1 6 D.B. CIVIL SPECIAL APPEAL NO.134/2006 (RFC Jodhpur Vs. Smt. Sugani & Ors.) Date:- 14.08.2007 HON'BLE MR. RAJESH BALIA,J. HON'BLE MR. MAHESH CHANDRA SHARMA,J. Mr. S.G.Ojha, for the appellant. Mr. RR Vyas, for the respondent. Heard learned counsel for the parties. The appellant challenges the order passed by learned Single Judge dated 03.02.2005 dismissing the appeal filed against the order of the Workmen Compensation Commissioner. One Mishrimal S/o Pusha Ram died as a result of accident that arose in the course of employment of Mishrimal with respondent No.4, the Presties Stones Industries on 17.07.1988. The claim under the Workmen Compensation Act was raised by widow Sugani and parents Smt. Hawali Devi wife of Pusha Ram against the employer , the Presties Stones Industries, Boranada, Jodhpur, and the Rajasthan State Financial Corporation (RFC) which has taken possession of the industries in exercise of its power under Section 29 of the State Financial Corporation Act, 1951. 2 While awarding the compensation against the employer, the Presties Stones Industries, the Commissioner Workmen Compensation Act also held under Section 14 A that the assets of the employer are under first charge to discharge the liability under Workmen Compensation Act, and, therefore, the corporation as a transferee of the assets of industries is liable to discharge that liability towards the claim of the Workman Compensation. Aggrieved with the aforesaid direction of the Workman Compensation Commissioner dated 31.5.1996, an appeal was preferred before this Court. The learned Single Judge has dismissed the said appeal as noticed above, by holding that in view of section 14 A of the Workman Compensation Act, 1923, liability of the said Financial Corporation cannot be avoided as taking over the industries in terms of Section 29 amounts to transfer of assets. The appellant the RFC, before us does not dispute that the assets of the respondent No.4 M/s Presties Stones Industries were taken over by the corporation and the assets have been sold by the corporation in exercise of authority conferred upon it under Section 29 to respondent No.5. 3 Learned counsel for the appellant urges that taking over the possession of the assets of the industrial concerned does not amount to transfer of the assets of the employer within the meaning of Section 14 A of Workman Compensation Act, and, therefore, the corporation cannot be held liable in terms of Section 14 A . We have given our anxious consideration, the contention of the appellant to absolve the corporation of its liability to discharge the liability of the employer towards Workman Compensation Act cannot be sustained. Though, we are of the opinion that mere taking over possession of the industries concerned by itself does not amount to transfer of the assets by the employer under Section 14-A of the Act, 1923 in favour of the Corporation, which reads as under:- “Where an employer transfers his assets before any amount due in respect of any compensation, the liability wherefor accrued before the date of the transfer, has been paid, such amount shall, notwithstanding anything contained in any other law for the time being in force, be a first charge on that part of the assets so transferred as consists of immovable property.” 4 Likewise Section 29 of the Act 1951 which reads as under:- “The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. Where an action has been taken against an industrial concerned under the provisions of Sec/Section (1), all costs, [ charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it [*****] shall, in the absence of any contract to the contrary , be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.] When there was sale of property under S.29 of the Act for recovery of loans advanced by the Corporation there were dues of electricity consumption charges in relation to that property during the ownership of previous incumbent, such sale cannot affect the right of the Board to recover its dues.” A reading of the Section 22 makes it clear that mere taking over the possession of the industry concerned 5 does not amount to transfer of assets by the employer in favour of the corporation. In effect by taking over the possession, the corporation gets right either to manage the industry concerned by itself or through some other agency by leasing it out or it can transfer the assets of the company to recover its dues. It is only when the corporation exercises its rights to transfer the property of the debtor legal effect thereof is to result in variety of such assets in the transferee's as if the transfer has been made by the owner of the property. This clearly classified that the transfer of the property by the owner takes place only by exercising by the power of the Financial Corporation to transfer the property taken over by it for recovering its dues. Until then the property continues to be vesting in the proprietor of the business. However, since there is a first charge on the assets of the employer on such transfer of assets the proceeds are to be appropriate to discharge first charge before the corporation, can appropriate it to its own use. That is because the effect of Section 14 A which takes place irrespective of any other law for the time being in force that is why in spite of Section (4) of Section 29 which enables the Financial Corporation to appropriate the surplus proceedings for paying its dues after it pays out the costs incurred by it 6 for conductor the sale of the assets. Since over the assets the first charge is created by the statute corporation before appropriately proceeds towards its own dues must extinguish the first charge. Out of proceeds of the sale which proceeds are recovered by it for assets of the owner in the first instance. It is only because this proceeds belong to owner that the corporation can adjust the same towards its own dues. We are, therefore, of the opinion that in making direction to the corporation for paying the dues to the defendants of the deceased workman under workman compensation Act before appropriating the proceeds of the assets by the employer, it cannot be faulted with. Accordingly, the appeal fails and therefore dismissed. (MAHESH CHANDRA SHARMA),J. (RAJESH BALIA),J. arti