Holding

WPL is not entitled to a full refund of its investment; the CAG's audit report is final and binding, and the liquidator must distribute assets according to the statutory priority scheme, resulting in a net payable of Rs. 3.39 crore to WPL.

Summary

The Supreme Court dealt with contempt petitions filed by M/s Writers and Publishers Pvt. Ltd. (WPL) seeking the disbursement of proceeds from the sale of Super Bazar assets after the Court had earlier ordered a full refund of WPL's investment with interest, subject to deduction of profits. The Court examined the Comptroller and Auditor General's (CAG) audit report, which found that WPL had failed to fulfil its revival commitments, had engaged in sham transactions, and had taken control of the cooperative by forfeiting existing members and inducting bogus new members. The Court held that the CAG's verification is final and binding, and that the liquidator must settle claims according to the statutory order of priorities under the Multi-State Co‑operative Societies Act, 2002 and its Rules, with EPF dues taking precedence. Consequently, WPL is entitled only to the net amount of approximately Rs. 3.39 crore determined by the CAG, not the full investment claimed. The contempt petitions were dismissed and all other applications were disposed of.

Issues considered

The effect of the Court's 29 March 2016 order directing a full refund of WPL's investment in light of the CAG audit findings.
Whether the CAG's verification report is final and binding on the parties and cannot be challenged.
Whether WPL is entitled to a full refund of its investment under the winding‑up provisions of the Multi‑State Co‑operative Societies Act, 2002 and its Rules.
The priority of Employees' Provident Fund dues under Section 11 of the EPF Act in the liquidation process.
The proper application of the statutory order of priorities (Rule 29, Multi‑State Co‑operative Societies Rules) by the Official Liquidator.
The maintainability of the contempt petitions seeking immediate disbursement of sale proceeds.

Legislation cited

Employees' Provident Fund and Miscellaneous Provisions Act, 1952s. 11
Industrial Disputes Act, 1947s. 25F
Multi-State Co-operative Societies Act, 2002s. 86, s. 89, s. 90
Multi-State Co-operative Societies Rules, 2002s. 28, s. 29

Subjects

winding upmulti‑state cooperative societyrevival schemerefund of investmentCAG auditstatutory priorityEmployees' Provident Fundcontempt petitionliquidationshare capitalfraudmismanagement

Judgment

78 [2020]
SUPREME COURT 4 S.C.R. 78
REPORTS [2020] 4 S.C.R.

A M/S WRITERS AND PUBLISHERS PVT. LTD.
v.
DR. AK MISHRA, OFFICIAL LIQUIDATOR
(Conmt. Pet. (C) Nos. 1665-1666 of 2017)
B MARCH 05, 2020
[DR. DHANANJAYA Y. CHANDRACHUD
AND AJAY RASTOGI, JJ.]
Multi-State Co-operative Societies Act, 2002:
C ss. 89 and 90 – Winding up of Super Bazar – Notice by Official
Liquidator u/s. 25F of Industrial Disputes Act, 1947 terminating
services of regular employees – SLP before Supreme Court
challenging winding up order – Scheme for revival of Super Bazaar
– The petitioner in its bid for revival envisaged investment of
Rs. 504 crores – Petitioner’s bid accepted – SLP disposed of in
D
above terms keeping the order of winding up suspended – During
period under petitioner’s management summons issued u/s. 7A of
Employees’ Provident Fund and Miscellaneous Provisions Act, 1952
– Application before Supreme Court seeking withdrawal of summons
– Constitution of Committee to look into certain issues regarding
E implementation of revival scheme – Committee in its report indicated
serious impasse arising out of the non-implementation of the revival
plan – Court directed refund of entire investment made by the
petitioner subject to deduction of profits made during the period of
arrangement – Direction to Comptroller and Auditor General of
India to determine exact amount to be refunded – Official Liquidator
F
was directed to bring to sale all the properties of Super Bazar –
Properties were handed over by the petitioner to Official Liquidator
– Contempt Petition by the petitioner seeking disbursement of certain
amount received from the sale of property of Super Bazar – The net
outstanding amount worked out by Comptroller and Auditor General
G (CAG), as against the claim of petitioner amounting to Rs. 126
crores, was Rs. 3.39 crores – Held: The conduct of the petitioner
shows lack of bonafide in revival of Super Bazar – Having failed
in reviving Super bazar, its claim for refund of entire amount it had
invested, is contrary to the principles which govern winding up as
well a statutory scheme embodied in ss. 89 and 90 of Multi-State
H
78
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 79
OFFICIAL LIQUIDATOR

Co-operative Societies Act; rr. 28 and 29 of Multi-State Co-operative A
Societies Rules and s. 11 of Employees Provident Fund Act –
Verification made by CAG is final and binding – Official Liquidator
to deal with petitioner’s claim to the extent set out by CAG in
accordance with statutory order of priorities – Multi-State Co-
operative Societies Rules, 2002 – rr. 28 and 29 – Employees’
B
Provident Fund and Miscellaneous Provisions Act, 1952 – s. 11.
Dismissing the Contempt Petitions, the Court
HELD: 1. The purpose of the direction of this Court dated
29.03.2016 in nominating an auditor was to ensure a proper
verification of the income and expenditure incurred by the C
petitioner and the profits earned from the Super Bazar
establishment. Underlying the above direction of this Court was
the necessity that the auditor conduct a due verification of the
actual and genuine income as well as the expenditure which was
incurred by the petitioner. That was premised on the assumption
that in pursuance of the revival plan, a genuine effort had been D
made by the petitioner to revive Super Bazar. The circumstances
which have come on the record as a result of the verification
which has been carried out by the CAG upon the report of the
auditor indicate several significant facets. The findings which have
emerged in the course of the verification by the CAG leave no E
manner of doubt that the petitioner did not intend at any material
time to embark upon the revival of Super Bazar. The business
and affairs of Super Bazar were conducted in a manner that was
sham and bogus. It dealt with related entities as explained in the
report. The Transactions and the modalities followed are
indicative of a lack of bona fides on the part of the petitioner in its F
operations. [Paras 26 and 27][102-B-D; 103-C]
2. No part of the order dated 29.03.2016 of this Court
contains a direction to the effect that the petitioner would not be
held to account, upon a verification by the CAG, for the nature of
its dealings during the period when it was in management. To G
accept the submission of the petitioner that no deduction could
be made from the investment which it had brought in save and
except for profits actually earned would be a simplistic reading of
the order of this Court. The entire process of verification of the
H
80 SUPREME COURT REPORTS [2020] 4 S.C.R.

A income and expenditure was designed not only for the purpose
of deducing the profits which was earned by the petitioner. The
Court was also conscious of the fact that in devising the terms
for exit of the petitioner, it was not appraised at that stage of the
nature and extent of the dealings of the petitioner in its
management of Super Bazar. The order of this Court therefore
B
can only be read to mean that the petitioner would be held to
account for the period when it was in management based on the
result of the verification initially by the auditor and thereupon by
the CAG. [Para 30][105-D-F]
3. The interpretation of the order dated 29 March 2016
C must also be juxtaposed in light of the statutory provisions which
govern an order of winding up under Section 89 and other cognate
provisions of the Multi-State Co-operative Societies Act 2002.
The statute lays down the manner in which the liquidator has to
function upon taking charge. The Multi-State Co-operative
D Societies Rules 2002, in particular, indicate the procedure to be
adopted by the liquidator and the manner in which the assets are
to be applied. The order of priority is spelt out. A pro-rata refund
of share capital appears third in the order of priority. The last in
the order of priorities is a pro-rata payment of dividend on share
capital at a rate not exceeding 6.25 per cent for the period of
E liquidation. To allow the claim of the petitioner to be refunded its
entire investment amount, the major part of which took place
through the subscription of share capital, would essentially place
it outside the purview of the winding up proceedings. Accepting
the claim would enable it to take away moneys overriding the
F order of priorities laid down by the Multi-State Co-operative
Societies Rules 2002. The petitioner was one of the three bidders
invited to bid for the opportunity to take over the management
of Super Bazar and revive its operations. The petitioner was under
no legal obligation to submit a bid. It engaged in a free-standing
market process, albeit one supervised by this Court, through
G which the petitioner sought to turnaround the business of Super
Bazar and subsequently receive profits from the business. This
is supported by the conduct of the petitioner in squeezing out
existing members and securing for itself 98.89 per cent of the
share capital of Super Bazar. Having failed in its market endeavour
H to revive Super Bazar, it now seeks to exit its investment with a
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 81
OFFICIAL LIQUIDATOR

