1 wp2503.11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, BENCH AT AURANGABAD WRIT PETITION NO. 2503 OF 2011 01. Subhash Jalam Patil, age 59 years, occupation: employee of Respondent No.5, 02. Ashok Manik Patil, age 59 years, occupation: employee of Respondent No.5. 03. Ashok Hasanrao Patil, age 55 years, occupation : employee of Respondent No.5, 04. Madhav Tryambak Patil, age 59 years, occupation : employee of Respondent No.5. All are residents of Vasant Sahakari Sakhar Karkhana Limited, Kasoda, Taluka Erandol, District Jalgaon. Petitioners versus 01. State of Maharashtra, through its Principal Secretary, Co-operation Department, Mantralaya, Mumbai. 02. The Commissioner of Sugar, State of Maharashtra, :Sahakar Sankul", Agriculture College Compound, Shivaji Nagar, Pune, Dist. Pune. 03. Jalgaon District Central Copoperative Bank Ltd., through its authorizied Representative and/or Court Receiver 27, Ring Road, Jalgaon, Dist. Jalgaon. 04. The Collector, (Appointed as Liquidator, Vasant Sahakari Sakhar Karkhana Ltd. Kasoda, Tq. Erandol, District Jalna). Dist. Collector Office, Jalgaon, District Jalgaon. 2 wp2503.11 05. Vasant Sahakari Sakhar Karkhana Ltd. through its Incharge Executive Director, Kasoda, Taluka Erandol, Dist. Jalgaon. Respondents WITH WRIT PETITION NO. 2512 OF 2011 01. Atul s/o Subhashchandra Sanghavi age 40 years, occupation Chartered Accountant and Elected Director of the Jalgaon District Central Cooperative Bank, r/of 36, Indira Nagar, Pachora, Taluka : Jalgaon, District : Jalgaon. Petitioner versus 01. The State of Maharashtra, through its Secretary, Co-operation Department, Mantralaya, Mumbai-32. 02. The Authorized Officer, The Jalgaon Dist.Central Cooperative Bank Ltd., Ring Road, Jalgaon, Taluka and District Jalgaon. 03. The Jalgaon District Central, Co-operative Bank Limited, Jalgaon, at Jalgaon, through its Managing Director. Respondents (WITH C.A. NOS. 4525/2010 AND 5058 & 5428 OF 2011) WITH WRIT PETITION NOS. 2666 OF 2011 01. Vasant Sahakari Sakhar Karkhana, Bachav Kruti Samiti, through its President, Mr. Amit Rajendra Patil, age 32 years, occupation : Agril. r/of Plot No.5, Shivaji Nagar, Erandol, Taluka Erandol, Dist.Jalgaon. 3 wp2503.11 02. Sanjay Waman Chaudhari, age 41 years, occup. Agril. r/of Kasoda, Taluka Erandol, District Jalgaon. 03. Vijay Pandharinath Mahajan, age 44 years, occup. Agril. r/of Erandol, Taluka Erandol, District Jalgaon. 04. Jagdish Devidas Thakur, Age 40 years, occup. business, r/of Erandol, Taluka Erandol, District Jalgaon. 05. Adv. Vishwasrao Ragho Bhosle, Age 40 years, occup. Advocate, r/of Pimparkhed, Taluka Bhadgao, District Jalgaon. Petitioners. versus 01. The State of Maharashtra, through its Principal Secretary, Cooperation Department, Mantralaya, Mumbai. 02. The Commissioner of Sugar, Maharashtra State, Pune. 03. The Director of Sugar, Aurangabad. 04. The Jalgaon District Central Cooperative Bank Limited, Jalgaon, Ringh Road, Jalgaon, through its Managing Director. 05. The Authorized Officer, Jalgaon District Central Cooperative Bank Ltd., Jalgaon, Ringh Road, Jalgaon. 06. Vasant Sahakari Sakhar Karkhana Ltd. Kasoda, Taluka Erandol, District : Jalgaon, through its Liquidator. Respondents 4 wp2503.11 WITH WRIT PETITION NO.2997 OF 2011 01. Rashtriya Sakhar Kamgar Union, (Registration No. N.S.K./J-196), At post Vasant Sahakari Sakhar Karkhana Ltd., Kasoda, Tq. Erandol, District Jalgaon, through its General Secretary Shri Ratan s/o Nathu Patil, age 57 years, occupation:Agriculture, r/of At Nachankhede, post Lohtar, Taluka Pachora, District Jalgaon. Petitioner versus . 01. The State of Maharashtra, through the Principal Secretary, Department of Cooperation, Textiles, Mantralaya, Mumbai-32. 02. The Commissioner of Sugar, Maharashtra State, and Registrar of Cooperative Societies, Sakhar Sankul, Shivaji Nagar Pune-5. 03. Jalgaon District Central Cooperative Bank Limited, Jalgaon, 27 Ringh Road, Head Office, Jalgaon, through its Authaorized Officer. 