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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.7447 OF 2010
Kolhapur District Central Co-operative
Bank Ltd.,1092 "E" Ward, Shahupuri,
Kolhapur. .. Petitioner
V/s
1. State of Maharashtra
2. Commissioner of Sugar and Special Registrar
Co-operative Societies, Maharashtra State, Pune,
3. Collector of Kolhapur having his office
at Kolhapur,
4. Tahsildar of Chandgad, having his office
at Chandgad, District Kolhapur,
5. Doulat Shetkari Sahakari Sakhar Karkhana
Ltd., Halkarni, Taluka Chandgad,
Dist: Kolhapur .. Respondents
WITH
CIVIL APPLICATION NO.2782 OF 2010 IN W.P.NO.7447 OF 2010
Doulat Shetkari Sahakari Sakhar Karkhana
Ltd., Halkarni, Taluka Chandgad,
Dist: Kolhapur. .. Applicant
V/s
1. Kolhapur District Central Co-operative
Bank Ltd.,1092 "E" Ward, Shahupuri,
Kolhapur.
2. State of Maharashtra
3. Commissioner of Sugar and Special Registrar
Co-operative Societies, Maharashtra State, Pune,
4. Collector of Kolhapur having his office
at Kolhapur,
5. Tahsildar of Chandgad, having his office
at Chandgad, District Kolhapur. .. Respondents
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WITH
CIVIL APPLICATION NO.2785 OF 2010 IN W.P.NO.7447 OF 2010
Kolhapur District Central Co-operative
Bank Ltd.,1092 "E" Ward, Shahupuri,
Kolhapur. .. Petitioner
V/s
1. State of Maharashtra
2. Commissioner of Sugar and Special Registrar
Co-operative Societies, Maharashtra State, Pune,
3. Collector of Kolhapur having his office
at Collector's Office, Kolhapur,
4. Tahsildar of Chandgad, having his office
at Chandgad, District Kolhapur,
5. Doulat Shetkari Sahakari Sakhar Karkhana
Ltd., Halkarni, Taluka Chandgad,
Dist: Kolhapur .. Respondents
And
Garden Court Distilleries Pvt.Ltd.
(A Company registered under the Companies
Act, 1956), having registered office at: Unit
No.303, 304, Raheja Plaza, Off Veera Desai
Road, Andheri (W), Mumbai 400 053, through
its Authorized Representative, Shri.Chintamani
Anil Mulay, Age 40 years, Occu: Service,
R/o. As above. .. Applicant/
Intervenor
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WITH
WRIT PETITION NO.8896 OF 2010
Garden Court Distilleries Pvt.Ltd.
(A Company registered under the Companies
Act, 1956), having registered office at: Unit
No.303, 304, Raheja Plaza, Off Veera Desai
Road, Andheri (W), Mumbai 400 053, through
its Authorized Representative, Shri.Chintamani
Anil Mulay, Age 40 years, Occu: Service,
R/o. As above. ig .. Petitioner
V/s
1. State of Maharashtra,
Through, the Secretary, Ministry of Co-operation
And Dairy, Mantralay, Mumbai,
2. Commissioner of Sugar and Special Registrar
Co-operative Societies, Maharashtra State, Pune,
3. Collector of Kolhapur having his office
at Collector's Office, Kolhapur,
4. Tahsildar of Chandgad, having his office
at Chandgad, District Kolhapur,
5. Doulat Shetkari Sahakari Sakhar Karkhana
Ltd., Halkarni, Taluka Chandgad,
Dist: Kolhapur,
6. Kolhapur District Central Co-operative
Bank Ltd.,1092 "E" Ward, Shahupuri,
Kolhapur. .. Respondents
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Appearances:
Writ Petition No.7447 of 2010:
Mr.S.S.Patwardhan, Advocate for the petitioner.
Ms.M.P.Thakur, AGP for Respondent Nos.1 to 4.
Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for Resp.No.5.
Civil Application No.2782 of 2010:
Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for the
Applicant.
Mr.S.S.Patwardhan, Advocate for Respondent No.1.
Mrs.M.P.Thakur, AGP for Respondent Nos.2 to 5.
Civil Application No.2785 of 2010:
Mr.P.K.Dhakephalkar, Sr.Advocate with Mr.S.R.Ganbavale, Advocate for the
Applicant.
Mr.S.S.Patwardhan, Advocate for the Petitioner.
Mrs.M.P.Thakur, AGP for Respondent Nos.1 to 4.
Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for Resp. No.5.
Writ Petition No.8896 of 2010:
Mr.P.K.Dhakephalkar, Sr.Advocate with Advocate Mr.S.R.Ganbavale for the
Petitioner.
Ms.M.P.Thakur, AGP for Respondent Nos.1 to 4.
Mr.A.Y.Sakhare, Sr.Advocate with Mr.Chetan Patil, Advocate for Resp. No.5.
Mr.S.S.Patwardhan for Respondent No.6.
CORAM : V.C.DAGA & R.G.KETKAR, JJ.
DATE : 31ST JANUARY, 2011
JUDGMENT: (Per R.G.Ketkar, J.)
1. Writ Petition No.7447 of 2010 is preferred by the Kolhapur District Central
Co-operative Bank Limited (for short “Bank), a federal Society under the
provisions of of the Maharashtra Co-operative Societies Act, 1960 praying
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for directions against the Respondent Nos.1 to 4, (Respondent No.1-the State
of Maharashtra, Respondent No.2-the Commissioner of Sugar and Special
Registrar, Co-operative societies, Respondent No.3-Collector of Kolhapur
and Respondent No.4-Tahasildar of Chandgad) to withdraw the
attachment/sealing of the sugar stock in the Godown Nos.3 and 6 of the
Respondent No.5-Daulat Shetkari Sahakari Sakhar Karkhana Limited (for
short the ‘sugar factory’) pledged to the Bank. The Bank has further prayed
for issuance of the direction against the Respondent Nos.1 to 4 to deliver the
possession of the sugar stock to the Bank which is stored in the Godown Nos.
