IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:2.09.2010 CORAM: THE HONOURABLE MS. JUSTICE K.B.K.VASUKI W.P.No.5561 of 2010 and M.P.Nos.1 & 2 of 2010 Parkins Textiles Labour Union, Regn.No.F1296 rep.by its General Secretary K.Chandrasekar, T.R.Kandriga, Nagari 517 590. .. Petitioner Vs. 1.Recovery Officer, Debt Recovery Tribunal, No.1670, Trichy Road, Ramanathapuram, Coimbatore 641 045. 2.The Authorised Officer, Indian Bank, Assets Recovery Management Branch, Coimbatore, Coimbatore District. 3.The Authorised Officer, India Bank, Circle Office, Seshapeeran Street, Chittoor, Chittoor District, Andhra Pradesh. 4.The Management of Parkins Textiles Pvt., Ltd., Reg.Office at 6/256, Avinasi Road, Coimbatoe 641 018. .. Respondents Writ Petition filed under Article 226 of the Constitution of India praying for issuance of Writ of Mandamus, directing the second respondent to reserve amount to the tune of Rs.6 crores due to workmen from the amount which may be realized as sale consideration from the sale in pursuance of sale Publication Notice dated 16.02.2010 of the second respondent. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner :Mr.S.T.Varadarajulu For Respondents :M/s. Aiyar and Dolia -R1 Mr.Kalyana Raman -R2 and 3 O R D E R The Writ Petition is filed for issuing appropriate direction to the second respondent/Indian bank to reserve a sum of Rs.6 crores from and out of the amount which may be realised as sale consideration from the sale in pursuance of the sale Publication Notice dated 16.02.2010 which is according to the petitioner represents the amount due to workmen from the fourth respondent management. 2.The brief facts leading to the filing of this Writ Petition are as follows: (i)The members of the petitioner union numbering 325 workmen were employed in the 4th respondent spinning mill and the fourth respondent faced certain problem from April 2003 to December 2004 resulting in lay off and Settlement under Section 18 (1) of the Industrial Disputes Act followed by strike due to reduction of salary and then lock out on 26.9.2006 leading to industrial dispute in I.D.No.170 of 2007. The workmen have also been adjudicating claim petition before the Labour Court, Anantapur for their monitory dues such as Gratuity, P.F., Lay off salary and other compensation payable to them. While so, the 2nd respondent /Indian bank as the secured creditor, obtained money decree for a sum of Rs.3,48,01,609.91 against the fourth respondent and has also attached the property and brought it for sale through public auction and the same compelled the petitioner to file W.P.No.9585 of 2008 and this Court granted injunction against confirmation of sale. However, the sale could not take place in pursuance of sale notice issued on earlier occasion. Hence, fresh sale publication notice was issued on 23.3.2010 by the second respondent through the third respondent/authorised officer of the second respondent bank, pending adjudication of I.D.No.170 of 2007 before the Labour Court, pending claim petition for settlement of monitory dues and pending proceedings under the Company Act and during the currency of injunction order. Hence, the petitioner approached this Court by filing the present writ petition for the above stated relief. 3.According to the petitioner, the property is being brought for sale despite the order of injunction granted in Writ Petition No.9585 of 2008 and in the event of the entire sale proceeds being adjusted towards the money due to the bank, no balance amount will remain to satisfy the amount legally due to the workmen from the management and a sum of Rs.6 crores from and out the entire sale consideration shall be reserved for meeting out the legal dues of the employees in the interest and welfare of the working class. https://hcservices.ecourts.gov.in/hcservices/ 4.Such claim of the petitioner is seriously opposed on behalf of the contesting second respondent/Indian bank. It is their case that the Indian bank has as secured creditor obtained money decree against the fourth respondent and the property is being brought for sale only to satisfy such money decree which is the first charge upon the property and the decree holder and is hence entitled to have its entire dues first adjusted from and out of the sale consideration and the workmen can have their claim, if any, only upon the balance amount if any. 5.Heard the rival submissions made on both sides and perused the materials available on record. 6.It is not in dispute that the Indian bank as the secured creditor has obtained money decree against the 4th respondent / Management. The property belonging to the 4th respondent was brought to sale for realisation of such money decree, during the pendency of industrial dispute raised by the employees in respect of lock out and the claim petition filed by the employees for recovery of monetary benefits and the company proceedings pending before the appropriate forum and currency of injunction order granted by this Court in the earlier writ petition. While it is contended by the learned counsel for the petitioner that in the event of Indian bank being permitted to adjust either entire or major portion of the sale proceeds towards the amount due to the Indian Bank from the fourth respondent management, the right of the employees to recover their monetary benefits as per the award to be passed by the labour court in the claim petition filed by the employees will be totally lost. Such contention is seriously opposed by the respondent bank by contending that no right is accrued to the employees/member of the petitioner's union upon the sale proceeds of the property of the fourth respondent management in the absence of any award being passed in their favour, as such no direction as claimed in the writ petition can be sought for at this stage. 