Navnath Ashraji Sable vs. The State Of Maharashtra Through Its District Collector And Others

Facts

The petitioners, Navnath Ashraji Sable and Ashti Taluka Sakhar Kamgar Union, are holders of Revenue Recovery Certificates (RRCs) issued under the Payment of Gratuity Act, 1952, and section 50 of the MRTU and PULP Act, 1971. They are seeking recovery of dues from Mahesh (Kada) Sahakari Sakhar Karkhana Ltd. The assets of this company are being sold by Respondent No. 3, a financial institution and secured creditor, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The core issue revolves around Clause 20 of the bid document for the sale of assets, which states that the purchaser will bear all statutory dues, including GST, workers' dues, and other applicable taxes.

Held

The Court found that Clause 20 of the bid document significantly secures the interests of the petitioners. It reasoned that the prospective buyer is obligated to satisfy the dues of the petitioners as per this clause. The Court acknowledged the principle that a secured creditor's right has priority over unsecured claims, as per the Khandelwal Tube Mill Kamgar Sangh judgment. However, it distinguished the present case by noting that the bid document explicitly shifts the liability for statutory dues, including workers' dues and GST, onto the purchaser. The financial institution also submitted that any amount beyond its secured dues could be used to satisfy the workers' dues, if permitted. Therefore, the Court concluded that the prospective buyer will have to bear the legal dues of the petitioners.

Key Issues

1. Whether Clause 20 of the bid document, which makes the purchaser strictly liable for all statutory dues including GST and workers' dues, is legally binding and enforceable in light of the secured creditor's priority under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002? The petitioners argued that Clause 20 of the bid document adequately protects their interest by making the prospective buyer liable for their dues. They relied on the judgment in Khandelwal Tube Mill Kamgar Sangh Vs. Government of Maharashtra and others, which held that a secured creditor's rights have priority over unsecured claims, but also noted that in that case, the bank had agreed to disburse employee dues from sale proceeds. The revenue (represented by the State) argued, through the learned Advocate for the financial institution (Respondent No. 3), that the bank will not claim amounts from sale proceeds exceeding its secured dues. The financial institution contended that Clause 20 of the bid document makes the purchaser strictly liable for the workers' legal dues.