3 and 6 of the sugar factory and which is lawfully pledged to the Bank.
2. Writ Petition No.8896 of 2010 is preferred by the Garden Court Distilleries
Pvt.Limited (for short ‘Distilleries’), praying for directions against the
Respondent No.3-Collector of Kolhapur to release 35050 quintals of M-30
Grade Sugar in accordance with the order dated 22.10.2010 issued by
Respondent No.2-the Commissioner of Sugar and Special Registrar, Co-
operative Societies, Maharashtra State, Pune and/or in the alternative to
direct the Respondent No.5-sugar factory to repay the price of the 35050
quintals of M-30 Grade Sugar at the rate of Rs.2373/- per quintal alongwith
the interest of 24% p.a.to be calculated from 27.9.2010.
3. We issue Rule in both the petitions as also in C.A.No.2782/2010 and C.A.No.
2785/2010 filed in Writ Petition No.7447/2010. The learned counsel
appearing for respective Respondents waive service. By consent of the
parties, Rule is made returnable forthwith and is heard finally.
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THE FACTS:
4. The Bank has filed Writ Petition No.7447 of 2010 contending inter-alia that
during the crushing season of 2009-10 the sugar factory has applied for
financial assistance in the nature of working capital for Rs.54 crores. The
Bank sanctioned the said loan. The sugar factory pledged the entire stock of
sugar as security for the said loan. The Bank has enclosed copy of the pledge
deed at annexure ‘A’ to the petition. The sugar factory applied for further
assistance of Rs.11 crores by way of enhancement of working capital limit
which was also sanctioned by the Bank for crushing season of 2009-10. The
sugar factory executed necessary loan documents in that regard.
5. It is the case of the Bank that the sugar factory has extended the pledge of the
sugar stock with it as a security for enhanced working capital limit also. The
Bank has annexed copy of the pledge deed for the additional sum of Rs.11
crores executed by the sugar factory in its favour at annexure ‘B’. It is the
case of the Bank that the sugar factory has in all seven godowns stored
sugar. The entire stock of sugar is in the physical custody of the Bank. The
keys of all the godowns are also with the Bank. The Bank has appointed its
employee at the site of the godowns, who is having custody of all the
godowns and the sugar stock kept therein.
6. The Bank has further averred that the Respondent No.2 (Commissioner of
Sugar and the Special Registrar, Co-operative Societies, Maharashtra State,
Pune) passed an order on 21.6.2010 under clause 3(8) of the Sugarcane
(Control) Order, 1966 (for short the ‘Order’) . The Respondent No.2 has
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directed the sugar factory to release the sum of Rs.11.09 crores with interest
as accrued to be paid over to the members of the sugar factory who had
supplied their sugarcane post 15.5.2010. The Respondent No.2 nominated
Respondent No.3-Collector of Kolhapur to be an authorised officer for
disbursement of the said money to the members of the sugar factory. It was
further directed that on the failure on the part of the sugar factory to make the
payment, a sum of Rs.11.09 crores be recovered as arrears of land revenue.
Pursuant to this, the Respondent No.3-Collector of Kolhapur issued an order
dated 21.8.2010 directing the Respondent No.4-Tahasildar of Chandgad to
recover amount of Rs.11.09 crores as arrears of land revenue from the sugar
factory under the provisions of the Maharashtra Land Revenue Code, 1966
read with the Maharashtra Land Revenue (Recovery) Rules 1967. By order
dated 22.8.2010, the Tahasildar of Chandgad directed the sugar factory not to
alienate any movable or immovable property.
7. It is the case of the Bank that the Respondent No.4-Tahsildar of Chandgad
directed the sugar factory to open the Godown Nos.3 & 6 for inspection of
the sugar stock which is pledged with it. The godown keeper of the said two
godowns reported this fact to the Bank under his report dated 22.8.2010. The
Respondent No.4-Tahasildar of Chandgad took possession of the sugar stock
in the Godown Nos.3 & 6 belonging to the sugar factory under the possession
receipt and the panchanama dated 22.8.2010. The Bank has challenged these
actions on the ground that the entire stock of sugar is in the custody of the
Bank and the pledge deeds are in force. The action of the Respondent No.4-
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Tahasildar of Chandgad of attaching/sealing Godowon Nos.3 & 6 as also
taking possession of the sugar stock therein is contrary to the provisions of
law. Respondent No.4-Tahasildar of Chandgad has no authority to dispossess
the Bank for recovery of dues of the members of the sugar factory, as the
Bank is a pledgee. In support of this contention, the Bank has relied upon the
judgment of the Apex Court in the case of Bank of Bihar V/s.State of Bihar,
(1972) 3 SCC 196 as also the the order dated 6.2.2008 passed by the Division
Bench of this Court (J.N.Patel as the leaned Chief Justice then was, and
Smt.Nishita Mhatre, JJ.) in Writ Petition No.7936 of 2007 filed by the Bank
against the sugar factory in respect of the controversy arising in the crushing
season of 2006-07. Relying upon this, the Bank has prayed for withdrawing
the attachment/sealing of the sugar stock in the Godown Nos.3 & 6 by
issuing appropriate directions to the Respondent Nos.1 to 4 and for delivery
of possession of the sugar stock in the Godown Nos.3 & 6 of the sugar
factory to the Bank.
