By the Court.—Petitioner before this Court is a subsidiary bank of the State Bank of India. The Bank is stated to have entered into a loan agreement with the respondent Oswal Industries Ltd., Nawabganj, Bareilly, through its General Manager of providing credit facility to the tune of Rs.15 crores against the Warehouse Receipts of National Bulk Handling Corporation.

According to the petitioner bank, necessary agreement for advance against pledge stocks of sugar stored in the warehouse dated 18.12.2010 was also executed between the parties.

2. The Sugar Mill has defaulted in payment of the dues of the farmers in the last crushing season. Therefore, the State authorities have initiated proceedings for recovery of the money from the Sugar Mill as arrears of land revenue by attachment of stocks of sugar and its sale.

3. The Tehsildar and the Sub Divisional Magistrate, Nawabganj visited the go-down of National Bulk Handling Corporation (NBHC) and have drawn sample of the sugar available for the purpose of putting the same to auction so that the dues of the farmers could be liquidated. The aforesaid fact has been communicated by the Vice President of the Sugar Mill to the State Bank of Patiala under letter dated 30.10.2013.

4. The District Magistrate, Bareilly on 25.10.2013 issued an order to the Managing Director and the Chief Manager of respondent Sugar Mill to ensure that 876.5 quinttel of levy sugar is immediately transferred to P.C.F., Bareilly in terms of the order of the Central Government date 26.2.2013 whereunder for the months of April and May 438.2 quinttel of levy sugar for each month was directed to be drawn from Oswal Industries Ltd. and which had not been complied with.

5. The Sub Divisional Magistrate has accordingly directed the District Manager, P.C.F., Bareilly to ensure lifting of said quantity of levy sugar from the Sugar mill.

6. It appears that the levy sugar was not available in the Sugar Mill, therefore, the stocks of sugar as available in the go-down of NBHC are being taken possession of by the district authorities in lieu of the levy sugar.

7. The State Bank of Patiala claims that it has the first charge over the stocks of sugar of respondent No. 8 Sugar Mills stored in the NBHC go-down has approached this Court for challenging the attachment and sale of sugar for the purpose of payment of dues of the farmers.

8. Shri M.P.Sarraf, counsel for the bank with reference to the judgment of High Court in the case of State Bank of India v. State of U.P. and others, 2003 Current Law Rulings 374, submits that the Bank has first charge over the sugar stored in the NBHC go-down and the state authorities do not have any right in preference to the Bank to either sell the sugar for liquidating the dues of the farmers.

9. Standing Counsel points out that release of levy sugar is required to be done by the Sugar Mill in terms of the control orders issued which are statutory in nature. It is stated that the levy sugar is being recovered from the stocks stored in other go-down and not in the go-down of NBHC, the stock whereof is pledged with the petitioner Bank.

10. We are not called upon to address on the aspect of recovery of levy sugar. The issue up for consideration before this Court as to whether in terms of the judgment in the case of State Bank of India (supra), the State authorities can proceed to attach and sell the sugar bags stored in NBHC go-down for the purposes of liquidating the dues of the farmers. It has to be examined as to whether the charge created in favour of the bank shall take preference over the dues of the farmers and as to what in fact has been laid down by the Division Bench in the State Bank of India (supra).

11. For gathering the real proposition of law which has been laid down by the Division Bench of this Court in the case of State Bank of India (Supra), we may only reproduce paragraphs No. 11 and 12 of the judgment which read as follows :

“11. In State of Madhya Pradesh v. State Bank o