04. Vasant Sahakari Sakhar Karkhana Ltd. Kasoda, Taluka Erandol, District : Jalgaon, through its Court Receiver/ Incharge Managing Director. Respondents 5 wp2503.11 WITH WRIT PETITION NO. 4793 OF 2011 01. Nimbaji s/o Narayan Chaudhari age 65 years, occupation : Agril. r/of Dnyandeep Chowk, Erandol, Taluka Erandol, District Jalgaon. Petitioner versus 01. The State of Maharashtra, through its Secretary, through Cooperative and Textile Department, Mantralaya, Mumbai-32 02 The Authorized Officer of the Jalgaon District Central Cooperative Bank Ltd., Jalgaon. 03. The Managing Director, The Jalgaon District Central Cooperative Bank Limited, Jalgaon, at Jalgaon. 04. Jaiganga Sugar Factory, Dondaicha, Tq. Shindhkheda, Dist. Dhue, through its Managing Director. Respondents ---------- Mr. S.R. Patil, Advocate, for petitioner in Writ Petition No. 2503 of 2011. Mr. N.B. Khandare, Govt. Pleader for Respondent-State in all the Petitions, and for applicant-State in Civil Application No. 5058/11 in WP 2512/11. Mr. R.N. Dhorde, Advocate, i/b Mr. V.R. Dhorde, Advocate, for Respondent No. 3 in WP No. 2503/2011, Resp. Nos. 2 and 3 in WP No. 2512 of 2011. Mr. G.V. Wani, Advocate for Petitioner in Writ Petition No. 2512 of 2011. Mr.N.B.Suryawanshi, Adv. for applicant in C.A.no.5428 /11 in WP 2512/11. Mr. V.B. Patil, Advocate, for the petitioner in Writ Petition no. 2666/11. Mr.A.V. Deshmukh, Advocate, for Respondent No. 4 in WP No. 2666/11. Mr. A.S. Shelke, Advocate for petitioner in Writ Petition No. 2997 of 2011. Mr.V.D.Hon, Advocate, holding for Mr. N.N.Desle, Advocate for Petitioner in Writ Petition No.4793 of 2011. 6 wp2503.11 Coram: Smt. Nishita Mhatre and M. T. Joshi, JJ. Date : 11th July, 2011. Oral Judgment (Per: Smt. Mhatre, J.) 01. Rule. Rule made returnable forthwith, with the consent of the parties. These Writ Petitions have been heard together, since the issue involved in all these writ petitions is the same. The facts giving rise to the present petitions are as follows; 02. The Vasant Sahakari Sakhar Karkhana Limited (for short "the karkhana") commenced operations in the year 1973. It is registered as a cooperative society under the Maharashtra Cooperative Societies Act, 1960 (for short "The MCS Act"). The karkhana had borrowed a loan from the Jalgaon District Central Cooperative Bank Limited (hereinafter referred to as "the bank"). The Karkhana incurred huge losses due to various reasons, including mismanagement by the directors and, therefore, it could not repay the loan to the bank within the stipulated period. It appears that the karkhana has not been conducting any operations after the year 2000. An agreement was entered into between the karkahana and the Rashtriya Sakhar Kamgar Union representing the workers of the Karkhana. Under the agreement, the karkhana agreed to pay the wages of the workers from March 1998 to December 1999 along with the other legal dues, such as, provident fund, gratuity, bonus, leave encashment etc. Moreover, the karkhana did not pay the amounts 7 wp2503.11 agreed to the workers, nor did it continue its operations after the year 2000. The bank filed a dispute in the year 2000 , being Dispute No.CC/JGA/459/2000, under the MCS Act, in the Cooperative Court, Jalgaon, against the karkhana, for recovery of the loans advanced by it. An application for appointment of the Court Receiver was also filed which was allowed and, accordingly, the Court Receiver has been appointed in respect of the assets of the karkhana, by an order dated 11.1.2001, passed by the Cooperative Court. The dispute filed by the bank was also allowed by the court by order dated 17.3.2001 and it was held that the karkhana was liable to pay an amount of ` 30,24,32,954.20 ps. including interest, to the bank. The Court Receiver was directed further to sell both the immovable and the movable, assets of the karkhana for realization of the amount. 03. The Commissioner of Sugar has passed an order on 14.3.2002 under Section 102 (1) (2) of the MCS Act and has started proceedings for liquidation of the karkhana. Accordingly, the Collector, Jalgaon, has been appointed as the liquidator of the karkhana. 04. The bank then issued a notice on 2.8.2006 to the karkhana, under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("The Securitisation Act" for short). It appears that the bank thereafter has taken over possession of the secured assets of the karkhana. It thereafter entered into an agreement of lease with Gangamai Industries and Construction Limited, on 16.7.2007 to run the karkhana. 