Goel, Advocate.
Mr. Ajay Abrol, Advoate Mr. Rajesh Pal Smotra Advocate.
i) Whether approved for reporting in Yes/No Law journals etc.:
ii) Whether approved for publication in press: Yes/No
1. The petitioner is a nationalised Bank, namely Bank of Baroda having a Branch at Purani Mandi, Jammu and its Head office in Mandavi, Baroda, Gujarat (hereinafter for short referred to as the „petitioner-Bank‟).
2. Brief facts as projected in the petition are that on the request of respondent No.3, financial assistance in the shape of cash credit (hypothecation), cash credit (pledge), purchase of bills, discount facility, bank guarantee, letter of credit to the tune of Rs.2.60 cr was provided for the promotion of his business of respondent No.3. However, the account of respondent No.3 became non-
performing asset (for short, hereinafter referred to, as „N.P.A‟) on 01-10-1997 when the principal amount of Rs.1,53,25,000/- was outstanding against the respondent No.3. In addition to OWP No.323/2008 Page 1 of 13 this amount unapplied interest was also due from respondent No.3. Thus, the petitioner-Bank filed a civil suit for recovery of Rs.2,29,40,511/- on 01-12-1999, which included unapplied interest from 01-10-1997 to 30-11-1999. While the suit was pending in the court of learned Addl. District Judge, Bank Cases, Jammu, the Jammu & Kashmir State Industrial Development Corporation Ltd., respondent No.1, initiated the proceedings against M/S Prabhat Terpenes & Synthetics Ltd., respondent No.3 under section 29 of the State Financial Corporation Act, and took possession of the mortgaged property of respondent No.3, i.e, land and building alongwith Plant and machinery. Notice of auction of the said mortgaged property was issued on 28-06-2006 by respondent No.1. This auction notice was challenged by the respondent No.3 in OWP No.502/06, which was disposed of by this court vide its judgement and order dated 31.08.2007. Relevant portion of the judgment reads as under;
"Auction Notice No.IDC/DB/99/CO/152/149 dated 26.6.2006 of the State Industrial Development Corporation is accordingly quashed with a direction to the corporation to get the whole of the mortgage property sought to be put to auction, evaluated for assessing its market value and then to go ahead with the auction of the mortgaged property indicating, in the auction notice, the details of the property along with their present market value either item wise or a whole, as may be found desirable so as to fetch maximum price of the mortgaged property together with the reserved bid price of the auction.OWP No.323/2008 Page 2 of 13
The Corporation is left free to device such procedure and prescribe such conditions for going ahead with the auction so as to get maximum price of the mortgaged property."
3. After the disposal of OWP No.502/2006, a fresh auction notice was issued and the mortgaged property was auctioned in terms of the directions of the court dated 31.08.2007 passed in OWP No.502 of 2006 and the entire mortgaged property was sold for Rs.819.50 Lacs (Eight Crore Ninteen Lakhs Fifty Thousand). Out of the auction amount Rs.3,13,33,261 was adjusted by the State Industrial Development Corporation, in its account and an amount of Rs.16,77,000 was paid to the State Financial Corporation respondent No.2. Thus, respondent No.1, is still in possession of Rs.4,89,39,739/-, since 01.02.2008. But respondent No.1, again paid Rs.1,68,93,000/- to respondent No.2 on 02.1.2009 and 16.01.2009 without the leave of the court and consent of Petitioner-Bank. This is so apparent from IA No.03 of 2018 filed by Mr.Vishal Goel, learned counsel on behalf respondent No.3, seeking release of payment of Rs.19,11,000/- due to the Power Development Department as electricity dues.