8. The matter was heard on 20.9.2010. This Court issued notice to the sugar
factory returnable on 23.9.2010. Hamdast was allowed. In addition, the
Advocate’s notice by fax to the sugar factory was also allowed. The Court
recorded the submissions made on behalf of the Bank and also directed the
Secretary in the Department of Co-operation, Government of Maharashtra to
remain present before the Court on the next date of hearing. The office noting
indicates that on behalf of the Bank, an affidavit of service was filed on
21.9.2010 alongwith the fax report evidencing the service. On 23.9.2010, the
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returnable date was extended to 30.9.2010 and the hamdast was permitted.
On 30.9.2010 petition was adjourned to 8.10.2010. In the meantime, on
5.10.2010, office made noting to the effect that notice issued to the sugar
factory on 23.9.2010 is returned duly served.
9. On 8.10.2010 this Court heard the learned counsel appearing for the Bank
and the learned AGP for the State. On that date none appeared for the sugar
factory despite service. Dr.Sudhir Kumar Goel, Secretary in the Department
of Co-operation, Government of Maharahstra who was present on that date
was heard. Dr.Goel invited attention of the Court to the Order issued by the
Government of India under section 3 of the Essential Commodities Act, 1955
and more particularly clause 3 (3) and 3(3A) of the said Order.
10. After recording the submissions, the Court directed the Collector of Kolhapur
to auction the entire sugarcane stock in the Godown Nos.3 & 6 of the sugar
factory and deposit the sale proceeds with the Bank. The Bank was directed
to remit the said sale proceeds in a separate account, and it was made clear
that the the disbursement of the sale proceeds was subject to the further
orders to be passed in the petition.
11. The sugar factory filed Civil Application No.2782 of 2010 for recalling the
order dated 8.10.2010 and praying for an injunction restraining the Collector
of Kolhapur from conducting auction sale of the entire sugar stock lying in
Godown Nos.3 & 6 of the sugar factory, and further prayer for directions
against the Respondent Nos.2 to 5 (Respondent No.2-State of Maharashtra,
Respondent No.3-Commissioner of Sugar & Special Registrar, Co-operative
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Societies, Respondent No.4-Collector of Kolhapur and Respondent No.5-
Tahasildar of Chandgad) to release the said sugar stock from the attachment.
In paragraph No.3 of the application it was averred that due to some
communication gap and some unavoidable reasons, the sugar factory could
not appear for hearing on 8.10.2010 and subsequently it became aware of the
said petition as also the order passed therein.
12. The Civil Application No.2785 of 2010 was filed by the Distilleries for
impleading it as party Respondent in Writ Petition No.7447 of 2010, as also
praying for modification of the order dated 8.10.2010 by directing the
Collector of Kolhapur to deliver 35050 quintals of M-30 Grade sugar to the
Distilleries in accordance with the order dated 22.10.2010 issued by the
Commissioner of Sugar & Special Registrar, Co-operative Societies,
Maharashtra State, Pune.
13. In support of this application, the Distilleries averred that it had placed an
order of purchase of 52000 quintal of sugar with the sugar factory through its
broker Atharva Intertrade on 25.9.2010. The said sugar was to be purchased
@ Rs.2373/- per quintal. It was learnt by the Distilleries that for the sugar
crushing year 2009-10 the sugar factory had produced an approximate
quantity of 3,37,000 quintals of sugar. On the same day i.e.25.9.2010 the
sugar factory confirmed the sale of 52000 quintals of sugar to the Distilleries,
alongwith direction to remit the sale amount in the State Bank of India,
Belgaum Branch, in the account of the sugar factory, by Real Time Gross
Settlement (for short RTGS). Accordingly the Distilleries remitted amount of
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Rs.12,33,96,000/- towards the full satisfaction of the payment for purchase
of 52000 quintals of M-30 Grade sugar from the sugar factory on 27.9.2010.
It is further averred that the sugar factory delivered initially 16950 quintals of
sugar to the Distilleries by around 30.9.2010 and thereafter the Distilleries
had sent its transporter to lift remaining 35050 quintals of sugar from the
sugar factory. However, the said transporter was not allowed to lift the sugar
as the Tahasildar of Chandgad had seized the sugar from Godown Nos.3 & 6
on the orders passed by his superiors.
14. It was further averred that the action was taken due to non-payment of the
Fair and Reasonable Price (FRP) of the farmers by the sugar factory. The
sugar factory was required to pay an amount of Rs.11,09,24,496.80 to the
farmers as the FRP @ of Rs.1268.40 per ton as fixed by the Central
Government. The sugar factory thus utilised the money paid by the
Distilleries towards the payment of FRP to the farmers, and despite this, the
balance quantity of 35050 quintals of sugar was not delivered to the
Distilleries. In view of this, the Distilleries wrote a letter to the Regional Joint
Director, Sugar, Kolhapur on 15.10.2010 requesting him to release the sugar
from the sugar factory. Pursuant to this letter, the Regional Joint Director,
Sugar, Kolhapur by his letter dated 16.10.2010 communicated his no-
objection to the Commissioner of Sugar for releasing the balance sugar to the
Distilleries. Pursuant to this, the Commissioner of Sugar who had ordered
seizure of sugar of the sugar factory, in turn, directed the Collector of
Kolhapur by letter dated 22.10.2010 to release the sugar of an quantity, of
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which, the FRP was paid to the farmers. When the representative of the
Distilleries went to the office of the Collector of Kolhapur with a request to
release the balance quantity of sugar as per the letter dated 22.10.2010 issued
by the Commissioner, the representative was intimated that the sugar
attached was to be auctioned in pursuance of the order dated 8.10.2010
passed by this Court in Writ Petition No.7447 of 2010 filed by the Bank. The
Distilleries therefore took out this application for the aforesaid reliefs as it is
directly aggrieved by the order dated 8th October, 2010 passed by this Court
in the Writ Petition.
