Ashti Taluka Sakhar Kamgar Union Through Its General Secretary vs. The State Of Maharashtra Through Its District Collector And Others

Facts

The petitioners, Navnath Ashraji Sable and Ashtit 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 seek recovery of dues from Mahesh (Kada) Sahakari Sakhar Karkhana Ltd. The assets of this company are being sold under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Respondent No. 3, a financial institution, is a secured creditor. The bid document for the sale of assets contains Clause 20, which states the sale is "As Is Where Is" and that the purchaser will bear all statutory dues, including GST, workers' dues, and other applicable taxes. The bank contends that the auction purchaser must accept Clause 20 for the sale to be confirmed.

Held

The Court found that Clause 20 of the bid document significantly secures the interests of the petitioners. This clause mandates that the prospective buyer must satisfy the dues of the petitioners. The Court acknowledged the submission of the financial institution that it would not claim amounts from the sale proceeds beyond its secured dues, and that any surplus could be used for workers' dues. The Court's reasoning hinges on the explicit contractual obligation undertaken by the auction purchaser through Clause 20, which shifts the liability for statutory dues, including those of the workers, onto the buyer. This effectively ensures that the petitioners' claims are addressed by the purchaser of the assets. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether Clause 20 of the bid document, which makes the purchaser liable for all statutory dues including GST, overrides the priority of secured creditors under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the distribution of sale proceeds? Petitioner's argument: The petitioners rely on the judgment in Khandelwal Tube Mill Kamgar Sangh Vs. Government of Maharashtra and others, which held that secured creditors' rights have priority over unsecured claims. However, they also point to the bid document's clause making the purchaser liable for statutory dues. Revenue/State's argument: The learned Advocate for Respondent No. 3 (financial institution) submits that the bank will not claim amounts from sale proceeds exceeding its secured dues. The remaining amount may be used for workers' dues. Crucially, Clause 20 of the bid document makes the purchaser strictly liable for the workers' legal dues.