Kesao son of Narayan Patil @ Babasaheb Dhabekar vs State of Maharashtra

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(Bom) 71

IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH : NAGPUR
A.H. JOSHI AND A.R. JOSHI, JJ.
Kesao son of Narayan Patil @ Babasaheb Dhabekar .... Appellant.
Versus
State of Maharashtra..... Respondents.
Letters Patent Appeal No.197 of 2009
IN
Writ Petition No.5993 of 2005 [decided]
With
Letters Patent Appeal No.239 of 2009
IN
Writ Petition No.5993 of 2005 [decided]
Letters Patent Appeal No.197 of 2009:
Decided on : 15th January,2010.

Advocates appeared:
Mr. P.C. Madkholkar, Adv., for the appellant.
Mrs. T.D. Khade, Asstt. Govt. Pleader for respondent nos.1 to 5.
Mr. M.V. Samarth, Adv., for respondent no.23.
Mr. R.L. Khapre, Adv., for respondent no.25.
Mr. A.S. Deshpande, Adv., for respondent no.26.
Mr. A.M. Ghare, Adv., for respondent no.24.

Headnote:Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13 - Maharashtra Co-operative Societies Act, 1960, Section 83 - Liquidation and winding up of factory - Enquiry under Section 83 of Act ordered by Commissioner of sugar and Additional Registrar - Stayed by Hon’ble Minister - Writ petition against - Allowed by single Judge - Letter Patent Appeal - Held - Entire sugar factory and distillery sold by Board of Directors to respondent-20 - Respondent-24-Bank in possession of factory by virtue of Article 2002 at liberty to use property in any manner set aside - Petitioners at liberty to challenge proposed sale by respondent-24-Bank in favour of respondent-20 - Enquiry under Section 83 of Act, 1960 to be completed by Registrar as indicated by single Judge - L.P.A. partly allowed. - The documentary evidence adequately demonstrates that there existed material before the Commissioner which does prima facie make out a case for order of enquiry. At the same time no material is shown to exist on record before Hon’ble Minister which would ex facie nullify the need of enquiry under Section 83 and all procedures which do in the result follow.
       The point as to whether enquiry under Section 83 should be done or should be dropped does not carry any significance as learned Advocate has conceded that the appellant is not opposed to enquiry under Section 83 of the Maharashtra Co-operative Societies Act. Moreover in the order passed by Hon’ble Minister need of enquiry under Section 88 of the Act is also left open.
       This Court even upon peaceful consideration believes from what prima facie appears is that the respondent No. 24 who claims superior rights and powers under a Central statute having overriding effect and equipped with special powers ought not to have felt astute and helpless to have fallen prey to the litigious tactics of the respondent No. 20 and agreed to approve the sale of the property to a worthless cost and offered it as if a ransom to the respondent No. 20. The statutory right available to respondent No. 23 has to be respected.
       The order allowing letters Patent Appeal No. 239 of 2009 however, needs to be kept in abeyance for 90 days from the date of the judgment. The matter of legality, fairness, propriety, mala fide acts of favour etc. whatsoever, are the objections to sale of property in favour of respondent No. 20 by respondent No. 24 shall remain open for scrutiny and adjudication by a competent forum, which may either be an appeal under Section 17 of the SR FAESI Act, an objection in the execution proceedings, or by way of a writ petition under Article 226, or any other remedy which may be resorted to by an interested party.

JUDGMENT

A.H. Joshi, J

1. Admit.

The Respondents, in appeal who are not appearing, need not be served afresh. Contesting respondents, are appearing. The Appeals are called out by consent of Advocates for the parties who are contesting / appearing. Heard at length for final disposal.

2. Status of the contesting parties in Letters Patent Appeal No. 197 of 2009 in Writ Petition No. 5993 of 2005 is as follows:-

[i] Present respondent nos. 25 and 26 were the writ petitioners. They are hereinafter referred to as Writ Petitioners.

[ii] Present appellant was respondent no.7. He is hereinafter referred to as Appellant.

[iii] Appellant in Letters Patent Appeal No. 239 of 2009 was respondent no. 24 in Writ Petition No. 5993 of 2005.

3. Parties are referred to in this Judgment according to their status in the writ petition No. 5993 of 2005 for convenience.

Respondent No. 20 in the Writ Petition, namely Vaibhav Liquors Pvt. Ltd. is a Private Limited Company, who came into the picture in the working of respondent no.6 initially as a lessee of distillery, and then as a purchaser.

Respondent No.24 in writ petition Maharashtra State Co-operative Bank Limited is a Federal Bank, which has advanced loan to respondent no.6, and is half way through in exercise of its powers under Section 13 of Securitization and Reconstruction of the Financial Assets and Enforcement of Securities Interest Act [SR FAESI Act].

4. Facts of the case can be summarized as follows:-

4.1 Respondent No.6 Balaji Sahakari Sakhar Karkhana is a Co-operative Society [Balaji SSK], under liquidation. It was a Society falling in the category contemplated by Section 73G of Maharashtra Co-operative Societies Act registered some day around 22-3-1985.

4.2 Respondent Nos. 7 to 19 are the Founder Directors of the said Sugar Factory. It is alleged that they were

members of 1st Board of Directors appointed by Government as well most are those who were elected to said Office later.

4.3 The petitioner No.1 is a share holder and Member of the said Society, while Petitioner No.2 is a Trade Union of the workers formerly employed in the said Sugar Factory.

4.4 The cost of project of the Balaji SSK which was estimated had gone in multiples when completed. When commissioned, it was run by incurring a huge loss. In a very sort duration Balaji SSK had huge accumulated debts and loans due, to several banks, financial institutions and the Government. Its net worth had become negative by over Rs.20 crores.

4.5 A distillery was established by the Sugar Factory sometime in 1993. The distillery unit was given on lease to the respondent no.20 from the very beginning.

4.6 According to the writ petitioners, there was gross mismanagement and misappropriation of funds at a very large scale, and in the result, the sugar factory had come to a very precarious financial condition. It was not in a position to pay the price of the sugarcane procured by it from the farmers, wages to the workers and had failed in making the deposit of provident fund contribution of workers, already deducted from their salary and wages.

4.7 Entire sugar factory and distillery were sold by the Board of Directors to the respondent no.20 in breach of orders restraining alienation etc., passed in various Writ Petitions.

4.8 The Petitioner Nos. 1 and 2 made certain complaints to authorities about mismanagement in the Sugar Factory and the distillery constructed / installed by the Balaji SSK. They have made serious allegations about the conduct of the Directors by way of mismanagement and misappropriations.

4.9 For the same reasons, several writ petitions and other judicial proceedings were launched by different aggrieved persons.

4.10 Simultaneously, the Joint Registrar (Sugar), Amravati, submitted two reports

dated 9th January, 2001 and 11th January, 2001 to the Commissioner of Sugar in relation to affairs of the respondent no.6.

4.11 In view of the material which was pointed out in the said reports submitted by Joint Registrar [Sugar], Commissioner of the Sugar

Click Here to Read the rest of this document