4. Counter has been filed on behalf of respondent No.3.
5. As the entire amount of Rs.819.50 (Eight Crore Ninteen Lacs Fifty Thousand) being the auction money was in possession of respondent-Corporation, the petitioner-Bank addressed a letter OWP No.323/2008 Page 3 of 13 dated 23.11.2007 requesting for payment due to it from respondent No.3 as the principal amount of Rs.1,53,25,000/-, excluding interest. On receipt of the letter respondent No.1 vide letter dated 27.11.2007 desired the petitioner-Bank to communicate the details of the amount along with necessary information duly authenticated as per letter No.IDC/CO/DB/07/ 15/44 dated 23-11-2007 (Annexure „C‟ to the writ petition). This information was conveyed as per letter dated 19-11-2007 (Annexure‟D‟ to the writ petition) stating that amount of Rs.7,51,85,000/- was due to the petitioner-Bank. The petitioner- Bank also forwarded a copy of the judgement dated 31.08.2007. Respondent No.1, however, did not respond to the communication from the petitioner-Bank and meanwhile, the petitioner-Bank came to know that respondent No.1 intended to settle the claims of Power Development Department Corporation, Sales Tax, Labour and other Department before any amount is disbursed to the petitioner-Bank.
6. After the money was received by respondent No.1, the petitioner-Bank vide letter dated 23.11.2007 asked the respondent No.1 that principal amount of Rs.1,53,22,500, in addition to the interest since 01-10-997 is due to it and same may be paid. Since there was no response to the letter the petitioner-Bank issued a notice dated 22-02-2008 to respondent No.1, which was also not acknowledged. It appears that respondent No.1 intended to satisfy the claims of Power OWP No.323/2008 Page 4 of 13 Development Corporation, Sales Tax Department and the Labour Department.
7. Since respondent No.1 vide its letter dated 10-03-2008 addressed to respondent No.3, sought confirmation of the amount due to the aforesaid claimants, the petitioner-Bank in order to protect its rights filed the instant writ petition seeking the following reliefs;
"i) that by a writ of certoriari quash letter dated 10.03.2008 issued by the respondent No.1 to respondent no.3 vide which the claims of Sales Tax, Power Development Department and Labour Department were settled and the claims of the unsecured creditors in preference to the secured creditors.
ii) writ of mandamus directing respondent No.1 to settle the claim of the petitioner-Bank, who is a secured creditor before settling the claim of the unsecured creditors.
iii) issue an order restrainng respondent No.1 not to disburse any of the amount to any of the unsecured creditors, such as, Power Development Department, Sales Tax Department and Labour Department."
8. Respondent No.3, has filed counter affidavit on 23-12-2010.
He has admitted having obtained the loan facilities from the petitioner-Bank, but the amount due as claimed by the petitioner-Bank is disputed though its premises have been auctioned for Rs.819.50 (Eight Crore Ninteen Lakhs Fifty Thousand) by respondent No.1. It is also admitted that respondent No.1 intends to settle the claims of Sales Tax OWP No.323/2008 Page 5 of 13 Department, Power Development Department and the claims of Labour Department.
9. I have heard the learnded founsel for the parties at length and also perused the record of the file meticulously.
10. All these addmissions have been made in the counter filed on 23.12.2010 by respondent no.3, but since the suit for recovery has been filed by the petitioner-Bank against respondent No.3 which is pending, so the amount could not be released.
11. On 21.04.2008, while hearing this petition of the petitioner-
Bank, this Court, while directing issuance of notice directed that „in the meanwhile, status quo as it exists on date shall be maintained‟. Thereafter the status quo order was modified and vacated by this court directing its operation qua the awards passed by the Labour Court, vide order dated 27.03.2014. Against this order Letters Patent Appeal bearing No.LPA(OW) No.49 of 2014, was preferred by the respondent No.3, M/S Prabhat Terpenes and Synthetics Ltd., which came to be disposed of by the Hon‟ble Divisin Bench vide order dated 04.12.2014. In terms of this order, the Hon‟ble Division Bench observed that since the controversy is alive before the Writ Court the matter was directed to be taken up by the Writ Court and decide the same at an early date preferably within a period of three months.
12. Vide order dated 08.07.2011, the order of status quo was modified to the extent of directing respondent No.2 to handover OWP No.323/2008 Page 6 of 13 the possession of auctioned property to the Auction Purchaser. The amount of auction purchased was directed to be kept in fixed deposit for one year.
