Mobile View
Main Search Forums Advanced Search Disclaimer
User Queries
Debt Recovery Appellate Tribunal - Madras
Gangavathi Sugars Ltd. vs State Bank Of India on 4 February, 2003
Equivalent citations: I (2004) BC 112
Bench: A Subbulakshmy

ORDER

A. Subbulakshmy, J. (Chairperson)

1. The Bank filed IA-3/2002 before the DRT, Bangalore, for directing the 1st defendant to deposit 50% of the sale proceeds of the sugar and molasses to the applicant. The Tribunal by its order dated 16.5.2002 allowed the application by directing the appellant to deposit 30% of the sale proceeds to the applicant Bank.

2. Counsel for the appellant submits that even 30% of the sale proceeds cannot be deposited to the Bank since the appellant has to incur statutory liability by paying taxes, wages to workers and payment to cane growers and even the sale proceeds would not be sufficient to meet those expenses and so the order passed by the PO, DRT, has to be set aside. He further submitted that the respondent Bank filed the petition for deposit of 50% of the sale proceeds of the sugar under Section 19(12) of the RDDB & FI Act and the petition itself is not maintainable under that section. Section 19(12) reads as follows:

"The Tribunal may make an interim order (whether by way of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal."

The respondent Bank sought for only interim order before the Tribunal under Section 19(12). The respondent Bank prayed for directing the 1st defendant to deposit 50% of the sale proceeds of sugar and molasses to the applicant Bank.

3. Counsel for the respondent Bank submitted that no attachment was sought for and only direction to deposit 50% of the sale proceeds has been sought for and the petition under Section 19(12) is maintainable. The respondent Bank has sought for only interim order directing the 1st defendant to deposit 50% of the sale proceeds. Section 19(12) is the section provided under the Act empowering the Tribunal to pass interim orders. The Bank sought for only interim order under Section 19(12). Even though the specific word 'Injunction' or 'Attachment' is not mentioned in the petition, direction has been sought for deposit of the sale proceeds. Such interim direction can be sought for by filing petition under Section 19(12) only. The specific non-mentioning of the word 'Injunction' or 'Attachment' in the petition cannot take away the right of the respondent Bank for seeking their relief of interim order under Section 19(12) based on the mere technicality. What has been sought for in the application is an interim order. Such interim order can be passed under Section 19(12) and the Bank is entitled to file such petition under Section 19(12) of the Act.

4. Under Section 19(20) of the Act, the Tribunal may after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice. The Tribunal is empowered to pass such interim or final order after giving opportunity to both the parties as it deems fit to meet the ends of justice. Under the provisions of the RDDB & FI Act, the DRT has passed interim order. So, it cannot be stated that the petition itself is not maintainable. The petition filed by the applicant Bank is maintainable.

5. With regard to the case of the appellant that 30% of the sale proceeds cannot be deposited because the appellant has to meet the expenses of payment of wages to workers and payment to cane growers and payment of tax dues, Counsel for the appellant submits that there is arrears of wages and payment to cane growers comes to Rs. 1.5 Crores and if those expenses are made there may not be any balance amount for depositing the 30% into the Bank and the order passed by the PO, DRT, is liable to be set aside. He further submitted that a Writ Petition was filed before the High Court of Karnataka with regard to the payment of Sales Tax dues to the Commercial Tax Department and order was passed in that Writ Petition and as per that order the appellant has to deposit at the rate of Rs. 50/- per bag of sugar sold by the 2nd petitioner in the Writ Petition before the 2nd respondent therein and the 2nd.petitioner was also directed to file a Statement of Account with regard to the value of sugar bags sold. It has been further stated in the order in that Writ Petition that it is made clear that subject to the affidavit to be filed before the Court, the petitioners are allowed liberty to dispose of the bags of sugar stored, in the factory and also carry on day-to-day activities. Relying upon the observation of the High Court in the order in Writ Petition 17357/2002, Counsel for the appellant submitted that the appellant has to deposit towards the tax dues at Rs. 50/- per bag of sugar sold and with regard to the balance amount, the appellant factory is at liberty to carry on the day-to-day activities by disposing of the sugar stored in the factory and even as per the observation of the High Court the appellant is not liable to deposit any amount to the Bank. That Writ Petition relates with regard to the payment of tax dues to the Commercial Tax Department and only on that aspect that order was passed. So, it was observed that the factory was allowed opportunity to dispose of sugar stored in the factory and carry on the day-to-day activities. Day-to-day activities include all the activities relating to the factory. The High Court has not passed any order prohibiting the secured creditor not to proceed against the hypothecated stock. So, I find no force in the arguments advanced by the Counsel for the appellant.

