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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE JURISDICTION  

SPECIAL LEAVE PETITION (CIVIL)  NO. 8684  OF 2010

ASSTT. GENERAL MANAGER,  KARNATAKA STATE FINANCIAL CORPORATION    Appellant(s)

                    :VERSUS:

GENERAL SECRETARY, MYSORE DIVISION  INDUSTRIAL WORKERS GENERAL UNION AND ORS.   Respondent(s)

O R D E R

Heard Ms. Kiran Suri, learned counsel for the  

appellant  in  support  of  this  petition  and  Mr.  

Raghupathy,  learned  counsel  appearing  for  the  

respondent Trade Union.

2. This  special  leave  petition  seeks  to  

challenge the judgement and order dated 16.12.2009  

rendered by a Division Bench of the Karnataka High  

Court in Writ Appeal No.1382/2009 whereby the writ  

appeal filed by the respondents was allowed, and the  

order passed by the learned Single Judge of the High  

Court dismissing Writ Petition No.4529/2009 filed by  

the respondent was set aside.

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3. The  short  facts  leading  to  the  present  

special leave petition are this wise: The respondent  

No.1 is a Trade Union registered under the Trade  

Unions Act, 1926 and was representing the workmen of  

the  industrial  concern  known  as  Mysore  Panel  and  

Boards  Pvt.  Ltd.  This  company  closed  down  its  

manufacturing activities sometime in January, 2002,  

leaving some 83 workmen jobless. Consequent upon the  

closure  of  the  said  company,  there  were  various  

statutory and legal dues of the workmen, and for  

that purpose they filed Applications under Section  

33-C of the Industrial Disputes Act, 1947 as well as  

under  the  Payment  of  Gratuity  Act.  Those  

applications  were  allowed  by  the  concerned  

authorities. Thus,  one Application  was allowed  by  

order dated 4.3.2005 for a claim of Rs.4,71,781/-,  

another Application was allowed by the order dated  

30.8.2005  for a claim of Rs.16,66,585/- and the  

third  Application  filed  under  the  Payment  of  

Gratuity Act was allowed by order dated 13.9.2005  

for  a  sum  of  Rs.7,78,696/-,  resulting  into  total  

dues of Rs.29,17,062/-. Having waited sufficiently,  

the  respondent  Trade  Union  wrote  to  the  Deputy

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Commissioner of the  Mysore District, Mysore  by its  

letter  dated  28.8.2008  seeking  recovery  of  these  

amounts.  

4. It  so  transpired  that  the  Deputy  

Commissioner, Mysore District was not quick enough  

in  taking  the  necessary  steps,  whereas  the  

petitioner Corporation which had its claim against  

this company, proceeded to sell the leasehold rights  

of  the  company  for  realizing  the  amount  of  

Rs.24,00,000/-.  The  claim  of  the  workmen  as  

aforesaid was for Rs.29,17,062/-.  Fearing that the  

amount recovered by the sale of the leasehold rights  

of  the  company  will  seriously  erode  the  dues  of  

workmen,  the  respondents  filed  a  writ  petition  

before the High Court. The first prayer in the writ  

petition  was  for  issue  of  a  writ  of  mandamus  or  

direction  to  the  Deputy  Commissioner,  Mysore  

District to take immediate steps to proceed against  

the Company for recovery of statutory and legal dues  

of the workmen as arrears of land revenue by selling  

the assets of the Company. Prayer (b) of the writ  

petition was to seek writ of mandamus or direction  

or  order  to  the  Karnataka  State  Financial

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Corporation, which is the petitioner herein, not to  

appropriate  the  sale  proceeds  from  the  sale  of  

machinery and other assets (realized pursuant to the  

public auction) and to apportion the same to satisfy  

the claims of the workmen in accordance with law.  

5. The  learned  Single  Judge  of  the  Karnataka  

High Court dismissed this writ petition, though the  

appeal therefrom was allowed by a Division Bench of  

the High Court. Being aggrieved by the judgment and  

order  passed  by  the  Division  Bench  of  the  High  

Court, the present special leave petition has been  

filed by the petitioner.  

