1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD WRIT PETITION NO.1237 OF 2010 The Maharashtra State Co-operative Bank Ltd, having its Registered Office at 9, Maharashtra Chamber, Commerce Lane, Mumbai-23 Regional Office at Aurangabad, Through it's Assistant Manager, Sudhir Mahadeo Mehetre, Age: 44 years, Occ: Service, R/o. Aurangabad. .. Petitioner Versus 1. The Assistant Provident Fund Commissioner, Solapur. 2. The Recovery Officer, Provident Fund Organisation, Sub-Divisional Office, 165-A, Surwase Towers, Railway Line, Solapur. 3. M/s Shivajirao Patil Nilangekar Sahakari Sakhar Karkhana Ltd., Nilanga, Tq. Nilanga, Dist.Latur Through its Managing Director/ Chairman. 4. The Union of India, Through its Principal Secretary, Ministry of Consumer Affairs Food and Public Distribution, Department of Food and Public Distribution,Krishi Bhavan, New Delhi-110 001. 5. The Chief Director of Sugar, 2 Department of Food and Public Distribution, Krishi Bhavan, New Delhi-110 001. 6. The Commissioner of Sugar, State of Maharashtra, Pune. 7. The State of Maharashtra, Through its Principal Secretary, Department of Co-operation, Mantralaya, Mumbai-32. .. Respondents ... Mr. R.N. Dhorde, Advocate for petitioner. Mr. K.B. Choudhary, Advocate for respondent Nos. 1 and 2. Mr. Alok Sharma, Standing Counsel for respondent Nos. 4 and 5. Mr. S.K. Tambe, A.G.P. for respondent Nos.6 & 7. ... WITH WRIT PETITION NO.1593 OF 2010 The Maharashtra State Co-operative Bank Limited Mumbai, A registered Co-operative Society having its regional office at Nashik, Plot No.3, Sector 'E', Post Box 81, Nashik-422 009. Through its Regional Manager, Nashik Region, Nashik. .. Petitioner Versus 1. The Union of India, Through its Principal Secretary, Ministry of 3 Labour and Welfare Department, Krishi Bhavan, New Delhi-110 001. 2. The Central Board Provident Fund Organisation, Bhavishya Nidhi Bhavan, 14, Bhikaji Cama Palace, New Delhi. 3. The Central Provident Fund Commissioner, Bhavishya Nidhi Bhavan, 14, Bhikaji Cama Palace, New Delhi. 4. The Assistant Provident Fund Commissioner, P-11, MIDC, Satpur, Nashik. 5. The District Enforcement Officer, Provident Fund Organisation, Jalgaon, District Jalgaon. 6. Pushpa Danteshwar Sahakari Sakhar Karkhana Ltd. Shamsherpur, Tq. & Dist. Nandurbar. 7. The Assistant Provident Fund Officer, Aurangabad Region, Aurangabad. .. Respondents ... Mr. R.N. Dhorde, Advocate for petitioner. Mr. Alok Sharma, Standing Counsel for respondent No.1. Mr. K.B. Choudhary, Advocate for respondent Nos. 2 to 5 and 7. ... 4 CORAM : A.M KHANWILKAR & S.S. SHINDE, JJ. DATE : 3RD MARCH, 2010 PER COURT : Heard learned Counsel for the parties. 2. By this petition under Article 226 of the Constitution of India, the petitioner, a registered Co-operative Society under the provisions of the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as "The Act of 1960") is an Apex Society, prays that it be declared that the auction notice dated 11-02-2010 published by the Recovery Officer, Provident Fund Organisation (respondent No.2), in the local newspaper for auctioning 6000 quintals of sugar bags to effectuate the 5 recovery of the provident fund dues of the employees of respondent No.3 M/s. Shivajirao Patil Nilangekar Sahakari Sakhar Karkhana Ltd., Nilanga District Latur, by invoking the enabling provisions of the Employees of the Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "The Act of 1952), is illegal and violative of Article 14 of the Constitution of India as well as Section 11(2) of the Act of 1952 and also provisions of Essential Commodities Act, 1955 (hereinafter referred to as "The Act of 1955), and the Sugar (Control) Order, 1966. The petitioner has also prayed for quashing and setting aside the auction notice dated 11-02-2010. 3. These reliefs are claimed on the assertion that the petitioner being an Apex Society and also a Scheduled bank, 6 had advanced loans to respondent No.3 sugar factory which is a Co-operative society registered under the provisions of Act of 1960; and to secure the said loans and advance given towards working capital loan, an agreement to pledge/hypothecation of sugar gunny bags produced and to be produced by respondent No. 3 sugar factory was executed. Besides, a mortgage deed in respect of immovable properties of respondent No. 3 sugar factory was also executed. In other words, the petitioner was the secured creditor in relation to the stated movable and immovable properties of the respondent No.3 sugar factory. The pledge account is of total 31045 quintals of sugar lying in Godown Nos. 1 to 4 of respondent No.3 sugar factory and are in possession of the petitioner bank. Further, the petitioner bank has to