1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.7447 OF 2010 Kolhapur District Central Co-operative Bank Ltd.,1092 “E” Ward, Shahupuri, Kolhapur. .. Petitioner V/s 1. State of Maharashtra 2. Commissioner of Sugar and Special Registrar Co-operative Societies, Maharashtra State, Pune, 3. Collector of Kolhapur having his office at Kolhapur, 4. Tahsildar of Chandgad, having his office at Chandgad, District Kolhapur, 5. Doulat Shetkari Sahakari Sakhar Karkhana Ltd., Halkarni, Taluka Chandgad, Dist: Kolhapur .. Respondents WITH CIVIL APPLICATION NO.2782 OF 2010 IN W.P.NO.7447 OF 2010 Doulat Shetkari Sahakari Sakhar Karkhana Ltd., Halkarni, Taluka Chandgad, Dist: Kolhapur. .. Applicant V/s 1. Kolhapur District Central Co-operative Bank Ltd.,1092 “E” Ward, Shahupuri, Kolhapur. 2. State of Maharashtra 3. Commissioner of Sugar and Special Registrar Co-operative Societies, Maharashtra State, Pune, 4. Collector of Kolhapur having his office at Kolhapur, 5. Tahsildar of Chandgad, having his office at Chandgad, District Kolhapur. .. Respondents 2 WITH CIVIL APPLICATION NO.2785 OF 2010 IN W.P.NO.7447 OF 2010 Kolhapur District Central Co-operative Bank Ltd.,1092 “E” Ward, Shahupuri, Kolhapur. .. Petitioner V/s 1. State of Maharashtra 2. Commissioner of Sugar and Special Registrar Co-operative Societies, Maharashtra State, Pune, 3. Collector of Kolhapur having his office at Collector’s Office, Kolhapur, 4. Tahsildar of Chandgad, having his office at Chandgad, District Kolhapur, 5. Doulat Shetkari Sahakari Sakhar Karkhana Ltd., Halkarni, Taluka Chandgad, Dist: Kolhapur .. Respondents And Garden Court Distilleries Pvt.Ltd. (A Company registered under the Companies Act, 1956), having registered office at: Unit No.303, 304, Raheja Plaza, Off Veera Desai Road, Andheri (W), Mumbai 400 053, through its Authorized Representative, Shri.Chintamani Anil Mulay, Age 40 years, Occu: Service, R/o. As above. .. Applicant/ Intervenor 3 WITH WRIT PETITION NO.8896 OF 2010 Garden Court Distilleries Pvt.Ltd. (A Company registered under the Companies Act, 1956), having registered office at: Unit No.303, 304, Raheja Plaza, Off Veera Desai Road, Andheri (W), Mumbai 400 053, through its Authorized Representative, Shri.Chintamani Anil Mulay, Age 40 years, Occu: Service, R/o. As above. .. Petitioner V/s 1. State of Maharashtra, Through, the Secretary, Ministry of Co-operation And Dairy, Mantralay, Mumbai, 2. Commissioner of Sugar and Special Registrar Co-operative Societies, Maharashtra State, Pune, 3. Collector of Kolhapur having his office at Collector’s Office, Kolhapur, 4. Tahsildar of Chandgad, having his office at Chandgad, District Kolhapur, 5. Doulat Shetkari Sahakari Sakhar Karkhana Ltd., Halkarni, Taluka Chandgad, Dist: Kolhapur, 6. Kolhapur District Central Co-operative Bank Ltd.,1092 “E” Ward, Shahupuri, Kolhapur. .. Respondents 4 Appearances: Writ Petition No.7447 of 2010: Mr.S.S.Patwardhan, Advocate for the petitioner. Ms.M.P.Thakur, AGP for Respondent Nos.1 to 4. Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for Resp.No.5. Civil Application No.2782 of 2010: Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for the Applicant. Mr.S.S.Patwardhan, Advocate for Respondent No.1. Mrs.M.P.Thakur, AGP for Respondent Nos.2 to 5. Civil Application No.2785 of 2010: Mr.P.K.Dhakephalkar, Sr.Advocate with Mr.S.R.Ganbavale, Advocate for the Applicant. Mr.S.S.Patwardhan, Advocate for the Petitioner. Mrs.M.P.Thakur, AGP for Respondent Nos.1 to 4. Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for Resp. No.5. Writ Petition No.8896 of 2010: Mr.P.K.Dhakephalkar, Sr.Advocate with Advocate Mr.S.R.Ganbavale for the Petitioner. Ms.M.P.Thakur, AGP for Respondent Nos.1 to 4. Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for Resp. No.5. Mr.S.S.Patwardhan for Respondent No.6. CORAM : V.C.DAGA & R.G.KETKAR, JJ. DATE : 31ST JANUARY, 2011 JUDGMENT: (Per R.G.Ketkar, J.) 1. Writ Petition No.7447 of 2010 is preferred by the Kolhapur District Central Co-operative Bank Limited (for short “Bank), a federal Society under the provisions of of the Maharashtra Co-operative Societies Act, 1960 praying 5 for directions against the Respondent Nos.1 to 4, (Respondent No.1-the State of Maharashtra, Respondent No.2-the Commissioner of Sugar and Special Registrar, Co-operative societies, Respondent No.3-Collector of Kolhapur and Respondent No.4-Tahasildar of Chandgad) to withdraw the attachment/sealing of the sugar stock in the Godown Nos.3 and 6 of the Respondent No.5-Daulat Shetkari Sahakari Sakhar Karkhana Limited (for short the ‘sugar factory’) pledged to the Bank. The Bank has further prayed for issuance of the direction against the Respondent Nos.1 to 4 to deliver the possession of the sugar stock to the Bank which is stored in the Godown Nos. 3 and 6 of the sugar factory and which is lawfully pledged to the Bank. 2. Writ Petition No.8896 of 2010 is preferred by the Garden Court Distilleries Pvt.Limited (for short ‘Distilleries’), praying for directions against the Respondent No.3-Collector of Kolhapur to release 35050 quintals of M-30 Grade Sugar in accordance with the order dated 22.10.2010 issued by Respondent No.2-the Commissioner of Sugar and Special Registrar, Co- operative Societies, Maharashtra State, Pune and/or in the alternative to direct the Respondent No.5-sugar factory to repay the price of the 35050 quintals of M-30 Grade Sugar at the rate of Rs.2373/- per quintal alongwith the interest of 24% p.a.to be calculated from 27.9.2010. 3. We issue Rule in both the petitions as also in C.A.No.2782/2010 and C.A.No. 2785/2010 filed in Writ Petition No.7447/2010. The learned counsel appearing for respective Respondents waive service. By consent of the parties, Rule is made returnable forthwith and is heard finally. 6 THE FACTS: 4. The Bank has filed Writ Petition No.7447 of 2010 contending inter-alia that during the crushing season of 2009-10 the sugar factory has applied for financial assistance in the nature of working capital for Rs.54 crores. The Bank sanctioned the said loan. The sugar factory pledged the entire stock of sugar as security for the said loan. The Bank has enclosed copy of the pledge deed at annexure ‘A’ to the petition. The sugar factory applied for further assistance of Rs.11 crores by way of enhancement of working capital limit which was also sanctioned by the Bank for crushing season of 2009-10. The sugar factory executed necessary loan documents in that regard. 5. It is the case of the Bank that the sugar factory has extended the pledge of the sugar stock with it as a security for enhanced working capital limit also. The Bank has annexed copy of the pledge deed for the additional sum of Rs.11 crores executed by the sugar factory in its favour at annexure ‘B’. It is the case of the Bank that the sugar factory has in all seven godowns stored sugar. The entire stock of sugar is in the physical custody of the Bank. The keys of all the godowns are also with the Bank. The Bank has appointed its employee at the site of the godowns, who is having custody of all the godowns and the sugar stock kept therein. 6. The Bank has further averred that the Respondent No.2 (Commissioner of Sugar and the Special Registrar, Co-operative Societies, Maharashtra State, Pune) passed an order on 21.6.2010 under clause 3(8) of the Sugarcane (Control) Order, 1966 (for short the ‘Order’) . The Respondent No.2 has 7 directed the sugar factory to release the sum of Rs.11.09 crores with interest as accrued to be paid over to the members of the sugar factory who had supplied their sugarcane post 15.5.2010. The Respondent No.2 nominated Respondent No.3-Collector of Kolhapur to be an authorised officer for disbursement of the said money to the members of the sugar factory. It was further directed that on the failure on the part of the sugar factory to make the payment, a sum of Rs.11.09 crores be recovered as arrears of land revenue. Pursuant to this, the Respondent No.3-Collector of Kolhapur issued an order dated 21.8.2010 directing the Respondent No.4-Tahasildar of Chandgad to recover amount of Rs.11.09 crores as arrears of land revenue from the sugar factory under the provisions of the Maharashtra Land Revenue Code, 1966 read with the Maharashtra Land Revenue (Recovery) Rules 1967. By order dated 22.8.2010, the Tahasildar of Chandgad directed the sugar factory not to alienate any movable or immovable property. 