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Bowreah Cotton Mills Co. Ltd & Others v/s Industrial Development Bank of India & Others


Company & Directors' Information:- P A S COTTON MILLS PRIVATE LIMITED [Active] CIN = U17111TN2005PTC058104

Company & Directors' Information:- V R A COTTON MILLS PRIVATE LIMITED [Active] CIN = U15311PB1997PTC020061

Company & Directors' Information:- C A V COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1987PTC002014

Company & Directors' Information:- V K S M COTTON MILLS LIMITED [Active] CIN = U17111TZ1998PLC008682

Company & Directors' Information:- BOWREAH COTTON MILLS CO LTD [Active] CIN = U17299WB1900PLC000244

Company & Directors' Information:- P K COTTON MILLS PRIVATE LIMITED [Active] CIN = U17111DL2004PTC130281

Company & Directors' Information:- K P G COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1993PTC004509

Company & Directors' Information:- D B V COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1982PTC001145

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- S S COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115PB1997PTC019918

Company & Directors' Information:- J R COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TN1996PTC034302

Company & Directors' Information:- D C H COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TZ1997PTC008130

Company & Directors' Information:- L D COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17291MH2014PTC256832

Company & Directors' Information:- A D COTTON MILLS PVT LTD [Active] CIN = U99999MH1970PTC014837

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- INDUSTRIAL BANK LIMITED [Dissolved] CIN = U65191KL1956PLC000452

Company & Directors' Information:- V P K COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TZ2000PTC009530

    C.O. Nos. 2581 & 3045 of 2010

    Decided On, 16 October 2012

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE PRASENJIT MANDAL

    For the Appearing Parties: Bishwaroop Bhattacharya, Tanay Chakrabarty, Saptangsu Basu, Amitava Das, Shiv Chandra Prasad, Amiya Kumar Sur, Advocates.



Judgment Text

1. These two application have arisen out of the same recovery proceeding. The C.O. No.2581 of 2010 is directed against the judgment and order dated July 20, 2010 passed by the Debts Recovery Appellate Tribunal in Appeal No.28 of 2010 thereby disposing of the appeal as well as the pending application.

2. The other application is at the instance of the Regional Provident Fund Commissioner and is directed against the Order dated August 17, 2010 passed by the Recovery Officer, Debts Recovery Tribunal-I, Kolkata in R.P. Case No.104 of 2003 and O.A. Case No.45 of 2001 thereby rejecting the prayer of the Provident Fund Authority as to the value of the property of the concerned mills.

3. These two applications are disposed of by this common judgment in the following manner.

4. For convenience, the C.O. No.2581 of 2010 is discussed first. C.O. No.2581 of 2010:-

Bowreah Cotton Mills Co. Ltd. Sangrami Shramik Union filed an application for being added as respondent no.5 for giving it an opportunity of hearing in connection with the recovery proceeding no.104 of 2003. The prayer for addition of party was rejected by the Recovery Officer, Debts Recovery Tribunal, Kolkata. Being aggrieved, the petitioners preferred the appeal against the order dated July 13, 2010 passed in the recovery proceeding.

5. Now, the question is whether the impugned order should be sustained.

6. Upon hearing the learned Counsel for the parties and on going through the materials on record, I find that the Bowreah Cotton Mills went on BIFR and then to AIFR. The matter in controversy went to the Apex Court and the same was dismissed being withdrawn with liberty to the petitioners to approach the High Court.

7. The secured creditors took steps for sale of the properties and assets of the said mills and accordingly, public auction was notified. The bidders filed their bids and now, the matter is at the stage of acceptance of the highest bid by the Recovery Officer of the Debts Recovery Tribunal. A Receiver has been appointed and he is taking care of the properties of the mills.

8. Mr. Bishwaroop Bhattacharya, learned Advocate appearing for the petitioners, has contended that the employees of the mills did not get any salary, service benefits, etc. since 1995 and as such, they are much interested to see that the property may not be sold at a lower price. The claims of the employees will get priority at the time of disbursement of the sale proceeds as per provisions of Section 529A of the Companies Act and as such, the petitioners are necessary parties. Submission was made to that effect. The other lawyers appearing for the concerned bank, provident fund and others have made their respective submissions in support of the fact that benefits to be given to the employees could not be ignored and the provident fund dues from the mills to the said authority is also a great consideration for the welfare of the employees of the said mills. Under the circumstances, the learned lawyers have prayed for passing appropriate orders.

