TMI Blog2005 (3) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assets of the company as a working concern, have received substantial amounts towards their past dues and are being paid their current dues. A situation of starvation of the workmen does no longer prevail. The order passed by the learned Single Judge cannot moreover be sustained on amongst others, the ground of not assigning any reason in support thereof. The Division Bench of the High Court also relied on the observation made in paragraph 76 of this Court s judgment in Allahabad Bank s case (supra). It did not advert independently to any other contention of the parties. The contention of Mr. Gupta that Debts Recovery Tribunal having been established in the West Bengal on 27-4-1994, the dispute has to be resolved without reference to the RDB Act, also cannot be accepted. The rights and obligations of the parties would only be crystallized after the lis is adjudicated upon. The question of issuance of any certificate in terms of section 19 of the RDB Act would arise only upon the conclusion of the proceeding before it. - CIVIL APPEAL NO. 1321 OF 2003 - - - Dated:- 14-3-2005 - N. SANTOSH HEGDE, B.P. SINGH AND S.B. SINHA, JJ. L. Nageswar Rao, V. Sheshagiri, M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court which was directed to reopen and run the factories of the company both at Agarpara and Biccavolu. The said scheme of management, however, ultimately having failed, the assets and properties of the company were directed to be sold by an order dated 23-9-1993 as an ongoing concern. By reason of an order dated 12-10-1993, the Company Judge directed the Appellant to pay a sum of Rs. 38 lakhs to the Official Liquidator on an ad hoc basis for the purpose of disbursing salaries to the officers, staff and workers of the company before the ensuing Puja vacation. 4. An appeal preferred thereagainst by the Appellant was dismissed by a Division Bench of the High Court by an order dated 23-11-1993 directing the Joint Receivers to draw the said sum of Rs. 38 lakhs from the fixed deposit made with the Appellant and pay the same to the Joint Special Officers in terms of the order of the learned Single Judge. 5. Two Special Leave Petitions were filed by the Appellant before this Court which were marked as S.L.P. (Civil) Nos. 20833 of 1993 and 20834 of 1993 against the said orders of disbursal whereupon by an order dated 14-1-1994, an interim order of stay was passed. In the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs." 6. In the meantime, the suit filed by the Appellant was transferred to Debts Recovery Tribunal on 25-7-2000. Submissions 7. Mr. L. Nageshwar Rao, the learned Senior Counsel appearing on behalf of the Appellant, assailing the judgment and order passed by the Division Bench of the High Court, would contend : (1) that the assets of the company having been sold as a going concern and the purchaser having been permitted to enter into a settlement as regard past salaries of the workmen, the High Court could not have passed the impugned order as the workmen could approach only if such amount was not sufficient to pay the entire dues of the workmen; (2) the impugned order which was ad hoc in nature could not have been passed by the High Court particularly in view of the fact that the Appellant was outside the purview of the winding-up proceeding as it filed the suit upon obtaining leave of the learned Company Judge in terms of section 446 of the Companies Act, 1956; and (3) the workers dues could not be held to have any precedence over all secured and unsecured creditors as has been held by this Court in Allahabad Bank s case ( supra ) and reliance thereupon by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter adjusting Rs. 135 lakhs in the year 1996, there is no due and owing by the said company in liquidation a sum of Rs. 35,50,80,103.15 as on 30th June, 2002. In any event clause ( 5 ) of the said agreement states as follows : That if the Hon ble Calcutta High Court allows the Bank to receive from the Joint Receivers the whole of Rs. 135 lakhs with or without the interest accrued thereon lying with Joint Receivers being the sale proceeds of hypothecated goods against the dues of NTC to the Bank, the Bank is entitled to appropriate the said amount towards the balance of the suit amount of Rs. 135 lakhs and interest accrued thereon. In the above event the entire amount of money being in the fixed deposit together with interest thereon referred to in paragraph 3 hereinabove, will be returned to the company within thirty days from the date of the order. The petitioner bank is therefore obliged to conduct its suit and enforce its claim in respect of Rs. 135 lakhs, being sale proceeds of tobacco lying with Joint Special Officers in the matter. It is denied that the claim of the petitioner bank against the company in liquidation has been settled." 9. Mr. Dipankar P. Gupta, lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of law contained in paragraph 76 of the judgment of this Court in Allahabad Bank s case ( supra ) does not lay down a good law; ( ii ) whether the impugned judgment could have been passed by way of an ad hoc measure in view of the fact that the company was sold as a going concern and the workers dues were to be paid from the sale proceeds of the assets of the company; and ( iii ) whether any payment could be made to the parties to the winding up proceedings only upon considering the claims of all the creditors and in terms of the certificate issued by the Debts Recovery Tribunal under the RDB Act. Allahabad Bank 12. The Allahabad Bank was an unsecured creditor, it had obtained a simple money decree from the Debts Recovery Tribunal (DRT) against the debtor company M/s. M.S. Shoes (East) Co. Limited, whereas the Respondent therein, Canara Bank, was a secured creditor, but its claim was pending before the DRT at Delhi. A sale proceeding was taken by the Allahabad Bank before the Recovery Officers under the RDB Act. The learned Company Judge in exercise of his power under sections 442 and 537 of the Companies Act stayed the proceedings. A question arose as to whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone to appropriate the entire sale proceeds realised by the appellant except to the limited extent restricted by section 529A. Can the secured creditors like Canara Bank claim under section 19(19) any part of the realisations made by the Recovery Officer and is there any difference between cases where the secured creditor opts to stand outside the