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REPORTABLE          

IN THE SUPREME COURT OF INDIA    

CIVIL APPELLATE JURISDICTION    

CIVIL APPEAL NO. 232 OF 2016    The Maharashtra State Co-operative Bank Ltd.    ...Appellant     

Versus    Babulal Lade & Ors.             …Respondents  

 J U D G M E N T  

 MOHAN M. SHANTANAGOUDAR, J.       1. This appeal arises out of judgment dated 01.12.2015 passed  

by the Nagpur Bench of the High Court of Bombay in W.P. No.  

3879/2012. Vide the impugned judgment, the Hon’ble High Court  

has directed the issuance of a recovery certificate against the  

Appellant herein, thereby modifying the order dated 08.08.2011  

passed by the Bhandara Bench, Industrial Court, Maharashtra.   

2. The brief facts giving rise to this appeal are as follows:  

2.1 Registered under the Maharashtra Co-operative Societies  

Act, 1960 (hereinafter ‘Societies Act’), Respondent No. 6 herein,

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Vainganga Sahakari Sakhar Karkhana Ltd. (hereinafter  

‘Karkhana’) had obtained credit facilities from the Appellant-Bank  

and mortgaged its properties in return. When it defaulted on the  

repayment of the loan, the Appellant-Bank initiated recovery  

proceedings on 10.02.2005, by issuing a notice under Section  

13(2) of the Securitisation and Reconstruction of Financial Assets  

and Enforcement of Security Interest Act, 2002 (hereinafter  

‘SARFAESI Act’). Later, on 13.06.2005, the Appellant-Bank took  

physical possession of the mortgaged properties of the Karkhana  

as per Section 13(4) of the SARFAESI Act.   

2.2  Owing to its poor financial condition, on 24.01.2006, the  

Karkhana issued a notice to its employees directing them to  

proceed on leave without salary w.e.f. 24.02.2006. This was  

challenged by representatives of the Karkhana employees  

(Respondent Nos. 1 to 3 herein) in ULPA No. 65/2006 filed under  

Section 28 read with items 9 and 10 of Schedule IV of the  

Maharashtra Recognition of Trade Unions & Prevention of Unfair  

Labour Practices Act, 1971 (hereinafter ‘MRTU & PULP Act’). Vide  

order dated 24.08.2006, the Industrial Court quashed the notice  

and held that it amounted to an unfair labour practice. Further,  

noting that Karkhana had not paid salaries to its employees since

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July 2003, the Industrial Court directed the Karkhana to pay the  

unpaid salaries on top priority basis from any funds that may  

become available with it.  

2.3  On the basis of this order, Respondent Nos. 1 to 3 filed a  

miscellaneous application, ULPA No. 5/2007, seeking the issuance  

of a recovery certificate against the Karkhana, its Managing  

Director (Respondent No. 4 herein), and the Appellant-Bank under  

Section 50 of the MRTU & PULP Act. It is to be noted that the  

Appellant was arraigned as a party in this proceeding for the first  

time. Vide order dated 27.04.2007, the Industrial Court held that  

a recovery certificate for unpaid salaries of the Karkhana  

employees could not be issued against the Appellant-Bank. It also  

refused to issue such a certificate against the Karkhana and its  

Managing Director in view of the precarious financial condition of  

the Karkhana. However, the Karkhana was directed to pay the  

unpaid salaries to the employees on top priority basis, as and when  

funds were to become available.   