8 wp2503.11 Accordingly, the Gangamai Industries and Construction Ltd. was able to run the karkhana for one year. All the workers, who were on the rolls of the karkhana, worked with the Gangamai Industries. The products of the Gangamai Industries were sold by the bank and the proceeds were deposited into the loan account of the respondent-karkhana. However, the Gangamai Industries was unable to run the karkhana any further after one year and the operations of the karkhana stopped again. 05. The workers, through their union, called upon the karkhana to pay them their unpaid wages and other legal dues. A representation was also sent to the Commissioner of Sugar, bringing to his notice the fact that the karkhana had earned sufficiently for paying the legal dues and unpaid wages of the workmen. As directed by the Commissioner of Sugar, the Auditor, Cooperative Societies, Jalgaon, has submitted a report in respect of the unpaid wages and the legal dues of the workers, but the workers' demands for payment of their dues went unheeded both, by the karkahana, as well as the bank. They have filed complaints in the Industrial Court under Item 9 of Schedule IV of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act,1971 (for short "the MRTU and PULP Act"). In response to the letter from the Commissioner of Sugar, the karkhana has submitted to him the exact amounts payable to the workmen towards their unpaid wages and all other legal dues, on 29.4.2009, the sum of which is ` 46,32,71,000/=. 9 wp2503.11 06. A notice was published in the daily "Lokmat" on 18.2.2011 with respect to an auction sale to be conducted of the assets of the karkhana. It appears that the Bank has agreed to sell the assets to the Jaiganga Sugar factory. 07. Writ petition No.2503 of 2011 has been filed by some of the affected workmen while Writ Petition No. 2997 of 2011 has been filed by the Rashtriya Sakhar Kamgar Union, which is the registered and approved union under the Bombay Industrial Relations Act, 1946 ("The BIR Act" for brevity). 8. Writ Petition no.2512 of 2011 has been filed by a director of the bank, who has also contended that a corrigendum was issued by the bank on 5.3.2011, changing certain terms and conditions for the auction. Instead of considering the value of the assets and obtaining the bids for the same, the bank, by issuing a corrigendum, had decided to sell the assets to whoever was the highest bidder, irrespective of the actual value of the assets. In these circumstances, the director of the bank has contended that he should not be held responsible, personally, for any such action of the bank. Civil Application No.4525 of 2010 has been filed in this petition, seeking a direction against the petitioner to join the applicants as party-respondents. The applicants claim to be duly elected directors of the bank and have supported the sale of the assets of the Karkhana on the basis of the corrigendum issued on 5.3.2011. Civil Application No. 5058 of 2010, which has been filed in the same petition, has been submitted by the State and the Assistant 10 wp2503.11 Commissioner, Sales Tax Department, Jalgaon. They have sought a direction against the bank to deposit an amount of ` 29,79,98,204/= towards the sales tax dues payable by the Karkhana. They have contended that the Sales Tax Department has a first charge on the property of the borrower in accordance with Section 38C of the Bombay Sales Tax Act, 1959. 09. Writ petition No.2666 of 2011 has been filed by the Vasant Sahakari Sakhar Karkhana Bachav Kruti Samiti and the members of the Karkhana. Writ Petition No. 4793 of 2011 is filed by some members of the karkhana. The contention in both these petitions is that because of the corrigendum issued by the bank in the notice for a public auction of the assets of the karkhana, they were being sold for a meagre amount. 