Case: Central Bank Of India Vs. Siriguppa Sugars &amp; Chemicals Ltd.

These appeals challenge the interim order passed by the Division Bench of the High Court in a pending writ appeal, directing disbursement of certain amounts realised on sale of stocks of sugar, owned by the first respondent - company held under pledge by the appellant-bank. The Labour Commissioner had passed an order under Section 33(c) of the Industrial Disputes Act against the first respondent company in respect of the dues to the workmen. The same was challenged by the first respondent in the writ petition as also by others. Similarly the Cane Commissioner had passed orders for recovery of amounts due from the first respondent-company for being paid to the sugarcane growers for the cane supplied by them to the first respondent-company. During the pendency of the writ petition, the recovery authority had taken possession of stock of sugar lying pledged to the appellant-bank and under its control, forcibly and without reference to the appellant-bank. The appellant-bank had got itself impleaded in the writ petition. Considering that the sugar stock was liable to lose its value by being stored indefinitely, the court had directed sale of the sugar. The sale fetched a price of Rs.1,53.50,400/-. Out of the same, a sum of Rs.10,60,800/- was paid towards excise duty and the balance was held under orders ofwrit petition filed by the first respondent challenging the recovery proceedings, both at the instance of the Labour Commissioner and the Cane Commissioner was dismissed by the learned Single Judge. The decision of the learned Single Judge was challenged in appeal. In the appeal filed by the company, the impugned interim order was made directing that a sum of Rs.43,00,000/- be made available to the Labour Commissioner for disbursement to the employees of the company, a sum of Rs.60,00,000/- be made available to the Cane Commissioner for disbursal to the sugarcane cultivators who had supplied sugarcane and a sum of Rs.20,00,000/- be paid to the appellant--bank, subject to the bank obtaining sanction from the Board for Industrial and Financial Reconstruction (for short "BIFR") and that the balance shall be kept in a fixed deposit subject to final orders. The appellant bank has challenged this order on the ground that its right as a pawnee, well recognised by law, had been totally ignored by the Division Bench of the High Court. Consequently, the order is clearly illegal and that such an interim order ought not to have been passed when the final adjudication had to be made in the appeals that were pending before the High Court.

Court's reasoning:
18. Thus, going by the principles governing the matter, propounded by this Court there cannot be any doubt that the rights of the appellant-bank over the pawned sugar had precedence over the claims of the Cane Commissioner and that of the workmen. The High Court was, therefore, in error in passing an interim order to pay parts of the proceeds to the Cane Commissioner and to the Labour Commissioner for disbursal to the cane growers and to the employees. There is no dispute that the sugar was pledged with the appellant bank for securing a loan of the first respondent and the loan had not been repaid. The goods were forcibly taken possession of at the instance of the revenue recovery authority from the custody of the pawnee, the appellant-bank. In view of the fact that the goods were validly pawned to the appellant bank, the rights of the appellant-bank as pawnee cannot be affected by the orders of the Cane Commissioner or the demands made by him or the demands made on behalf of the workmen. Both the Cane Commissioner and the workmen in the absence of a liquidation, stand only as unsecured creditors and their rights cannot prevail over the rights of the pawnee of the goods.19. We are also of the view that pending the writ appeals, the High Court ought not to have passed such an interim order of consequence especially in the light of the legal principles settled by this Court. The order of the High Court, therefore, cannot be sustained and calls for interference.