2.4  In the challenge against this order in W.P. No. 4746/2007,  

the High Court of Bombay, vide order dated 12.07.2010, held that  

recovery could only be made against the Karkhana and not the  

Appellant-Bank, as there was no employer-employee relationship

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between the Bank and the employees. It was further held that the  

Industrial Court had erred in relying upon the non-availability of  

funds with the Karkhana to refuse the grant of a recovery  

certificate, as the relevant consideration for issuance of such a  

certificate is the entitlement of the applicants and not the financial  

condition of the employer. In view of this, the High Court directed  

the issuance of a recovery certificate against the Karkhana and its  

Managing Director. Pursuant to this direction, the Industrial  

Court, vide order dated 08.08.2011, disposed of ULPA No. 5/2007  

by issuing a recovery certificate of Rs.13,89,84,334 against the  

Karkhana and its Managing Director. However, the prayer to issue  

a recovery certificate against the Appellant-Bank was rejected.   

2.5  In the interim period, on 26.08.2010, one of the attached  

properties of the Karkhana was auctioned and sold by the  

Appellant-Bank to one Purti Power and Sugar Ltd. (Respondent  

No. 5 herein). According to the terms and conditions of this sale,  

the purchaser had accepted all encumbrances on the property as  

agreed upon in the sale letter. It is found that the proceeds from  

this sale were appropriated by the Appellant-Bank towards the  

amount due to it from the Karkhana.  

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2.6  At the same time, aggrieved by the non-issuance of a  

recovery certificate against the Appellant, Respondent Nos. 1 to 3  

filed W.P. No. 3879/2012. During the pendency of this petition, on  

19.01.2013, an order was passed by the competent authority  

under the Societies Act directing the liquidation of the Karkhana.  

Finally, vide the impugned judgment dated 01.12.2015, the High  

Court disposed of W.P. No. 3879/2012. It was observed that in  

terms of Section 50 of the MRTU & PULP Act, the recovery  

certificate should have been issued to the Collector for recovering  

the amount from the Karkhana and its Managing Director. Thus,  

the order of the Industrial Court dated 08.08.2011 was modified  

to this extent to clarify that the certificate is to be issued to the  

Collector first, who would then proceed to recover the sum as per  

the recovery certificate. On the question of whether the Collector  

could effectuate such recovery from sale proceeds of the attached  

property of the Karkhana, it was held that after the auction sale,  

the Appellant-Bank held the proceeds in trust as per Section 13(7)  

of the SARFAESI Act and did not have a first charge over them.  

Further, it was found that upon the liquidation of the Karkhana  

on 19.01.2013, Section 529A of the Companies Act, 1956  

(hereinafter ‘Companies Act’) came into operation, thereby

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according employees’ dues priority over all other dues in respect of  

the sale proceeds. In light of this, it was held that the Collector  

could recover the said amount of Rs.13,89,84,334 from the sale  

proceeds held in trust by the Appellant-Bank. It is against this  

order that the instant appeal has been filed.  

3. Heard learned Counsel for both the parties.   

4. Learned Senior Counsel for the Appellant argued that the  

High Court erred in applying Section 529A of the Companies Act,  

as Section 167 of the Societies Act specifically bars the application  

of the Companies Act to co-operative societies, as is the case with  

the Karkhana here. In any case, he submitted that Section 529A  

of the Companies Act was misapplied, as the proviso to Section  

13(9) of the SARFAESI Act requires the company to be “in  

liquidation” at the time of the sale of secured assets for Section  

529A to apply. Given that the Karkhana only went into liquidation  

on 19.01.2013, i.e. after the sale of its properties in 2010, he  

argued that the provision was wrongly applied. In light of this, he  

also submitted that there is no other provision that makes  

employees’ dues a paramount charge, and the Appellant-Bank,  

being a secured creditor, should be given precedence over the  

proceeds from the auction sale as per Section 13(7) of the

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SARFAESI Act. It was also his contention that a claim for unpaid  

salaries cannot lie against the Appellant, as there is no employer-

employee relationship between the Appellant-Bank and the said  

employees.   