10. Writ Petition No. 2513 of 2011 was filed by Mounigiri Sugar Sugar Bio Fuels Ltd., challenging the action of the Bank in issuing the corrigendum dated 5.3.2011. According to the petitioner in the petition, the bank had not followed a transparent procedure for sale of the assets of the Karkhanan, while opening the tenders. That Writ Petition has been withdrawn by the learned Advocate for the petitioner on 11.7.20911 when we heard this batch of petitions. 11. Mr. Dhorde, the learned counsel appearing for the bank, has submitted before us that none of these writ petitions is maintainable, in view of the proceedings under the Securitisation Act having been initiated by the bank. According to him, the remedy available to the 11 wp2503.11 petitioners in all these writ petitions lies before the Debt Recovery Tribunal ("DRT" for short) under the provisions of Section 17 of the Securitisation Act. Mr. Dhorde has fortified his submissions, by relying on the judgement of this Court in the cases of Marathwada Gramin Bank vs. Mah. State Co-op. Bank, reported in 2007 (2) Mh.L.J., 594 and Ramchandra s/o Deorao Pere and others vs. The State of Maharashtra and others in Writ Petition No.6039 of 2010 along with other connected matters, decided on 26.8.2010. He has relied on the judgements of the Supreme Court in Union Bank of India vs. Satyawati Tondon 2010 (5) ALL MR 902, and Kanaiyalal Lalchand Sachdev vs. State of Maharashtra, (2011) 2 SCC 782 to point out that the Supreme Court has deprecated the practice of the High Courts of entertaining writ petitions in respect of matters arising under the Securitisation Act. 12. The learned Counsel for the petitioners in Writ Petition Nos. 2503 of 2011 and 2997 of 2011 have submitted that the workmen have a prior charge over the assets of the karkhana and, therefore, the sale proceeds of the assets of the karkhana must be utilized to pay the workers their dues. It is further submitted by them that apart from the unpaid dues, the karkhana is also liable to pay the workers' their provident fund dues which must be recovered from the sale proceeds. The Supreme Court, in the case of Maharashtra State Coop. Bank Ltd. v. Provident Fund Commr., (2009) 10 SCC 123, has held that the dues payable in respect of the provident fund have a priority over all other charges including the claims of secured creditors, according to the 12 wp2503.11 learned counsel. Therefore, submitted the learned Counsel, the bank cannot appropriate the entire sale proceeds of the assets of the karkhana towards its claims. It is urged that the workers' provident fund dues will have to be deposited with the Provident Fund Commissioner before the bank adjusts the amount towards its debts. 13. The learned counsel appearing for the members of the karkhana submitted that the karkhana is proposed to be sold for a paltry amount by the bank, when its assets run into several crores of rupees. According to them, if the assets of the karkhana are sold at the market price, not only will be the bank's loan be repaid, but the workers and the members of the karkhana will also stand to benefit. They, therefore, contended that the proposed sale should be quashed and instead fresh bids should be called for. 14. The learned counsel appearing for the director of the bank who has filed a writ petition in his individual capacity, also submitted that the proposed sale is being finalized by the bank contrary to the legal provisions and without adhering to the norms for selling such secured assets. It is further submitted on behalf of the director that he should not be held responsible personally, if the impending sale is allowed to be completed. 15. The learned advocate appearing for the Jaiganga Sugar Factory- the auction purchaser of the assets of the karkhana, urged that the sale of the assets to him has been stayed unnecessarily when the 13 wp2503.11 purchaser has paid a part of the purchase price. According to him, the purchaser has been caused grave hardship by the interim order as he has invested a huge amount for the purchase of the assets of the company. Therefore he submitted that the sale must be permitted to proceed. 