recovery an amount of Rs. 85.93 Crores 7 alongwith interest as on 31-11-2009 from the respondent No.3. In terms of deed of pledge/hypothecation, the petitioner had complete control over the sugar gunny bags weighing about 31045 quintals of sugar lying in the above mentioned Godowns of respondent No. 3 sugar factory, being secured creditor. Notwithstanding this, the Assistant Provident Fund Commissioner and Recovery Officer, Provident Fund Organisation, respondent Nos. 1 and 2 respectively (for the sake of brevity hereinafter referred to as "P.F.C."), proceeded to attach 6000 quintals of sugar bags out of the abovesaid stock of sugar lying in the above mentioned Godowns of respondent No. 3 sugar factory which was in possession of the petitioner bank and also proceeded to issue the impugned auction notice dated 11-02-2010 for sale of the said sugar to be held on 16-02-2010 at 11-00 8 a.m. According to the petitioner, respondent Nos. 1 and 2 have no authority, in law, to auction the said sugar. Therefore, this petition was filed on 16-02-2010 and the matter was moved by producing it before us on the same day at 2-30 P.M. apprehending completion of auction sale by respondent No.2. We directed the matter to be listed on 23-02-2010. In the meantime, we ordered that even if auction was to be conducted, sale shall not be confirmed. On being intimated of the above order, the matter was moved by respondent Nos. 1 and 2 on 17-02-2010 pointing out that the sale was already confirmed by the time the order was passed and communicated to the said respondents. In the circumstances, we directed the parties to maintain status quo as of that date with regard to sugar stock in question. The matter was then heard in part on 23rd and 24th February, 9 2010 and placed today when this order is passed. 4. According to the respondent Nos. 1 and 2 however, no relief can be granted to the petitioner as the Apex Court has already taken the view that the P.F.C. would have priority to recover provident fund dues over all other debts of respondent No.3, in terms of Section 11(2) of the Act of 1952. Section 11(2) has been construed to mean that the priority of the P.F.C. would operate against the statutory as well as non statutory, secured as well as unsecured debts including mortgage or pledge and the dues payable under the Act of 1952 would always remain as first statutory charge and shall be paid first out of the assets of the establishment notwithstanding anything contained in any other law for the time being in force. 10 This view has been taken in the case of Maharashtra State Co-op. Bank Limited (petitioner herein) vs Assistant Provident Fund Commissioner and another, reported in 2009 AIR SCW 6784. According to the respondents, therefore, the petition is devoid of merits. Further, the petitioner, to overcome the decision of the Apex Court, which is binding on the petitioner as well as this Court, is attempting to raise frivolous and untenable pleas out of desperation. 5. Counsel for the petitioner, however, was at pains to persuade us that the judgment of the Apex Court can be distinguished and in any case, the same cannot be treated as a binding precedent, in any case it is per incuriam. To buttress the above submissions, it is contended that in the case decided by the 11 Apex Court, the matter arose from an interlocutory order passed by this Court granting relief to P.F.C. during the pendency of Writ Petition in this Court, between the parties in that case. We do not find any substance in this submission. In our view, however, the said decision of the Apex Court expounds the legal position pertaining to the scheme of Act of 1952 and in particular Section 11 of the Act of 1952 and has had an occasion to consider the similar issues as in the present case. In that, the stocks/goods/commodities of the sugar factory were pledged to the petitioner bank and the P.F.C. to recover the provident fund dues of the employees of the sugar factory attached part of the pledged stocks/goods/commodities thereof. The petitioner objected to the said action of the P.F.C. and claimed that the attachment and sale of sugar which was in 12 possession of the petitioner bank could not be proceeded with in law. 6. To overcome this position, it was contended that the above said decision of the Apex Court is per incuriam, in as much as the same proceeded to examine the point in issue without there being any proper adjudication or interpretation of pledge document which could be done by the Court of first instance where the Writ Petition was filed and pending. Besides, the Apex Court decided the matter by interpreting the pledge deed alone which was produced before