full refund and without having to account for the business which A
was carried on during the period when Super Bazar was under
the management of the petitioner. Such a course of action would
be contrary both to the first principles which govern winding up
as well as the statutory scheme which is embodied in Sections 89
and 90 of the Multi-State Co-operative Societies Act 2002 and
B
Rules 28 and 29 of the Multi-State Co-operative Societies Rules
2002. [Para 31][105-G-H; 106-A-E]
4. Section 11 of Employees’ Provident Fund and
Miscellaneous Provisions Act, 1952 (EPF Act) provides that where
an order of winding up is made, dues owed towards employees’
provident fund (or any other liability mentioned therein) shall be C
paid in priority to all other debts in the distribution of the property
or the assets of the entity which is being wound up. [Para 33]
[107-A-B]
Maharashtra State Co-operative Bank v. Assistant
Provident Fund Commissioner (2009) 10 SCC 123 : D
[2009] 15 SCR 1 – relied on.
5. The plea of the petitioner to receive payments at the
present stage would confer on it a preference and priority which
would be in the teeth of the statutory provisions contained in the
Multi-State Co-operative Societies Act 2002 and the EPF Act. E
There is no substance in the challenge that has been preferred
on behalf of the petitioner to the determination which has been
made in the audit report following which a verification has been
carried out by the CAG. The claim of the petitioner to the extent
set out in the verification report by the CAG will necessarily have F
to be dealt with by the liquidator upon the realization of the assets
of Super Bazar in accordance with the statutory order of priorities
contained in the Multi-State Co-operative Societies Rules 2002.
The verification made by the CAG is final and binding and shall
not be called into question before the OL or in any proceeding.
[Para 34][108-C-E] G

6. The liquidator shall evaluate the claim as determined by
the verification report by the CAG in terms of the priorities for
the payment of claims as envisaged in the Multi-State
Co-operative Societies Act 2002 and the associated rules. The
H
82 SUPREME COURT REPORTS [2020] 4 S.C.R.

A liquidator is also directed to treat the amount outstanding to the
EPFO in terms of the first priority which is created by the
provisions of Section 11(2) of the EPF Act. The liquidator shall
also consider the claim of the Union Government. The liquidator
is directed to consider the auditor and the CAG’s observations
with respect to the 14,149 new members inducted during WPL’s
B
management not being genuine. The liquidator shall, in the
process of winding up, be at liberty to consider all other claims
received and to make a determination in accordance with law. In
the event any further judicial determinations are required to be
made, parties shall be at liberty to approach the High Court. [Para
C 35][109-A-C]

Case Law Reference

(2009) 10 SCR 123 relied on Para 33

D INHERENT JURISDICTION: Contempt Petition (C) Nos. 1665-
1666 of 2017 in I.A. NOS. 102-103 of 2017 in SLP(C) NOS.8398-8399/
2005.

Petition filed for disobedience of the Order dated 27.04.2017 passed
by this Hon’ble Court.
E
WITH

MA Nos. 1394-1395/2017 in IA Nos. 102-103 of 2017 in SLP(C)
No. 8398- 8399/2005
F
MA Nos. 677-678/2018 in SLP(C) Nos. 8398-8399/2005
CONMT.PET.(C) No. 866-867/2018 in SLP(C) Nos. 8398-8399/2005

MA Nos. 1862-1863/2018 in SLP(C) Nos. 8398-8399/2005

G Misc Appl Diary No. 25930/2019 in SLP(C) Nos. 8398-8399/2005.

Ms. Madhavi Divan, Vikramjit Banerjee, ASGS, C.A. Sundaram,
N.K. Mody, Harin P. Raval, Sr. Advs., Ankur Mody, Ms. Fareha Ahmad
Khan, Sachin Gupta, Pranay Mohan Govil, Ms. Rohini Musa, Zafar

H
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 83
OFFICIAL LIQUIDATOR

Inayat, Abhishek Gupta, Praveen Swarup, R.K. Kapoor, Ms. Shweta A
Kapoor, Rajat Kapoor, Anis Ahmed Khan, S. Wasim Quadri, Lakshmi
Raman Singh, Nipun Saxena, Ms. Sukanya Singh, Kartikey Kanojiya,
Ms. Upasna Shukla, Vijay K. Jain, Sumit Goel, Ms. Malvika Bhanot,
Raghav Bansal, Paritosh Arora, M/s. Parekh & Co., Mohit Chaudhary,
Ms. Puja Sharma, Kunal Sachdeva, Zulfikar Ali Chowdhary, Balabir
B
Singh Suri, Imran Ali, Parveen Kumar, Ms. Garima Sharma, Ms. Sristi
Gupta, Ashok K. Srivastava, R. Balasubramanian, Ms. Swati Ghildiyal,
Ms. Aakanksha Kaul, Ms. Nidhi Khanna, Manek Singh, Mrs. Anil Katiyar,
S. Wasim Qadri, Lakshmi Raman Singh, Nipun Saxena, Ms. Sukanya
Singh, Kartikey Kanojiya, Zaid Ali Subzposh, Tamim Qadri, Saeed Qadri,
Nachiketa Joshi, Ms. Rekha Pandey, Siddhartha Sinha, Anshul Gupta, C
Prashant Rawat, Om Prakash Shukla, Raj Bahadur Yadav, Siddharth,
Amit Kumar Agrawal, Vijay K. Jain, Vishnu B. Saharya, Viresh B.
Saharya, Advs. for the appearing parties.

The Judgment of the Court was delivered by
D
DR DHANANJAYA Y CHANDRACHUD, J.
The Winding Up of Super Bazar
1. Super Bazar, which was envisaged to be a model of
co-operation in the consumer movement fell on bad days. On 15 March E
2002, an inquiry was conducted into the working and financial conditions
of Super Bazar under Section 78 of the Multi-State Co-operative
Societies Act 2002. The inquiry identified poor management and a rise
in the wage bill of Super Bazar as the primary causes for the losses.
2. On 5 July 2002, the Central Registrar of Co-operative Societies1 F
passed an order for the winding up of Super Bazar. The order of winding
up was upheld by the Appellate Authority on 5 November 2002. Finding
that as a multi-state cooperative society, the institution had not
sub-served the interest of the general public, the Appellate Authority
held that the Central government was under no obligation to continue
infusing funds to keep Super Bazar afloat without the prospect of any G
returns. The total loss of Super Bazar as on 31 March 2002 was
` 60.28 crore. The order of winding up was challenged before the High
Court of Delhi in writ petitions instituted by the employees’ unions of
Super Bazar.
1
“Central Registrar”
H
84 SUPREME COURT REPORTS [2020] 4 S.C.R.