6. Counsel for the respondent Bank submitted that a sum of more than Rs. 10 Crores is due from the appellant to the respondent Bank and the appellant committed default without making any payment and the appellant docs not deserve any consideration and further the DRT directed only to deposit 30% of the sale proceeds and the order passed by the PO, DRT, is perfectly justified. The High Court has passed order to deposit at the rate of Rs. 50/- per bag of sugar sold towards the Sales Tax due to the Commercial Tax Department. So, provision has been made with regard to the payment of commercial tax dues by the Order passed by the High Court.

7. The PO, DRT, has directed only to deposit 30% of the sale proceeds. That cannot be stated to be erroneous. There is balance amount available with the factory for payment of wages to workers and also payment to cane growers. Only a portion of the sale proceeds i.e. 30% has been directed to be deposited towards the dues due to the Bank. Counsel for the appellant also relies upon the Circular of the Government of India dated 10.6.2002 which states that the proceeds out of the sale of the allotted quantity would exclusively be used for clearance of cane price dues. Relying upon that Circular, Counsel for the appellant submits that even the Govt. of India has permitted the appellant to use the sale proceeds of the allotted quantity of sugar for clearance of the cane price dues. This Circular was issued in June, 2002 whereas the PO, DRT, has passed order in May, 2002. Prior to coming into force of that Circular the order of the PO, DRT, has been passed.

8. From the submission made by the Counsel for the respondent Bank, it is clear that more than Rs. 10 Crores is due by the appellant factory to the Bank. The loan amount due to the Bank has also to be realised. The stock of sugar have also been hypothecated to the Bank. The Bank has got every right to proceed against the hypothecated articles, namely the stock of sugar. The Bank has sought for direction for deposit of 50% of the sale proceeds of the sugar which have been hypothecated to the Bank. Since the stock of sugar have been hypothecated to the Bank and huge amount of more than Rs. 10 Crores is due from the factory to the Bank, the PO, DRT, was perfectly justified in passing such order directing deposit of 30% of the sale proceeds to the Bank. There is remaining amount available in the factory for meeting other expenses i.e. payment of wages to workers and payment to cane growers. Since huge amount is outstanding to the Bank and as the stock of sugar have also been hypothecated, the Bank has got every right to proceed against the hypothecated sugar and the appellant is not entitled to contend that the factory has to meet other expenses and the factory is not liable to deposit any amount to the Bank towards the dues due to the Bank. The outstanding dues to the Bank by the appellant has to be realised by the Bank and the Bank has got every right to proceed against the hypothecated goods, Since only 30% of the sale proceeds have been ordered to be deposited to the respondent Bank and as there is balance amount available with the appellant to meet other expenses, I find that there is no error in the order passed by the PO, DRT, Bangalore.

9. While passing the order, the PO, DRT, has observed that the High Court order reserves Rs. 50/- per bag of sugar sold towards the statutory payments as well as payments to workers and subject to that order of the High Court, the PO, DRT, has passed that order. The High Court has passed order in the Writ Petition directing to deposit at the rate of Rs. 50/- per bag of sugar towards the Sale Tax dues to the Commercial Tax Department. The High Court's order relates only to payment of Sales Tax dues to the Commercial Tax Department and that does not relate to payment to workers. So, the observation of the PO, DRT, that Rs. 50/- per bag of sugar sold towards statutory payments as well as payment to workers, has to be deleted and that observation is deleted. As per the High Court's direction, Rs. 50/- per bag of sugar from the sale proceeds of sugar goes only to the Commercial Tax Department inwards the tax dues, I find no error in the order passed by the PO, DRT, Bangalore.

10. Appeal dismissed.

11. The appellant is also directed to file the Statement of Account with regard to the sale proceeds of sugar and molasses, before the DRT, Bangalore, once in a week.