9. Mr. Bhattacharya has drawn my attention to the different paragraphs of the application for addition of parties appearing at page no.43 and he has submitted that in view of the prayer of the petitioners, a direction was issued upon the petitioner no.1 to deposit a sum of Rs. 2 crores to show that they were really interested to revive the company. But, they failed to do so for non-cooperation of the part of the Provident Fund Authority and as such, their plan for revival of the company was not adopted. Anyway, I find that the prayer for revival on the part of the petitioners could not succeed.

10. For convenience, Section 19(1) of the Debts Recovery Tribunal Act is quoted below:-

"19. Application to the Tribunal. - (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction-

(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or

(c) the cause of action, wholly or in part, arises:

[Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under the Act:

Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor.]"

11. Anyway, what I find is that the properties and assets of the mills are to be sold by public auction and the sale is yet to be completed. Whatever may be the claim of the petitioners, that could be considered only after the realisation of the sale proceeds.

12. The liabilities of the mills to the employees cannot be ignored in view of the provisions of Section 529A of the Companies Act. But, their prayer should be considered at the time of disbursement of the money to be realised by sale of the properties of the mills by public auction. At that stage, the hearing on behalf of the petitioners may be held for securing the interests of the employees. At present, we are concerned about the sale by public auction. The initiation for sale had been taken at the instance of the secured creditors and the necessary parties had been impleaded in the recovery proceeding before the Recovery Officer, Debts Recovery Tribunal. The petitioners cannot be described as necessary parties at all, but, it may take appropriate steps at the time of disbursement. Certain procedures are to be maintained for getting the sale price and the amount to be obtained by auction sale are to be deposited with the bank and thereafter, on hearing of all the concerned, the appropriate orders would be passed by the Recovery Officer including the consideration of the claim of the employees through the petitioners.

13. So far as the apprehension of selling the property of the mills at lesser value is concerned, I find that a Receiver has been appointed and norms and rules are to be followed for holding public auction so that the maximum benefit can be obtained from the sale. I am of the view that certain safeguards are to be observed by the concerned Recovery Officer for conducting the sale.

14. After completion of the sale, reasonable opportunity should be given to the petitioners for ventilating their cause for realisation of dues for the employees of the mills.

15. Mr. Shiv Chandra Prasad, learned Advocate appearing for the Provident Fund Authority, has referred to Section 11 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and he has referred to the decision ofEmployees Provident Fund Commissioner v. Official Liquidator of Esskay Pharmaceuticals Ltd., VIII(2011)SLT 285 :IV (2011)CLT 301 (SC): (2011) 10 SCC 727: AIR 2012 SC 11, particularly the paragraph no.s 10, 11, 14, 15, 22 & 30 and thus, he has submitted that EPF Act dues have priority over workmen's dues and secured debts under Section 529A of the Companies Act - Non obstante clause in Section 11(2), EPF Act, held, is not subject to non obstante clause in Section 529A of the Companies Act.

16. Mr. Prasad has also referred to the decision ofMaharashtra State Co-operative Bank Ltd. v. The Assistant Provident Fund Commissioner & ors., reported in 2010(2) All India Services Law Journal 472, and thus, he has submitted that Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is a social welfare legislation intended to protect the interest of a weaker section of the society, i.e., the workers employed in factories and other establishments. According to Section 11(2) of the said Act in respect of recovery on account of provident fund, the amount due to the Provident Fund Authority from the employer shall remain first charge over the sale proceeds.

17. Mr. Prasad has also submitted that for the benefit of the employees, the contribution towards Provident Fund Account should also to be considered and out of the sale proceeds, the said amount due from the employer to the Provident Fund Authority should be deducted. It does not mean that if such deduction is to be given effect, it would take away the right of the employees as provided in Section 529A of the Companies Act. Section 529A does not give priority to debts due to secured creditors over the amount due from the employer-company under Provident Fund Act.