7. It is the case of the Bank that the Respondent No.4-Tahsildar of Chandgad directed the sugar factory to open the Godown Nos.3 & 6 for inspection of the sugar stock which is pledged with it. The godown keeper of the said two godowns reported this fact to the Bank under his report dated 22.8.2010. The Respondent No.4-Tahasildar of Chandgad took possession of the sugar stock in the Godown Nos.3 & 6 belonging to the sugar factory under the possession receipt and the panchanama dated 22.8.2010. The Bank has challenged these actions on the ground that the entire stock of sugar is in the custody of the Bank and the pledge deeds are in force. The action of the Respondent No.4- 8 Tahasildar of Chandgad of attaching/sealing Godowon Nos.3 & 6 as also taking possession of the sugar stock therein is contrary to the provisions of law. Respondent No.4-Tahasildar of Chandgad has no authority to dispossess the Bank for recovery of dues of the members of the sugar factory, as the Bank is a pledgee. In support of this contention, the Bank has relied upon the judgment of the Apex Court in the case of Bank of Bihar V/s.State of Bihar, (1972) 3 SCC 196 as also the the order dated 6.2.2008 passed by the Division Bench of this Court (J.N.Patel as the leaned Chief Justice then was, and Smt.Nishita Mhatre, JJ.) in Writ Petition No.7936 of 2007 filed by the Bank against the sugar factory in respect of the controversy arising in the crushing season of 2006-07. Relying upon this, the Bank has prayed for withdrawing the attachment/sealing of the sugar stock in the Godown Nos.3 & 6 by issuing appropriate directions to the Respondent Nos.1 to 4 and for delivery of possession of the sugar stock in the Godown Nos.3 & 6 of the sugar factory to the Bank. 8. The matter was heard on 20.9.2010. This Court issued notice to the sugar factory returnable on 23.9.2010. Hamdast was allowed. In addition, the Advocate’s notice by fax to the sugar factory was also allowed. The Court recorded the submissions made on behalf of the Bank and also directed the Secretary in the Department of Co-operation, Government of Maharashtra to remain present before the Court on the next date of hearing. The office noting indicates that on behalf of the Bank, an affidavit of service was filed on 21.9.2010 alongwith the fax report evidencing the service. On 23.9.2010, the 9 returnable date was extended to 30.9.2010 and the hamdast was permitted. On 30.9.2010 petition was adjourned to 8.10.2010. In the meantime, on 5.10.2010, office made noting to the effect that notice issued to the sugar factory on 23.9.2010 is returned duly served. 9. On 8.10.2010 this Court heard the learned counsel appearing for the Bank and the learned AGP for the State. On that date none appeared for the sugar factory despite service. Dr.Sudhir Kumar Goel, Secretary in the Department of Co-operation, Government of Maharahstra who was present on that date was heard. Dr.Goel invited attention of the Court to the Order issued by the Government of India under section 3 of the Essential Commodities Act, 1955 and more particularly clause 3 (3) and 3(3A) of the said Order. 10. After recording the submissions, the Court directed the Collector of Kolhapur to auction the entire sugarcane stock in the Godown Nos.3 & 6 of the sugar factory and deposit the sale proceeds with the Bank. The Bank was directed to remit the said sale proceeds in a separate account, and it was made clear that the the disbursement of the sale proceeds was subject to the further orders to be passed in the petition. 