5. On the other hand, learned Senior Counsel for Respondent  

Nos. 1 to 3 drew our attention to Section 50 of the MRTU & PULP  

Act, under which the recovery certificate had been issued by the  

Industrial Court on 08.08.2011. Noting that this provision makes  

employees’ dues recoverable in the same manner as arrears of land  

revenue, learned Senior Counsel referred us to Section 169(1) of  

the Maharashtra Land Revenue Code, 1966 (hereinafter ‘Land  

Revenue Code’), which makes arrears of land revenue a paramount  

charge on the land. Relying on this, he submitted that the  

employees’ dues, recoverable as arrears of land revenue, should be  

given primacy over the claim of the Appellant-Bank while dealing  

with the proceeds from the auction sale.   

6. In addition to this, learned Counsel for Vainganga Sahakari  

Sakhar Karkhana Mazdoor Sangh (Respondent No. 8 herein) relied  

on the sale letter dated 08.03.2010, which was issued by the  

Appellant-Bank prior to the sale of the properties of the Karkhana.  

In this letter, the Appellant-Bank had stated that it would take

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responsibility for employees’ dues. In light of this, it was argued  

that the Appellant cannot be absolved of its liability towards the  

payment of employees’ dues. Learned Counsel for the subsequent  

purchaser of the property (Respondent No. 5 herein) similarly  

relied on this letter to submit that the liability for the payment of  

employees’ dues must be placed on the Appellant.  

7. In view of the arguments raised and the material on record,  

the issue that arises for our consideration in this appeal is  

whether, in the facts of this case, employees’ dues can take  

precedence over the claim of the secured creditor in respect of the  

proceeds from sale of secured assets of the Karkhana under the  

SARFAESI Act.   

8. At the outset, we find merit in the argument raised by learned  

Senior Counsel for the Appellant that the High Court erred in  

applying Section 529A of the Companies Act to this case. It would  

be apposite to refer to Section 167 of the Societies Act in this  

regard:  

“167. Companies Act not to apply – For the removal  of doubt, it is hereby declared that the provisions of the  Companies Act, 1956 shall not apply to societies  registered or deemed to be registered; under this Act.”   

It is clear that Section 167 creates an express bar on the  

applicability of the Companies Act to societies registered under the

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Societies Act. Given that the Karkhana was a co-operative society  

registered under the said Act, we find that Section 167 is squarely  

applicable, and the High Court committed a grave error in relying  

upon Section 529A of the Companies Act. Thus, the employees  

cannot make use of Section 529A of the Companies Act to claim  

priority over all other debts of the Karkhana.  

9. Against this backdrop, the next question to be considered is  

whether the employees’ dues can take priority over other claims by  

virtue of being recoverable as arrears of land revenue. Section 50  

of the MRTU & PULP Act and Section 169 of the Land Revenue  

Code are relevant in this regard. Section 50 of the MRTU & PULP  

Act reads as follows:  

“50. Recovery of money due from employer – Where  any money is due to an employee from an employer  under an order passed by the Court under Chapter VI,  the employee himself or any other person authorized by  him in writing in this behalf, or in the case of death of  the employee, his assignee or heirs may, without  prejudice to any other mode of recovery, make an  application to the Court for the recovery of money due  to him, and if the Court is satisfied that money is so  due, it shall issue a certificate for the amount to the  Collector, who shall, proceed to recover the same in the  same manner as an arrear of land revenue…”    

Section 169 of the Land Revenue Code is reproduced hereunder:

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“169. Claims of State Government to have  precedence over all others– (1) The arrears of land  revenue due on account of land shall be a paramount  charge on the land and on every part thereof and shall  have precedence over any other debt, demand or claim  whatsoever, whether in respect of mortgage,  judgement-decree, execution or attachment, or  otherwise howsoever, against any land or the holder  thereof.   

(2) The claim of the State Government to any monies  other than arrears of land revenue, but recoverable as a  revenue demand under the provisions of this Chapter,  shall have priority over all unsecured claims against any  land or holder thereof.”    