winding up and where he goes before the Company Court ? (6) What is the relief to be granted on the facts of the case since the Recovery Officer has now sold some properties of the Company and the monies are lying partly in the Tribunal or partly in this Court?" As regards the first issue, it was held : "In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to banks or financial institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under section 19(22) [formerly under section 19(7)] to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word "recovery" in section 17 of the Act. It appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or." As regard Point No. 6, however, this Court at paragraph 76 of the judgment held : "The next question is whether the amounts realised under the RDB Act at the instance of the appellant can be straightaway released in its favour. Now, even if section 19(19) read with section 529A of the Companies Act does not help the respondent Canara Bank, the said provisions can still have an impact on the appellant Allahabad Bank which has no doubt a decree in its favour passed by the Tribunal. Its dues are unsecured. The "workmen s dues" have priority over all other creditors, secured and unsecured because of section 529A(1)( a ). There is no material before us to hold that the workmen s dues of the defendant Company have all been paid. In view of the general principals laid down in National Textile Workers Union v. P.R. Ramakrishnan ([1983] 1 SCC 228 : 1983 SCC (L S) 72 : 1983 SCC (Tax) 2 : AIR 1983 SC 75) there is an obligation resting on this Court to see that no secured or unsecured creditors including banks or financial institutions, are paid before the workmen s dues are paid. We are, therefore, unable to release any amounts in favour of the appellant Bank straightaway." 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied rateably for the discharge of workmen s dues; and ( c )so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen s portion in his security, whichever is less, shall rank pari passu with the workmen s dues for the purposes of section 529A. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding-up, and make such claims against the company as they respectively are entitled to make by virtue of this section : ****** (3) For the purposes of this section, section 529A and section 530,- ( a )and ( b )****** ( c ) workmen s portion , in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen s dues bears to the aggregate of- ( i )the amount of workmen s dues; and ( ii )the amount of the debts due to the secured creditors. Illustration. The value of the security of a secured creditor of a company is Rs. 1,00,000. The total amount of the workmen s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torney General on the other hand submitted that the first part of clause ( c ) of the proviso to section 529(1) is to be read along with the words or the amount of the workmen s portion in his security, whichever is less . In other words, the priority of the secured creditor is only to the extent that any part of the said security is lost in favour of the workmen consequent to demands made by the liquidator under clauses ( a ) and ( b ) or the said proviso to section 529(1). No such situation has arisen so far. It is contended that where a secured creditor keeps himself outside as stated in the proviso to section 529(1) and seeks to recover his dues outside the Company Court, if he loses part of his security towards workmen s dues, he gets reimbursed to that extent as a secured creditor, with an overriding priority under section 529A(1)( b ). He gets priority over all other creditors before the Tribunal, to be compensated for this loss out of the monies that may have been realised at the instance of other creditors before the Tribunal. It is pointed out that Canara Bank has neither realised any amount outside winding-up nor has it lost any part of its security towards workmen s du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the officers, staff and workers of New Tobacco Co. Ltd., both at Calcutta and Durgapur, before the ensuing Puja. The Official Liquidator will disburse such salary to the officers, staff and workers of New Tobacco Co. Ltd., as aforesaid, before the ensuing Puja." No reason has been assigned in support of the said direction. The contentions of the parties had not been noticed. What impelled the learned Judge in issuing the said directions is not discernible. The jurisdictional question had also not been addressed. 19. Whether the workmen could be directed to be paid on an ad hoc basis having regard to their claim of past dues vis-a-vis the claim of the Appellants had not been deliberated upon. When a matter is not pending before the Tribunal under the RDB Act, in terms of section 19(19) thereof, the secured creditors would not get priority per se as it is qualified by the words "in accordance with the provisions of section 529A". The claims of the secured creditors are, thus, required to be considered giving priority over unsecured creditors but their claim would be pari passu with the workmen. 20. Section 446 of the Companies Act indisputably confers a wide po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate stage, it is but fair that the relief is moulded, varied or reshaped in the light of updated facts. Patterson v. State of Alabama [1934] 294 U.S. 600, illustrates this position. It is important that the party claiming the relief or change of relief must have the same right from which either the first or the modified remedy may flow. Subsequent events in the course of the case cannot be constitutive of substantive rights enforceable in that very litigation except in a narrow category (later spelt out) but may influence the equitable jurisdiction to mould reliefs. Conversely, where rights have already vested in a party, they cannot be nullified or negated by subsequent events save where there is a change in the law and it is made applicable at any stage. Lachmeshwar Prasad Shukul v. Keshwar Lal Choudhuri AIR 1941 FC 5 falls in this category. Courts of justice may, when the compelling equities of a case oblige them, shape reliefs - cannot deny rights - to make them justly relevant in the updated circumstances. Where the relief is discretionary, Courts may exercise this jurisdiction to avoid injustice. Likewise, where the right to the remedy depends, under the statute its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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