Research › Search › Judgment

Punjab High Court · body

2014 DIGILAW 459 (PNJ)

Rubber Workers Union v. Kotak Mahindra Bank Ltd.

2014-03-05

G.S.SANDHAWALIA

body2014
JUDGMENT : G.S. Sandhawalia, J. The present writ petition has been filed under Articles 226 and 227 of Constitution of India praying for issuance of an appropriate writ, order or direction to the respondent No. 1-Bank to satisfy the claim of 118 workmen of Rs. 6,80,76,355/- before auctioning the assets of the company and claiming first claim on the company's assets in the auction proceedings. Prayer has also been made to restrain respondent No. 1-Bank from confirming the auction of the movable and immovable property of the company and keep the proceeds of the auction safe for disbursement to the workers. The case of the petitioner-union is that Hilton Rubbers Ltd.-respondent No. 2 has filed a reference with the Board for Industrial and Financial Reconstruction (in short 'BIFR') u/s 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short 'SICA'), company was declared sick on 20.04.2000 and Bank of India was appointed as Operating Agency and in the hearing held on 08.07.2003, winding up was confirmed by the BIFR. However, an appeal is pending before the Appellate Authority for Industrial and Financial Reconstruction (in short 'the AAIFR') who, vide order dated 27.01.2005, set aside the order and directed a new operating agency to be appointed and formulate the further revival scheme. However, proceedings under the SICA were still pending and vide order dated 12.10.2009, the BIFR permitted the workers to continue with their recovery suits. A petition u/s 33-C(2) read with Section 33-C(5) of the Industrial Disputes Act, 1947 was filed before the Labour Court, Panipat claiming sum of Rs. 6,80,76,355/-. In the meantime, the bank issued auction notice dated 12.11.2013 (Annexure P-6), which is the subject matter of challenge, as noticed above. 2. This Court, vide order dated 03.02.2014, directed the petitioner-Union to file an affidavit as to whether company petition has been registered on the recommendations of BIFR and whether the Company Court is seized of the matter. 3. In compliance of the said order, affidavit has been filed by Partap Singh Chauhan, in which it is mentioned that in view of the order dated 28.04.2011, BIFR had ordered winding up but an appeal is pending before AAIFR. That Company Petition No. 91 of 2011 was listed and is now fixed for 28.04.2014 and the bank was going ahead by auctioning the assets. 4. That Company Petition No. 91 of 2011 was listed and is now fixed for 28.04.2014 and the bank was going ahead by auctioning the assets. 4. Counsel for the respondent-Bank, on the other hand, submitted that in pursuance of the auction notice issued under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act), the building and the structure and all plant and machinery stand sold to Creative Enterprises for a sum of Rs. 4,72,50,000/- and possession has been handed over to the auction purchaser and certificate of sale had also been issued on 21.01.2014. A photocopy of the said certificate has been placed on record. 5. After hearing counsel for the parties, this Court is of the opinion that the auction was conducted under the provisions of the SARFAESI Act. The appropriate remedy to the petitioner to challenge any action of the secured creditors would lie with the Tribunal and it would not be open to it to come directly to this Court firstly. Reliance can be placed upon judgment of the Apex Court in T.P. Vishnu Kumar Vs. Canara Bank P.N. Road, Tiruppur and Others, (2013) 10 SCC 652 wherein, it has been held that a writ petition challenging the order of the Debt Recovery Tribunal was not maintainable in view of the alternative remedy available u/s 20 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (in short 'the RDB Act'). It was held as under: 8. Powers, which were conferred on the civil court, now stands conferred on a Tribunal u/s 17 of the Act thereby it can deal with applications from banks and financial institutions for recovery of debts due to such banks and financial institutions. We are of the view when a specific remedy is made available to the aggrieved party u/s 20 of the Act, learned Single Judge of the High Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, was not justified in interfering with the orders passed by the Debt Recovery Tribunal. 9. Powers of the High Court under Article 226 cannot be invoked in the matter of recovery of dues resulting in prejudice to the party or where such proceedings or action is wholly arbitrary, unreasonable and unfair. 9. Powers of the High Court under Article 226 cannot be invoked in the matter of recovery of dues resulting in prejudice to the party or where such proceedings or action is wholly arbitrary, unreasonable and unfair. When the Act itself provides for a mechanism, by an appeal u/s 20 of the Act, in our view, the High Court is not justified in invoking jurisdiction under Article 226 of the Constitution of India to examine that the rejection of the applications by the tribunal was correct or not. The petitioner and the contesting respondents have no case that either the bank or the Tribunal had violated any statutory provisions by rejecting their applications. 10. Writ petition was preferred against the rejection of applications and the same were entertained by the learned Single Judge and decided on merits and which in or view is impermissible while exercising its jurisdiction under Article 226 of the Constitution. If the correctness of otherwise of each and every interim order passed by the Tribunal, is going to be tested in a writ court, it will only defeat the object and purpose of establishing such tribunal. We already noticed that due to the intervention of the writ court, the matter got delayed for four years defeating the very purpose and object of the Act. We, therefore, find no merit in these petitions and the same are dismissed. 