15. Apart from filing the Civil Application No.2785 of 2010 by the Distilleries in
the Writ Petition No.7447 of 2010, it also filed substantive writ petition
bearing No.8896 of 2010 praying for identical reliefs and further in the
alternate for direction to the Sugar factory to repay the price of 35050
quintals of M-30 Grade sugar at the rate of Rs.2373/- per quintal.
RIVAL SUBMISSIONS:
16. We have heard learned counsel appearing for the parties in the Writ Petition
No.7447/2010, Civil Application No.2782/2010, Civil Application No.
2785/2010, so also the learned counsel appearing for the parties in the Writ
Petition No.8896/2010.
17. In support of Bank’s Writ Petition No.7447/2010 Mr.Patwardhan, learned
counsel appearing for the petitioner-Bank relied upon the judgment of the
Apex Court in the case of Central Bank of India V/s.Siriguppa Sugars and
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Chemicals Limited, (2007) 8 SCC 353 and contended that pawnee/pledgee’s
right of retainer would have precedence over workmens’s dues and those of
statutory authorities viz.in the present case, the Commissioner of Sugar. The
Commissioner of Sugar (on behalf of cane growers) and the workmen of the
pawner/pledgor, in the absence of liquidation proceedings under Section 529
and 529-A of the Companies Act, 1956 stand only as unsecured creditors and
their rights cannot prevail over the rights of the pawnee of the goods. The
Apex Court has exhaustively considered the earlier judgments dealing with
the right of the pledgee in the light of sections 172 to 176 of the Indian
Contract Act, 1872. The Apex Court considered the following judgments:-
(1) Lallan Prasad V/s.Rehmat Ali, AIR 1967 SC 1322,
(2) Bank of Bihar V/s.State of Bihar, (1972) 3 SCC 196,
(3) Karnataka Pawnbrokers Association V/s.State of Karnataka, (1998)
7 SCC, 707.
(4) Dena Bank V/s.Bhikabhai Prabhudas Parekh & Co., (2000), 5 SCC
694.
(5) O.Konavalou V/s.Commander, Coast Guard Region, (2006), 4
SCC 620,
(6) Workers V/s.Rohtas Industries Limited, (1987) 2 SCC 588,
(7) State of M.P.V/s.Jaora Sugar Mills Limited, (1997) 9 SCC 207.
18. Ultimately, in paragraph No.17, the Apex Court observed as under:-
“17. Thus, going by the principles governing the matter propounded by
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14this 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.”
19. Mr.Patwardhan also invited our attention to the order dated 6.2.2008 passed
by this Court in Writ Petition No.7936 of 2007 in respect of this very Bank
and very sugar factory, raising the identical controversy. Division Bench of
this Court observed in paragraph No.4 as under:-
“4. The question which arises in this petition is as to who has precedence
over the stock of sugar which is sought to be attached pursuant to the
order passed by the respondent Commissioner of Sugar for making
payment to sugar cane growers. The issue stands covered by the recent
decision of the Supreme Court rendered in the case of Central Bank of
India V/s.Siriguppa Sugars and Chemicals Limited & Ors.reported iin
2007(6) All M.R.431. In the said matter the Supreme Court held that the
principles which would govern the issue and as propounded by the
Supreme Court there cannot be any doubt that the rights of the appellate
bank over the pawned sugar has precedence over the claims of the Cane
Commissioner and that of the workmen.”
20. Mr.Patwardhan therefore submitted that the reliance placed on behalf of the
sugar factory as also the authorities of the State Government and the
Distilleries on the Order and in particular clauses 3(3) and 3 (3-A) thereof is
of no avail as it is a settled position of law that the Commissioner of Sugar
who is unsecured creditor cannot have any higher rights than that of pawnees
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rights.
21. On the other hand the learned counsel appearing for the authorities of the
State Government, sugar factory and the Distilleries submitted that in terms
of clauses 3(3) and 3(3-A) of the Order, the sugar factory is obliged to pay
within 14 days from the date of delivery of the sugarcane to the seller or
tender him the price of the cane sold at the rate agreed to between the
purchaser and the sugarcane growers or sugarcane growers co-operative
society, and on failure to make payment for sugarcane purchased within 14
days of the date of delivery, the sugar factory has to pay interest on the
amount due @ 15% p.a.for the period of such delay beyond 14 days. Thus,
the provision is made to protect the interest of farmers who supply sugarcane
to the sugar factory. Since these clauses protect the interest of the farmers and
the order is issued u/s.3 of the Essential Commodities Act, 1955, they will
override and/or curtail the rights of the Bank in the instant case. It was
therefore submitted that the sale proceeds deposited in a separate account
maintained by the Bank should not be allowed to be appropriated by the
Bank towards its dues from the sugar factory.
22. On behalf of Distilleries it was submitted that the Collector of Kolhapur be
directed to deliver 35050 quintals of M-30 Grade sugar in accordance with
the order dated 22.10.2010 issued by the Commissioner of Sugar,
Maharashtra State, Pune. It was further submitted that there was concluded
sale between the sugar factory and the Distilleries in respect of 52000
quintals of sugar. The Distilleries had remitted an amount of Rs.
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12,33,96,000/- by RTGS. Pursuant to this concluded sale, the Distilleries
received 16950 quintals of sugar and therefore the Distilleries is entitled to
get 35050 quintals of M-30 Grade sugar. In the alternative, to direct the sugar
factory to repay the price of 35050 quintals of M-30 Grade Sugar @ Rs.