A 3. On 15 January 2003, the Official Liquidator2 issued a notice
under Section 25F of the Industrial Disputes Act 19473 terminating the
services of the regular employees with effect from 15 February 2003 on
the ground that Super Bazar did not possess the necessary financial
resources to meet its salary obligations. In a reply filed to one of the
writ petitions before the High Court, the Central government expressed
B
its inability to infuse funds for the rehabilitation of the enterprise. In a
reply filed on 3 March 2003, the OL stated that upon the winding up of
the enterprise, the services of the employees had come to an end by the
operation of law. The writ petitions before the High Court were dismissed
on 19 December 2003 as a consequence of which the order of liquidation
C was upheld. In a writ petition titled RS Mudgal v Official Liquidator4,
notices issued by the OL on 15 January 2003 and 30 April 2003 under
Section 25F and Section 25N of the Industrial Disputes Act were assailed.
The High Court of Delhi by its order dated 17 May 2004 dismissed the
petition, holding:
D “Legal position, not disputed by any of the counsel appearing for
the parties that with the winding up of Super Bazar, by operation
of law, Super Bazar closed down. Employer-employee
relationship between the employees of Super Bazar snapped, the
winding up order being deemed to be a notice of discharge of the
officers and employees of Super Bazar.”
E
4. The judgment of the High Court of Delhi dated 19 December
2003 dismissing the petitions challenging the order of winding up was
challenged before this Court in proceedings under Article 136 of the
Constitution titled Super Bazar Karamchari Dalit Sangh v Union
of India5. Between August and December 2004, this Court granted
F opportunities to the workers to bring forth an entity with whose assistance
Super Bazar could be revived.
Bids for Revival
5. On 4 February 2005, the Indian Labour Co-Operative Society
G and the Indian Potash Limited made a proposal for taking over the assets
and liabilities of Super Bazar, and in pursuance of a direction of this

2
“OL”
3
“Industrial Disputes Act”
4
2004 (74) DRJ 694
5
H SLP (C) Nos 8398-99 of 2005 and SLP (C) No 12145 of 2005
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 85
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

Court, an amount of ` 50 lakh was deposited. Subsequently, the amount A
came to be refunded. By an order dated 28 February 2006, this Court
was of the view that the entrustment of Super Bazar to a professionally
managed entity was essential. Based on this view, an Evaluation
Committee6 was constituted to prepare a comprehensive scheme for
the revival of Super Bazar. This Court by its order dated 12 February
B
2008 noted that as a result of the co-operative society having become
defunct, the livelihood of about 1,030 workers had been affected. The
court further noted that three bids had been received for the revival of
Super Bazar from (i) Indian Potash Limited; (ii) Writers and Publishers
Limited7; and (iii) National Consumer Cooperative Federation, together
with Pantaloons Retail India Limited. The court observed that, before C
the bids could be considered, it would be appropriate to examine the
demand of the workers with regard to wages, including dearness
allowance and any other allowances which were expected to be paid by
the future management for at least three years after taking over Super
Bazar. The court expressed the hope that once the demand was worked
D
out category-wise, it would facilitate the acceptance of bids as well as
the working of the committee which was to evaluate them. The Workers’
Union filed an affidavit dated 14 March 2008 quantifying their demands
at ` 54.31 crore as on 31 December 2007, noting that the Central
government had waived an amount of ` 114 crore. This Court
subsequently required the EC to complete the process of evaluating the E
three bids based on the net-worth of the bidders as on 31 March 2007
and their net-profits as on 31 March 2005, 31 March 2006 and 31 March
2007. In the course of its order dated 7 May 2008, this Court observed:
“…Under the recommendations dated 3rd August, 2007 made by
the Evaluation Committee, the successful bidder is required to F
get the by-laws of Super Bazar amended. That amendment can
be made only by the Official Liquidator. However, it appears that
as a result of the said amendment, the share capital of Super
Bazar might have to be enhanced. Therefore, the highest bidder
should undertake that in such eventuality, it will stand by the
enhancement of the share capital and reconstitution of the new G
Board of Super Bazar to be done in accordance with the provisions
of Multi-State Cooperative Societies Act, 2002.”

6
“EC”
7
“WPL” H
86 SUPREME COURT REPORTS [2020] 4 S.C.R.

A The court issued directions for the evaluation of the three bids by
the EC. The court stated that its order was in exercise of the power
conferred by Article 142 of the Constitution of India, with the object of
ensuring the revival of Super Bazar.
6. On 6 August 2008, WPL submitted a revised bid together with
B a business plan in terms of the recommendations of the EC. The bid
submitted by WPL envisaged an investment by it of ` 504 crore to be
made in the following manner:

10. Amount to be deposited by the
bidder in Super Bazar
C
a) Before withdrawal of liquidation Rs. 102 Crores (Rupees One
order to make the net worth of the Hundred and Two Crores)
society positive (see conditions) towards issued and
subscribed paid up capital.

D b) Towards working capital of Super Rs. 276 Crores (Rupees Two
Bazar after the withdrawal of Hundred and Seventy-Six
liquidation order. Crores) or more, as and when
required.

c) Amount to be invested for revival Rs. 126 Crores (Rupees One
E & revamping of the business of Hundred and Twenty-Six
Super Bazar Rs. 102 Crores Crores) or more as per the
(Rupees One Hundred and Two revival business plan and as
Crores) towards issued and and when required.
subscribed paid up capital.
F
“The above extract indicates that WPL was to infuse an amount
of ` 504 crore divided into:
(i) An amount of ` 102 crore towards issued and subscribed
paid up share capital (before withdrawal of the liquidation
G order to make the net-worth positive);
(ii) An amount of ` 276 crore towards working capital (as and
when required after the withdrawal of the liquidation order);
and
(iii) An amount of ` 126 crore for the revival and revamping of
H the business of Super Bazar (as and when required).
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 87
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

7. On 26 February 2009, this Court accepted the recommendation A
of the EC dated 5 November 2008 by which it had recommended the
acceptance of WPL’s bid. The three trade unions which were represented
before this Court stated that they had no objection to the recommendations
of the EC. Hence, by the order of the court the OL and the Central
Registrar were directed to take steps to revive SuperBazar in terms of
B
the orders passed from time to time. The court ordered that, pending
the revival of Super Bazar, the order of winding up was to remain
suspended. Moreover, as and when the scheme of revival came into
force, it would substitute the order of winding up. The special leave
petitions were disposed of in the above terms.
Period under WPL Management C

8. On 8 October 2009, Super Bazar, now under the management
of WPL, issued a notice for the re-employment of 1,030 workers with
effect from 5 October 2009. In Super Bazar Karamchari Hiteshi
Sangthan v Ramesh Chander Agarwal8, a contempt petition was filed
seeking the disbursement of the sum of ` 54.31 crore to the employees D
immediately. A direction was also sought for the deposit of the employees’
share of provident fund contributions by WPL. By an order dated 13
August 2010, this Court directed that out of the amount of ` 55 crore
which had been deposited by the highest bidder (WPL), an amount of
` 20 crore be disbursed to employees by the OL and a nominee of the E
Central Registrar, in the presence of a representative of each of the
unions within four weeks. Insofar as the balance was concerned, the
order directed WPL to file an undertaking that within a period of eight
weeks from the date of the constitution of a new Board of Directors, the
remaining amount would be disbursed to the workers. The general body
was to elect the new Board of Directors within ninety days. This Court F
also directed that the premises of Super Bazar, which had been
valued at ` 117.52 crore, shall not be encumbered and no third-party
rights should be created till further orders.
9. By a subsequent order dated 14 March 2011, this Court directed
WPL to deposit an amount of ` 14.84 crore with the Registry of this G
Court, clarifying that this was a part of the total amount of ` 54.31 crore
owed to employees of Super Bazar. WPL was ordered to comply with
such directions as may be issued from time to time by the Central
8
Contempt Petitions Nos (C) 353-355 of 2009 in SLP (C) Nos 8398-8399 of 2005 and
SLP (C) No 12145 of 2005 H
88 SUPREME COURT REPORTS [2020] 4 S.C.R.

