1 W.P. 5656.2011 - [ J ] IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD WRIT PETITION NO. 5656 OF 2011 1. Swatantrya Sainik Bhila Motiram Mahajan Nagari Sahakari Pat Sanstha Ltd., Shirpur Ekvira Ssdan, Vakil Colony, Shirpur, Dist. : Dhule Through its Chairman. 2. The Special Recovery Officer and Sale Officer, (Dhule Zilla Nagari Sahakari Pat Sanstheche District Federation Ltd.,) Swatantra Sainik Bhila Motiram Mahajan Nagari Sahakari Pat Sanstha Ltd., Shirpur, Ekvira Sadan, Vakil Colony, Shirpur, Dist. Dhule. .... PETITIONERS V E R S U S 1. The State of Maharashtra Through the Secretary Co-operation, Textiles and Marketing Department, Mantralaya, Mumbai. 2. The Divisional Joint Registrar Co-operative Societies Nashik Division, Nashik. 3. The District Deputy Registrar 2 W.P. 5656.2011 - [ J ] Co-operative Societies, Dhule Dist. : Dhule. 4. Shirpur Shetkari Sahakari Sakhar Karkhana Ltd., Shivaji Nagar, Dahiwat, Tq. Shirpur, Dist. : Dhule Through its Managing Director/ Chief Accountant. 5. Dhule and Nandurbar Dist. Central Co-operative Bank Ltd., Dhule through its Chief Accountant/ Managing Director, Fakira Daga Patil, Shivajinagar Road, Dhule. 6. Heda Chemicals Pvt. Ltd. Surat Palace Building, Town Centre, CIDCO, Aurangabad , Through its Director. .... RESPONDENTS Mr. P.G. Godhamgaonkar, Advocate for the petitioners. Mr. S.P. Shah, Advocate for the respondents. CORAM : S.V. GANGAPURWALA, J. DATE OF JUDGMENT : 19/10/2011 JUDGMENT : 1. The petitioner no. 1 had deposited the amount with respondent no. 4 – Sugar Factory. The Sugar Factory did not refund the 3 W.P. 5656.2011 - [ J ] amount. Petitioner no. 1 filed Dispute No. 75 of 2007 before the Co- operative Court, Jalgaon. The same was decreed vide Judgment and Award dated 24/03/2008 in favour of petitioner no. 1. Vide the said Judgment and Award, petitioner no. 1 was entitled to recover the amount of Rs. 1,38,15,781/- with interest @ 15 % per annum on the principal amount of Rs. 1,19,75,000/- till realization of the entire awarded amount. The present respondent no. 4 – Sugar Factory was allowed to pay the amount in six monthly instalments. The Sugar Factory did not pay the 5th and 6th monthly instalments. Petitioner no. 1, therefore, forwarded the Award for execution. Petitioner no. 2 is appointed as Special Recovery Officer to recover the amount. 2. The petitioner no. 2 proceeded to attached three ( 3 ) tanks of molasses, which were in the premises of the Sugar factory. In spite of the attachment, the Sugar factory issued tender for the purpose of sale of the molasses to which petitioner no. 1 objected before the Dy. Registrar of Co-operative Societies. The present respondent no. 5 – the District Central Co-operative Bank Ltd. also approached the Dy. Registrar by filing an objection on the ground that the said molasses is pledged with the said Bank and it had right and priority over the said property for recovery of l0an advanced to the Sugar Factory. The Dy. Registrar in stead of deciding the objections and the priority of the claims, directed that the sale of the molasses shall be effected, the amount credited and thereafter disbursed to the extent of 50 % to 4 W.P. 5656.2011 - [ J ] petitioner no. 1 and 50 % to respondent no. 5. Respondent no. 5 challenged the said order before the Jt. Registrar of Co-operative Societies. The Jt. Registrar allowed the Revision and set aside the order issued by the District Dy. Registrar on the ground that it was without jurisdiction. The Writ Petition bearing No. 8749 of 2010 was filed by the petitioners. The learned Single Judge of this Court vide Order dated 07/01/2011 disposed of the said Writ Petition observing that the Dy. Registrar of the Co-operative Societies did not have any jurisdiction to direct disbursement of 50 % of the amount to petitioner no. 1 and 50 % to respondent no. 5 and as such the order impugned in the Writ Petition dated 17/09/2010 passed by the Jt. Registrar of Co-operative Societies need not be interfered with. This Court further observed that the stock of molasses is already sold and the amount is credited in this Court. The said amount should be kept in fixed deposit with the Nationalized bank and directed the parties to put-forth