2373/- per quintal. It was further submitted that basically the Bank’s claim is
based on the pledge deeds at annexures ‘A’ & ‘B’ to the Writ Petition No.
7447 of 2010. Perusal of this exhibits will show that they do not bear any
dates and they cannot be said to be valid pledge deeds, and consequently, the
Bank is not entitled to lay its claim on that basis.
CONSIDERATION:
23. We have considered the rival submissions made by the learned counsel
appearing for the parties. We have also gone through the written submissions
filed on behalf of the sugar factory as also the written submissions filed by
the distilleries in both the petitions. We will take up first the Writ Petition
No.7447/2010 and the Civil Application Nos.2782/2010 & 2785/2010 filed
therein for consideration.
24. As noted earlier the Bank has filed Writ Petition No.7447/2010 praying for
directions against the authorities of the State Government to withdraw the
attachment/sealing of the sugar stock in the Godown Nos.3 & 6 of the sugar
factory and has further prayed for issuance of directions against these
authorities to deliver possession of the sugar stock to the Bank, which is
stored in the said godowns. The matter was heard on 20.9.2010 when notice
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was issued to the sugar factory, returnable on 23.9.2010. The Court recorded
the submissions made on behalf of the Bank and also directed the Secretary
in the Department of Co-operation, Government of Maharashtra to remain
present before the Court on the next date of hearing. The matter was heard
on 8.10.2010 when none appeared on behalf of the sugar factory despite
service. Dr.Goel, Secretary in the Department of Co-operation, Government
of Maharashtra, invited attention of this court to the Order issued by the
Government of India u/s.3 of the Essential Commodities Act, 1955 and
particularly clauses 3(3) and 3(3A) of the said Order. After recording the
submissions, this Court directed the Collector of Kolhapur to auction the
entire sugar stock in the Godown Nos.3 & 6 of the sugar factory and deposit
the sale proceeds with the Bank. The Bank was directed to remit the sale
proceeds in a separate account. It was made clear that the disbursement of the
sale proceeds would be subject to the further orders to be passed in the
petition.
25. The sugar factory filed Civil Application No.2782/2010, for recalling the
order dated 8.10.2010 and praying for an injunction restraining the Collector
of Kolhapur from conducting the auction sale of the entire sugar stock lying
in Godown Nos.3 & 6 of the sugar factory and further praying for directions
against the authorities of the State to release the sugar stock from the
attachment. Civil Application No.2785/2010 was filed by the Distilleries for
impleading it as a party Respondent in Writ Petition No.7447/2010 as also
praying for modification of the order dated 8.10.2010 by directing the
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Collector of Kolhapur to deliver 35050 quintals of M-30 grade sugar to the
Distilleries in accordance with the order dated 22.10.2010 issued by the
Commissioner of Sugar and the Special Registrar, Co-operative Societies,
Maharashtra State, Pune.
26. Now it is common ground and equally it is not in dispute that pursuant to the
order dated 8.10.2010, the Collector of Kolhapur conducted auction and sold
35050 quintals of sugar that was lying in the Godown Nos.3 & 6 of the sugar
factory and realised an amount of Rs.18,86,90,000/- and the said amount is
remitted in a separate account maintained by the Bank. Thus the order dated
8.10.2010 passed by this Court in Writ Petition no.7447/2010 is already
implemented and therefore there is no question of recalling the said order as
also for issuing an injunction restraining the Collector of Kolhapur from
conducting the auction sale of the entire sugar stock lying in the Godown
Nos.3 & 6 of the sugar factory and for directions against the authorities of the
State to release the said sugar stock from attachment. The prayers made in
the Civil Application have become infructuous.
27. As far as Civil Application No.2785/2010 filed by the Distilleries is
concerned, the prayer is made for impleading it as a party Respondent in Writ
Petition No.7447/2010 as also praying for modification of the order dated
8.10.2010 by directing the Collector of Kolhapur to deliver 35050 quintals of
M-30 grade sugar to the Distilleries in accordance with the order dated
22.10.2010 issued by the Commissioner of Sugar and the Special Registrar,
Co-operative Societies, Maharashtra State, Pune. The prayer for modification
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of the order dated 8.10.2010 has also become infructuous as the said order
has already been implemented. The Distilleries has also filed substantive
petition being the Writ Petition No.8896/2010 praying for identical reliefs. In
view of this, nothing survives in the Civil Application Nos.2782/2010 filed
by the sugar factory and the Civil Application No.2785/2010 filed by the
Distilleries. Rule is discharged in both the applications with no order as to
costs.
28. As far as Writ Petition No.7447/2010 is concerned, the Bank has prayed for
issuance of directions against the authorities of the State to withdraw
attachment/sealing of the sugar stock in the Godown Nos.3 & 6 of the sugar
factory and for directions against the authorities of the State to deliver
possession of the sugar stock to the Bank, which is stored in the said
godowns. As noted earlier on 8.10.2010 the Court has directed the Collector
of Kolhapur to sell the said stock. The Court has further directed that the sale
proceeds shall be remitted to a separate account to be maintained by the
Bank. Accordingly, an amount of Rs.18,86,90,000/- realised from the auction
sale is lying with the Bank. The Court has further made it clear in the order
dated 8.10.2010 that the disbursement of the sale proceeds shall be subject to
the further orders to be passed in the petition. We have therefore to consider
the question i.e.how to disburse the sale proceeds which are for the time
being lying with the Bank.
