IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE FIFTHDAY OF MARCH TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE L.NARASIMHA REDDY WRIT PETITION Nos : 15970 of 2005 and 2330 of 2006 Between: W.P.No.15970 of 2005 The A.P.State Coop Bank Ltd., Troop Bazar, Hyderabad , Rep by its General Manager. ..... PETITIONER AND 1 Sri J.Rama Rao, S/o.J.V.S.Nagabhushan Rao, Jai Jawan Colony, Kapra , ECIL, Hyderabad. 2 The Managing Director, M/s.Kotsun Chemicals Ltd., lot No.31, Annapoorna Block, Aditya Enclave, Ameerpet, Hyderabad. 3 K.S.Chowdary, S/o.Late Kolla Kotaiah, of Kotsun Chemicals Ltd., 8-3-976/86/1/1, Shalivahananagar, Yousufguda, Hyderabad. 4 K.Vijay Kumar, S/o.K.Dasaiah, Kotsun Chemicals Ltd, Plot No.D-70, Madhuranagar , Hyderabad. 5 Mrs.K.Annapoorna , W/o.k.Dasaiah, Plot No.D-70, Madhuranagar, Hyderabad. 6 B.Subba Rao, R/o.Post Appapuram, Kakumarru Mandal, Guntur district. 7 S,Narayana Swamy, R/o.Post Oleru, Repalle, Guntur district. 8 The Dy.Commissioner of Labour, Hyderabad (Twin Cities), .....RESPONDENTS W.P.No.2330 of 2005 The A.P.State Coop Bank Ltd., Troop Bazar, Hyderabad , Rep by its General Manager. ..... PETITIONER AND 1 Sri J.Rama Rao, S/o.J.V.S.Nagabhushan Rao, Jai Jawan Colony, Kapra , ECIL, Hyderabad. 2 The Managing Director, M/s.Kotsun Chemicals Ltd., lot No.31, Annapoorna Block, Aditya Enclave, Ameerpet, Hyderabad. 3 K.S.Chowdary, S/o.Late Kolla Kotaiah, of Kotsun Chemicals Ltd., 8-3-976/86/1/1, Shalivahananagar, Yousufguda, Hyderabad. 4 K.Vijay Kumar, S/o.K.Dasaiah, Kotsun Chemicals Ltd, Plot No.D-70, Madhuranagar , Hyderabad. 5 Mrs.K.Annapoorna , W/o.k.Dasaiah, Plot No.D-70, Madhuranagar, Hyderabad. 6 B.Subba Rao, R/o.Post Appapuram, Kakumarru Mandal, Guntur district. 7 S,Narayana Swamy, R/o.Post Oleru, Repalle, Guntur district. 8 The Dy.Commissioner of Labour, Hyderabad (Twin Cities), .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue any appropriate order or direction more in the nature of writ of certiorari and quash the Proceedings of the payment of Gratuity Appeal No.8/2004, dt.07-4- 2005, on the file of the Dy.Commissioner of Labour, Hyderabad, as arbitrary, illegal without jurisdiction and payment of Gratuity Act.1972, and pass such other order or orders. Counsel for the Petitioner:MR.G.PURUSHOTHAM RAO Counsel for the respondent Nos. 1 to 7: None appeared. Counsel for the Respondent No.8: GP FOR LABOUR The Court made the following : COMMON ORDER: The petitioner and most of the respondents are common in both the writ petitions. The point involved is also the same. Hence, they are being disposed of through this common order. The petitioner is a scheduled bank. As part of its activity, it advanced a sum of Rs.2.75 crores to M/s.Kotsun Chemicals Ltd., Hyderabad, the second respondent herein, in the year 1996. Apart from obtaining a loan repayment agreement on 14.09.1996, the petitioner secured documents, through which, the plant and machinery of the second respondent industrial unit were hypothecated. Default was committed by the second respondent in repayment of the loan. Therefore, the plant and machinery were seized by the petitioner. Further proceedings could not, however, take place on account of the fact that though industrial unit was purchased by the second respondent from the Andhra Pradesh State Financial Corporation (in short, ‘APSFC’), title to the property was not transferred. The first respondent was employed with the second respondent. On account of the unit becoming sick, his employment did not continue. He approached the Additional Industrial Tribunal-cum-Additional Labour Court, by filing an application under Section 33-C(2) of the Industrial Disputes Act, 1947, for recovery of arrears of salary, leave encashment, retrenchment compensation, un-remitted P.F. contribution etc. amounting to Rs.2,11,273/-. The same was taken up as M.P.No.51 of 2003. The petitioner herein was impleaded as second respondent