it and the conclusion reached by the Apex Court is not on the basis of all the relevant facts and documents and the provisions of law. It is not possible to countenance this plea at the instance of the petitioner herein who was party to the appeal before the Apex Court in the said 13 matter. We are conscious of the fact that finding in that case on factual matrix which arose for consideration before the Apex Court will be of no avail to decide the present case. At the same time, as noticed earlier, the decision, in our view, is an unambiguous exposition of law regarding the interpretation and scope of the provisions of the Act of 1952 to answer the objection of this very petitioner. That opinion would be binding on us in view of Article 141 of the Constitution of India. 7. It was then submitted that certain relevant facts were not brought to the notice of the Court - such as that BRIO was appointed by the petitioner for each factory who is employee of the petitioner bank and posted by the petitioner for each sugar factory like respondent sugar factory. The effect of such arrangement 14 is that the entire sugar stock and Godowns are exclusively in the possession of the petitioner bank through its BRIO who locks the Godowns and keeps the keys of the said Godowns and one set of keys are as per rules kept with the petitioner bank and it is the duty of the said BRIO as prescribed by rules to keep the custody of said sugar which is pledged with the petitioner bank. In other words, the petitioner has exclusive custody of the stock/sugar and the respondent sugar factory has no concern whatsoever with the said stock. Even this argument does not commend to us. The Apex Court in the above said judgment has held that even though symbolic possession of the sugar bags was given to the petitioner bank as security for the repayment of loan, sugar mill continued to be the owner thereof and that the action of P.F.C. was in respect of 15 general property of the sugar factory. The Apex Court has held that even if the contract of pawn or pledge, the pawnee/pledgee has only a special property in the pledge but the general property remains with the pawnor/pledgor and wholly reverts to him on discharge of the debt. Further, the right to property vests in the pledgee only so far as necessary to secure his debt and that arrangement between pawnor and pawnee, as security for repayment of loan does not have the effect of transferring the ownership of the sugar bags to the petitioner bank. For that reason, the Recovery Officer could legitimately attach the said property and sell the same to recover the amount due towards provident fund of the employees which was payable by the respondent No.3 sugar factory. 16 8. Counsel for the petitioner, however, placed reliance on the decision of the Apex Court in the case of The Bank of Bihar vs. The State of Bihar and others reported in AIR 1971 SC 1210 and another case of Central Bank of India vs. Siriguppa Sugars and Chemicals Ltd and others reported in 200(8) Mh.L.J. 11 (SC), to contend that pawnee has special property of lien on the goods and so long as his claim is not satisfied, no other creditor of pawnor has any right to take away the goods or its price. Both these decisions are of no avail to the petitioner. They deal with the situation which is governed by the ordinary law of Contract Act. Indeed, these decisions are not specifically adverted to by the Apex Court while deciding the case of Maharashtra State Co-operative Bank Ltd. (supra). That would make no difference. 17 For, in the reported decision of the petitioner bank, the question has been answered in the context of special provisions of Act of 1952 which give priority and operates against the statutory as well as non statutory, secured as well as non secured debts including a mortgage or pledge. According to the petitioner, the statement of law expounded in the case of Maharashtra State Co-operative Bank Ltd., interalia in Para. 33 thereof, is not correct and runs counter to the exposition in the two cases relied by the petitioner. We do not find any merit in this submission. Counsel for P.F.C. rightly relied on the decision of our High Court in the case of Indus Agro Products vs. Union of India and others reported in 2006(5) Mh.L.J. 136, and of the Kerala High Court in the case of Recovery Officer and Assistant Provident Fund Commissioner vs. Kerala 18 Finance Corporation reported in 2002 (III) LLJ 643 to support the argument that the Courts have considered the similar contention regarding priority of payment of contribution over other debts, as also, the effect of non obstante clause in Section 11(2) qua provisions of Transfer of Property Act, 1882. It is held that Section 11(2) of the Act of 1952 overrides all other provisions of law including Transfer of Property Act,1882. 