29. Mr.Dhakephalkar, learned Senior Counsel submitted that basically the Bank’s
claim based on pledge deeds at Exhibits ‘A’ and ‘B’ to the petition is
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unenforceable. He submitted that the pledge deeds are not valid. In so far as
sugar factory is concerned, no such stand is taken either in the affidavit filed
in Writ Petition No.7447/2010 or in the Civil Application No.2782/2010. The
Distilleries which is totally a stranger to the pledge deeds has no locus to
question their veracity. There is no privity of contract between the Bank and
the Distilleries. We are therefore of the opinion that the said contention is
devoid of any merits.
30. In the case of Central Bank of India (supra) the Apex Court, after
exhaustively considering the earlier judgments dealing with the right of the
pledgee in the light of sections 172 to 176 of the Indian Contract Act, 1872
has held that there cannot be any doubt that the rights of the Bank over the
pawned sugar has precedence over the claims of the Cane Commissioner (in
the present case the Commissioner of Sugar and the Special Registrar) and
that of the workmen. The Apex Court has held that the Commissioner of
Sugar (on behalf of the cane growers) in the absence of liquidation
proceedings u/s.529 and 529-A of the Companies Act, 1956 stand only as
unsecured creditor and their rights cannot prevail over the rights of the
pawnee of the goods. The Division Bench of this Court had an occasion to
consider the controversy between the Bank and the sugar factory in Writ
Petition No.7936 of 2007. By order dated 6.2.2008 the Court held that the
said issue stood covered by the judgment of the Apex Court in the case of
Central Bank of India (supra). In view of the settled legal position, the
reliance placed by the authorities of the State Government, the sugar factory
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and the distilleries on clauses 3(3) and 3(3A) of the Order is wholly mis-
conceived. It will have to be held that since there are no liquidation
proceedings in respect of the sugar factory in question, the right of the
Commissioner of Sugar cannot prevail over the rights of the Bank and the
status of the Commissioner of Sugar is that of an unsecured creditor. We
therefore hold that the Bank is entitled to retain the sale proceeds subject to
the taking of accounts. In case it is found that the sale proceeds exceed the
dues of sugar factory, the Bank shall refund the surplus to the sugar factory.
In the result, Rule is made absolute in the aforesaid terms with no order as to
costs.
31. The Distilleries has filed substantive writ petition being Writ Petition No.
8896 of 2010 praying for directions against the Respondent No.3-Collector of
Kolhapur to release 35050 quintals of M-30 grade sugar in accordance with
the order dated 22.10.2010 issued by the Respondent No.2-Commissioner of
Sugar and the Special Registrar, Co-operative Societies, Maharashtra State,
Pune and/or in the alternative for direction to the sugar factory to repay the
price of 35050 quintals of M-30 grade sugar @ Rs.2373/- per quintal
alongwith the interest @ 24% p.a.to be calculated from 27.9.2010. The
Distilleries has averred that through its broker Atharv Intertrade, it had
ordered purchase of 52000 quintals of sugar with the sugar factory on
25.9.2010 @ Rs.2373/- per quintal, as it was learnt by the Distilleries that for
the sugar crushing season of the year 2009-2010 the sugar factory had
produced approximate quantity of 3,37,000 quintals of sugar, and that the
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sugar offered to the Distilleries was from ‘free hold’ category. As per the
purchase order, the sugar factory confirmed the sale on the same day i.e.
25.9.2010 and directed the Distilleries to remit the sale amount by RTGS.
The Distilleries remitted an amount of Rs.12,33,96,000/- towards the full
satisfaction of payment for purchase of 52000 quintals of M-30 grade sugar
to the sugar factory on 27.9.2010. The sugar factory also issued its Receipt
No.291 on 27.9.2010 confirming that it had received an amount of Rs.
12,33,96,000/- in lieu of sale of 52000 quintals of M-30 grade sugar. It is the
case of the Distilleries that initially the sugar factory delivered 16950 quintals
of sugar by 30.9.2010. Thereafter the Distilleries has sent its transporter to
lift the remaining 35050 quintals of sugar from the sugar factory. However,
the said transporter was not allowed to lift the sugar as the Tahasildar of
Chandgad, on the orders passed by his superiors, had seized the sugar from
the Godown Nos.3 & 6.
32. It was further averred by the Distilleries that the said action was taken due to
non-payment of FRP of the farmers by the sugar factory. The sugar factory
was required to pay an amount of Rs.11,09,24,496.80 to the farmers as the
FRP @ Rs.1268.40 per ton as fixed by the Central Government. The sugar
factory thus utilised the money paid by the Distilleries towards the payment
of FRP to the farmers and despite this, the balance quantity of 35050 quintals
of sugar was not delivered to it. The Distilleries addressed a letter dated
15.10.2010 to the Regional Joint Director, Sugar, Kolhapur, requesting him to
release the sugar from the sugar factory. The Regional Joint Director, Sugar,
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Kolhapur, in turn, by its latter dated 16.10.2010 communicated his ‘no-
objection’ to the Commissioner of Sugar for releasing the balance sugar to
the Distilleries. Pursuant to this, by a letter dated 22.10.2010, the
Commissioner of Sugar who had ordered seizure of the sugar, directed the
Collector of Kolhapur to release the sugar of a quantity, of which, FRP was
paid to the farmers. When the representative of the Distilleries went to the
office of the Collector of Kolhapur with a request to release the balance
quanity of sugar as per the letter dated 22.10.2010, it was intimated that the
sugar was attached and was to be auctioned as per the order dated 8.10.2010
passed by this Court in Writ Petitoin No.7447/2010 filed by the bank.