in those proceedings. Through its award, dated 10.08.2005, the Labour Court came to the conclusion that a sum of Rs.1,61,456/- was due to the first respondent herein and held that apart from the employer, the second respondent herein, the petitioner is also responsible to pay the same, on the ground that the plant and machinery was hypothecated to it. W.P.No.2330 of 2006 is filed against the said award. The first respondent has also instituted proceedings before the Deputy Commissioner of Labour, Hyderabad, for payment of gratuity. There again, the petitioner was impleaded as second respondent and similar directions were issued against it in the order, dated 07.04.2005. Petitioner filed W.P.No.15970 of 2005 against the same. Sri D. Krishna Murthy, learned counsel for the petitioner submits that though the first respondent is entitled to recover arrears of salary or other service benefits from his employer, the petitioner cannot be held liable to pay the same, simply because the plant and machinery were hypothecated to it. He contends that the question of the first respondent being able to make any claim, vis-à-vis, the petition would arise only when the hypothecated property is sold and the sale proceeds are being distributed, and that such an eventuality does not arise in this case. Though the respondents are served with notices, they have not chosen to enter appearance. Admittedly, the first respondent is not the employee of the petitioner. Except that the plant and machinery of the second respondent were hypothecated to the petitioner, there exists no other connection. It was always competent for the first respondent to proceed against his employer, the second respondent, to recover arrears of salary, gratuity and other benefits. The Labour Court as well as the authority under the Payment of Gratuity Act held that the second respondent is liable to pay the amounts adjudicated as due, to the first respondent. To that extent, no exception can be taken. I n TEXTILE LABOUR ASSOCIATION v. STATE OF GUJARAT[1], the Supreme Court held that the workers, who have contributed their labour for an industry, have a right against the stock and other property, to realize their claims, and that they hold lien for their unpaid wages. On that basis, it can certainly be said that the first respondent had a proportionate claim against the properties of his employer. However, an occasion for him to proceed against the petitioner would have arisen, if only the hypothecated properties were brought to sale, and that the realized amounts are available for distribution according to priorities. Such is not the case here. The petitioner itself was handicapped from realizing any amount, on account of the fact that the valid title did not pass to the 2nd respondent, for the properties purchased by it from APSFC. When no liquid cash was recovered from the second respondent by the petitioner, the question of its being required to satisfy the claim of the 1st respondent, does not arise. Therefore, the Writ Petitions are allowed, limited to the extent of absolving the petitioner herein of any liability to pay the amounts under the award in M.P.No.51 of 2003, dated 10.08.2005, passed by the Additional Labour Court, Hyderabad and the order passed by the authority under the Payment of Gratuity Act-cum- Deputy Commissioner of Labour, Hyderabad in case No. PGA 8/2004, dated 07.04.2005. It is, however, made clear that the existence of hypothecation against the plant and machinery of the second respondent in favour of the petitioner shall not come in the way of the steps that may be initiated by the first respondent to recover the arrears. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J Dated: 05.03.2008 sj ..... REGISTRAR // TRUE COPY // SECTION OFFICER To 1.2CCs to the Government Pleader for Labour, High Court Buildings, Hyderabad (OUT) 2.2CD copies Form-NIC-OGS/WP{TRR} [1] 1994 II LLJ 303