A Registrar, including with regard to the inspection of Super Bazar’s
accounts.
10. WPL claims that in compliance of the orders passed by this
Court, it effected the following payments:
• Amount paid to workers: Rs. 30.16 crores
B
• Amount deposited in Supreme Court Registry: Rs. 14.84
crores
• Amount paid towards PF: Rs. 8.07
• Deductions towards shortage: Rs. 0.57 crores
C
• Unclaimed amount: Rs. 0.68
According to WPL, further demands were raised by the workmen
from WPL under the recommendations of the Fifth Pay Commission.
WPL filed IAs9 seeking a clarification that its liability had been pegged
at ` 54.31 crore. On 5 October 2012, a notice was issued to the workmen,
D
stating that the obligation to engage them for three years had been
complied with and directing them to cease from reporting to work.
11. On 22 March 2013, the Employees’ Provident Fund
Organization10 issued a summons to Super Bazar under Section 7A of
the Employees’ Provident Funds and Miscellaneous Provisions Act 195211.
E WPL disputed this by instituting IAs12 seeking a direction to the EPFO
to withdraw the summons.
12. On 16 October 2014, this Court constituted a committee, being
of the opinion that certain issues in regard to the implementation of the
revival scheme were required to be addressed. The committee was to
F comprise of:
(i) Shri L Nageswara Rao, Additional Solicitor General of India
(as he then was);
(ii) Mr P Sampath, Director, Department of Agriculture &
G Co-operation, Ministry of Agriculture, Government of India;

9
IA Nos 28-30 of 2011
10
“EPFO”
11
“EPF Act”
12
IA Nos 87-88 of 2013
H
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 89
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

(iii) Mr Kesav Dasiraju, Secretary to Government of India, A
Department of Consumer Affairs;
(iv) Mr Harin P Raval, Senior Advocate (representing the OL);
(v) Mr CA Sundaram, Senior Advocate (representing WPL).
The committee submitted its report on 22 June 2015. The B
committee noted that out of the proposed infusion of ` 504 crore under
the revival plan, WPL had brought in an amount of ` 102 crore towards
share capital but the status of the infusion under the other two heads
(working capital and revival funds) was unknown. As regards the
disbursement of ` 54.31 crore to the workers, the report of the
committee reflected the following position: C

• Amount disbursed by Official Liquidator: Rs. 19.79 crores
• Amount paid by M/s Writers and Publishers Ltd : Rs. 7.93
Crores
• Amount deposited by M/s Writers and Publishers Ltd. in D
Provident Fund Office: Rs. 8.07 Crores.
On the time frame for the implementation of the revival
scheme, the committee recorded the submissions of WPL which were
as follows:
“M/s Writers and Publishers Ltd has also stated that they are E
ready to bring in further investment provided the liquidation
proceedings are withdrawn and there is no deviation from the
original bid conditions. However, they have stated that bidder cannot
provide a definite time period for the investment keeping in view
the series of unnecessary litigations/hurdles since last so many F
years. The requisite investments will be made by the bidder in
the society as per the business plan provided free hand is given
to the bidder without any inference from OL and from the registrar
in the day to day affairs.”
Adverting to a difference of opinion between the OL and WPL in G
regard to the preservation of the properties of Super Bazar, the report
indicated that:
“There is a cleavage of opinion between M/s Writers and Publishers
Ltd. and the Official Liquidator on this point. While the Official
Liquidator demands that no property of Super Bazar should be H
90 SUPREME COURT REPORTS [2020] 4 S.C.R.

A allowed to be sold/disposed off or leased out to any third party in
future, in the interest of revival of Super Bazar, M/s Writers and
Publishers Ltd. have stated clearly that in case of any such
restrictions being placed on the sale of properties, the bidder shall
seek an option to withdraw its bid along with interest and damages.
B In addition, M/s Writers and Publishers Ltd. has also stated that
it should have total control of the society and its assets.In view of
the above, the Committee is of the view that this issue would
have to be resolved by this Hon’ble Court.”
Besides the above aspect on which the committee observed that
C a decision of this Court was necessary, it also noted that another area of
a similar nature was the means required to ensure that the management
of the Super Bazar project functioned within the framework of the Multi-
State Co-operative Societies Act 2002.
13. The report of the committee appointed by this Court indicated
D that there was a serious impasse arising out of the non-implementation
of the revival plan. In March 2016, the Union of India filed an affidavit
stating that despite the lapse of seven years, Super Bazar had not been
revived. The Central government drew attention to the fact that in the
intervening years WPL had not submitted a revival plan before the Central
Registrar of Co-operative Societies, despite reminders. It was alleged
E that instead of reviving Super Bazar, WPL had outsourced the shops
and properties of Super Bazar to third parties on a rental basis, earning
huge rental incomes in the process. The Central government submitted
that the infusion of funds by WPL was for the revival of Super Bazar
and even if it were to withdraw from the revival process, there could be
F no stipulation for a refund. The Central government submitted that if
WPL were to withdraw from the revival process, Super Bazar ought to
be placed under liquidation and all claims would be duly investigated
by the Central Registrar.
14. Eventually, by an order dated 29 March 2016, this Court
G observed that:
“Admittedly, the infusion of funds by the bidder was for the
revival of the Super Bazar, and there was no stipulation forrefund,
in case of withdrawal of the bidder from the revival process…”
The court noted the submission that WPL had failed to submit a
H revival plan before the Central Registrar in spite of several directions, as
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 91
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

a result of which Super Bazar had not been revived seven years after A
WPL took over management of the concern. The court took note of the
submission that under Section 90 of the Multi-State Co-operative Societies
Act 2002, all claims would have to be investigated by the OL and to be
settled in accordance with the statutory order of priorities for the
settlement of liabilities. The Central government, as a creditor of Super
B
Bazar, had an outstanding loan amount of ` 68.51 crore. The court noted
that on the issue as to how and under what terms WPL could be released
from the arrangement, a joint statement of the Central government and
WPL dated 3 March 2016 had been submitted. Yet, upon reconsideration,
“there was a change of heart” on the part of the Central government
which then submitted a revised statement dated 5 March 2016. On 29 C
March 2016 the following directions were then issued by this Court:
“Learned counsel for the rival parties have assisted this Court,
on the manner in which M/s Writers and Publishers Ltd., should
be released from the obligation of the instant arrangement. Having
heard learned counsel, we are satisfied in recording, that M/s D
Writers and Publishers Ltd. should be refunded the entire
investment made by them, along with interest at the rate of 6%
per annum (though it was suggested, that the rate of interest could
be at 9% per annum), subject to deduction of profits made during
the period when the arrangement subsisted.”
E
The above directions envisaged that WPL should be refunded the
entire investment made by them together with interest at 6 per cent per
annum, subject to the deduction of profits made during the period that
the arrangement subsisted. In order to determine the exact amount to be
refunded, the Court directed the Comptroller and Auditor General of
India13 to nominate an auditor who would verify the income and F
expenditure incurred by WPL as well as the profits earned from the
Super Bazar establishment during the period under consideration.
The CAG was to verify the determination made by the auditor and
the result would be binding on all the parties including WPL. This part of
the Court’s direction reads as follows: G
“In order to effectuate the refund referred to hereinabove (to
M/s Writers and Publishers Ltd.), we consider it just and appropriate

13
“CAG” H
92 SUPREME COURT REPORTS [2020] 4 S.C.R.

A to direct the Comptroller and Auditor General of India, to nominate
an Auditor, to verify the income and expenditure incurred by M/s
Writers and Publishers Ltd., and also, the profits earned by it
from the Super Bazar establishment, during the period under
consideration. The determination so made by the Auditor, will be
verified by the office of the Comptroller and Auditor General
B
of India, whereupon, the same shall be binding on all the parties
including M/s Writers and Publishers Ltd. Needless to mention,
that all interested parties shall have the liberty to appear before
the nominated Auditor, and canvass their respective claims.
We hereby also direct, that M/s Writers and Publishers Ltd., will
C forthwith handover (within two weeks) against inventory and
receipt, all concerned documents and actual physical possession
of all movable and immovable properties of the Super Bazar, to
the Official Liquidator.”
15. The OL was directed to bring to sale all the properties of
D Super Bazar and to deposit the proceeds in an escrow account. Apart
from the direction, the court directed that on the filing of an application,
WPL would be entitled to withdraw:
(i) An amount of ` 14.84 crore together with accrued interest
which was deposited in the Registry of this Court; and
E
(ii) An amount of ` 8.07 crore together with accrued interest
which was deposited with the Regional Commissioner, EPFO,
Delhi.
These amounts were to be deducted from the payments to be
F made to WPL. In pursuance of the order of this Court dated 29 March
2016, WPL claims to have handed over the documents pertaining to
Super Bazar, together with actual physical possession of Super Bazar
properties, to the OL.
16. The workmen instituted a review petition against the order
dated 29 March 2016 which was dismissed on 28 September 2016. A
G
curative petition filed by the workmen was dismissed on 15 December
2016. The OL instituted IAs14 in March 2017 seeking an extension of
time for the completion of the audit and for permission to conduct the

