Mohan M. Shantanagoudar, J. - (1.) This appeal arises out of judgment dated 01.12.2015 passed by the Nagpur Bench of the High Court of Bombay in W.P. No. 3879/2012. Vide the impugned judgment, the Hon'ble High Court has directed the issuance of a recovery certificate against the Appellant herein, thereby modifying the order dated 08.08.2011 passed by the Bhandara Bench, Industrial Court, Maharashtra.
(2.) The brief facts giving rise to this appeal are as follows: 2.1 Registered under the Maharashtra Co-operative Societies Act, 1960 (hereinafter 'Societies Act'), Respondent No. 6 herein, Vainganga Sahakari Sakhar Karkhana Ltd. (hereinafter 'Karkhana') had obtained credit facilities from the Appellant-Bank and mortgaged its properties in return. When it defaulted on the repayment of the loan, the Appellant-Bank initiated recovery proceedings on 10.02.2005, by issuing a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter 'SARFAESI Act'). Later, on 13.06.2005, the Appellant-Bank took physical possession of the mortgaged properties of the Karkhana as per Section 13(4) of the SARFAESI Act. 2.2 Owing to its poor financial condition, on 24.01.2006, the Karkhana issued a notice to its employees directing them to proceed on leave without salary w.e.f. 24.02.2006. This was challenged by representatives of the Karkhana employees (Respondent Nos. 1 to 3 herein) in ULPA No. 65/2006 filed under Section 28 read with items 9 and 10 of Schedule IV of the Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971 (hereinafter 'MRTU & PULP Act'). Vide order dated 24.08.2006, the Industrial Court quashed the notice and held that it amounted to an unfair labour practice. Further, noting that Karkhana had not paid salaries to its employees since July 2003, the Industrial Court directed the Karkhana to pay the unpaid salaries on top priority basis from any funds that may become available with it. 2.3 On the basis of this order, Respondent Nos. 1 to 3 filed a miscellaneous application, ULPA No. 5/2007, seeking the issuance of a recovery certificate against the Karkhana, its Managing Director (Respondent No. 4 herein), and the Appellant-Bank under Section 50 of the MRTU & PULP Act. It is to be noted that the Appellant was arraigned as a party in this proceeding for the first time. Vide order dated 27.04.2007, the Industrial Court held that a recovery certificate for unpaid salaries of the Karkhana employees could not be issued against the Appellant-Bank. It also refused to issue such a certificate against the Karkhana and its Managing Director in view of the precarious financial condition of the Karkhana. However, the Karkhana was directed to pay the unpaid salaries to the employees on top priority basis, as and when funds were to become available. 2.4 In the challenge against this order in W.P. No. 4746/2007, the High Court of Bombay, vide order dated 12.07.2010, held that recovery could only be made against the Karkhana and not the Appellant-Bank, as there was no employer-employee relationship between the Bank and the employees. It was further held that the Industrial Court had erred in relying upon the non-availability of funds with the Karkhana to refuse the grant of a recovery certificate, as the relevant consideration for issuance of such a certificate is the entitlement of the applicants and not the financial condition of the employer. In view of this, the High Court directed the issuance of a recovery certificate against the Karkhana and its Managing Director. Pursuant to this direction, the Industrial Court, vide order dated 08.08.2011, disposed of ULPA No. 5/2007 by issuing a recovery certificate of Rs.13,89,84,334 against the Karkhana and its Managing Director. However, the prayer to issue a recovery certificate against the Appellant-Bank was rejected. 2.5 In the interim period, on 26.08.2010, one of the attached properties of the Karkhana was auctioned and sold by the Appellant-Bank to one Purti Power and Sugar Ltd. (Respondent No. 5 herein). According to the terms and conditions of this sale, the purchaser had accepted all encumbrances on the property as agreed upon in the sale letter. It is found that the proceeds from this sale were appropriated by the Appellant-Bank towards the amount due to it from the Karkhana. 2.6 At the same time, aggrieved by the non-issuance of a recovery certificate against the Appellant, Respondent Nos. 1 to 3 filed W.P. No. 3879/2012. During the pendency of this petition, on 19.01.2013, an order was passed by the competent authority under the Societies Act directing the liquidation of the Karkhana. Finally, vide the impugned judgment dated 01.12.2015, the High Court disposed of W.P. No. 3879/2012. It was observed that in terms of Section 50 of the MRTU & PULP Act, the recovery certificate should have been issued to the Collector for recovering the amount from the Karkhana and its Managing Director. Thus, the order of the Industrial Court dated 08.08.2011 was modified to this extent to clarify that the certificate is to be issued to the Collector first, who would then proceed to recover the sum as per the recovery certificate. On the question of whether the Collector could effectuate such recovery from sale proceeds of the attached property of the Karkhana, it was held that after the auction sale, the Appellant-Bank held the proceeds in trust as per Section 13(7) of the SARFAESI Act and did not have a first charge over them. Further, it was found that upon the liquidation of the Karkhana on 19.01.2013, Section 529A of the Companies Act, 1956 (hereinafter 'Companies Act') came into operation, thereby according employees' dues priority over all other dues in respect of the sale proceeds. In light of this, it was held that the Collector could recover the said amount of Rs.13,89,84,334 from the sale proceeds held in trust by the Appellant-Bank. It is against this order that the instant appeal has been filed.
(3.) Heard learned Counsel for both the parties.;