Sahyadri Coop Credit Society Ltd vs State Of Maharashtra & Ors

Brief facts of the case are that the appellants are Multi State Co- operative Societies registered under Multi States Co-operative Societies Act, 2002 and operate in the geographical territories of Maharashtra and Karnataka. The appellant-societies are engaged in the business of accepting deposits from its members, and lending money to them. Respondent no. 6 M/s. Tasgaonkar Sugar Mills Ltd. is lessee of business of respondent no. 5 Daulat Shetkari Sahakari Sakhar Karkhana Ltd. under the deed dated 15.10.2010, and, as such, respondent no. 6 has taken over the business of respondent no. 5. They approached the appellants for financial assistance. Appellant Sahyadri Co-operative Credit Society Ltd. sanctioned loan of Rs.7,00,00,000/- repayable within a period of six months to respondent no. 5, and appellant Navhind Co-operative Credit Society Ltd. sanctioned loan of Rs.12,20,00,000/- on similar terms to it. Both the sums are credited into the account of Kolhapur District Central Co-operative Bank Ltd., erstwhile creditor of respondent no. 5. Said Bank had consented to respondent No. 5 for creation of charge in favour of the appellants in the form of pledge. As such, sugar stock of 35,000 quintals stored in godown no. 6 of respondent nos. 5 and 6 was agreed to be pledged in favour of appellant Sahyadri Co-operative Credit Society Ltd., and sugar stock of 80,985 quintals stored in godown Nos. 7-I and 7-II was agreed to be pledged in favour of appellant Navhind Co-operative Credit Society Ltd. In respect of said transactions of pledge, separate letters dated 31.03.2011 regarding consent of respondent no. 6 were issued in favour of the appellants. The appellants and respondent nos. 5 and 6 entered into an agreement on 25.05.2011 and the same was duly registered. It is pleaded that respondent no. 8 Daulat Sakhar Kamgar Sangh (workers union) also gave consent for creation of pledge.

Admittedly, respondent nos. 5 and 6 ran into losses and failed to pay the outstanding dues of the cane growers. Consequently, respondent no. 2, Commissioner of Sugar/ Special Registrar, Co-operative Societies, State of Maharashtra, Pune, passed an order under Sugarcane (Control) Order, 1966 directing release of Rs.36,22,66,591 with interest accrued to be paid to the members who had supplied their sugarcane post May 15, 2010. Respondent no. 3 Collector, Kolhapur, was nominated as authorized officer for disbursement of said amount. In pursuance of said order, respondent no. 3 directed respondent no. 4 Tehsildar, Chandgad, District Kolhapur, Maharashtra, to recover the amount of Rs.36,22,66,591/- as arrears of land revenue under clause 3(9) of the Sugarcane (Control) Order, 1966, from respondent no. 5. Accordingly, respondent no. 4 visited site of respondent no. 5 and attached the stock of godown no. 6 and godown nos. 7-I and 7-II under clause 3(9) of the Sugarcane (Control) Order, and directed respondent no. 5 not to dispose of the stock of sugar lying in the above godowns. Respondent nos. 5 and 6 objected to the attachment of sugar stock pledged to them. The appellants also raised their objections to the attachment. However, on 18.6.2011 a public notice was issued in the newspapers, including Daily Sakal, wherein it was informed that godown no. 6 and godown nos. 7-I and 7-II along with other stock would be put to auction on 22.6.2011 at 3.30 p.m. in pursuance of the order dated 28.5.2011. Aggrieved by this, appellant Navhind Co-operative Credit Society Ltd., and appellant Sahyadri Co-operative Credit Society Ltd. filed Writ Petition Nos. 4539 and 4533 of 2011 respectively before the High Court of Judicature at Bombay pleading that they have right of precedence in the repayment of loan amount. The High Court, vide its order dated 22.6.2011 (on the day of public auction), directed that auction, as notified, should be conducted after fixing the set price. The High Court further directed that the amount receivable against the stock of sugar pledged to the appellants shall be deposited with the Registrar (Judicial) of the High Court whereafter the Registrar (Judicial) was to keep the amount in a nationalized bank in fixed deposit. On 11.7.2011, Sub Divisional Officer filed an affidavit stating that the entire stock of sugarcane was sold for a sum of Rs.52,95,36,483/-, out of which the amount realized against the pledged sugar was Rs.27,94,27,910/-. A sum of Rs.21,65,00,000/- was deposited in the High Court, and regarding rest, it was stated before the High Court that the same would be deposited after receiving the same from the auction-purchaser. The High Court finally disposed of both the writ petitions (Nos. 4533 and 4539 of 2011) holding that the appellants would have first right over the amount of pledged sugar, and respondent no. 3 was directed to make distribution of the amount collected in accordance with rules keeping in mind the rights of precedence of the parties. Consequently, the appellants approached respondent no. 3, but said authority rejected the claim of the appellants and held that the payment of Provident Fund amounting to Rs.4,66,40,511/- on account of dues to the Assistant Provident Fund Commissioner would be the first priority, and a sum of Rs.36,22,66,591/- plus interest shall be paid to the cane growers who supplied sugarcane to respondent no. 5 (Daulat Shetkari Sahakari Sakhar Karkhana Ltd.). It is further directed by respondent no. 3 that the balance amount, after auction of sugar stock, be paid to the workers of factory of respondent no. 5.

Aggrieved by aforesaid order of the Collector, Kolhapur (respondent no. 3), the appellants, namely, Sahyadri Co-operative Credit Society Ltd. and Navhind Co-operative Credit Society Ltd. filed Writ Petition Nos. 8452 of 2011 and 8453 of 2011 respectively before the High Court. Notices were issued and the respondents objected to the maintainability of the two writ petitions. Vide interim order dated 17.11.2011, the High Court passed common order in both the writ petitions declining interim stay prayed by the writ petitioners and observed that a sum of Rs.27,94,27,910/- deposited in the High Court shall continue to remain invested in fixed deposit and the objection relating to the maintainability shall be heard at the time of arguments on admission. In said order the High Court took note of the fact that the total amount realized after auction of 2,17,984 bags/ quintals of sugar manufactured by respondent no. 5 (including the disputed pledged sugar in favour of the appellants), is Rs.52,95,36,483/-. It is further observed by the High Court in the interim order dated 17.11.2011 that a sum of Rs.27,94,27,910/- was deposited in the High Court, and out of balance amount of Rs.25,01,08,573/- with the Collector, Kolhapur, an amount of Rs.20,00,00,000/- has been distributed amongst workers. And rest of the sum left with the Collector, as allowed by the High Court on 23.12.2011, was disbursed towards Provident Fund of workers. Finally, the High Court, vide impugned order dated 10.2.2012, dismissed the writ petitions on the ground that the appellant-creditors have alternative remedy available to them to file suit under Section 218 of the MLR Code.

For the reasons, as discussed above, both the appeals deserve to be allowed. Accordingly, the appeals are allowed. The impugned judgment and order dated 10.2.2012, passed in Writ Petition Nos. 8452 of 2011 and 8453 of 2011 is set aside. We direct the authorities concerned to disburse the amount in the light of the observations made above regarding entitlement of the appellants with precedence over the dues payable to workers and sugarcane farmers, under Sugarcane (Control) Order, 1966. However, we clarify that the amount already distributed shall not be recovered from the workers and the sugarcane farmers. There shall be no order as to costs.

March 28 , 2016.