6. The  submission  of  Ms.  Kiran  Suri,  learned  

counsel for the appellant Corporation is that under  

Section 29 of the State Financial Corporations Act,  

1951, the Financial Corporation has a right to take  

over the management or possession of the properties  

or both of the industrial concern, and this right  

has  precedence  over  all  other  claims.  She  relies  

upon Section 31 of the said Act which gives special  

provisions  for  enforcement  of  the  claims  of  the  

Financial  Corporation.  Ms.  Suri  criticises  the

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judgment of the High Court which looked into the  

proviso to Section 529 of the Companies Act, 1956  

under  which  the  dues  of  the  workmen  are  given  a  

precedence.  The  submission  of  Ms.  Suri  was  that  

unless the  liquidation proceedings  are taken,  the  

rights  of  the  workmen  under  Section  529  of  the  

Companies Act cannot fructify, and until then those  

rights cannot have any precedence over the rights of  

the State Financial Corporation under Sections 29 &  

31 of the State Financial Corporations Act, 1951.  

7. The  learned  counsel  relies  upon  a  few  

decisions of this Court. Firstly, on Central Bank of  

India vs. Sriguppa Sugars & Chemicals Ltd. and Ors.,  

(2007) 8 SCC 353. In that case, this Court has held  

that the rights of the appellant Bank had precedence  

over the workmen's dues and the statutory rights,  

like that of the Cane Commissioner. She relies upon  

particularly  paragraphs  16  and  17  of  the  said  

judgment where it has been held that the rights of  

the appellant Bank  cannot be affected by the orders  

of  the  Cane  Commissioner  and  both  the  Cane  

Commissioner, and the workmen, in the absence of a  

liquidation, stand only as unsecured creditors and

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their rights cannot prevail over the rights of the  

workmen. She has also relied upon the decision of  

this Court in the case of  Union of India and Ors.  

vs. Sicom Limited and another, (2009) 2 SCC 121, and  

particularly  paragraphs  16  and  23  thereof.  In  

paragraph  23,  Section  46-B  which  deals  with  the  

rights of the State Financial Corporation, has been  

referred to, and it is held that the non obstante  

clause in that Section will not only prevail over  

the contract but also other laws.   

8. We may we refer to Section 46-B of the State  

Financial  Corporations  Act,  1951  which  reads  as  

follows:    

“46B.  Effect  of  Act  on  other  laws.- The  

provision of this Act and of any rule or orders  

made  thereunder  shall  have  effect  

notwithstanding anything inconsistent therewith  

contained in any other law for the time being in  

force  or  in  the  memorandum  or  articles  of  

association of an industrial concern or in any  

other instrument having effect by virtue of any  

law other than this Act, but save as aforesaid,  

the provisions of this Act shall be in addition  

to, and not in derogation of, any other law for  

the  time  being  applicable  to  an  industrial  

concern.”  (emphasis supplied)

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9. The two authorities relied upon by Ms. Suri  

will have to be looked at in a proper perspective.  

As far as the judgment of this Court in Central Bank  

of India (supra) is concerned, the Court has not  

discussed  the  provision  of  Section  46-B  and  

particularly,  the  later  part  thereof,  which  

specifically lays down that the provisions of the  

State  Financial  Corporations  Act,  1951  shall  be  

applicable in addition to, and not in derogation of  

any other laws for the time being  applicable to an  

industrial concern. Similarly, the judgment in Sicom  

Limited (supra), though refers to the provision of  

Section  46-B  of  the  State  Financial  Corporations  

Act, 1951, does not deal with the effect thereof.  

10. In the present case, as we have noted above,  

the workmen had their rights adjudicated way back in  

the year 2005, and the Court concerned had held that  

they were entitled to their dues under Section 33-C  

of  the  Industrial  Disputes  Act,  1947  as  well  as  

under the  Payment of  Gratuity Act.  Unfortunately,  

the Labour Commissioner had not proceeded with the  

proceedings for realizing the claims of the workmen

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which  he  was  expected  to  realize  from  the  sale  

proceeds  of  the  assets  of  the  company.  Merely  

because  the  appellant  Financial  Corporation  

subsequently sold the properties,  that by itself  

cannot destroy the rights of the workmen which they  

had under the orders passed by the competent Courts.  

Under  Section  46-B,  the  provisions  of  the  State  

Financial Corporations  Act shall  be applicable  in  

addition to, and not in derogation of any other law  

for  the  time  being  applicable  to  an  industrial  

concern.  The High Court compared the claim of the  

petitioner with the claims of the workmen where a  

company goes into liquidation and held that the dues  

of the workmen shall have preference. The comparison  

has to be seen with proper perspective and that has  

to be seen on the backdrop of Section 46-B of the  

Act.  We do not find any error in the order passed  

by the High Court. This special leave petition is,  

therefore, dismissed.  

.........................J (H.L. GOKHALE)

...........................J (RANJAN GOGOI)

New Delhi; April 03, 2013.