10. From a reading of these provisions, it is evident that dues of  

employees in respect of which an order has been made by a Court  

under Chapter VI of the MRTU & PULP Act are recoverable in the  

same manner as arrears of land revenue. It was argued by learned  

Senior Counsel for Respondent Nos. 1 to 3 that such treatment of  

employees’ dues as arrears of land revenue makes it a charge  

paramount to all other claims in view of Section 169(1) of the Land  

Revenue Code. In response, learned Senior Counsel for the  

Appellant contended that the instant case falls under Section  

169(2) of the Land Revenue Code, which deals with monies other  

than arrears of land revenue but which is recoverable as a revenue  

demand. Since Section 169(2) only accords priority over unsecured  

claims, he submitted that the Appellant’s claim, being that of a

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secured creditor, would still have priority over employees’ dues  

recoverable as arrears of land revenue.   

10.1   It is important to appreciate that there is a material  

difference between arrears of land revenue due on account of land,  

and amounts other than arrears of land revenue but recoverable  

in the same manner as arrears of land. On a close reading of sub-

sections (1) and (2) of Section 169 of the Land Revenue Code, it  

becomes clear that Section 169(1) deals with the former category  

of claims and makes them a paramount charge on the land over  

all other claims. On the other hand, Section 169(2) deals with the  

latter category and gives them priority only over unsecured claims.  

10.2    This distinction has also been noted in SICOM Ltd. v.  

State of Maharashtra & Anr., (2010) 6 Bom CR 749, where a  

division Bench of the High Court of Bombay was called upon to  

consider whether sales tax dues of a company in liquidation, which  

were recoverable as arrears of land revenue under Section 38-B of  

the Bombay Sales Tax Act, 1959, created a first charge. While  

discussing the scheme of Section 169 of the Land Revenue Code,  

the division Bench drew upon the reasoning of the Constitution  

Bench of this Court in Builders Supply Corporation v. Union of  

India, AIR 1965 SC 1061 and observed as follows:

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“10. Perusal of the above quoted provisions shows that  the Maharashtra Land Revenue Code makes a clear  distinction between the sum which is recoverable as a  land revenue and sum which is recoverable as arrears  of land revenue. What creates paramount charge is the  sum which is the amount of land revenue and not the  sum which is recoverable as land revenue. The  Constitution Bench of the Supreme Court in its  judgment in the case of Builders Supply Corporation,  referred to above, in our opinion, has made the position  absolutely clear. Following observations in the case of  Builders Supply Corporation, in our opinion, are  relevant. They read as under:-    

“We have referred to this decision, because it  brings out emphatically the real character of  the provisions prescribed by s. 46(2). Section  46(2) does not deal with the doctrine of the  priority of Crown debts at all; it merely  provides for the recovery of the arrears of tax  due from an assessee as if it were an arrear  of land revenue. This provisions cannot be  said to convert arrears of tax into arrears of  land revenue either, all that it purports to do  is to indicate that after receiving the  certificate from the Income-tax Officer, the  Collector has to proceed to recover the  arrears in question as if the said arrears were  arrears of land revenue. We have already  seen that other alternative remedies for the  recovery of arrears of land revenue are  prescribed by sub-sections (3) and (5) of s.  46. In making a provision for the recovery of  arrears of tax, it cannot be said that s. 46  deals with or provides for the principle of  priority of tax dues at all; and so, it is  impossible to accede to the argument that s.  46 in terms displaces the application of the  said doctrine in the present proceedings.”  

(emphasis supplied)

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This difference in the scope of sub-sections (1) and (2) of  

Section 169 of the Land Revenue Code was again noted by the High  

Court of Bombay in City Co-op Credit & Capital Ltd. & Anr. v.  

Official Liquidator of Satwik Electric Controls Pvt Ltd., (2019)  

4 Bom CR 274.   

10.3    When we look to the facts of the instant case, it is seen that  

the recovery certificate issued under Section 50 of the MRTU &  

PULP Act only makes employees’ dues recoverable as arrears of  

land revenue. Thus, in view of the foregoing discussion, it is clear  

that such employees’ dues would fall under the category of claims  

captured by Section 169(2), and can only take priority over  

unsecured claims.  