14
IA Nos 102-103 of 2017 in SLP (C) Nos 8398-8399 of 2005
H
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 93
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

sale of properties in order to effect payment to WPL. On 30 June 2017, A
WPL moved contempt proceedings15 seeking the disbursement of the
consideration amounting to ` 28.80 crore received from the sale of
immovable properties of Super Bazar.
The CAG Report
17. The OL filed the report of the CAG on an affidavit on B
4 September 2017. Some of the salient features which emerged from
the CAG report are identified below:
A. The share capital of ` 102 crore:
(i) During the financial year 2009-10, WPL introduced only an
amount of ` 35 crore as against the committed amount of C
` 102 crore. Out of the ` 35 crore which was introduced
towards share capital, ` 28 crore was invested in fixed deposits
with banks. Further infusions of money in the form of share
capital were to be invested for enhancing the business activity
of Super Bazar, which was not done. As against seventy-
D
three stores which were planned to be re-opened in terms of
the revival, only one was made operational in January 2010;
(ii) During the financial year 2009-10, WPL revised the minimum
extent of share capital to be subscribed and paid by the
members of the cooperative society from five shares per
member to fifty shares per member by amending the byelaws. E
The management assumed the power to forfeit the
membership of existing members if they failed to subscribe
to the additional shares required to be subscribed to as per
the amended byelaws. Through this process, the share capital
of Super Bazar which was subscribed to by 39,760 members
was forfeited and 14,149 new members were introduced into F
the society. This modus operandi enabled WPL to take
absolute control over the co-operative society; and (iii) The
new members inducted under WPL’s management were not
genuine; proper modalities were not followed; and membership
money was accepted in cash. There is an absence of details,
G
including addresses, and letters addressed by the auditors to
the ostensible new members were either returned undelivered
or with members stating that they had not entered into any
such transaction.
15
Contempt Petition Nos. 1665-1666 of 2017 in IA Nos. 102-103 of 2017 in SLP (C)
Nos 8398-8399 of 2005 H
94 SUPREME COURT REPORTS [2020] 4 S.C.R.

A B. Doubtful dealings:
(i) An advance of ` 20 crore was given to a vendor (Premier
Industries India Limited) in January 2011 without interest.
On 30 March 2011, a purchase of ` 23.93 lakh was made
and simultaneously the same goods were sold back to the
B same party on that very date for ` 24.18 lakh. In the context
of a trade of ` 24 lakh, the advance of ` 20 crore is not
supported by any business rationale. The advance resulted
in an interest loss of ` 36.73 lakh;
(ii) During the financial year 2011-12, more than 67 per cent of
C Super Bazar’s turnover was recorded in book entries only.
The total turnover was ` 30.29 crore whereas the turnover
recorded in the Bhopal branch was ` 21.37 crore. Goods
were purchased and sold to the same party, namely Premier
Nutrition. Premier Nutrition is a proprietorship concern of
Premium Industries India Limited, to whom an advance of
D ` 20 crore was outstanding. These transactions are not
genuine as the bills specifically mentioned that there was no
movement of goods and there was no flow of funds at the
time of sale or purchase. The transactions were set up to
show the revival of Super Bazar; and
E (iii) During the financial year 2012-13, over fifty per cent of the
turnover was recorded only by book entries without the actual
movement of goods. There are instances where goods were
sold at an earlier date and purchased at a later date. The
transactions entered into pertained to two enterprises: goods
F were ostensibly sold by Manthan Milk Products Private
Limited and Premier Industries (India) Limited and purchased
by Premier Nutrition and Premier Proteins Limited.
C. MoUs with third parties:
(i) On 18 April 2011, a MoU was entered into between RD
G Retail Marketing Private Limited and Super Bazar, by which
the right to manage and operate stores was given to the former.
At the time of the submission of the revival bid, WPL had
stated that it possesses the experience and specialized
manpower for managing multi product-multi location
activities. The MoU was contrary to the scheme of revival
H
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 95
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

which postulated that WPL had the necessary expertise to A
revive Super Bazar and expressly restrained WPL from
creating third party interests in Super Bazar and its properties.
Despite this, WPL entered into an agreement with RD Retail
Marketing Private Limited to manage and operate all the
stores that were run by Super Bazar;
B
(ii) An MoU was entered into between Super Bazar and Sahara
QShop Unique Product Range Limited. On 8 June 2013, the
right to manage and operate the stores was handed over to
the latter. As in the case of the earlier MoU, this was in
breach of the revival plan under which WPL was restrained
from creating third party rights. Though under the MoU Super C
Bazar was entitled to a margin of 5.5 per cent on a monthly
sales of up to ` 2 crore, Sahara QShop debited only one per
cent and the balance remains to be recovered; and
(iii) On 2 July 2015, Super Bazar entered into an MoU with Sun
Agri Fresh Industries Private Limited. Despite the revival D
scheme stipulating that no third-party rights could be created
in the properties of Super Bazar, the MoU granted Sun Agri
Fresh Industries Private Limited the right to manage and
operate all the stores of Super Bazar. Under the terms of the
MoU, an amount of ` 1,00,00,000 was to be deposited with E
Super Bazar as security against the rights granted. The amount
was paid to Super Bazar but was immediately refunded and
thus never constituted a security deposit.
D. Stripping of assets:
While using the Connaught Place building for conducting F
the business of Super Bazar, WPL caused extensive damage
to the building. All the lifts, shutters, furniture and fixtures
were removed and sold and even the partition walls were
removed. As chartered accountants, the auditors were not
in a position to quantify the actual loss caused to the building G
and structure;
E. Decreasing trend of gross profits:
Between 2009-10 and 2015-16, there was a decreasing trend
in the gross profits of Super Bazar on a year to year basis.
Even though the stores which were managed by third parties H
96 SUPREME COURT REPORTS [2020] 4 S.C.R.

A recorded gross profit, those managed by WPL incurred losses.
This was indicative of mismanagement or pilferage of stock
records, which were not available for review.
18. The summary of the audit report, as verified by the CAG, is
divided into four parts:
B (i) Part-I shows the amount recoverable from WPL on account
of various amounts received by it during its operation of Super
Bazar after deducting the balance payable on account of the
working capital infused by WPL into Super Bazar: ` 29.66
crore;
C (ii) Part-II shows the amount payable to WPL on account of
share capital invested by it after the adjustment of losses
incurred during the period when management control of Super
Bazar was with WPL: ` 57.54 crore;
(iii) Part-III shows the amount recoverable from WPL in respect
D of third parties which were introduced and dealt with by WPL
when Super Bazar was under its management: ` 24.49 crore;
and (iv) The EC had been constituted by this Court for
evaluating bids which had been received from three bidders
for the revival of Super Bazar. The EC recommended the bid
E of WPL on the basis that it was to infuse funds to the extent
of ` 504 crore, comprising of ` 102 crore towards share capital,
` 276 crore towards working capital and ` 126 crore towards
revival and revamping the operations of Super Bazar. As
against the above commitments, while WPL introduced ` 102
crore towards share capital, the maximum working capital
F infused by WPL over a period of six years was ` 28.79 crore
as on 31 December 2015 which was subsequently withdrawn
and reduced to ` 9.34 crore as on 31 March 2016. This
resulted in a shortfall of ` 247.21 crore towards working
capital. The amount of ` 126 crore towards revival and
G revamping of operations was never brought in by WPL. As a
result of this, the total investment which was to be made
under the revival plan was deficient to the extent of ` 373.21
crore. If this amount had been infused as committed there
would have been an interest cost computed at nine per cent
per annum over a period of six years from August 2009 to
H March 2016.
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 97
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

WPL’s Claim A
19. Pursuant to the order dated 29 March 2016 which directed
WPL be refunded its entire investment, the total claim for refund brought
by WPL as of 31 March 2019 amounts to ` 142,51,65,978. The breakup
of this amount is reflected in the following tabulation chart:
B
I. Share capital infused by WPL ` 102,00,00,000/-
II. Working capital infused by WPL ` 9,34,09,794/-
III. Interest on share capital at 6% `41,69,13,540/-
(between2.8.2007and31.3.2016)
IV. Interest on share capital at 6% `15,57,42,644/-
C
(between1.4.2016and31.3.2019)
V. Total amount `168,60,65,978/-
VI. (Less) Amount refunded by EPFO ` 11,25,00,000/-
VII. (Less) Amount refunded by Supreme ` 14,84,00,000/-
Court Registry
NetAmountclaimed ` 142,51,65,978/- D