their claim for disbursement before the competent authority. The Court further directed that petitioner no. 1 and respondent no. 5 may put-forth such claims before the Jt. Registrar of Co-operative Societies or petitioner no. 2, as the case may be. 3. Pursuant to the aforesaid directions of this Court in Writ Petition No. 8749 of 2010, the parties approached the Divisional Jt. Registrar, Co-operative Societies. The Divisional Jt. Registrar, Co- operative Societies vide its Judgment and Order dated 07/07/2011 5 W.P. 5656.2011 - [ J ] held that the present respondent no. 5 – Co-operative bank has a priority of the charge over the amount so deposited after the sale of molasses. The said order is assailed in the present Writ Petition. 4. Mr. Godhamgaonkar, the learned counsel for the petitioners with all his persussive skill submitted that : ( a ) The deposit of petitioner no. 1 with respondent no. 4 – Sugar Factory is since the year 1999 and the Sugar Factory had assured petitioner no. 1 of its due payment. When the deposit is since 1999 and the said amount is sought to be recovered, any security created thereafter will not bind petitioner no. 1 nor will have a priority claim over petitioner no. 1 ; ( b ) Even the Award is dated 23/03/2008. The same is prior to the loan advanced. The loan is advanced in the year 2010, as such any security created subsequently would not be of any avail or benefit to respondent no. 5 – bank. (c) The Award/decree having been passed by the Court of competent jurisdiction will have precedence over any security. The decreetal debt will have the precedence and the mortgage debt can not merge in the decreetal death. For the said purpose, the learned counsel relied on the Judgment of the Apex Court in the case of Mhadagonda 6 W.P. 5656.2011 - [ J ] Ramgonda Patil and others V/s Shripal Balwant Rainade and others reported in AIR 1988 Supreme Court – 1200 ( 1 ). (d) The petitioner no. 1 has taken further steps pursuant to the Award or the decree by attaching the property. Respondent no. 5 did not take any steps to recover the amount. Respondent no. 5 – Bank was negligent. Law can not help the negligent person. On this count also, respondent no. 5 is not entitled for any amount. (e) Even on the count of rule of equity, it is only the petitioner no. 1 who would be entitled for the amount. The petitioner no. 1 is a Co-operative Credit Society [ Pat Sanstha ], who on the debt and assurance of the Karkhana/Sugar Factory had invested the amount as deposit with it in the year 1999. The respondent no. 5 – bank claims recovery of more than Rs. 3,166.68 Lacs. If the amount is not directed to be paid to petitioner no. 1, petitioner no. 1 shall suffer irreparable loss. The respondent no. 5 has other securities worth more than their claim. As such, on the count of equity also, the petitioners deserves to be paid the amount. (f) Even as per Rule 107 ( 13 ) of the Maharashtra Co- operative Societies Rules, petitioner no. 1 has got the first right to claim amount. 7 W.P. 5656.2011 - [ J ] 5. Per contra, Mr. S.P. Shah, the learned counsel appearing for respondent no. 5 – bank supported the order and states that respondent no. 5 – bank has a priority claim in view of the fact that the said molasses were pledged with it since the year 2007. The authority has properly considered this aspect. No error has been committed by the authority. The question of equity does not arise. The molasses were pledged with respondent no. 5 – bank. 6. The factual matrix i.e. the Award passed in favour of petitioner no. 1 against respondent no. 4 – Sugar Factory is not disputed. It is also not disputed that as per the Award, the 5th and 6th instalments have not been paid by respondent no. 4 – Sugar Factory. It is also not disputed that respondent no. 5 – bank has to recover huge loan from respondent no. 4 – Sugar factory. The molasses has been sold. The amount is lying with the High Court. It is also on record that the molasses which were owned by respondent no. 4 – Sugar factory and are sold, are pledged with respondent no. 5. 