10.4    Further, as has been held by this Court in Central Bank  

of India v. State of Kerala, (2009) 4 SCC 94, only expressly  

created statutory first charges under Central and State laws can  

take precedence over the claims of secured creditors under the  

SARFAESI Act. It is not enough to merely provide for recovery of  

dues as arrears of land revenue. Given that Section 50 of the MRTU  

& PULP Act falls short of expressly making the employees’ dues a  

‘first charge’, it cannot be said that such dues have priority over  

the claims of the Appellant-Bank, which is a secured creditor.

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Thus, we find that under the scheme of the Land Revenue Code  

and the MRTU & PULP Act, the employees’ dues cannot claim  

priority over the claim of the Appellant-Bank.   

11. However, this does not mean that the Appellant-Bank  

automatically holds a paramount charge over the proceeds from  

the sale of the secured assets. Under the scheme of the SARFAESI  

Act, there is nothing to show that a priority is created in favour of  

banks, financial institutions, and other secured creditors as  

against a first charge specifically created under any other statute.  

This has been captured succinctly by this Court in Central Bank  

(supra) as follows:  

“126. While enacting the DRT Act and the Securitisation  Act, Parliament was aware of the law laid down by this  Court wherein priority of the State dues was recognized.  If Parliament intended to create first charge in favour of  banks, financial institutions, or other secured creditors  on the property of the borrower, then it would have  incorporated a provision like Section 529-A of the  Companies Act or Section 11(2) of the EPF act and  ensured that notwithstanding series of judicial  pronouncements, dues of banks, financial institutions  and other secured creditors should have priority over  the State’s statutory first charge in the matter of  recovery of the dues of sales tax, etc. However, the fact  of the matter is that no such provision has been  incorporated in either of these enactments despite  conferment of extraordinary power upon the secured  creditors to take possession and dispose of the secured  assets without the intervention of the court or Tribunal.  The reason for this omission appears to be that the new

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legal regime envisages transfer of secured assets to  private companies.”    

Thus, in the absence of a paramount charge created in favour  

of the employees’ dues under the MRTU & PULP Act, it cannot be  

said that the Appellant-Bank automatically gets a first charge  

under the SARFAESI Act.   

12. In this light, what becomes relevant for the instant case is the  

scheme of the SARFAESI Act in relation to the manner of  

distributing the money received by the secured creditor through  

the sale of secured assets. The following parts of Section 13 of the  

SARFAESI Act are relevant in this regard:  

13. Enforcement of security interest – (4) In case the  borrower fails to discharge his liability in full within the  period specified in sub-section (2), the secured creditor  may take recourse to one or more of the following  measures to recover his secured debt, namely:— (a) take  possession of the secured assets of the borrower  including the right to transfer by way of lease,  assignment or sale for realising the secured asset…  

xxx  

(7) Where any action has been taken against a borrower  under the provisions of sub-section (4), all costs,  charges and expenses which, in the opinion of the  secured creditor, have been properly incurred by him or  any expenses incidental thereto, shall be recoverable  from the borrower and the money which is received by  the secured creditor shall, in the absence of any  contract to the contrary, be held by him in trust, to be  applied, firstly, in payment of such costs, charges and  expenses and secondly, in discharge of the dues of the

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secured creditor and the residue of the money so  received shall be paid to the person entitled thereto in  accordance with his rights and interests.  

Section 13(4) of the SARFAESI Act allows a secured creditor  

to take possession of the secured assets of a borrower-in-default,  

including the right to transfer them by way of sale. What may be  

done with the proceeds from such sale is provided under Section  

13(7). In the absence of a contract to the contrary, such proceeds  

are held by the secured creditor in trust and are to be applied first  

towards payments of costs, charges, and expenses incurred with  

respect to the sale; second, towards dues of the secured creditor;  

and lastly, towards any person entitled to the residue money.   