9. It was next contended that the decision of the Apex Court is per incuriam on account of the fact that it has not adverted to the crucial provisions of the Act of 1955, as well as Sugar (Control) Order, 1966 which are special provisions in the interests of general public- unlike the Act of 1952 is only in the interests of public, intended to regulate production, supply and distribution and trade and commerce of 19 the essential commodities like sugar. That being special enactment will prevail and for which reason, the action of the P.F.C. will be illegal and without authority of Law. Reliance is placed on Sub-sections (3-D), (3-E), (4) to (6) of Section 3 the Act, 1955, which read thus : "(3-D) The Central Government may direct that no producer, importer or exporter shall sell or otherwise dispose of, or deliver any kind of sugar or remove any kind of sugar from the bonded godown of the factory in which it is produced, whether such godowns are situated within the premises of the factory or outside, or from the warehouses of the importers or exporters, as the case may be, except under and in accordance with the direction issued by the Government: Provided that the sub-section shall not affect the pledging of 20 such sugar by any producer or importer in favour of any scheduled bank as defined in clause (c) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934) or any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 (5 of 1970), so, however, that no such bank shall sell the sugar pledged to it except under and in accordance with a direction issued by the Central Government. (3-E) The Central Government may, from time to time, by general or special order, direct any producer or importer or exporter or recognised dealer or any class of producers or recognised dealers, to take action regarding production, maintenance of stocks, storage, sale, grading, packing, marking, weighment, disposal, delivery and distribution of any kind of sugar in the manner specified in the direction. Explanation.-For the purposes of sub-section (3-D) and this sub- 21 section.- (a) "producer" means a person carrying on the business of manufacturing sugar; (b) "recognised dealer" means a person carrying on the business of purchasing, selling or distributing sugar; (c) "sugar" includes plantation white sugar, raw sugar and refined sugar, whether indigenously produced or imported. (4) If the Central Government is of opinion that it is necessary so to do for maintaining or increasing the production and supply of an essential commodity, it may by order, authorise any person (hereinafter referred to as an authorised controller) to exercise, with respect to the whole or any part of any such undertaking engaged in the production and supply of the commodity as may be specified in the order such functions of control as may be provided therein and so long as such order is in force with respect to any 22 undertaking or part thereof,- (a) the authorised controller shall exercise his functions in accordance with any instructions given to him by the Central Government, so, however, that he shall not have any power to give any direction inconsistent with the provisions of any enactment or any instrument determining the functions of the persons in-charge of the management of the undertaking, except insofar as may be specifically provided by the order; and (b) the undertaking or part shall be carried on in accordance with any directions given by the authorised controller under the provisions of the order, and any person having any functions of management in relation to the undertaking or part shall comply with any such directions. (5) An order made under this Section shall,- (a) in the case of an order of a general nature or affecting a class of 23 persons be notified in the Official Gazette; and (b) in the case of an order directed to a specified individual be served on such individual- (i) by delivering or tendering it to that individual, or (ii) if it cannot be so delivered or tendered, affixing it on the outer door or some other conspicuous part of the premises in which that individual lives, and a written report thereof shall be prepared and witnessed by two persons living in the neighbourhood. (6) Every order made under this section by the Central Government or by any officer or authority of the Central Government shall be laid before both Houses of Parliament, as soon as may be, after it is made". 