13. During the pendency of this petition, respondents-7 to 46 were impleaded as party respondents and they filed CMP No.1955/2011 for release of the dues as per the orders of the authorities under the payment of Wages Act. The CMA was allowed on 27.03.2014, directing as under;
"CMA No.1955/2011Allowed. Order directing maintenance of status quo passed by this court on 21.04.2008 is modified by vacating its operation qua the awards passed by the Labour Court (Authority under Payment of Wages Act) whatsoever, in favour of the private respondents (respondents nos.7 to 46)"
14. This order was challenged by the M/S Prabhat Terpenes and Synthetics Ltd. by filing Letters Patent Appeal, which the Bench decided on 04.12.2014 holding that ;
"3.Be that as it may we are not inclined to enter into the controversy as to whether principles laid down in sections 529-A and 503 of the Companies Act would be attracted to the proceedings initiated by the Financial Corporation in pursuance of provisions of section 29 of State Financial Act. The controversy is alive before the learned Writ Court. We, therefore, request the learned writ Court to take up the matter and decide the same at an early actual date preferably within a period of 3 months from today.
4. Registry is directed to list the case before the Writ Court in the last week of March 2015. However, in the meanwhile, the sale proceeds of the auction or the OWP No.323/2008 Page 7 of 13 other assets belonging to the appellant-company shall not be appropriated by either of the parties. If any such necessity arises for appropriation of the assets, appropriate application may be filed before the Writ Court. The interim order passed by the learned Writ Court stands modified."
15. However, the matter could not be finally decided though it was listed from time to time as per directions of the Hon‟be Division Bench.
16. This takes us to the claims of (1) Power Devlopment Department (2) Sales Tax Department and (3) the claims of respondents 7 to 46, the erstwhile workers of respondent No.3, herein. The moot question whether the amount claimed by the Sales Tax Department is a crown debt. This question was considered by Hon‟ble Supreme Court in Union of India & ors. vs. SICOM Limited and another, (2009) 2 SCC 121, and the Court has been pleased to hold as under ;
"Generally, the rights of the crown to recover the debt would prevail over the right of a subject. Crown debt means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. [See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p. 1147]. Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such pertains to the common law principle. A common law which is a law within the meaning of Article 13 of the Constitution is saved in terms of Article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A OWP No.323/2008 Page 8 of 13 debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one".
17. So as per the law declared by Hon‟ble the Apex Court that a debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property in regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one. Regarding the claim of Sales Tax Department is concerned the issue stands concluded by the judgement of Coordinate Bench of this Court, while deciding OWP No.502/2006 in which CMP 876/2006, was filed by the Appellate Authority Commercial Tax Officer, C.T.Circle-I, claiming its first charge on the mortgaged property to recover sales tax arrears amounting to Rs.1,54,35,357.70/-(Rupees one Crore Fifty Four Lakh Thirty Five Thousand Three Hundred Fifty Seven and Seventy Paise). Relying on the judgment of Hon‟ble Full Bench of Madras High Court reported in „the Director (Personal), Neyveli vs. R. Senathipathi, AIR 2007 (Mad) 118, it was dismissed on 31.8.2007 holding that;
"I do not find any merit in the CMP claim of the Sale Tax Department for its first charge and the of company is found to be untenable and CMP is accordingly dismissed.OWP No.323/2008 Page 9 of 13
18. The next claim is about the arrears of Electricity duty. The State has enacted (Electricity Duty Act, 1963) which came into force with effect from Ist of April, 1963 by SRO 141 dated 29 March, 1963. Section 8 of the Act, being relevant is extracted below;
"8. Recovery of Duty. Any duty under this Act or Penalty imposed under section 7 which remains unpaid, whether by a consumer or by a person generating energy of his own or consumption , to the Government shall be recoverable as arrears of land revenue."