13. In the facts of the present case, in exercise of its powers under  

Section 13(4)(a) of the SARFAESI Act, the Appellant-Bank had  

taken possession of the property of the Karkhana on 13.06.2005.  

Later, vide sale letter dated 08.03.2010, the Appellant-Bank had  

offered to sell the said property to one M/s Vidarbha Realties Pvt.  

Ltd. for a total consideration of Rs. 14.10 crores. Notably, this  

letter stated that the Appellant-Bank would take responsibility for  

employees’ dues, and all other liabilities including statutory  

liabilities would rest solely on the purchaser. This letter was  

followed by a sale certificate dated 14.09.2010 recording the sale

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of the property by the Appellant-Bank in favour of M/s Wainganga  

Sugar and Power Ltd. for a consideration of Rs. 14.10 crores.   

13.1    Before delving into the applicability of the distribution of  

the sale proceeds as per Section 13(7) of the SARFAESI Act, we  

note that the sale letter dated 08.03.2010 can be relied upon by  

this Court. The contention of the learned Senior Counsel for the  

Appellant that the sale letter dated 08.03.2010 was addressed to  

a different entity than the company mentioned in the sale  

certificate dated 14.09.2010 cannot be accepted. It is found that  

the addressee in the sale letter dated 08.03.2010, M/s Vidarbha  

Realties Private Limited, had been renamed as M/s Wainganga  

Sugar and Power Private Limited as notified on 05.04.2010.  

Subsequently, on 03.06.2010, M/s Wainganga Sugar and Power  

Private Limited was converted to a public limited company and its  

name was changed to M/s Wainganga Sugar and Power Limited,  

which is also the name of the purchaser indicated on the sale  

certificate. These interim developments between March 2010 and  

September 2010 explain why the sale letter dated 08.03.2010 and  

the final sale certificate issued on 14.09.2010 reflect different  

names. However, since it is only a case of change in name of the  

company, we find that the two entities are the same and the

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subsequent purchaser, Respondent No. 5 herein (successor of  

Wainganga Sugar and Power Ltd.) would be bound by the terms of  

the sale letter dated 08.03.2010.  

13.2    Further, it cannot be said that the sale letter dated  

08.03.2010 is an external document and cannot be relied upon to  

interpret the sale certificate. This is because the sale certificate  

specifically references the sale letter by providing that the  

purchaser accepts “all the encumbrances presently there on the  

property and may arise in future and agreed to to pay the same as  

per the sale letter accepted by the purchaser”. In view of such  

wording, we find that the parties intended that the sale letter dated  

08.03.2010 be read harmoniously with the sale certificate  

inasmuch as it appears that the same is a part of the sale  

certificate. When a composite reading of the sale certificate dated  

14.09.2010 and the sale letter dated 08.03.2010 is undertaken, it  

is revealed that though the purchaser had accepted all  

encumbrances on the property, this did not include employees’  

dues in view of the specific undertaking by the Appellant-Bank  

that it would pay them. Given that the certificate directly  

references the prior sale letter, it is essential to give effect to its  

terms. Hence, it can be concluded that the parties had agreed to

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the Bank paying the employees’ dues and the subsequent  

purchaser settling other liabilities, including statutory liabilities.  

When read in this light, it becomes clear that the sale certificate  

and the sale letter constitute a contract.   

13.3    This brings us to the scheme of distribution of sale  

proceeds under Section 13(7) of the SARFAESI Act. As mentioned  

supra, this provision prescribes the manner in which money  

received by the secured creditor pursuant to its action under  

Section 13(4) should be distributed. However, such manner of  

distribution is only applicable in the absence of a contract to the  

contrary. In this case, the sale certificate and sale letter form a  

contract, the cumulative effect of which is an agreement that only  

the employees’ dues would be settled by the Appellant-Bank, and  

all other liabilities would be settled by the subsequent purchaser.  