18. Mr. Saptangsu Basu, learned Senior Advocate appearing for the opposite party no.6 / bank, has referred to the provisions of Section 19(1) of the Debts Recovery Tribunal Act and by referring the decision ofAllahabad Bank v. Canara Bank & anr., reported in I (2000)BC 627 : III(2000)CLT 129 (SC) : IV (2000)SLT 325 : AIR 2000 SC 1535, he has submitted that the adjudication of a dispute under Section 17 and the execution of the certificate under Section 25 etc., the provisions of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 confer exclusive jurisdiction in the Tribunal and the Recovery Officer in respect of debts payable to Banks and Financial Institutions and that there cannot be any interference by the Company Court under Section 442 read with Section 537 or under Section 446 of the Companies Act, 1956.

19. He has referred to the discussion in referring to paragraph no.53 of the said decision and thus, he has submitted that the powers under Section 22 of the 1993 Act are wider than those of Civil Courts and the only restriction on its powers is that the principles of natural justice have to be followed. Thus, he has submitted that this decision is the test whether interference by this Hon'ble Court should be done or not.

20. Mr. Basu has submitted that the process of sale cannot be forestalled in the manner as taken by the petitioners. He has contended that winding up proceeding had already been started.

21. Mr. Basu has also contended that since the workers' union is not the creditor, its claim cannot be considered inasmuch as the assets of the mills had not been sold as yet and the sale proceeds had not been realised, the workers' union cannot be permitted to agitate its claim at this stage.

22. It has also been contended that the petitioners did not challenge the order dated April 29, 2010 in R.P. No.104 of 2003, wherein it has been held that the workers' union filed an application earlier and that application was rejected by the order dated March 28, 2005 passed by the Recovery Officer. That order has not been set aside. The writ petition being W.P. No.530 of 2001 filed by the petitioners before this Court was not entertained. So, the application should not be considered.

23. In reply, Mr. Bhattacharya has drawn my attention to the findings of the Writ Court in W.P. No.530 of 2001 at page no.s 154 & 155 of the application on the fact as to why the writ petition filed by the petitioners was not entertained. For convenience, the findings are quoted below:

"Having heard the learned Counsel for the parties, I am of the view that since the matter is pending before the Company Court in connection with the winding up proceedings, this writ application has become infructuous. The will, however, not prevent the petitioners/Union from taking part in the winding up proceedings as also from taking part in the sale before the Recovery Officer, Debts Recovery Tribunal, in R.P. No.104 of 2003, if it is still pending.

Accordingly, this writ application stands disposed of. There will, however, be no order as to costs."

24. No doubt, the said recovery proceeding is still pending and is at the stage of sale by public auction. So, by the order dated July 27, 2006 of the Writ Court, the petitioners were at liberty to take part in the winding up proceeding and also in the sale proceeding. But, now, the question is at what stage permission could be given. In the instant case, the Recovery Officer has held that the application of the petitioners is frivolous and is filed to create hurdles in completing the sale process.

25. This being the position, having considered the materials on record, I am convinced that both the Tribunals have rightly held that the application of the petitioners is rather prematured and the petitioners will be at liberty to approach the concerned authority with particular grievances, but, that can only be done after the sale has taken place. There is no ground to stay the proposed sale. Therefore, I am of the view that the Hon'ble Appellate Tribunal has rightly addressed the issue and that there is no scope of interference with the impugned order.

26. Acc

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ordingly, I am of the view that this application should be dismissed. 27. The application is, therefore, dismissed. 28. However, there will be no order as to costs. C.O. No.3045 of 2010:- This application is at the instance of the Regional Provident Fund Commissioner and is directed against the Order dated August 17, 2010 passed by the Recovery Officer, Debts Recovery Tribunal I, Kolkata in R.P. Case No.104 of 2003 and O.A. Case No.45 of 2001 thereby rejecting the prayer of the Provident Fund Authority as to the value of the property by the Recovery Officer. 29. The sale of the property and assets of the mills is going to be held by observing the norms relating to sale of the property of the company, by public auction. The Hon'ble Appellate Tribunal has rightly held that there is no reason or justification for staying the proposed sale. 30. On the selfsame reasoning as observed in C.O. No.2581 of 2010, I am of the view that this application should also to be dismissed. 31. Accordingly, this application is dismissed. 32. Considering the circumstances, there will be no order as to costs. Urgent xerox certified copy of this order, if applied for, be supplied to the learned Advocates for the parties on their usual undertaking. Later: It is recorded that all the pending applications are hereby disposed of in view of the disposal of the revisional applications. Applications dismissed.
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