6. Similarly, in The Official Liquidator, U.P. and Uttarakhand Vs. Allahabad Bank and Others, (2013) 4 SCC 381 , the question that came up for consideration was whether the Company Judge under the Companies Act, 1956 had jurisdiction at the instance of the Official Liquidator to set aside the auction or sale held by the Recovery Officer under the RDB Act or whether he was required to file the appeal assailing the auction and the resultant confirmation of sale. The said question was answered by holding that the Official Liquidator should take recourse to the mode of appeal under the RDB Act and not approach the Company Court. The relevant paragraphs read thus: 26. We have referred to the said passage for the purpose of highlighting that an appeal lies to the DRT challenging the action of the Recovery Officer. The relevant paragraphs read thus: 26. We have referred to the said passage for the purpose of highlighting that an appeal lies to the DRT challenging the action of the Recovery Officer. In the case at hand, the Official Liquidator was not satisfied with the manner in which the auction was conducted and he thought it apposite to report to the learned Company Judge who set aside the auction. Needless to emphasise, the Official Liquidator has a role under the 1956 Act. He protects the interests of the workmen and the creditors and, hence, his association at the time of auction and sale has been thought appropriate by this Court. To put it differently, he has been conferred locus to put forth his stand in the said matters. Therefore, anyone who is aggrieved by any act done by the Recovery Officer can prefer an appeal. Such a statutory mode is provided under the RDB Act, which is a special enactment. The DRT has the powers under the RDB Act to make an enquiry as it deems fit and confirm, modify or set aside the order made by the Recovery Officer in exercise of powers under Sections 25 to 28 (both inclusive) of the RDB Act. Thus, the auction, sale and challenge are completely codified under the RDB Act, regard being had to the special nature of the legislation. 27. It has been submitted by Mr. Banerji, learned senior counsel, that if the Company Court as well as the DRT can exercise jurisdiction in respect of the same auction or sale after adjudication by the DRT, there would be duality of exercise of jurisdiction which the RDB Act does not envisage. By way of an example, the learned senior counsel has submitted that there are some categories of persons who can go before the DRT challenging the sale and if the Official Liquidator approaches the Company Court, then such a situation would only bring anarchy in the realm of adjudication. The aforesaid submission of the learned senior counsel commends acceptance as the intendment of the legislature is that the dues of the banks and financial institutions are realized in promptitude. It is to be noted that when there is inflation in the economy, the value of the mortgaged property/assets depreciates with the efflux of time. The aforesaid submission of the learned senior counsel commends acceptance as the intendment of the legislature is that the dues of the banks and financial institutions are realized in promptitude. It is to be noted that when there is inflation in the economy, the value of the mortgaged property/assets depreciates with the efflux of time. If more time is consumed, it would be really difficult on the part of the banks and financial institutions to realize their dues. Therefore, this Court in Allahabad Bank's case has opined that it is the DRT which would have the exclusive jurisdiction when a matter is agitated before the DRT. The dictum in the said case has been approved by the three-Judge Bench in Rajasthan State Financial Corporation and Another (supra). It is not a situation where the Official Liquidator can have a choice either to approach the DRT or the Company Court. The language of the RDB Act, being clear, provides that any person aggrieved can prefer an appeal. The Official Liquidator whose association is mandatorily required can indubitably be regarded as a person aggrieved relating to the action taken by the Recovery Officer which would include the manner in which the auction is conducted or the sale is confirmed. Under these circumstances, the Official Liquidator cannot even take recourse to the doctrine of election. It is difficult to conceive that there are two remedies. It is well settled in law that if there is only one remedy, the doctrine of election does not apply and we are disposed to think that the Official Liquidator has only one remedy, i.e., to challenge the order passed by the Recovery Officer before the DRT. Be it noted, an order passed u/s 30 of the RDB Act by the DRT is appealable. Thus, we are inclined to conclude and hold that the Official Liquidator can only take recourse to the mode of appeal and further appeal under the RDB Act and not approach the Company Court to set aside the auction or confirmation of sale when a sale has been confirmed by the Recovery Officer under the RDB Act. 7. Further, the Apex Court in United Bank of India Vs. Satyawati Tondon and Others, (2010) 8 SCC 110 has also held that once there is an alternative remedy, this Court would be at loath to interfere under Article 227 of the Constitution of India. 7. Further, the Apex Court in United Bank of India Vs. Satyawati Tondon and Others, (2010) 8 SCC 110 has also held that once there is an alternative remedy, this Court would be at loath to interfere under Article 227 of the Constitution of India. It was laid down as under:- 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 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, 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. xxxx xxxx xxxx 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. 8. Counsel for the petitioner has vehemently submitted that since the auction as such has not been challenged, therefore, the Tribunal would have no jurisdiction. 9. This Court does not agree with the said submission. Once the proceedings have been initiated under a particular Statute, it would be appropriate for the said Tribunal to decide the rights of the workman in view of the law laid down by the Apex Court, as noticed above. 9. This Court does not agree with the said submission. Once the proceedings have been initiated under a particular Statute, it would be appropriate for the said Tribunal to decide the rights of the workman in view of the law laid down by the Apex Court, as noticed above. Accordingly, this Court feels that it is not a case where the discretionary jurisdiction under Article 226 of the Constitution of India is to be invoked and the present petition is accordingly dismissed.