19. That it is not a crown debt because it has no precedence on the secured creditors because the recovery is effected as it is as arrears of land revenue. This brings us to the procedure prescribed under Section 90 of Land Revenue Act, which reads as under;
"90. Recovery of certain arrears through Revenue officer instead of by suit. - An officer whose duty it is under any law or rule having the force of law to realize a sum of money and the same is lawfully recoverable as an arrear of land revenue may request an Assistant Collector of the first class under whose jurisdiction the person from whom it is recoverable resides or holds any property to realize the same as arrear of land revenue. With such request such officer shall forward to the Assistant Collector a certificate showing the correct amount due up to the date of such certificate: 1 [Provided that the period of limitation for making request before the competent revenue authority for realising sums recoverable as arrears of land revenue under this Chapter shall be the same as is prescribed for suits by or on behalf of the State under the Limitation Act, Samvat 1995.] The person from whom the money is so recovered may, OWP No.323/2008 Page 10 of 13 if he denies his liability, sue the Government to recover the same."
20. So the dues payable to the Electricity Department, cannot be paid unless the debt due to the petitioner-Bank is satisfied.
21. The second claim is of the Sales Tax Department, but this question is no longer res-integra between the parties because learned Single Bench of this Court decided OWP No.502/2006 filed by the respondent No.3 against the State of J&K, Industrial Development Corporation and State Financial Corporation relying on the judgment of the Madras High Court in case reported as „UTI Bank v/s Dy. Commissioner, Central Excise, Chennai, AIR 2007 Madras 117, which held as under;
"in view of the authoritative pronouncement by the Full Bench of Madras High Court dealing with point in view and in the absence of any provision in the General Sale Tax in the State of Jammu and Kashmir supporting the plea of FIRST CHARGE".
I, do not find any merit in the CMP and claims of the Sale Tax Department for its first charge over the assets of the petitioner, complaint is found to be untenable this CMP is accordingly rejected."
22. This takes us to the claim of the erstwhile employees of the company under the labour Laws. The Assistant Labour Commissioner, Jammu being the authority under Payment Wages Act, 1923, has held that Rs.20,03,820 (Twenty Lacs Three Thousand Eight Hundred Twenty) is payable to 40 OWP No.323/2008 Page 11 of 13 employees of the company, who have filed an application in the writ petition.
23. The Assistant Labour Commissioner, Jammu further vide his order dated 09.03.2009, has held that Rs.5,93,017/- (Five Lacs Ninty Three Thousand Seventeen) is due to 37 employees of the M/S Prabhat Terpenes and Synthetics Private Limited. By another order of the same date, that is, 09.03.2009, the said Officer has also decided five applications of the applicants and held them entitled to Rs.2,20,711/- (Two Lakhs Twenty Thousand Seven Hundred Eleven) under the Payment of Wages Act, from the same Company. Again five applicants have also been held entitled to Rs. 62,474/- vide order of the same date, that is, 09.03.2009.
24. The claim of Ramesh Kumar Nirmal has also been allowed vide order dated 9.3.2009 directing the Company to pay Rs.68,381/- to the applicant. In another claim filed by Ramesh Kumar Nirmal, the controlling authority under Payment of Wages Act, has directed payment Rs.22,595/- to the applicant.
25. The question for consideration is whether the claims of labour if any could be held to be crown debt having priority over the secured creditor such as petitioner-Bank. However, there is no provision in the Payment of Wages Act, 1923 declaring the amount due to them from respondent No.3 as crown debt. Infact, even the State has no obligation to pay the amount to them. Therefore, the erstwhile company, respondent No.3 has a right OWP No.323/2008 Page 12 of 13 to execute the orders against the employer who has denied its liablity. Why they have not proceeded against their employer under sections 20 and 21 of the Act is a mystery. So respondents 4 to 46 are not entitled to be paid any amount of the balance auction amount before the claim of the petitioner-Bank is satisfied.
26. In view of the above, the writ petition is allowed and the letter dated 10.03.2008 addressed by respondent No.1 to respondent No.3 is quashed by a writ of certiorari and respondent No.1 is directed to pay the petitioner-Bank the amount due to it and, therefore, all other creditors have to wait until the claims of the petitioner-Bank is satisfied.
27. Writ petition is, accordingly, disposed of.
(Sindhu Sharma) Judge Jammu 16.04.2019 Ved-Secy.
VED PARKASH 2019.04.23 14:23 I attest to the accuracy and integrity of this document OWP No.323/2008 Page 13 of 13