Thus, it can be said that the contract between the parties diverges  

from the order of distribution stipulated under Section 13(7) and  

constitutes a contract to the contrary, which must necessarily be  

given effect.   

13.4    In this regard, we find that the clarification given by the  

Appellant-Bank in its counter-affidavit before the High Court that  

by the sale letter dated 08.03.2010 it had only accepted liability

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towards the payment of provident fund of the employees, is  

unsustainable. Upon perusing the record, it is clear that this  

clarification is only a subsequent attempt by the Appellant to  

escape its liability. If the Appellant genuinely intended to restrict  

its liability to provident fund, it would have expressly stated so in  

the sale letter, which clearly prescribes the terms and conditions  

of the sale between the Appellant and the purchaser. It is  

important to bear in mind that at the time of entering into this  

sale, the Appellant-Bank was well aware of the unpaid salaries due  

to the employees of the Karkhana in view of the orders of the  

Industrial Court dated 24.08.2006 and 27.04.2007. Hence, it  

cannot be said that the Appellant-Bank agreed to use the term  

“employees’ dues” in the sale letter despite intending to limit it to  

provident fund dues only.    

13.5   Thus, on facts, we find that in terms of Section 13(7) of the  

SARFAESI Act, the distribution of money received by the  

Appellant-Bank should be done as per the sale contract with  

Respondent No. 5. In other words, the Appellant-Bank is liable to  

satisfy the employees’ dues as per its undertaking in the sale letter  

dated 08.03.2010. However, in view of the fact that all other  

liabilities, including statutory liabilities were agreed to be borne by

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the subsequent purchaser, statutory liabilities in respect of  

employees, such as provident fund, gratuity, bonus etc., would  

have to be borne by Respondent No. 5 herein. We reiterate here  

that a subsequent attempt by the Appellant-Bank to interpret the  

sale contract in a manner that reduces the scope of its liability to  

provident fund dues cannot be given effect.   

14. In view of the foregoing discussion, we summarize our  

findings as follows:   

(i) Section 529A of the Companies Act, which gives  

workers’ dues a priority over all other debts, cannot be applied to  

the instant case in view of Section 167 of the Societies Act.  

(ii) Merely by virtue of being recoverable as arrears of land  

revenue, the employees’ dues, in respect of which a recovery  

certificate had been issued by the Industrial Court, cannot be  

treated as a paramount charge in terms of Section 169(1) of the  

Land Revenue Code. Instead, under 169(2) of the Land Revenue  

Code, they would take precedence only over unsecured claims.  

(iii) At the same time, the Appellant-Bank does not enjoy  

any paramount charge over the sale proceeds either. Instead, as  

per Section 13(7) of the SARFAESI Act, the sale letter dated  

08.03.2010 and the sale certificate dated 14.09.2010 constitute a

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contract which displaces the order of distribution stipulated under  

the said provision.  

(iv) The cumulative effect of these documents is that the  

Appellant-Bank must pay the employees’ dues out of the sale  

proceeds from the auctioned property. To this extent, the recovery  

certificate issued by the Industrial Court on 08.08.2011 may be  

executed against the Appellant herein. Further, given the  

significant delay in payment of the salaries to the employees, such  

recovery shall be made by the Collector within a period of six  

months from the date of this order.   

(v) All other dues in respect of the secured property,  

including any unpaid statutory dues in relation to employees  

(provident fund, gratuity, bonus, etc.) shall be paid by Respondent  

No.5 within a period of six months from the date of this order.   

15. The instant appeal is disposed of accordingly.   

 …..…………................................J.  

      (MOHAN M. SHANTANAGOUDAR)        

….…………………………...............J.                     (KRISHNA MURARI)  

New Delhi;  December 4, 2019