11. The sugar factory filed Civil Application No.2782 of 2010 for recalling the order dated 8.10.2010 and praying for an injunction restraining the Collector of Kolhapur from conducting auction sale of the entire sugar stock lying in Godown Nos.3 & 6 of the sugar factory, and further prayer for directions against the Respondent Nos.2 to 5 (Respondent No.2-State of Maharashtra, Respondent No.3-Commissioner of Sugar & Special Registrar, Co-operative 10 Societies, Respondent No.4-Collector of Kolhapur and Respondent No.5- Tahasildar of Chandgad) to release the said sugar stock from the attachment. In paragraph No.3 of the application it was averred that due to some communication gap and some unavoidable reasons, the sugar factory could not appear for hearing on 8.10.2010 and subsequently it became aware of the said petition as also the order passed therein. 12. The Civil Application No.2785 of 2010 was filed by the Distilleries for impleading it as party Respondent in Writ Petition No.7447 of 2010, as also praying for modification of the order dated 8.10.2010 by directing the Collector of Kolhapur to deliver 35050 quintals of M-30 Grade sugar to the Distilleries in accordance with the order dated 22.10.2010 issued by the Commissioner of Sugar & Special Registrar, Co-operative Societies, Maharashtra State, Pune. 13. In support of this application, the Distilleries averred that it had placed an order of purchase of 52000 quintal of sugar with the sugar factory through its broker Atharva Intertrade on 25.9.2010. The said sugar was to be purchased @ Rs.2373/- per quintal. It was learnt by the Distilleries that for the sugar crushing year 2009-10 the sugar factory had produced an approximate quantity of 3,37,000 quintals of sugar. On the same day i.e.25.9.2010 the sugar factory confirmed the sale of 52000 quintals of sugar to the Distilleries, alongwith direction to remit the sale amount in the State Bank of India, Belgaum Branch, in the account of the sugar factory, by Real Time Gross Settlement (for short RTGS). Accordingly the Distilleries remitted amount of 11 Rs.12,33,96,000/- towards the full satisfaction of the payment for purchase of 52000 quintals of M-30 Grade sugar from the sugar factory on 27.9.2010. It is further averred that the sugar factory delivered initially 16950 quintals of sugar to the Distilleries by around 30.9.2010 and thereafter the Distilleries had sent its transporter to lift remaining 35050 quintals of sugar from the sugar factory. However, the said transporter was not allowed to lift the sugar as the Tahasildar of Chandgad had seized the sugar from Godown Nos.3 & 6 on the orders passed by his superiors. 14. It was further averred that the action was taken due to non-payment of the Fair and Reasonable Price (FRP) of the farmers by the sugar factory. The sugar factory was required to pay an amount of Rs.11,09,24,496.80 to the farmers as the FRP @ of Rs.1268.40 per ton as fixed by the Central Government. The sugar factory thus utilised the money paid by the Distilleries towards the payment of FRP to the farmers, and despite this, the balance quantity of 35050 quintals of sugar was not delivered to the Distilleries. In view of this, the Distilleries wrote a letter to the Regional Joint Director, Sugar, Kolhapur on 15.10.2010 requesting him to release the sugar from the sugar factory. Pursuant to this letter, the Regional Joint Director, Sugar, Kolhapur by his letter dated 16.10.2010 communicated his no- objection to the Commissioner of Sugar for releasing the balance sugar to the Distilleries. Pursuant to this, the Commissioner of Sugar who had ordered seizure of sugar of the sugar factory, in turn, directed the Collector of Kolhapur by letter dated 22.10.2010 to release the sugar of an quantity, of 12 which, the FRP was paid to the farmers. When the representative of the Distilleries went to the office of the Collector of Kolhapur with a request to release the balance quantity of sugar as per the letter dated 22.10.2010 issued by the Commissioner, the representative was intimated that the sugar attached was to be auctioned in pursuance of the order dated 8.10.2010 passed by this Court in Writ Petition No.7447 of 2010 filed by the Bank. The Distilleries therefore took out this application for the aforesaid reliefs as it is directly aggrieved by the order dated 8th October, 2010 passed by this Court in the Writ Petition. 