7. The only point of debate is about the priority of the claim. In view of the fact that respondent no. 5 – bank is held to be a secured creditor by the authority pursuant to the pledge of the said molasses which are sold, I need not enter into the investigation of the facts in the limited jurisdiction under Article 227 of the Constitution of India. 8 W.P. 5656.2011 - [ J ] 8. The said molasses are pledged prior to the attachment made by petitioner no. 2. Simply because the Award/decree has been passed in favour of petitioner no. 1, that would not make petitioner no. 1 a priority claim holder. The secured creditor will always have a priority over any other creditor. Even Rule 107 ( 22 ) of the Maharashtra Co-operative Societies Rules lays down that the amount received from the sale has to be rateably distributed amongst all the applicants in the manner provided in Section 73 of the Code of Civil Procedure, 1908 [ For short, ‘ the Code ’ ]. Section 73 of the Code reads as under : “ Sec. 73 : Proceeds of execution – sale to be rateably distributed among decree holders, - ( 1 ) where assets are held by a Court and more persons than one have, before the receipt of such assets, made application to the Court for the execution of decrees for the payment of money passed against the same judgment-debtor and have not obtained satisfaction thereof, the assets, after deducting the costs of realization,l shall be rateably distributed among all such persons : Provided as follows : - (a) where any property is sold subject to a mortgage or charge, the mortgagee or incumbrancer shall not be entitled to 9 W.P. 5656.2011 - [ J ] share in any surplus arising from such sale; (b) where any property liable to be sold in execution of a decree is subject to a mortgage or charge, the Court may, with the consent of the mortgagee or incumbrancer, order that the property be sold free from the mortgage or charge, giving to the mortgagee or incumbrancer the same interest in the proceeds of the sale as he had in the property sold; (c) where any immovable property is sold in execution of a decree ordering its sale for the discharge of an incumbrance thereon, the proceeds of sale shall be applied - first,in defraying the expenses of the sale; secondly, in discharging the amount due under the decree; thirdly, in discharging the interest and principal moneys due on subsequent incumbrances ( if any); and fourthly, rateably among the holders of decrees for the payment of money against the judgment debtor, who have, prior to the sale of the property, applied to the Court which passed the 10 W.P. 5656.2011 - [ J ] decree ordering such sale for execution of such decrees and have not obtained satisfaction thereof. (2) Where all or any of the assets liable to be rateably distributed under this section are paid to a person not entitled to receive the same, any person so entitled may sue such person to compel him to refund the assets. (3) Nothing in this section affects any right of the Government ”. 9. Even reading Section 73 of the Code, it is manifest that the claim of the secured creditor will have priority over any other claim. If any surplus amount remains from sale proceeds after satisfying debt of secured creditor, then only the other person would be entitled to the surplus amount. The fact that respondent no. 5 – bank is a secured creditor of respondent no. 4 – Sugar Factory, is unequivocally established. The equity would not have any part to play in such matters. The proceedings would be governed by the statutory rights of the parties. The statute is clear and there is no ambiguity in the same. Even in the case of Re : Patel Corporation, Mumbai and another V/s Ramnik Pasu Gala reported in 2009 ( 4 ) Mh.L.J. - 511, the learned Single Judge of this Court has held that the expression “ secured 11 W.P. 5656.2011 - [ J ] creditor ” does not include unsecured creditor, who has obtained a decree and at whose instance the executing Court has attached the property. Even if the decree has been passed in favour of petitioner no. 1, that would not supersede the rights of the secured creditor to have a priority over the claim. 10. In the result, there is no merit in the Writ Petition, the Writ Petition deserves to be dismissed and is hereby dismissed. 11. Rule is accordingly discharged. No costs. [ S.V. GANGAPURWALA, J.] KNP/W.P. 5656.2011 - [ J ]