At the time of the submission of the verification report by the
CAG dated 1 September 2017, interest up to 31 March 2016 was claimed,
therefore for the purposes of the verification report by the CAG, the
net amount claimed was ` 126.92 crore. Subsequently, WPL has claimed E
interest from 1 April 2016 to 31 March 2019.
The Computation by the CAG
20. Contrary to the above amount claimed by WPL, according to
the CAG’s computation, the final amount payable to WPL is ` 3.39 crore.
This is indicated in the following table: F
Part I: Amount to be recovered from WPL – ` 29,65,58,133/-
Determined by (i) adding the various amounts
received by WPL during the period it was in
management of Super Bazar, and by (ii)
deducting the working capital brought in by G
WPL
Part II: Amount to be paid to WPL – ` 57,53,67,149/-
Determined by adding the share capital invested
and adjusting this against the losses incurred to
H
98 SUPREME COURT REPORTS [2020] 4 S.C.R.

A Super Bazar during the period it was under the
management of WPL.
Part III: Amount to be recovered from WPL – ` 24,49,19,323/-
These are amounts that WPL ought to have
recovered from third parties that it introduced
B and dealt with during the period it managed
Super Bazar.
Net amount payable to WPL = (Part II) – ` 3,38,89,693/-
(Part I+III)
At this stage it may also be noted that the CAG has included a
C redrafted profit and loss statement indicating that the total loss incurred
for the entire period was ` 44.96 crore. The CAG calculated WPL’s
share of the loss proportional to its shareholding in Super Bazar (98.89
per cent) at ` 44.46 crore.
21. The net outstanding amount worked out by the CAG as
D payable to WPL is computed in the following manner:
(i) The investment made by WPL in the share capital of Super
Bazar: ` 102,00,00,000 (Rupees 102 crore);
(ii) Less net amount recoverable from WPL on account of
payments received by it during the operation of Super Bazar
E after deducting the working capital brought in by WPL:
` 29,65,58,133 (Rupees 29.66 crore);
(iii) Less net amount recoverable from WPL on account of third
party claims: ` 24,49,19,323 (Rupees 24.49 crore); and
(iv) Less the loss incurred by WPL since it had taken over the
F
business of Super Bazar: ` 44,46,32,851 (Rupees 44.46 crore).
After deducting the above amounts from the share capital brought
in by WPL, the amount to be refunded works out to ` 3,38,89,693 (Rupees
3.39 crore).
G 22. The amount of ` 29,65,58,133 which is referred to in (ii) above
has been computed in the following manner:
a) Balance of working capital ` 9,34,09,794/-
b) Interest on share capital at 6% (disallowed) ` 41,69,13,540/-
Note: According to CAG, no interest is
H
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 99
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

payable to WPL on the amount brought in A
towards share capital since dividends can
only be paid on share capital where the
entity has made a profit.
c) EPF payment refunded ` 11,25,51,046/- B
d) Amount refunded by the Supreme Court ` 14,84,65,856/-
Registry
e) Amount withdrawn up to 12 April 2016 ` 9,00,000/-
f) Amount recoverable on account of C
discrepancies e.g. income not booked and
expenses not supported with documents
g) Interest on security deposit of Sun Agri
Fresh ` 6,73,770/-
D
Total Amount recoverable ` 29,65,58,133/-
The amount of ` 12,73,77,255 referred to in the above table
(amounts recoverable on account of discrepancies) has been computed
under the following heads:

Expenses not supported by documents ` 2,71,76,178/- E
Expenses not related to Super Bazar Bills ` 64,28,961/-
Bills which don't seem to be genuine ` 4,22,86,552/-
Income not booked/escaped (unconnected receipts) ` 2,15,58,130/-
Amount paid to Director of Estate and Legal ` 3,65,88,140/- F
Professionals for INA Shop
Cash payments made against market survey ` 13,71,800/-
Fire fighting expenditure without any related ` 1,53,000/-
documentary evidence G
Rent of Connaught Place building not included (-) ` 75,93,756/-
in 2015-16 accounts
Rent of INA Shops not included in 2015-16 (-) ` 5,91,750/-
accounts
H
Total Amount ` 12,73,77,255/-
100 SUPREME COURT REPORTS [2020] 4 S.C.R.

A The amount of ` 24,49,19,323 which is reflected in (iii) above
which has been deducted from the investment of ` 102 crore in share
capital is computed as follows:
Amounts recoverable from Sahara Q Shop ` 5,44,40,075/-
Amount recoverable from Premier Industries, ` 9,07,05,206/-
B
Manthan Milk, Premier Nutrition and Premier
Proteins
Amount recoverable from RD Retail Marketing ` 9,97,74,042/-
Total amount recoverable ` 24,49,19,323/-
C
Submissions
23. During the course of the present proceedings, Ms Madhavi
Divan, learned Additional Solicitor General of India, has greatly assisted
this Court by providing a detailed explanation of the report of the auditor
D and the verification conducted by the CAG. It is the position of the Central
government that the findings of the CAG are correct and binding on all
parties including WPL.
24. Mr Harin Raval, learned Senior Counsel appearing on behalf
of the OL, has supported the submissions of the Union government and
E further argued that the amount to be refunded to WPL must be in
accordance with the CAG’s report and the statutory order of priorities
for the settlement of liabilities provided in the Multi-State Co-operative
Societies Act 2002.
25. Critiquing the CAG report and opposing the above submissions,
F Mr CA Sundaram, learned Senior Counsel appearing on behalf of WPL
submitted that:
(i) By the order of this Court dated 29 March 2016, WPL was
entitled to a refund of the entire investment together with
interest at the rate of 6 per cent per annum, subject to the
G deduction of the profits made during the period when the
arrangement subsisted;
(ii) Between 2009-2016, WPL brought in ` 102 crore towards
share capital and ` 9.34 crore towards working capital. Thus,
the total moneys which were received by Super Bazar from
H WPL over this period stood at ` 111.34 crore.
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As against the aforesaid amount, the undisputed expenditure A
on Super Bazar between 2009-2016 was ` 54.31 crore
towards the arrears of wages paid to workmen and a further
sum of ` 31 crore paid to the workmen over three years
between 2009-2012 besides ` 15 crore paid towards statutory
dues including arrears of property tax and freehold charges.
B
The undisputed expenditure of WPL on the Super Bazar
concern would thus stand at ` 100.31 crore;
(iii) The order dated 29 March 2016 makes it abundantly clear
that WPL was entitled to the refund of the entire investment
with interest at 6 per cent per annum and the only deduction
that was permissible was on account of the profits which C
it had received. The order did not contemplate any deduction
of losses;
(iv) The CAG has proceeded on a misconceived assumption that
(a) WPL was not entitled to interest on share capital since,
as shareholders WPL would only be entitled to dividends and D
net interest; and (b) Dividends are only payable if a company
has earned profits.
Assessing WPL’s Revival of Super Bazar
26. In assessing the above submissions, it is at the outset E
necessary to emphasise the remit given to the CAG in terms of the
order of 29 March 2016. By its order, this Court directed the CAG to:
“nominate an Auditor, to verify the income and expenditure incurred
by M/s Writers and Publishers Ltd., and also, the profits earned
by it from the Super Bazar establishment, during the period under F
consideration. The determination so made by the auditor, will be
verified by the office of the Comptroller and Auditor General of
India, whereupon the same shall be binding on all the parties
including M/s Writers and Publishers Ltd.”
(Emphasis supplied)
G
In this backdrop, the order recorded as follows:
“...we are satisfied in recording, that M/s Writers and
Publishers Ltd. should be refunded the refunded the entire
investment made by them, along with interest at the rate of
6% per annum (though it was suggested, that the rate of H
102 SUPREME COURT REPORTS [2020] 4 S.C.R.