15. Apart from filing the Civil Application No.2785 of 2010 by the Distilleries in the Writ Petition No.7447 of 2010, it also filed substantive writ petition bearing No.8896 of 2010 praying for identical reliefs and further in the alternate for direction to the Sugar factory to repay the price of 35050 quintals of M-30 Grade sugar at the rate of Rs.2373/- per quintal. RIVAL SUBMISSIONS: 16. We have heard learned counsel appearing for the parties in the Writ Petition No.7447/2010, Civil Application No.2782/2010, Civil Application No. 2785/2010, so also the learned counsel appearing for the parties in the Writ Petition No.8896/2010. 17. In support of Bank’s Writ Petition No.7447/2010 Mr.Patwardhan, learned counsel appearing for the petitioner-Bank relied upon the judgment of the Apex Court in the case of Central Bank of India V/s.Siriguppa Sugars and 13 Chemicals Limited, (2007) 8 SCC 353 and contended that pawnee/pledgee’s right of retainer would have precedence over workmens’s dues and those of statutory authorities viz.in the present case, the Commissioner of Sugar. The Commissioner of Sugar (on behalf of cane growers) and the workmen of the pawner/pledgor, in the absence of liquidation proceedings under Section 529 and 529-A of the Companies Act, 1956 stand only as unsecured creditors and their rights cannot prevail over the rights of the pawnee of the goods. The Apex Court has exhaustively considered the earlier judgments dealing with the right of the pledgee in the light of sections 172 to 176 of the Indian Contract Act, 1872. The Apex Court considered the following judgments:- (1) Lallan Prasad V/s.Rehmat Ali, AIR 1967 SC 1322, (2) Bank of Bihar V/s.State of Bihar, (1972) 3 SCC 196, (3) Karnataka Pawnbrokers Association V/s.State of Karnataka, (1998) 7 SCC, 707. (4) Dena Bank V/s.Bhikabhai Prabhudas Parekh & Co., (2000), 5 SCC 694. (5) O.Konavalou V/s.Commander, Coast Guard Region, (2006), 4 SCC 620, (6) Workers V/s.Rohtas Industries Limited, (1987) 2 SCC 588, (7) State of M.P.V/s.Jaora Sugar Mills Limited, (1997) 9 SCC 207. 18. Ultimately, in paragraph No.17, the Apex Court observed as under:- “17. Thus, going by the principles governing the matter propounded by 14 this Court, there cannot be any doubt that the rights of the appellant Bank over the pawned sugar had precedence over the claims of the Cane Commissioner and that of the workmen.” 19. Mr.Patwardhan also invited our attention to the order dated 6.2.2008 passed by this Court in Writ Petition No.7936 of 2007 in respect of this very Bank and very sugar factory, raising the identical controversy. Division Bench of this Court observed in paragraph No.4 as under:- “4.The question which arises in this petition is as to who has precedence over the stock of sugar which is sought to be attached pursuant to the order passed by the respondent Commissioner of Sugar for making payment to sugar cane growers. The issue stands covered by the recent decision of the Supreme Court rendered in the case of Central Bank of India V/s.Siriguppa Sugars and Chemicals Limited & Ors.reported iin 2007(6) All M.R.431. In the said matter the Supreme Court held that the principles which would govern the issue and as propounded by the Supreme Court there cannot be any doubt that the rights of the appellate bank over the pawned sugar has precedence over the claims of the Cane Commissioner and that of the workmen.” 20. Mr.Patwardhan therefore submitted that the reliance placed on behalf of the sugar factory as also the authorities of the State Government and the Distilleries on the Order and in particular clauses 3(3) and 3 (3-A) thereof is of no avail as it is a settled position of law that the Commissioner of Sugar who is unsecured creditor cannot have any higher rights than that of pawnees 15 rights. 