1 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 08.09.2011 CORAM: THE HONOURABLE MR.JUSTICE K.CHANDRU Cont.P.No.1320 of 2010 W.J.Subramaniam .. Petitioner Vs 1 Tmt.Kakarla Usha, I.A.S., Collector of Chennai Chennai Collectorate Chennai 600 001 2 The Branch Manager Indian Bank ARM Branch Chennai (2nd respondent is impleaded as per order dated 25.7.2011 in Sub A.No.334 of 2011) .. Respondents Petition filed under Section 11 of the Contempt of Courts Act to punish the respondent for having disobeyed the orders of this Hon'ble Court dated 10.2.2004 passed in W.P.No. 2403 of 2004. For Petitioner : Mr.V.B.Thirupathikumar For Respondents : Mr.V.Subbiah, Spl.GP for R1 Ms.Rita Chandrasekar for M/s.Aiyar & Dolia for R2 https://hcservices.ecourts.gov.in/hcservices/ 2 O R D E R The contempt petition came to be filed for the alleged disobedience of the order passed by this Court in W.P.No.2403 of 2004 dated 10.2.2004. By the aforesaid order, this Court directed the 1st respondent to recover the amount in terms of the Government Order in G.O.Nos.1004 and 1005 Labour and Employment Department dated 19.11.2002, authorising her to recover the amounts computed by the Labour Court in C.P.Nos.361 of 1989, 2021 of 1992 and 773 of 1994 vide order dated 28.11.1995 within a time frame. Since the said order was not complied with, the contempt came to be filed. 2. When the matter came up on 8.4.2011, this Court directed the learned Government Advocate to get instructions from the 1st respondent. Subsequently, while the Tahsildar, Egmore- Nungambakkam Taluk by a written instruction dated 10.1.2011 informed this Court that the amounts of Rs.39,700/- and Rs.69,240/- could not be recovered from the employer of the petitioner on account of the fact that the properties of the employer were seized and sealed by the Indian Bank, ARM Branch, Chennai by an order passed by the learned Chief Metropolitan Magistrate in CRL.M.P.No.581 of 2010 dated 4.6.2010 and the bank was proposing to sell the property in open auction. Admittedly, the properties were taken possession in terms of SARFAESI Act. When the revenue authorities contacted the Indian Bank, ARM Branch and informed him that the amounts are to be recovered as https://hcservices.ecourts.gov.in/hcservices/ 3 Government dues in terms of Revenue Recovery Act and the Revenue Recovery Certified Authorities have to recover Rs.1,08,940/-, the Manager of the Bank informed them that he will contact his head office and get back to them. It is under the circumstances, the petitioner filed a Sub Application No.334 of 2011 for impleading the Branch Manager, Indian Bank, ARM Branch, Chennai as a party respondent to the Contempt Petition. When the matter came up on 16.6.2011, this Court directed private notice to be served including a Notice on the Standing Counsel of the Indian Bank. Accordingly, notice was served and the proof of service was also filed. 3. On notice from this Court, the Chief Manager of ARM Branch, Indian Bank, Chennai filed a counter affidavit dated 23.7.2011. It was claimed by the bank that the employer of the petitioner M/s.Southern Security Services was having dues to the bank and the bank filed O.A.No.1356 of 1998 before the Debt Recovery Tribunal, Chennai for recovering the dues amounting to Rs.1,34,28,988.37p. with future interest. Even while the matter was pending before the Debt Recovery Tribunal, the matter was taken before the Lok Adalat with the consent of the bank and the borrower and an award dated 22.11.2003 was passed, wherein the borrower/employer agreed to remit Rs.102 lakhs before 30.6.2004. Because of the default clause contained in the Award and the employer defaulted in payment, the matter was revived by the Debt Recovery Tribunal. But the borrower approached the Debt https://hcservices.ecourts.gov.in/hcservices/ 4 Recovery Tribunal for staying the final order. The Debt Recovery Tribunal issued a Debt Recovery Certificate on 18.5.2010 and dismissed the Interlocutory application filed by the employer. 4. After notice was given under Section 13(2) of the SARFAESI Act and as there was no response, the 2nd respondent took symbolic possession of the mortgaged property on 19.7.2005. Because of the several stay petitions, the property could not be brought under auction and a petition under Section 14 of the SARFAESI Act was filed before the Chief Metropolitan Magistrate Court. By order dated 4.6.2010, an Advocate Commissioner was appointed and he took physical possession of the property on 29.7.2010. The borrower filed S.A.No.51 of 2010 before the Debt Recovery Tribunal for entering premises, which was also dismissed. Once again the matter was referred to Lok Adalat and finally the borrower agreed to pay Rs.225 lakhs. They also obtained an exparte order before Debt Recovery Tribunal from proceeding further. 