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2023 Supreme(Online)(KAR) 12198
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RP No. 157 of 2018
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF APRIL, 2023
BEFORE
THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
REVIEW PETITION NO. 157 OF 2018
IN
WRIT PETITION NOS.56378-413/2013 (L-TER)
BETWEEN:
1.
CANARA BANK
A PUBLIC LIMITED COMPANY OF
GOVERNMENT OF INDIA,
(H.O. BANGALORE),
CUNNINGHAM ROAD,
BANGALORE-560 052 ,
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
CURRENTLY AT ITS ARM
BRANCH CIRCLE OFFICE AT 86,
MAHATMA GANDHI ROAD,
ASHOK NAGAR,
BENGLAURU - 560 001
… PETITIONER
(BY SMT. NAVITHA RATHORE, ADVOCATE AND
SRI R.C. THIRUVENGADAM, ADVOCATE)
AND:
1.
SRI R.D SINGH
S/O SEMURTHY SINGH,
AGED 52 YEARS
2.
SRI M U BHEEMANNA
S/O URGEE GOWDA,
AGED 38 YEARS
3.
SRI B R SATHEESH
S/O RANGANATHA GOWDA,
AGED 42 YEARS
Digitally signed by
R HEMALATHA
Location: HIGH
COURT OF
KARNATAKA
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RP No. 157 of 2018
4.
SRI S N NAGARAJ
S/O NINGAIAH,
AGED 42 YEARS
5.
SRI V KARUNAKARAN
S/O VENUGOPAL
AGED 43 YEARS
6.
SRI CHANDRAIAH
S/O GANGABHARIAH,
AGED 46 YEARS
7.
SRI MUDDARANGAIAH
S/O SREE RANGAIAH,
AGED 40 YEARS
8.
SRI C S SURESH BABU
S/O SATISH GUPTA,
AGED 50 YEARS
9.
SRI B N NAGESH RAO
S/O NARAYANA RAO
AGED 42 YEARS
10. ARAVIND KUMAR SINGH
S/O VASUDEV SINGH,
AGED 44 YEARS
11. SRI H MANJUNATH
S/O V HANUMANTHAIAH,
AGED 41 YEARS
12. SRI BASAVARAJAIAH
S/O GAYAPPA,
AGED 46 YEARS
13. SRI RAMACHANDRA
S/O CHIKKANNA,
AGED 40 YEARS
14. SRI T G NAGARAJ
S/O GUNDAIAH,
AGED 44 YEARS
15. SRI S MANOHAR
S/O SHAMANNA,
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RP No. 157 of 2018
AGED 45 YEARS
16. SRI C GANGARAJU
S/O CHIKKAHANUMAIAH,
AGED 41 YEARS
17. SRI P PENCHALAIAH
S/O PENCHALAIAH,
AGED 50 YEARS
18. SRI C H SANJEEVARAJU
S/O HANUMANTHAIAH,
AGED 43 YEARS
19. SRI MUNNANAIK
S/O RABHINDRA NAYAK,
AGED 36 YEARS
20. SRI CHIKKATHIMMAIAH
S/O THIMMAIAH,
AGED 46 YEARS
21. SRI RAMARAO
S/O VASUDEV,
AGED 37 YEARS
22. SRI H B VIJAYAKUMARA
S/O H S BASAVARAJ,
AGED 45 YEARS
23. SRI JAGANNATH
S/O LAKSHMIPATHY,
AGED 41 YEARS
24. SRI CHIKKAMUDHAGOWDA
S/O CHIKKAHANUMAIAH,
AGED 49 YEARS
25. SRI NARAYAN
S/O VENKATACHALAIAH,
AGED 44 YEARS
26. SRI RAJU
S/O SIDDEGOWDA,
AGED 47 YEARS
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RP No. 157 of 2018
27. SRI SREEKANTAMURTHY
S/O NANJUNDASWAMY,
AGED 45 YEARS
28. SRI H N NARASARAJU
S/O NARASIMHARAJAIAH,
AGED 45 YEARS
29. SRI V KUMAR
S/O A VENKATESH,
AGED 43 YEARS
30. SRI N R LOKESH
S/O RAJAPPA,
AGED 33 YEARS
31. SRI K P ERAPPA
S/O K T PUTTAIAH,
AGED 47 YEARS
32. SRI T PRASANNA
S/O THAMMAYANNA,
AGED 47 YEARS
33. SRI HONNAMUTHAIAH
S/O HOLASAIAH,
AGED 45 YEARS
34. SRI K V N MURTHY
S/O URAGAPPA,
AGED 58 YEARS
35. SRI KALLAPPACHARI
S/O KODDAGANNAPPA,
AGED 47 YEARS
36. SRI RAM BAHADUR SINGH
S/O ESHWARPAL SINGH,
AGED 52 YEARS
ALL RESPONDENTS 1 TO 36 R/AT
NO.71/72, 2ND CROSS, VINAYAKANAGAR,
NEAR GANESH TEMPLE, PIPELINE ROAD,
CHIKKABANAVARA,
BANGALORE-560 090
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RP No. 157 of 2018
37. THE MANAGEMENT OF
RELIANCE ENGINEERS LIMITED,
HAVING ITS REGISTERED OFFICE AT
NO.120, CUNNINGHAM ROAD
BENGALURU - 560 052
REPRESENTED BY ITS
MANAGING DIRECTOR
38. OFFICIAL LIQUIDATOR
HIGH COURT OF KARNATAKA,
NO.26/27, 12TH FLOOR,
RAHEJA TOWERS,
MG ROAD,
BANGALORE - 560 001
ALL RESPONDENTS NO.1 TO 36 CAN BE SERVED
THROUGH RESPONDENT NO.15,
SRI. S. MANOHAR,
S/O SRI SHAMANNA,
AGED 45 YEARS,
R/AT NO.71/72, 2ND CROSS,
VINAYAKANAGAR,
NEAR GANESH TEMPLE,
PIPELINE ROAD,
CHIKKABANAVARA
BANGALORE - 560 090.
