Recovery of workers' dues and statutory priorities take precedence over the Bank's claim under equitable mortgage.

Karl Reddy, F.C. - The applicant-petitioner Bank advanced loans to respondent No. 4-M/s. Jagatjit Fasteners (P) Ltd., Kapurthala. The Company mortgaged its property/land situated in Khasra No. 6391/5367 (39K 14M) with the Bank on 3.9.1980 and 30.9.1982. The Bank filed a suit for recovery of Rs. 21,42,290.94 along with interest against the Company on 17.9.1985, and obtained a decree front the Debt Recovery Tribunal on 17.9,1998.

2. In the meantime, Recovery Certificates No. 3112 dated 15.12.1985 for Rs. 2,11,374 and No. 2949 dated 18.6.1985 for Rs. 3,48,344.52, being dues of Provident Fund, ESI, and wages of workers, were sent by the Labour-cum- Conciliation Officer, Jalandhar to the Collector Kapurthala. The workers filed a Writ of Mandamus CWP No. 1276 of 1987 in the High Court of Punjab and Haryana for early recovery of their dues. The writ petition was dismissed as infructuous by the High Court vide order dated 1.6.1987 on the written undertaking of the Collector Kapurthala that the workers dues would be recovered at an early date. The property was attached under Section 72 of the Punjab Land Revenue Act, 1887 (hereinafter the Act) by the Collector Kapurthala vide order dated 11.5.1987. The property was put to auction on 13.6.1988 and 20.7.1988 but did not attract sufficient bids.

3. The Collector Kapurthala vide order dated 27.1.1994 attached the land/property bearing Khasra No. 6391/5267 min measuring 20K 9M, gair mumkin karkhana under Section 72 of the Act. After attachment of the property, notice of auction was sent to the Directors of the Company by Registered Post, which was returned undelivered. Then a copy of the auction notice was pasted on the last known address of the Directors. Thereafter, mushtri munadi was effected though the tehsil agency, and auction notice was published through the DPRO, Kapurthala. Copies of the proclamation were pasted at conspicuous places on the property and at the site of auction. The property was auctioned on 14.2.1994. Respondent No. 5 was the highest bidder at Rs. 7,15,000. 1/4th of the bid amount was deposited by him. The Commissioner confirmed the sale on 14.5.1996.

4. The Bank filed ROR No. 423 of 1995-96 seeking to revise the order of the Commissioner. The Financial Commissioner Revenue vide order dated 6.10.1997 dismissed the petition. The Bank filed Misc. No. 10 of 1997-98 for review on the ground that its Counsel was unintentionally absent on the date of hearing, as he had been informed of the date 4 days later. The Financial Commissioner Revenue vide order dated 9.2.1998 dismissed the review application. Against those orders, the Bank filed CWP No. 5412 of 1996. The High Court of Punjab and Haryana vide order dated 15.9.1999 held that it was incumbent on the Financial Commissioner to hear the Bank before passing any order, particularly when notice of the date of hearing had been conveyed to the Banks counsel 4 days later, and remanded the matter for fresh decision.

5. The Bank applied to the Deputy Commissioner Kapurthala on 4.3.1994 for setting aside the auction sale. Counsel for the Bank did not appear before the Deputy Commissioner Kapurthala on 26.4.1994, the date fixed for consideration and arguments. The application was dismissed, as not maintainable under Section 91 of the Act. The Bank applied to the Commissioner on 16.8.1994 under Section 91 of the Act to have the auction sale set aside. The application was therefore not made within the period stipulated in Section 91 of the Act i.e. 30 days. No explanation for the delay was offered.

6. The grounds taken were :

(i) that the property had been auctioned without following the prescribed procedure. No proclamation had been effected or published prior to the auction. No notice was given to the Company or the Bank;

(ii) that the Company had created an equitable mortgage on the property in favour of the Bank. The original title deeds had been deposited by the Company with the Bank. The mortgage is the first and prior c