33. It is the case of the Distilleries that the sugar factory and the Bank colluded
with each other to over reach the orders passed by the authorities of the State
Government and have malafide sought to create illegal charge on 52000 of
M-30 grade sugar purchased by the Distilleries. The Distilleries asserted that
the Bank has made a claim on the basis of two undated pledge deeds which
are annexed at Exhibits ‘A’ & ‘B’ to the petition No.7447/2010. It is in these
circumstances, the Distilleries have prayed for release of 35050 quintals of
M-30 grade sugar in accordance with the order dated 22.10.2010 issued by
the Commissioner of Sugar, Maharashtra State, Pune, and in the alternative
for a direction to the sugar factory to repay the price of 35050 quintals of
M-30 grade sugar @ 2373/- per quintal together with interest @ 24% p.a.to
be calculated from 23.9.2010.
34. Thus the prayers made in the Writ Petition filed by the Distilleries are based
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upon the order dated 22.10.2010 passed by the Commissioner of Sugar, as
also on the basis that the Distilleries have purchased 52000 quntals of M-30
grade sugar from the sugar factory on 25.9.2010. At the time of hearing of
this petition, we suggested Mr.P.K.Dhakephalkar, learned Senior Cousnel
appearing for the Distilleries to withdraw the writ petition with liberty to
institute a suit, and in order to enable the learned counsel to take instructions,
the hearing of the petition was deferred. On the next date of hearing, the
learned Senior Counsel reported that the Distilleries does not want to
withdraw the writ petition. We accordingly proceed to consider the question
whether the Distilleries is entitled to prayer (B) of the petition.
35. As indicated earlier, the Writ Petition No.7447/2010 is filed by the Bank
praying for a direction to the authorities of the State Government to withdraw
the attachment/sealing of the sugar stock in the Godown Nos.3 & 6 of the
sugar factory and also for a direction to the authorities of the State
Government to deliver possession of the sugar stock which is lying in the
Godown Nos.3 & 6 of the sugar factory. On 20.9.2010 this Court issued
notice to the sugar factory returnable on 23.9.2010. Hamdast was allowed. In
addition, Advocates notice by fax to the sugar factory was also allowed. The
Court recorded submissions made on behalf of the Bank and directed the
Secretary in the Department of the Co-operation, Government of
Maharashtra, to remain present before the Court on the next date of hearing.
On 21.9.2010 affidavit of service was filed on behalf of the Bank alongwith a
fax report showing compliance of the Court’s order dated 20.9.2010. On
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8.10.2010, this Court heard learned counsel appearing for the Bank and the
learned AGP for the State. On that date, none appeared for the sugar factory
despite service. Dr.Goel, Secretary in the Department of Co-operation,
Government of Maharashtra, Pune, who was present on that date was heard.
The sugar factory filed Civil Application No.2782/2010 on 26.10.2010 for
recalling the order dated 8.10.2010 and praying for an injunction restraining
the Collector of Kolhapur from conducting auction sale of the entire sugar
stock lying in the Godown Nos.3 & 6. In paragraph No.3 of that application,
it was averred that due to some communication gap and some unavoidable
reasons, the sugar factory could not appear for hearing on 8.10.2010 and
subsequently it became aware of the said petition as also the order passed
therein It is significant to note here that in the first place, the sugar factory
did not dispute that it did not receive the fax sent on behalf of the Bank on
21.9.2010. Despite service none appeared on behalf of the sugar factory on
23.9.2010 or on 8.10.2010. Secondly, in the application filed on 26.10.2010,
there is no mention, much less any whisper about the purported sale of 52000
quintals of M-30 grade sugar to the Distilleries on 25.9.2010. The application
was filed for recalling the order dated 8.10.2010 precisely on the ground of
developments that took place subsequent to the filing of the Writ Petition No.
7447/2010. In view of this, we called upon Mr.Sakhare, learned Senior
Counsel to produce the record of the sugar factory for our perusal. After
going through the record produced by the sugar factory, it transpired that on
23.9.2010 the sale in favour of the Distilleries was concluded. However, the
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letter dated 25.9.2010 addressed by the Atharv Intertrade to the Chairman of
the sugar factory is relied upon for showing the confirmation of purchase of
52000 quintals of sugar. The said letter is totally silent about the name of the
purchaser. However, the sugar factory on the same day, i.e.25.9.2010
addressed a communication to the Distilleries confirming the sale of 52000
quintals of sugar to it. The said letter also does not bear any outward number.
If at all the sale as per the record maintained by the sugar factory was
concluded on 23.9.2010, there was no question of Atharv Intertraders
confirming the sale on 25.9.2010 and the sugar factory, in turn, addressing
the letter to the Distilleries. This is to be appreciated on the backdrop of the
fact that on 21.9.2010 notice by way of a fax was sent to the sugar factory.
Thus, on one hand the sugar factory did not appear before this Court on
23.9.2010 and 8.10.2010 and on the other hand entered into the sale
transaction despite the knowledge of filing of writ petition by the Bank. This
is more so when the Bank had filed writ petition praying for identical reliefs
against the sugar factory in the past. Considering the cumulative effect of the
aforesaid, we are prima-facie of the opinion that the purported sale made by
the sugar factory in favour of the Distilleries was with a view to prejudicing
the claim of the Bank. The sugar factory was fully aware that 52000
quintals of M-30 grade sugar which was tried to be sold to the Distilleries
was pledged with the Bank. Without taking the Bank’s permission, the sugar
factory entered into the purported sale transaction with the Distilleries.
Prima-facie, we are therefore satisfied that the sale effected by the sugar
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factory in favour of the Distilleries is not a genuine transaction and it was
entered into solely with a view to prejudicing the claim of the Bank.
Mr.Dhakephalkar submitted that the Bank has not filed any affidavit
opposing the petition of the Distilleries and no such stand is taken. We are
not impressed by this submission, as we have ourselves perused the record
produced by the sugar factory. We do not find any merit in this submission.