… RESPONDENTS
(BY SRI. SHRISHAIL NAVALGUND, ADVOCATE FOR R38;
SRI SRIDHAR R., ADVOCATE FOR R3, R7, R8, R10, R14,
R15, R25, R29 & R36;
SRI MOHAN B.K., ADVOCATE FOR R2, R4, R5, R9, R12,
R13, R16, R18, R20, R22, R23, R24, R27, R28 & R35;
SRI PRAMOD R., ADVOCATE FOR R4, R9, R10, R26,
R32, R33 & R36[NOC], R1, R6, R11, R17, R19,
R21, R30, R31, R34;
V/O DATED 14.09.2021, NOTICE TO R37 IS DISPENSED WITH)
THIS REVIEW PETITION IS FILED UNDER ORDER 47 RULE 1 OF
CPC, PRAYING TO REVIEW THE ORDER DATED 10/11/2014 PASSED
IN WP NOS.56378-413/2013(L-TER), ON THE FILE OF THE HON'BLE
HIGH COURT OF KARNATAKA, BENGALURU.
THIS REVIEW PETITION COMING ON FOR DICTATING ORDERS,
THIS DAY, THE COURT MADE THE FOLLOWING:
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RP No. 157 of 2018
O R D E R
This review petition is filed for setting aside the order
dated 10.11.2014 passed in WP No.56378/2013, by which, the
38th respondent herein was directed to recover the monies due
to
the
respondents
No.1
to
36 towards
retrenchment
compensation from the petitioner herein and make over the
same in the light of the Section 529 of the Companies Act
providing for preferential treatment to workmen’s due.
The respondent No.37 was classified as a non
performing asset under the provisions of Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (for short `SARFAESI Act’).
The winding up proceedings were initiated against
the respondent No.37 in Company Petn. No.128/2008.
Thereafter,
the
petitioner
-
Bank
initiated
proceedings for recovering the loan amount due from the
respondent No.37 under Section 13 of the SARFAESI Act,
2002. The petitioner -Bank sold the mortgaged property in an
auction
conducted
on
25.1.2011
for
an
amount
of
Rs.6,96,00,000/-, and in pursuance of the same, the sale
certificate was issued in favour of the successful bidder.
Thereafter, the impugned order was passed holding that the
petitioner - Bank to be the custodian of the amount thus
making it answerable to the official liquidator.
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Sri B C Thiruvengadam, learned Senior counsel for
the petitioners’ counsel would submit that as on the date when
the auction or sale certificate was issued, the Official Liquidator
was not appointed. Hence, there is no question of distribution
of the amount realized from the sale of secured assets as
specified under Section 529-A of the Companies Act, 1956.
The provisos to Clause-9 of Section 13 of the SARFAESI Act,
2002 are applicable only when the company is in liquidation
and not otherwise. In the instant case, as on the relevant date,
the winding up of proceedings had commenced,but Official
Liquidator was not appointed for managing and selling off
company assets in order to pay the creditors. In support, he
places reliance on the decision of the Hon’ble Supreme Court in
the case of Bank of Maharashtra -vs- Pandurang Keshav
Gorwardkar and others (2013) 7 SCC 754 and decision of the
Hon’ble Supreme Court in the case of Pegasus Assets
Reconstruction Pvt. Ltd. -vs- M’s.Haryana Concast Ltd. and anr.
(Civil Appeal No.3646/2011)(DD 29.12.2015).
He further submits that the SARFAESI Act, 2002 is
a subsequent enactment, and the provisions of the Act have
got overriding effect, notwithstanding anything inconsistent
therewith contained in any other law as specified under Section
35 of the SARFAESI ACT, 2002.
On the other hand, the learned counsel for the
respondent - workmen would submit that the winding up
proceedings had commenced prior to the mortgage property
was brought for sale, hence, Section 529-A of the Companies
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Act comes into operation and statutory charge is created in
favour of workmen in respect of the dues over such proceeds.
He further submits that the relevant date for creating statutory
charge is the date of commencement of the winding up
proceedings and not the appointment of Official Liquidator. In
support, he also places reliance on the decision of the Hon’ble
Supreme Court in the case of Bank of Maharashtra v.
Pandurang Keshav Gorwardkar, (2013) 7 SCC 754.
Considered the submissions of the learned counsel
for the parties.
The only question that arises for consideration in
this petition is, whether the security of every secured creditors
is subject to pari paasu charge in favour of the workmen to the
extent of their dues as on the date when the secured asset was
brought for sale.
10.
To consider the question , it is necessary to refer
to the following provisions of law.
11.
Section 529-A of the Companies Act reads thus:
“[529-A.
Overriding
preferential
payments.—(1)
Notwithstanding anything contained in any other provision of this
Act or any other law for the time being in force, in the winding up
of a company,—
(a) workmen's