5. In the meanwhile, the property was brought up for auction on 12.11.2010 with a reserve price of Rs.155 Lakhs and the property was sold for Rs.156.50 and the sale was also confirmed on 15.11.2010. The borrower's appeal in S.A.No.286 of 2010 was entertained by the Debt Recovery Tribunal and an order to prevent the issuance of sale certificate was obtained by him https://hcservices.ecourts.gov.in/hcservices/ 5 but the bank was permitted to receive the balance sale consideration of Rs.156.50 lakhs to the dues on the suit on 28.12.2010. In view of the stay, the 2nd respondent bank was unable to issue the sale certificate in favour of the auction purchaser. Thereafter, the present petitioner had moved this court and got an order on 10.2.2004. The mortgaged property, which was sold in public auction was exclusively mortgaged to the 2nd respondent bank as early as on 5.8.1994 and even after appropriation of the entire sale consideration, there was further dues of Rs.1416.22 Lakhs as on 31.3.2011. No surplus is available for satisfaction of the other liabilities of the borrower. 6. While in this case, the action of the 1st respondent in not able to implement the orders of this Court cannot be found fault with because the property has been taken over by the Indian Bank (2nd respondent). But, at the same time, the petitioner having secured an order in his favour against his employer M/s.Southern Security Services from the Labour Court as early as 28.11.1995 as a 1st charge over the properties of the employer and when he secured a revenue recovery certificate on 19.11.2002 by G.O.Nos.1004 and 1005 dated 19.11.2002 and the dues have become as if an arrear of land revenue to the state, it is recoverable from the employer. Merely because the property was mortgaged with the 2nd respondent Indian Bank due to the loan sanctioned to the employer, they cannot appropriate https://hcservices.ecourts.gov.in/hcservices/ 6 the entire property to themselves. Though the SARFAESI Act enables the owner's property, which was given as security, for sale by a sale officer but the entire amount realized from that sale cannot be appropriated towards the contractual dues to the 2nd respondent bank. The claim of the workman has a priority charge over the property as against the contractual dues to the 2nd respondent bank. 7. Under Section 33-C (1) of the Industrial Disputes Act, 1947, dues to the workman from the employer can be recovered by the certificate issued by the appropriate State Government and the amount can be recovered as if an arrear of land revenue and therefore the petitioner's dues will have to be collected as an arrear of land revenue, which has a priority over the contractual claim by the 2nd respondent bank. 8. The Supreme Court in Ahmedabad Municipality vs. Haji Abdul reported in 1975(1) SCC 757, held that debts due to a local authority are given priority being bracketed with the debts due to the State. 9. Similarly, in Union of India and others v. Silicon Ltd and another reported in 2009 (1) Scale 10 has held that a debt which is secured or which by reasons of the provisions of a Statute becomes first charge over the property. https://hcservices.ecourts.gov.in/hcservices/ 7 10. In view of the above, since the 2nd respondent bank has appropriated the entire sale proceeds, notwithstanding the petitioner has got a concrete right in terms of the Labour Court's order, followed by the revenue recovery certificate, this Court hereby directs the 2nd respondent bank to pay the the worker a sum of Rs.1,08,940/- from the sale proceeds received pursuant to the auction conducted by them in respect of the petitioner's employer's property. Though Ms.Rita Chandraseakar, learned counsel for the 2nd respondent bank contended that the bank is having further claim from the employer, this Court is not concerned with the said contention and the bank has no right to appropriate the entire sale proceeds, when there are other claims which are having preferable rights over the bank's claim. 11.Since the 1st respondent Collector through her revenue officials was informed by the 2nd respondent bank about the sale and their refusal to part with the sale proceeds, while exonerating the 1st respondent from proceeding with the revenue recovery action and also the fact that the 2nd respondent bank comes within the meaning of State under Article 12 of the Constitution, instead of driving the petitioner for different forums for claiming the amount, this Court in the exercise of its extraordinary jurisdiction, directs the 2nd respondent bank to pay the petitioner a sum of Rs.1,08,940/- within a period of eight weeks from the date of receipt of this order and report compliance of the same to this Court. If the order is not https://hcservices.ecourts.gov.in/hcservices/ 8 obeyed, further action will be initiated against the 2nd respondent bank. The Contempt Petition is disposed of accordingly. ajr SD/- DEPUTY REGISTRAR (OS) //Certified to be true copy// Dated at Madras this the day of 2011. COURT OFFICER (O.S.) From 25th Day of September 2008 the Registry is issuing certified copies of the orders/judgments/Decrees in this format. KS(CO) SMV/30/09/2011 To 1 Tmt.Kakarla Usha, I.A.S., Collector of Chennai Chennai Collectorate Chennai 600 001 2 The Branch Manager Indian Bank ARM Branch Chennai https://hcservices.ecourts.gov.in/hcservices/