A interest could be at 9% per annum), subject to deduction of
profits made during the period when the arrangement
subsisted”.
The purpose of the above direction of this Court in nominating
an auditor was to ensure a proper verification of the income and
B expenditure incurred by WPL and the profits earned from the Super
Bazar establishment. Underlying the above direction of this Court was
the necessity that the auditor conduct a due verification of the actual
and genuine income as well as the expenditure which was incurred by
WPL. That was premised on the assumption that in pursuance of the
revival plan, a genuine effort had been made by WPL to revive Super
C Bazar. This was however yet to be verified. The facts which emerged
in the course of the CAG report were subsequent to the order dated 29
March 2016. These facts were neither in the knowledge of the court nor
could they have been factual considerations that were borne in mind
when the order was passed. The circumstances which have come on
D the record as a result of the verification which has been carried out by
the CAG upon the report of the auditor indicate several significant facets.
Firstly, though in terms of the revival plan, a solemn commitment was
made by WPL to bring in an investment of ` 504 crore comprising of
` 102 crore towards share capital, ` 276 crore towards working capital
and ` 126 crore towards revival and revamping the operations of Super
E Bazar, WPL fell woefully short of this commitment. An amount of ` 102
crore was brought in towards share capital and ` 9.34 crore towards
working capital. The commitment to bring in working capital of ` 276
crore and investment for reviving and revamping of ` 126 crore was
plainly breached. Secondly, while bringing in the amount of ` 102 crore
F towards share capital, WPL by the modus operandi which it followed,
ensured that it took over 98.89 per cent of the shareholding, ensuring
it controlled the management and operations of Super Bazar. This, as
the CAG report indicates, was achieved by requiring existing members
of the cooperative society to subscribe to additional capital on the pain
of forfeiture of their existing shareholdings. Additional members who
G were inducted by WPL were found by the CAG to be bogus. Thirdly,
WPL while submitting its bid for the opportunity to revive Super Bazar
had made a solemn representation that it possessed the necessary
expertise to manage the Super Bazar stores. Instead, it entered into
various MoUs with third parties for running and conducting the stores in
H breach of the restrainingcovenants contained in the revival plan. Fourthly,
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large and unexplained advances were made by WPL during the period A
when it was in control of Super Bazar. Advances as high as ` 20 crore
were not backed by any business rationale. It dealt with third parties on
the basis of book entries without any real movement of goods or funds.
Fifthly, during the period when it was in management and control
of Super Bazar, the physical assets of the concern were stripped
B
and the building at Connaught Place was deprived of all its essential
fixtures.
27. The findings which have emerged in the course of the
verification by the CAG leave no manner of doubt that WPL did not
intend at any material time to embark upon the revival of Super Bazar.
The business and affairs of Super Bazar were conducted in a manner C
that was sham and bogus. It dealt with related entities as explained in
the report. The transactions and the modalities followed are indicative
of a lack of bona fides on the part of the WPL in its operations.
Statutory Scheme applicable to Super Bazar
D
28. Chapter X of the Multi-State Co-operative Societies Act 2002
deals with the winding up of multi-state co-operative societies. Under
sub-section (1) of Section 86, the Central Registrar is empowered to
direct the winding up of a multi-state co- operative society after an audit,
special audit or an inquiry or, as the case may be, or an inspection under
Sections 70, 77, 78 and 79 respectively. Sub-section 2(b) empowers the E
Central Registrar of his own motion to direct the winding up of a multi-
state co-operative society which has ceased to function in accordance
with co-operative principles. Section 89 provides for the appointment
of a liquidator while Section 90 provides for the powers of the liquidator.
Under Section 90(1), all the assets of a multi-state co-operative society F
in respect of which an order of winding up has been passed, vest in the
liquidator from the date on which the order takes effect. The liquidator
is entrusted with the power to realise monies from the assets. Under
clause (b) of sub-section 2 of Section 90, the liquidator is empowered
to determine the contribution to be made or remaining to be made by the
members or past members or by officers or former officers to the assets G
of the society. Under clause (c) of sub-Section (2) of Section 90, the
liquidator is empowered to investigate all claims against the society and
subject to the other provisions of the statute, to decide questions of
priority between claimants. Under clause (d), the liquidator is empowered
to pay claims against the society, including interest up to the date of H
104 SUPREME COURT REPORTS [2020] 4 S.C.R.

A winding up according to their respective priorities in full or rateably, as
the assets of the society may permit. The surplus, if any that remains,
has to be applied in the payment of interest from the date of the order of
winding up.
29. Rule 28 of the Multi-State Co-operative Societies Rules 2002
B lays down the procedure to be adopted by the liquidator. Rule 29 provides
for the order of priority in accordance with which the assets of a multi-
state co-operative society shall be applied in the payment of liabilities.
Rule 29 provides as follows:
“29. Application of assets of the multi-State co-operative
C society- The assets of the multi-State co-operative society shall
be applied in order of priority as given below tor payment of
the liabilities:(1) Pro- rata payment of all outside liabilities.
(2) Pro-rata repayment of loans and deposits of members. (3)
Pro-rata refund of share capital.
D (4) Pro-rata payment of dividend on the share at the rate not
exceeding 6.25 per cent. per annum for the period of liquidation.”
Analysis of WPL’s Claim for Refund
30. An order of winding up had been passed on 5 July 2002. By
the order of this Court dated 26 February 2009, it was directed that the
E
OL and the Central Registrar take steps for the revival of the Super
Bazar following the acceptance of the bid submitted by WPL. Pending
the revival of Super Bazar, the order of winding up was to remain
suspended. By the order dated 29 March 2016, the court recorded that
in spite of the earnest efforts made by the court since the acceptance of
F WPL’s bid and the series of hearings since 2009, it was not possible to
give effect to the terms of revival. The order indicates that suggestions
were invited from the rival parties in regard to the manner in which the
arrangement with WPL could be terminated. Initially a joint statement
was submitted by the Government of India and WPL on 3 March 2016,
but it would appear that upon re-consideration the Government of India
G
submitted a revised statement dated 5 March 2016. It was in this backdrop
that the court by its order dated 29 March 2016 noted that it was “satisfied
in recording” that WPL should be refunded the entire investment together
with interest at 6 per cent per annum, subject to the deduction of the
profits made during the period when the arrangements subsisted. At that
H stage, the court envisaged the appointment of an auditor by the CAG for
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 105
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

the purpose of verifying the income received and expenditure incurred A
by WPL and the profits earned by it from the Super Bazar establishment.
Upon the auditor making a determination, the amounts were to be
verified by the CAG whose determination was to be binding on all the
parties including WPL. At the stage when the above order was passed
by this Court, the Court did not have the benefit of the auditor’s
B
investigation. Nor were the facts which emerged subsequently in the
report of the CAG within the knowledge of the court. The order of the
court envisaged a due and proper verification at two levels; first by the
auditor and thereupon by the CAG. This verification was to underlie
the ultimate computation of the profits earned by WPL. It is impossible
to read the order of this Court as containing an implication that WPL C
was only liable to account for the actual profits earned by it during the
period when it operated Super Bazar or that it was relieved of the
responsibility of accounting for its dealings during the period when it
was in management of the establishment. No part of the order of this
Court contains a direction to the effect that WPL would not be held to
D
account, upon a verification by the CAG, for the nature of its dealings
during the period when it was in management. To accept the submission
of WPL that no deduction could be made from the investment which it
had brought in save and except for profits actually earned would be a
simplistic reading of the order of this Court. The entire process of
verification of the income and expenditure was designed not only for the E
purpose of deducing the profits which was earned by WPL. The Court
was also conscious of the fact that in devising the terms for exit of
WPL, it was not appraised at that stage of the nature and extent of the
dealings of WPL in its management of Super Bazar. The order of this
Court therefore can only be read to mean that WPL would be held to
F
account for the period when it was in management based on the result
of the verification initially by the auditor and thereupon by the CAG.
31. The above view which we have taken of the interpretation of
the order dated 29 March 2016 must also be juxtaposed in light of the
statutory provisions which govern an order of winding up under Section
89 and other cognate provisions of the Multi-State Co-operative Societies G
Act 2002. The statute lays down the manner in which the liquidator has
to function upon taking charge. The Multi-State Co- operative Societies
Rules 2002, in particular, indicate the procedure to be adopted by the
liquidator and the manner in which the assets are to be applied. The
order of priority is spelt out. A pro-rata refund of share capital appears H
106 SUPREME COURT REPORTS [2020] 4 S.C.R.

