IMPORTANT POINT
The deposit of auction proceeds in court does not discharge the debt, and interest continues to accrue at the contractual rate until payment is received.

JUDGMENT :

1. Rule. With Consent, rule made returnable forthwith in all Petitions and taken up for final hearing.

THE CHALLENGE:

2. Exception is taken to Collector’s order dated 31st March, 2023 computing the amount payable to the Respondent No. 4-Sahyadri Co- operative Credit Society Ltd in Writ Petition No.5742 of 2023 and Respondent No. 4-Navhind Co-operative Credit Society Ltd. in Writ Petition No.5743 of 2023, by applying contractual rate of interest and directing payment of Rs.19,60,00,000/- and Rs.34,16,00,000/- respectively from the auction proceeds, which were deposited in this Court in the year 2011 and transferred to the office of Collector vide order dated 27th February, 2023.

THE ISSUE:

3. The issue arising for consideration is whether the deposit of auction proceeds in this Court amounts to payment in discharge of debt relieving the Petitioner from the liability of interest payment at contractual rate from the date of deposit.

PARTIES TO THE PROCEEDINGS:

4. Writ Petition No.5742 of 2023 and Writ Petition No.5743 of 2023 have been filed by the Sugar Factory and Writ Petition No.5874 of 2023 is filed by the sugarcane growers raising common issues and claiming right in the balance of auction proceeds received from sale of pledged sugar. As common issues arise, with consent, the Petitions were taken up for hearing together. Common submissions were advanced and all the three petitions are being disposed of by this common judgment. For sake of convenience, the Credit Societies are referred to as “Sahyadari” and “Navhind” or collectively as “credit societies”, the Petitioner in Writ Petition Nos. 5742 of 2023 and 5743 of 2023 are referred to as “Sugar Factory” and Petitioners in Writ Petition No. 5874 of 2023 are referred to as “Sugarcane Growers”.

FACTUAL MATRIX:

5. In December 2010, a lease came to be executed by the Sugar Factory in favor of Respondent No. 5 for conducting the Petitioner’s business of sugar factory. In March, 2011, the Respondent No. 5 obtained short term credit of Rs.7,00,00,000/- against pledge of 35,000 quintals of sugar stored in Godown No.6 from Sahyadari and Rs.12,20,00,000/- against pledge of 80,392 quintals of sugar stored in Godown Nos.7-I and 7-II from Navhind, the Petitioner being the consenting party to the loan transaction.

6. The default by Respondent No.5 towards the dues of Rs.36,22,66,591/- of the sugarcane growers led to issuance of Recovery Certificate by the Respondent No. 2 on 28th May, 2011, and attachment of the sugar stored in various godowns including the pledged sugar. Vide auction notice dated 16th June, 2011, the auction of the attached sugar was scheduled on 22nd June, 2011 in office of Respondent No. 3.

7. Navhind and Sahyadri challenged the auction sale by filing Writ Petition Nos. 4533 of 2011 and 4539 of 2011 respectively objecting to the auction of the pledged sugar and claiming priority over the dues of the sugarcane growers and the workers. Vide Order dated 22nd June, 2011, this Court permitted the Tahsildar to proceed with the auction after fixing the upset price with further direction to deposit the auction proceeds of the pledged sugar in this Court with the Registrar (Judicial) to be invested in nationalized bank in fixed deposit.

8. The auction conducted fetched proceeds of Rs.52,95,36,483/- and included proceeds from sale of pledged sugar of Rs.27,94,27,910/-. As per the directions in order dated 22nd June, 2011, the auction proceeds of pledged sugar was deposited with the Registrar (Judicial) and invested in nationalized bank. The balance amount of Rs.25,01,08,573/- remained with the Collector out of which Rs. 20,00,00,000/- was disbursed to the workers and the sugarcane growers.

9. Writ Petition Nos. 4533 of 2011 and 4539 of 2011 of Navhind and Sahyadari came to be disposed of vide order dated 12th August, 2011 in light of the statement made by Assistant Government Pleader that the amounts will be disbursed as per hierarchy keeping in view the settled position of law wi