Case Briefs
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Central Bank of India v. Siruguppa Sugars and Chemicals Ltd. Others


Author: Himanshu Sharma, 1st year student at Amity law School Rajasthan.


Citation: 2007 (8) SCC 353

Date of decision: 7th August, 2007

Bench: Tarun Chatterjee & P.K. Balasubramanyan 

Original copy: View

Statutes involved: Companies Act, 1956

 

Background of Case:

  • In the given case “central bank of India” is the petitioner and “Siriguppa Sugars & Chemical Ltd. & Others” is respondent.
  • “Siriguppa sugars and Chemical Ltd.” It was a sugar manufacturing company that never used to pay its workers their salary and not even they gave money to those farmers from whom they used to take sugarcane.
  • That’s why Labour Commissioner had passed an order under section 33(c) of the Industrial Dispute Act of India against the respondent company and similarly the cane Commissioner also passed an order for the amount that was due from the first respondent company to being paid to the sugarcane growers for the can they supplied to the first respondent company.
  • During the time of instant case/writ petition the sugar manufacturing company pledged its stock of sugar with the appellant bank and the recovery authority had taken possession of all the stock of sugar by force.
  • The appellant bank (Central Bank of India) had got virtually implemented in the writ petition.
  • In the given situation the rights of the appellant bank over the sugar stock had supremacy over the claims of cane commissioner regarding payment of dues. 
  • Considering that the sugar stock loses its value by time, the court has directed to sell the sugar. The sale brings a price of Rs.15350400/- out of the same, a sum of Rs. 10,60,800/- was paid towards excise duty and the balance was held under order of the court.

Issue in question:

  • The first issue is, who has the first right or supremacy over the stock of sugar that was in the possession of the appellant bank.
  • The second one is, firstly who got their amount from the amount which came after the sale of sugar stock. 

Decision:

  • The court ordered that the sum of Rs.43,00,000/- was made to be available for the labour commissioner for the disbursement to the employees of the first respondent company, and a sum of 60,00,000/- made available to the cane commissioner for sugarcane cultivators who had supplied sugarcane to the company and appellant bank was get a sum of Rs20,00,000/-.
  • The writ petition was filed by the first respondent company challenging the process of recovery proceedings, both at the instance of the cane and labour commissioner was dismissed by the learned single judge. In this appeal the decision of the learned single judge was challenged.
  • The appellant bank has challenged the order of learned single judge on the grounds that its right as a Pawnee (well recognised by law) had been ignored totally by the Division bench of the High court.
  • Further learned counsel for the appellant-bank submitted that the High court was clearly in error in ignoring the rights of the Pawnee. According to the learned counsel the appellant bank as a Pawnee has the first charge and more superiority on the sugar stock.
  • On the behalf of the respondent, the amount due to the sugarcane growers and to the workmen had to be provided and these dues ignored and under the circumstances, there is no reason to interfere with the order of the Division Bench of the High court.

Critical analysis:

  • In my opinion there is no proceedings for ceasing the first respondent company under the companies Act. In this circumstance the company only approached the BIFR by the way of reference under section 15(1) of the “Sick Industrial Companies Act”.
  • Under this case we may notice that the cane commissioner was held to be an unsecured creditor, he did not have any superior rights than the Pawnee and was entitled only to the surplus money after the satisfaction of Pawnee’s dues.
  • And according to me here in this situation, the first right on the sugar stock and on the money was of the appellant bank and the court should acknowledge the rights of the bank.

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