A third in the order of priority. The last in the order of priorities is a
pro-rata payment of dividend on share capital at a rate not exceeding
6.25 per cent for the period of liquidation. To allow the claim of WPL to
be refunded its entire investment amount, the major part of which took
place through the subscription of share capital, would essentially place
it outside the purview of the winding up proceedings. Accepting the
B
claim would enable it to take away moneys overriding the order of
priorities laid down by the Multi-State Co-operative Societies Rules 2002.
WPL was one of the three bidders invited to bid for the opportunity to
take over the management of Super Bazar and revive its operations.
WPL was under no legal obligation to submit a bid. It engaged in a
C free-standing market process, albeit one supervised by this Court,
through which WPL sought to turnaround the business of Super Bazar
and subsequently receive profits from the business. This is supported
by the conduct of WPL in squeezing out existing members and
securing for itself 98.89 per cent of the share capital of Super Bazar.
Having failed in its market endeavour to revive Super Bazar, it now
D
seeks to exit its investment with a full refund and without having to
account for the business which was carried on during the period when
Super Bazar was under the management of WPL. Such a course of
action would be contrary both to the first principles which govern
winding up as well as the statutory scheme which is embodied in
E Sections 89 and 90 of the Multi-State Co-operative Societies Act 2002
and Rules 28 and 29 of the Multi-State Co-operative Societies Rules
2002.
Dues owed to the EPFO
32. During the course of the hearing, the EPFO has appeared
F before this Court. Mr Siddharth, learned Counsel appearing on behalf
of the EPFO has placed on record:
(i) An order dated 13 July 2015 passed by the Regional
Provident Fund Commissioner – II, Delhi (North), holding
WPL liable for the payment of provident fund contributions
G in respect of all the employees to whom arrears of wages
have been disbursed for the period from May 2003 to
December 2007; and
(ii) An order dated 25 July 2016 determining the dues payable to
the EPFO at ` 8.43 crore for the period from May 2003 to
H December 2007.
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 107
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

33. In adjudicating the present matter, this Court must bear in A
mind the provisions of the EPF Act. Section 11 provides that where an
order of winding up is made, due sowed towards employees’ provident
fund (or any other liability mentioned therein) shall be paid in
priority to all other debts in the distribution of the property or the
assets of the entity which is being wound up16. Interpreting the provisions
B
of Section 11(2), a three judge Bench of this Court in Maharashtra
State Cooperative Bank v Assistant Provident Fund
Commissioner17 has held:
“31…The priority given to the dues of provident fund, etc. in
Section 11 is not hedged with any limitation or condition. Rather,
a bare reading of the section makes it clear that the amount C
due is required to be paid in priority to all other debts. Any
doubt on the width and scope of Section 11 qua other debts
is removed by the use of expression “all other debts” in
both the sub-sections. This would mean that the priority clause
enshrined in Section 11 will operate against statutory as well as D
non-statutory and secured as well as unsecured debts including a
mortgage or pledge. Sub-section (2) was designedly inserted in
the Act for ensuring that the provident fund dues of the workers
are not defeated by prior claims of secured or unsecured creditors.
This is the reason why the legislature took care to declare
that irrespective of time when a debt is created in respect E
of the assets of the establishment, the dues payable
16
11. Priority of payment of contributions over other debts.- [(1)] [Where any
employer is adjudicated insolvent or, being a company, an order for winding up is made,
the amount due-
(a) From the employer in relation to [an establishment] to which any [Scheme or the F
Insurance Scheme] applies in respect of any contribution payable to the Fund [or, as
the case may be, the Insurance Fund] damages recoverable under section 14B,
accumulations required to be transferred under sub-section (2) of section 15 or any
charges payable by him under any other provision of this Act or of any provision of the
[Scheme or the insurance Scheme]; or
(b) From the employer in relation to an exempted [establishment] in respect of G
any contribution to [the provident fund or any insurance fund] (in so far as it relates
to exempted employees), under the rules of [the provident fund or any insurance fund],
[any contribution payable by him towards the [Pension] Fund under sub—section (6)
of section 17,] damages recoverable under section 14B or any charges payable by him
to the appropriate Government under any provision of this Act or under any of the
conditions specified under section 17, Shall where the liability thereof has accrued
before the order of adjudication or winding up is made, be deemed to be included] H
108 SUPREME COURT REPORTS [2020] 4 S.C.R.

A under the Act would always remain first charge and shall
be paid first out of the assets of the establishment
notwithstanding anything contained in any other law for the
time being in force. It is, therefore, reasonable to take the view
that the statutory first charge created on the assets of the
establishment by sub-section (2) of Section 11 and priority
B
given to the payment of any amount due from an employer
will operate against all types of debts.”
(Emphasis supplied)
34. In view of the above discussion, we have come to the
C conclusion that the plea of WPL to receive payments at the present
stage would confer on it a preference and priority which would be in the
teeth of the statutory provisions contained in the Multi-State Co-operative
Societies Act 2002 and the EPF Act. We have found no substance in
the challenge that has been preferred on behalf of the WPL to the
determination which has been made in the audit report following which
D a verification has been carried out by the CAG. The claim of WPL to
the extent set out in the verification report by the CAG will necessarily
have to be dealt with by the liquidator upon the realization of the assets
of Super Bazar in accordance with the statutory order of priorities
contained in the Multi-State Co-operative Societies Rules 2002. The
E verification made by the CAG is final and binding and shall not be called
into question before the OL or in any proceeding.
among the debts which under section 49 of the Presidency Towns Insolvency Act,
1909 (3 of 1909) or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920)
or under [section 530 of the Companies Act, 1956 (1 of 1956)], are to be paid in
priority to all other debts in the distribution of the property of the insolvent or the
F assets of the company being wound up, as the case may be.
[Explanation.- In this sub-section, and in section 17, “ insurance fund” means any
fund established by an employer under any scheme for providing benefits in the nature
of life insurance to employees, whether linked to their deposits in provident fund or
not, without payment by the employees of any separate contribution or premium in
that behalf.]
G [(2) Without prejudice to the provisions of sub-section (1), if any amount is due from
an employer [,whether in respect of the employees’(deducted from the wages of the
employees) or the employer’s contribution], the amount so due shall be deemed to be
the first charge on the assets of the establishment, and shall, notwithstanding anything
contained in any other law for the time being in force, be paid in priority to all other
debts.]
17
H (2009) 10 SCC 123
M/S WRITERS AND PUBLISHERS PVT. LTD. v. DR. AK MISHRA, 109
OFFICIAL LIQUIDATOR [DR DHANANJAYA Y CHANDRACHUD, J.]

35. The liquidator shall evaluate the claim as determined by the A
verification report by the CAG in terms of the priorities for the payment
of claims as envisaged in the Multi-State Co-operative Societies Act
2002 and the associated rules. The liquidator is also directed to treat
the amount outstanding to the EPFO in terms of the first priority which
is created by the provisions of Section 11(2) of the EPF Act. The
B
liquidator shall also consider the claim of the Union government.
The liquidator is directed to consider the auditor and the CAG’s
observations with respect to the 14,149 new members inducted during
WPL’s management not being genuine. The liquidator shall, in the process
of winding up, be at liberty to consider all other claims received and to
make a determination in accordance with law. In the event any further C
judicial determinations are required to be made, parties shall be at liberty
to approach the High Court of Delhi and we request the Chief Justice of
the High Court to constitute an appropriate bench to hear any matters
arising out of the liquidation of Super Bazar.
36. The contempt petitions shall stand dismissed. All miscellaneous D
applications are accordingly disposed of in the above terms.

Kalpana K. Tripathy Contempt Petitions dismissed.

E

F

G

H