16. Under Section 17 of the Securitisation Act, any person, who is aggrieved by any measures taken by the secured creditors towards recovery of the debt by taking possession of the secured assets or taking over management of the business of the borrower, may make an application to the DRT within 45 days of such measures being undertaken by the bank. Such an application can be preferred, not only by the borrower, but by any person affected by such steps taken by the bank under Section 13(4) of the Securitisation Act. 17. In the case of Union Bank of India vs. Satyawati Tondon (supra), the Supreme Court has held thus; "42. There is another reason why the impugned order should be set aside. If respondent No.1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression "any person" used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate 14 wp2503.11 Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. 43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. 44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for 15 wp2503.11 the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. 45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance. 46. It must be remembered that stay of an action initiated by the State and/or its agencies/ instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/ institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to 16 wp2503.11 show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad [AIR 1969 SC 556], Whirlpool Corporation v. Registrar of Trade Marks, Mumbai [(1998) 8 SCC 1] and Harbanslal Sahnia and another v. Indian Oil Corporation Ltd. and others [(2003) 2 SCC 107] and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order." After considering several of its earlier judgements in which the issue as to whether the High Court should exercise its jurisdiction under Articles 226 and 227 of the Constitution when an alternate remedy is available to the petitioner, the Court has observed thus: "55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. " 18. A similar view has been taken by the Division Bench of our High Court in Marathwada Gramin Bank and Ramchandra Deorao Pere (supra). 17 wp2503.11 19. In Kanaiyalal Lalchand Sachdev vs. State of Maharashtra, (2011) 2 SCC 782. the Supreme Court has reiterated its earlier view that the High Court should decline to exercise its jurisdiction under Articles 226 and 227 of the Constitution of India, with respect to the matters falling under the Securitisation Act, as an alternate efficacious remedy is available under the Act for any person aggrieved. 20. In our opinion, therefore, the appropriate remedy available to the petitioners would be to file appeals before the DRT under Section 17 of the Securitisation Act. Moreover the workers dues towards unpaid wages, gratuity and other legal dues are yet to be quantified by the Industrial Court in the complaints filed by them. Therefore it would not be proper for us to direct the bank to pay these amounts in the present writ petitions. 21. However, we are conscious of the fact that the provident fund dues have priority over all other dues and, therefore, if the secured assets are sold, the proceeds must first be applied towards the provident fund dues of the workmen. Mr. Dhorde, the learned counsel for the respondent-bank has submitted that it is for the Provident Fund Commissioner, if at all, to send a notice to the bank and to recover the dues and no orders need be passed in the present petitions, regarding provident fund dues. 18 wp2503.11 22. Section 11 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, provides for a statutory priority for the payment of contributions towards the provident fund over all other debts. Sub-section (1) of Section 11 prescribes that even when an employer is adjudged insolvent, or a company has been wound up, the amount due from such an employer in respect of the provident fund contribution, or insurance fund contributions, damages recoverable under section 14-B and other dues prescribed under the section must be paid in priority over all other debts in the distribution of the properties of the insolvent or the assets of the company being wound up. Sub- section (2) of Section 11 provides that notwithstanding anything contained in any other law for the time being in force, the amounts due from