36. The Distilleries has also relied upon the order dated 22.10.2010 issued by the
Commissioner of Sugar for releasing the sugar to the Distilleries. Pursuant to
the directions given by us, the learned AGP produced record of the
Commissioner of Sugar for our perusal. After going through the record, we
found that the Commissioner of Sugar was duly served with the copy of the
writ petition No.7447/2010. The learned AGP appeared on behalf of the
Commissioner of Sugar right from 20.9.2010. Shri.Rajendra R.Chavan, the
Commissioner of Sugar was personally present before us at the time of
hearing. Initially, he said that he was not served with the copy of the petition.
When we pointed out that the copy of the petition is very much part of his
office record, he said that he was not aware of any order passed by this Court
in Writ Petition No.7447/2010. We are really amazed by the stand taken by
the Commissioner of Sugar. He was aware of the filing of the Writ Petition
No.7447/2010 and the prayers made therein. The least one can expect from
the Commissioner of Sugar is to appraise himself about passing of any order
by this Court in Writ Petition No.7447/2010 and till that time stay his hands.
Instead of doing either of these things, the Commissioner of Sugar issued
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letter dated 22.10.2010 directing the Collector of Kolhapur to release the
sugar. The Commissioner of Sugar also expressed his willingness to
withdraw that order. Be that as it may, we expect Shri.Rajendra R.Chavan, to
be very careful in future, particularly when the Court is seized of the
controversy. We leave the matter there.
37. Mr.Dhakephalkar submitted that the sugar factory sold 52000 quintals of
M-30 grade sugar to the Distilleries on 25.9.2010. By 30.9.2010, 16950
quintals of sugar was delivered by the sugar factory to the Distilleries. The
balance 35050 quintals of sugar was however not delivered. The same sugar
was sold by the Collector of Kolhapur in an auction. He therefore submitted
that in effect so far as 35050 quintals of M-30 grade sugar is concerned, the
sale was effected twice. In the first instance to the Distilleries and secondly in
the auction sale. He therefore submitted that the auction sale is invalid. We
have already held that the purported sale between the sugar factory and the
Distilleries on 25.9.2010 is not a genuine transaction. In view thereof, we do
not find any substance in the contention raised by the Distilleries that 35050
quintals of M-30 grade sugar was sold twice.
38. Mr.Dhakephalkar has further submitted that at any rate the sale proceeds
realised from the auction should not be allowed to be appropriated by the
Bank. By order dated 8.10.2010 the Court made it clear that the amount
remitted in the Bank account shall be disbursed subject to the further orders
to be passed in the petition. He therefore submitted that the Bank should
recover the said amount by following due process of law. Section 176 of the
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Indian Contract Act, 1872 reads as under:-
Section 176:- Pawnee’s right where pawnor makes default-
“If the pawnor makes default in payment of the debt, or pefrormance,
at the stipulated time, of the promise, in respect of which the goods were
pledged, the pawnee may bring a suit against the pawnor upon the debt or
promise, and retain the goods pledged as a collateral security; or he may
sell the thing pledged, on giving the pawnor reasonable notice of the
sale.
If the proceeds of such sale are less than the amount due in respect of
the debt or promise, the pawnor is still liable to pay the balance. If the
proceeds of the sale are greater than the amount so due, the pawnee shall
pay over the surplus to the pawnor.”
(emphasis supplied)
39. As per section 176 of the Indian Contract Act, 1872 pawnee is entitled to sell
the things pledged on giving the pawner reasonable notice of the sale. In the
instant case, under order dated 8.10.2010 passed by this Court, the Collector
of Kolhapur was directed to sell the sugar in auction. In view thereof, it
cannot be said that the sugar factory (pawnor in this case) had no reasonable
notice of the sale. We are satisfied that in the present case, the Bank is
entitled to appropriate the amount realised from the sale proceeds subject to
taking of the accounts as indicated earlier.
40. In the result, the Distilleries is not entitled to any relief. That apart,
considering the conduct of the sugar factory and the Distilleries, we are of the
opinion that this is not a fit case for invocation of extra ordinary jurisdiction
under Article 226 of the Constitution of India. In the result, petition fails and
rule is discharged with no order as to costs.
41. It is expressly made clear that the observations made by us as far as the sale
effected between the sugar factory and the Distilleries are concerned, they are
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only for the limited purpose of disposing of the petitions. In case the
Distilleries institutes suit, the observations made by us about the said sale
shall not influence the Judge seized of the matter and the learned Judge shall
decide the suit on the basis of material on record and in accordance with law.
CONCLUSION:
42. In the result, Writ Petitions and the Civil Applications are disposed of as
under:-
(i) Rule is made absolute in the aforesaid terms in Writ Petition
No.7447 of 2010, with no order as to costs.
(ii) So far as the Civil Application Nos.2782 of 2010 and 2785 of
2010 in Writ Petition No.7447 of 2010 are concerned, Rule is
discharged in both the civil applications, with no order as to costs.
(iii) Rule is discharged in Writ Petition No.8896 of 2010, with no
order as to costs.
43.At this stage, learned counsel appearing for the petitioner in Writ
Petition No.8896 of 2010 orally prayed that the Bank should not be
permitted to appropriate the sale proceeds which has already been
kept in a separate account with the Kolhapur Disctict Central Co-
operative Bank Limited. In view of the directions to appropriate
subject to taking accounts, we do not think it necessary to grant the
relief of interim stay as prayed. The prayer made in this behalf is
rejected.
(R.G.KETKAR, J.) (V.C.DAGA, J.)
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