TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1331
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....these appeals is the secured creditor, a Co-operative Bank, who seeks to proceed against the properties of the mortgagee, a Co-operative Society, engaged in the manufacture of sugar at its factory. The specific contention is that the appellant having registered the transaction with the respondent Society, at the Central Registry, as constituted by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ['the SARFAESI Act'], has an overriding claim over the assets of the factory. The factory has become defunct, and the Society has defaulted the loan. For recovery of the dues, the mortgaged property has been proceeded against by the Bank, which has a priority insofar as satisfaction of the defaulted loan amounts. The specific contention taken is that the secured creditor has a priority, even as against the dues of the workmen and the Provident Fund amounts defaulted, as provided under Section 26E of the Act of 2002. 3. We heard Mr. M.Y. Deshmukh, learned counsel appearing for the appellant-bank and Mr. Shivaji M. Jadhav, learned counsel appearing for the respondent workmen and their union. 4. It is submitted by Mr. Deshmukh that ....
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....d later in the year 2007 approached the Industrial Court under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 ['the MRTU & PULP Act']. The said application stood dismissed as it was delayed and since there was no application filed for condonation of the delay occasioned. 8. When the appellant-bank proceeded to sell the properties, there were multiple writ petitions filed challenging the same by the workmen and their Union seeking recovery of the dues of the workmen and the defaulted amounts of provident fund. A Director of the appellant also challenged the auction proceedings, specifically a corrigendum issued. The Society and its members also filed separate writ petitions; all of which were decided by the impugned judgment, against which the appeals are filed. The impugned judgment relied on the judgment in United Bank of India v. Satyawati Tondon and Ors. (2010) 8 SCC 110, wherein this Court had expressed serious concern in the High Courts' continuing to ignore the statutory remedies available under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the SARFAESI Act to invoke the jurisdiction under Artic....
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.... registered with the Central Authority as provided under the Act of 2002. 12. One other aspect to be observed is that the workmen had approached the Industrial Court which rejected the different claims filed by them which have been annexed as Annexures A-6 to A-16. A challenge was made to the order of the Industrial Court in a writ petition which was disposed of by Annexure R-3. The petitioners therein challenged the order of the Industrial Court, claiming wages between March 1998 to December 1999. The learned Single Judge who disposed of the petition posed a question as to whether the matter should be remanded to the Industrial Court, since it was rejected on the ground of delay or allowed to be agitated before the Liquidator. Eventually, the Liquidator was directed to verify the claims and pass an order computing the amounts due to the workmen, pending disposal of the present appeals. The Liquidator's role is no more relevant since the secured creditor has taken over the property and had proceeded for sale as per the Act of 2002. There is hence no question of determination of the amounts due, by the Liquidator, 13. Punjab National Bank2 considered the issue of priority of C....
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....n, the same shall be deemed to be the first charge on the assets of the establishment and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts...." 15. We are in the present case concerned with a non obstante clause, giving priority to the secured creditors brought under the SARFAESI Act in the year 2020 which overrides any other law in force at the time of its incorporation, pitted against a specific first charge provided in a welfare legislation, enacted earlier. The above requires consideration based on the precedents of this Court on similar issues of precedence, whether it be to a priority conferred by statute, notwithstanding the law in force at the time of enactment or a first charge statutorily created in a stand-alone provision. 16. Maharashtra State Cooperative Bank Ltd. (2009) 10 SCC 123 has to be perused in detail, though the said decision is prior to introduction of Chapter 26-E in the Act of 2002 with effect from 24.01.2020. The issue arising therein was whether the sugar bags pledged by a company in favour of the appellant bank as security for repayment of a loan, could be attached and so....
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....x enactment. It was held unequivocally that the statutory first charge created on the property of a dealer is on the entire property, the title of which is held by the mortgagee. Despite the mortgage it operates on the property as a whole, without being subject to the mortgage, was the finding. A charge was held to be a wider term, covering within its ambit, a mortgage, giving absolute precedence to the charge created. State of M.P. v. State Bank of Indore (2002) 10 SCC 441 likewise held the statutory first charge created under the sales tax act to prevail over the banks charge created by a mortgage. 19. In Maharashtra State Cooperative Bank Ltd.3 this Court referred, with approval, to a decision of a Division Bench of the Kerala High Court in Recovery Officer and Assistant Provident Fund Commissioner v. Kerala Financial Corporation (2002) 3 LLJ 643, which considered the interplay of Section 46-B of State Financial Corporations Act, 1951 ['SFC Act'] with Section 11 of the EPF&MP Act. The Division Bench emphasised the two facets of Section 11(2) of the EPF&MP Act, primarily the first charge created and then the declaration that it would have priority over all other debts notwiths....
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....recedence conferred on Crown debt was a law, within the meaning of Article 13 of the Constitution of India, saved in terms of Article 372. However, when a debt is secured by reason of the provisions of a statute that becomes a first charge over the properties having regard to the plain meaning of Article 372 of the Constitution of India, which prevails over the Crown debt; an unsecured debt, was the finding. The Court also referred to Section 46-B of the SFC Act which is a non-obstante clause giving the provisions of the SFC Act an overriding effect notwithstanding anything inconsistent in any other law for the time being in force or any other instrument having effect by virtue of any law. 22. Punjab National Bank2 again considered the question of priority of Crown debt, being the duty due under the Central Excise Act of 1944, as against the secured creditor. Therein the department had made a confiscation order which however was not tenable, for reason of the power in the rules permitting such confiscation, having been omitted before the order was passed. Section 35 of the Act of 2002 which is in pari materia with Section 46-B of the SFC Act was noticed along with Section 13 to ....
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....as incorporated, assumes significance and the provision latter in time would prevail. However, if there is a first charge statutorily created, validly, dehors the non obstante clause conferring priority over other debts, the statutory charge would prevail. With these principles in mind, when we look at the provisions under the SARFAESI Act and the EPF&MP Act, the former with the incorporation of Section 26-E, we are of the opinion that there has to be found a first charge to the EPF&MP Act dues, under Section 11(2) of that Act. 26. We extract Section 11(2) of the EPF Act and Section 26-E of the SARFAESI Act hereunder. "Sec. 11(2): Without prejudice to the provisions of sub-section (1), if any amount is due from an employer, whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution, the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts. Sec. 26-E: Priority to secured creditors- Notwithstanding anything contained in any other law fo....