10. Our attention was also invited to Section 2(b) and 2(e) of the Act of 1955. Section 2(b) defines expression "food 24 crops" to include crops of sugarcane, whereas the term "sugar": is defined in section 2(e). As a result, the Central Government has power under Section 3 to control production, supply, distribution of essential commodities (sugar in this case) and it is competent to issue order for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. According to the petitioner, the entire sugar production, supply and distribution is regulated under the Act of 1955 and the Orders passed thereunder. Our attention was also invited to Clauses 3(3) and 3(3-A) in particular, of the Sugarcane (Control) Order, 1966. The same read thus : "3(3) Where a producer of sugar purchases any sugarcane from a grower of sugarcane or from a 25 sugarcane growers' co- operative society, the producer shall, unless there is an agreement in writing to the contrary between the parties, pay within fourteen days from the date of delivery of the sugarcane to the seller or tender to him the price of the cane sold at the rate agreed between the producer and the sugarcane grower or the sugarcane growers' co-operative society or that fixed under Sub-clause (1), as the case may be, either at the gate of the factory or at the cane collection centre or transfer or deposit the necessary amount in the Bank account of the seller or the co- operative society, as the case may be. 3[3-A) Where a producer of sugar or his agent fails to make payment for the sugarcane purchased within 14 days of the date of delivery, he shall pay interest on the amount due at the rate of 15 per cent per annum for the period of such delay beyond 14 days. Where payment of 26 interest on delayed payment is made to a cane growers' society, the society shall pass on the interest to the cane growers concerned after deducting administrative charges, if any, permitted by the rules of the said society.]" Relying on these provisions, it was contended that it is the obligation of the sugar factory to pay the purchase price to cane growers within 14 days, failing which the producer is liable for necessary action including payment of interest @ 12% p.a. and such payment is required to be made by Co-operative Society such as respondent No.3 herein through scheduled bank like the petitioner. Our attention was also invited to Sugar (Control) Order, 1966 and clause-4 in particular which provides that no manufacturer can sell the sugar except with written permission of the 27 Central Government. The same reads thus: "[4. Power to restrict sale, etc. of sugar by producers or importers.- The Central Government may direct that no producer or importer shall sale or agree to sell or otherwise dispose of, or deliver or agree to deliver any kind of sugar or remove any kind of sugar from the bonded godowns of the factory in which it is produced or from the warehouses of the importers except under and in accordance with a direction issued in writing by the Central Government; Provided that this clause shall not affect the pledging of such sugar by any producer or importer in favour of any scheduled bank as defined in Clause (e) of Sec.2 of the Reserve Bank of India Act, 1934 (2 of 1934) or any corresponding new bank constituted under Sec. 3 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 ( 5 of 1970) and no such bank shall sale the sugar pledged to it except under and in accordance with a direction issued in writing by the Central Government]." 28 Besides, reliance is placed on clause 5-A of Sugar (Control) Order, 1966 which was introduced in 1971 stipulating that sugar attached by Government Officers shall not be sold without directions issued by the Central Government. The same reads thus: "[5-A. Sugar attached by Government officers etc., not to be sold without directions.- Where any stock of sugar with any [producer or importer] or recognised dealer is attached or seized- (i) by any officer of the Central or State Government in accordance with the provisions of any enactment for the time being in force, or (ii) in pursuance of any proceedings in a Civil Court, the sugar so attached or seized shall not be ordered to be sold unless the officer or Court is satisfied that directions have been issued by the Central Government under 29 Clause 5 regarding the sale of such sugar.]" Referring to the above provisions, it is contended that there is statutory prohibition for sale of sugar by virtue of provisions of Act of 1955 and the Orders issued thereunder, which is in vogue to maintain supply of sugar in the interests of general public. All these provisions though material have not been adverted to by the Apex Court while deciding the question answered by it. 11. The argument though attractive, is