Court dismisses petitions for allocation of sale proceeds under SARFAESI Act, emphasizes workers' entitlements

The court dismissed the petitions seeking allocation of funds from the sale proceeds for employees' dues under the SARFAESI Act. Emphasizing the Act's provisions, the court clarified that the bank cannot prioritize its dues over workers' entitlements. The sale proceeds must be distributed as per the Act, with costs and expenses paid first, followed by the bank's dues, and the remaining amount distributed according to stakeholders' rights. The bank assured settlement of workers' dues post fund collection, leading to the dismissal of the petitions without costs awarded to any party.

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Issues:
Petition seeking direction to set apart funds from sale proceeds for employees' dues under SARFAESI Act.

Analysis:
The writ petitions were filed by a trade union and an employee requesting the bank to allocate Rs. 3 crores from the sale proceeds of a company's assets towards the employees' dues. The notice issued by the bank under section 13(4) of the SARFAESI Act specified the dues recoverable from the company, including amounts owed to various departments and workers. The petitioners claimed that their dues should be given priority over the bank's recovery. Additionally, an individual worker filed a separate petition to secure his dues from the sale proceeds.

The court considered the provisions of the SARFAESI Act, emphasizing that the sale by the authorized officer is not solely for the bank's benefit but aims to secure assets pledged for the bank's dues. Section 13 outlines the sale procedure, and sections 13(7), (9), and (10) detail the distribution of sale proceeds. The Act mandates that costs and expenses incurred by the bank should be paid first, followed by the bank's dues, with the remaining amount distributed according to stakeholders' rights.

The court clarified that the sale proceeds should be distributed as per the Act's provisions, and the bank cannot prioritize its dues over the workers' entitlements. The bank assured that the workers' dues would be settled after collecting the funds. Consequently, the court dismissed the petitions, directing the bank to disburse the amount in accordance with the SARFAESI Act, without awarding costs to any party.

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