With Farmers’ Dues Cleared, Karnataka HC Allows Sugar Factory to Sell 2025-26 Stock Over Bank’s Objection, Preserving Bank’s Legal Remedies

The appellant sugar factory challenged the Single Judge’s dismissal of its petition seeking permission to sell unsold sugar from the 2025–26 season.

The Single Judge had declined further relief after noting that the appellant had already sold substantial stock under an interim order, had not adequately addressed the bank’s lien, and had not established that further sales would meaningfully meet its liabilities.

In the appeal, the Court obtained reports from the Union and the State showing that all cane dues for the season had been paid.

The appellant’s sugar stock was pledged to respondent No. 4 bank, which claimed substantial amounts were owed to it.

The appeal was brought under Section 4 of the Karnataka High Court Act, 1961.

The Court considered the applicable Government of India circulars governing the sale of sugar, including those dated 31.08.2026, 15.09.2026 and 30.09.2026.

It also proceeded on the principle that a bank claiming rights over pledged stock may pursue its remedies in accordance with law.

The judgment does not identify a specific precedent or set out the text of the circulars.

The Court’s principal concern was whether farmers remained unpaid; the Union and State reports both showed that cane dues for the 2025–26 season were nil.

The Union of India stated that it had no objection to sale in accordance with the relevant circulars.

As to the bank’s claim over the pledged sugar, the Court considered that the bank had adequate remedies in law and reserved its right to pursue them.

On those circumstances, it permitted sale under the specified circulars rather than allowing the bank’s claim to bar the sale.

The bank was granted liberty to initiate proceedings against the appellant in accordance with law.

The Court confined its order to the particular facts of the 2025–26 sugar year and left other contentions open.