21. On the other hand the learned counsel appearing for the authorities of the State Government, sugar factory and the Distilleries submitted that in terms of clauses 3(3) and 3(3-A) of the Order, the sugar factory is obliged to pay within 14 days from the date of delivery of the sugarcane to the seller or tender him the price of the cane sold at the rate agreed to between the purchaser and the sugarcane growers or sugarcane growers co-operative society, and on failure to make payment for sugarcane purchased within 14 days of the date of delivery, the sugar factory has to pay interest on the amount due @ 15% p.a.for the period of such delay beyond 14 days. Thus, the provision is made to protect the interest of farmers who supply sugarcane to the sugar factory. Since these clauses protect the interest of the farmers and the order is issued u/s.3 of the Essential Commodities Act, 1955, they will override and/or curtail the rights of the Bank in the instant case. It was therefore submitted that the sale proceeds deposited in a separate account maintained by the Bank should not be allowed to be appropriated by the Bank towards its dues from the sugar factory. 22. On behalf of Distilleries it was submitted that the Collector of Kolhapur be directed to deliver 35050 quintals of M-30 Grade sugar in accordance with the order dated 22.10.2010 issued by the Commissioner of Sugar, Maharashtra State, Pune. It was further submitted that there was concluded sale between the sugar factory and the Distilleries in respect of 52000 quintals of sugar. The Distilleries had remitted an amount of Rs. 16 12,33,96,000/- by RTGS. Pursuant to this concluded sale, the Distilleries received 16950 quintals of sugar and therefore the Distilleries is entitled to get 35050 quintals of M-30 Grade sugar. In the alternative, to direct the sugar factory to repay the price of 35050 quintals of M-30 Grade Sugar @ Rs. 2373/- per quintal. It was further submitted that basically the Bank’s claim is based on the pledge deeds at annexures ‘A’ & ‘B’ to the Writ Petition No. 7447 of 2010. Perusal of this exhibits will show that they do not bear any dates and they cannot be said to be valid pledge deeds, and consequently, the Bank is not entitled to lay its claim on that basis. CONSIDERATION: 23. We have considered the rival submissions made by the learned counsel appearing for the parties. We have also gone through the written submissions filed on behalf of the sugar factory as also the written submissions filed by the distilleries in both the petitions. We will take up first the Writ Petition No.7447/2010 and the Civil Application Nos.2782/2010 & 2785/2010 filed therein for consideration. 24. As noted earlier the Bank has filed Writ Petition No.7447/2010 praying for directions against the authorities of the State Government to withdraw the attachment/sealing of the sugar stock in the Godown Nos.3 & 6 of the sugar factory and has further prayed for issuance of directions against these authorities to deliver possession of the sugar stock to the Bank, which is stored in the said godowns. The matter was heard on 20.9.2010 when notice 17 was issued to the sugar factory, returnable on 23.9.2010. The Court recorded the submissions made on behalf of the Bank and also directed the Secretary in the Department of Co-operation, Government of Maharashtra to remain present before the Court on the next date of hearing. The matter was heard on 8.10.2010 when none appeared on behalf of the sugar factory despite service. Dr.Goel, Secretary in the Department of Co-operation, Government of Maharashtra, invited attention of this court to the Order issued by the Government of India u/s.3 of the Essential Commodities Act, 1955 and particularly clauses 3(3) and 3(3A) of the said Order. After recording the submissions, this Court directed the Collector of Kolhapur to auction the entire sugar stock in the Godown Nos.3 & 6 of the sugar factory and deposit the sale proceeds with the Bank. The Bank was directed to remit the sale proceeds in a separate account. It was made clear that the disbursement of the sale proceeds would be subject to the further orders to be passed in the petition. 25. The sugar factory filed Civil Application No.2782/2010, for recalling the order dated 8.10.2010 and praying for an injunction restraining the Collector of Kolhapur from conducting the auction sale of the entire sugar stock lying in Godown Nos.3 & 6 of the sugar factory and further praying for directions against the