Belgaum District Central Co-operative Bank Limited vs The Commissioner of Cane Development & Director of Sugars in Karnataka and Others

L. Narayana Swamy, J.—The petitioner is a Bank who states that it has lent loans to the respondent No. 4 towards working capital as against pledge of sugar produced by the 4th respondent and in this regard an agreement dated 30.3.2015 was executed. Now the Tahsildar has seized the sugar by drawing panchanama on 10.2.2015 and 16.6.2015 and the Deputy Commissioner, the 2nd respondent initiated auction to sell the property by public auction in order to pay the farmers towards supply of sugarcane. At this juncture, this petition has been filed with a prayer to quash the panchanama made by the Tahsildar on 16.6.2015 and also to direct the respondents 1 to 3 not to auction the seized sugar and to handover possession of the seized sugar to the petitioner bank.

It is submitted by the petitioner that as per the pledge deed executed by the 4th respondent, sugar has to be handed over to the petitioner who has preference over the farmers for the purpose of recovery of arrears of Rs. 30 crores. In case, the second respondent is permitted to auction to pay the farmers, then it is difficult for the petitioner to recover from the 4th respondent.

The learned counsel for the respondents 5 to 8, who have come on record by filing impleading application which was allowed, submits, 5th respondent is an association of farmers and respondents 7 to 8 are sugarcane growers. The sugar was seized by third respondent at the instance of the 2nd respondent, since 4th respondent factory has not paid sugarcane arrears well in time for sugar years, 2013, 2014 & 2015. These respondents are not parties to the agreement between the petitioner and the 4th respondent and they are entitled for sugarcane arrears. In respect of preference, the learned counsel submitted that since the supply has been made by farmers, they are entitled on preference to be paid the sugarcane price.

The learned counsel for the respondent Government submits to dismiss this petition. It is an admitted fact that the 4th respondent is due to the farmers for the years 2013, 2014 & 2015 and the Sugarcane Commissioner directed the Deputy Commissioner and Tahsildar to seize the sugarcane which was in possession of the 4th respondent. Accordingly, the Tahsildar has drawn the panchanama on 10.2.2015 and 10.6.2015. When the first mahazar was made, there was no pledge agreement entered into between the petitioner and the 4th respondent and agreement came later only in order to defeat the claim of the farmers. In the circumstances, it is submitted that the agreement between the petitioner and the 4th respondent is a collusive in nature only to defeat the claim of the farmers and hence sought for dismissal of the petition.

Heard both.

The learned counsel for the petitioner placed reliance on the judgment of the Hon''ble Supreme Court in the case of Central Bank of India Vs. Siriguppa Sugars and Chemicals Ltd. and Others, and submitted that rights of the appellant bank as pawnee cannot be affected by the orders of the Cane Commissioner or the demands made by him. The learned counsel for respondents 5 to 8 referred the judgment of Allahabad High Court in PIL No. 29523/2014 (Rashtriya Kisan Mazdoor Sangathan (Regd.) Thru'' Convenor vs., State of U.P. & 2 others and submitted that preference is to be given to the farmers than the Bank, which order was carried to the Supreme Court and the Hon''ble Supreme Court has upheld the said view.

The narrow question that arises for consideration in this case is, who has to be preferred against whom, whether the petitioner Bank or the farmers in the matter of payment of arrears?

The petitioner bank has extended the loan as against the pledge of sugar produced by the 4th respondent vide agreement dated 14.3.2015. The 4th respondent became defaulter. Accordingly, the petitioner made claim against the pledged sugar which was in possession of the 3rd respondent Tahsildar by virtue of the Panchanama dated 16.6.2015. But as it is submitted by the learned Government Advocate, the seizure was made by the Tahsildar for the arrears of sugarcane supplied by the farmers and mahazar was made on 10.2.2015 itself as on that date, there was no agreement entered into between the petitioner and the 4th respondent. May be for remaining sugar, there was again panchanama drawn on 10.6.2015, that is only challenged by the petitioner and sought for quashing.

When question of preference comes, it is the farmers, who are to be preferred than the bank for the reason that if the dues of the bank are not paid, the Bank will not starve and still bank can avail such of the other remedies to recover its dues by invoking necessary provisions of law. But in case farmers, if they are not paid, they will starve. The High Court which is a constitutional machinery, it is its fundamental duty for exercising its power to see that the farmers should not starve for want of payment of sugarcane arrears.

In the circumstances, the prayers made by the petitioner to quash the Mahazar and also to direct the respondents to handover the seized sugar cannot be granted. However, it is to be observed that after payment to the farmers out of the sale proceeds of sugars, the remaining amount, if any, can be kept in deposit, which can be claimed by the petitioner either by approaching the civil court or the forum provided for effective recovery. It is needless to state that after the proceedings are over, the Deputy Commissioner has to pay the farmers as expeditiously as possible.

With these observations, the writ petition is disposed of.