7.As already referred to the property of the fourth respondent management is brought for sale only under the relevant provision of SARFAESI Act. The said Act prescribes the complete procedure and the method by which the sale can be made and the sale proceeds be adjusted. For better understanding, the relevant sections 13(7), (9) and (10) of the Act are extracted hereunder: 13(7): Where any action has been taken against a borrower under the provisions of sub-section (4), all costs charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence https://hcservices.ecourts.gov.in/hcservices/ of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interest. (9)-In the case of financing of a financial asset by more than one secured creditors of joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub- section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth is value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors: Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529-A of the Companies Act, 1956 (1 of 1956): Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of Section 529 of the Companies Act, 1956 (1 of 1956) may retain the sale proceeds of his secured assets after depositing the workmen's due with the liquidator in accordance with the provisions of Section 529-A of that Act: Provided also that the liquidator referred to in the second proviso shall intimate the secured creditor the workmen's dues in accordance with the provisions of Section 529 of the Companies Act, 1956 (1 of 1956) and in case such workmen's due cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that Section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator: Provided also that in case the secured creditor deposits the estimated amount of workmen's dues, such https://hcservices.ecourts.gov.in/hcservices/ creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount ,if any, deposited by the secured creditor with the liquidator: Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any. Explanation- For the purposes of this sub-section- (a) "record date" means the date agreed upon by the secured creditors representing not less than three- fourth in value of the amount outstanding on such date; (b)"amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor. (10)- Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent Court, as the case may be, for recovery of the balance amount from the borrower". 8.That being so, if any amount is recovered by the third respondent, the same can be distributed only in terms of provisions laid down as referred above. In this case admittedly the company proceeding is still pending as such, the proviso to Sub Section 13(9) is not applicable to the facts of the present case. It is nobody's case that the property is having more than one secured creditor and the facts which remain undisputed would show that the Indian Bank is the only secured creditor, as such the provisions applicable to the present case are Sections 13(7) and 13(10). That being the legal position, any money recovered by the authorised officer can be distributed only in terms of relevant provisions contained in the Act. 9.In the course of hearing, the attention of this Court is also drawn to the decision of the Division Bench of our High court reported in 2007 (4) MLJ 483 (Coromandel Leather Employees Union v. Indian Bank), wherein similar employees union filed writ petition against different branch of the same bank for identical relief and the writ petition was disposed of by directing the Authorised Officer of the respondent bank to disburse the amount strictly in terms of the provisions of the Act. In my view, the present writ petition can also be disposed of in the same line. https://hcservices.ecourts.gov.in/hcservices/ 10.In the result, the respondents 1 to 3 are directed to disburse the sale proceeds of the assets belonging to the fourth respondent management strictly in terms of the provisions of the SARFAESI Act. 11.With the above direction, the writ petition is disposed of. No Costs. Consequently, connected Miscellaneous Petitions are closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar kkd/rk To 1.Recovery Officer, Debt Recovery Tribunal, No.1670, Trichy Road, Ramanathapuram, Coimbatore 641 045. 2.The Authorised Officer, Indian Bank, Assets Recovery Management Branch, Coimbatore, Coimbatore District. 3.The Authorised Officer, India Bank, Circle Office, Seshapeeran Street, Chittoor, Chittoor District, Andhra Pradesh. 1 cc To Mr.S.T.Varadarajaulu, Advocate, SR.65292 W.P.No.5561 of 2010 pur(co) pmk.3.11.2010 https://hcservices.ecourts.gov.in/hcservices/