Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (2) TMI 645 - BOMBAY HIGH COURT

2016 (2) TMI 645 - BOMBAY HIGH COURT - TMI - Calculation of dues of the workers on winding up - from the date of actual winding up or from the date of appointment of the Provisional Liquidator with full powers to sell the assets or from the date on which there is cessation of work on account of various valid legal reasons? - Held that:- While calculating the cut off date the facts in each case have to be taken into consideration. The Amendment Act of 1985 which amended various provisions of wind .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t after selling the assets of the Company and distributing the assets for paying off liabilities, the Company may still have surplus amount or in the alternative the liabilities would outweigh the amount realized by the sale of assets in which case even though both, workers and secured creditors had priority would have to accordingly rateably get their share out of assets and whatever remains would be distributed ratably amongst the other creditors. Therefore, in our view, the Official Liquidato .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ention of the legislature in giving paripasu benefit to workers alongwith the secured creditors.

Since the immovable property of Svadeshi Mills admittedly has not been sold and it has a land of almost about 50 acres in the heart of the City which is a prime residential and commercial area, the Official Liquidator would receive substantial amount (approximately ₹ 1000 crores) to say the least by sale of these assets. The Grandview Estates Private Limited which is a majority share .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ll have to be held that the date of the last order of the winding up of the Company would be the date from which the workers dues would be calculated and not the earlier date on which much emphasis is laid by the learned Senior Counsel appearing on behalf of the Appellants. - APPEAL NO. 447 OF 2014 - Dated:- 22-12-2015 - V.M. KANADE & DR. SHALINI PHANSALKAR-JOSHI, JJ. JUDGMENT: (Per V.M. Kanade, J.) 1. Both these appeals can be disposed of by a common judgment since the same order passed by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of work on account of various valid legal reasons? 3. The Company was wound up by the final order of winding up which was passed by this Court on 05/09/2005. Provisional Liquidator, however, was appointed with full powers including the power to sell the Company's assets on 13/02/2002. The workers filed claim before the Official Liquidator claiming their dues from the date of winding up. 4. The Company - Svadeshi Mills Ltd contended that the workmen were entitled to get their dues but not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the workers were entitled to get their dues from the date of official winding up of the Company. The Appellant - Grandview Estate Private Ltd is a secured creditor of the Company and it has challenged this order on the ground that if the order of the learned Single Judge is implemented, it would get less money towards its dues since substantial portion would have to be paid to the workers if their dues are calculated from 05/09/2005 and not from 13/02/2002. The other Appellant - Forbes & Com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

creditor of the Company. The Appellant (hereinafter referred to as ( Grandview Estates Private Limited ) owns 22,83,210 equity shares of the Company constituting 29.29% of the total equity shareholding in the Company. Respondent No.7 - Forbes & Company is a promoter shareholder, a secured and unsecured creditor of the company and is carrying on business of engineering goods, shipping and office automation. Respondent No.7, alongwith its wholly owned subsidiary Company, owns 17,64,430 equity .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y High Court and the Company made a reference to BIFR on 24/02/1998. On 24/04/1998, BIFR declared the Company as a sick Company. In October 2000, the Company stopped payment of wages to workers at Mill and Head Office. The BIFR on 05/02/2001 made a recommendation to the Bombay High Court for winding up of the Company. On 14/05/2001, AAIFR dismissed the appeal preferred against the Order of BIFR. 10. On 28/09/2001, Government of Maharashtra passed a Resolution and appointed High Power Committee ( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o dispose of the movable assets of the Company, and deposit proceeds with the Official Liquidator. 11. The Official Liquidator took possession of the factory and office premises in July 2002 and on 17/09/2003, sale of movable assets was confirmed by the Company Court. Thereafter, on 18/10/2003, the Official Liquidator issued an advertisement inviting claims from creditors including the claims of workers. The workers filed their claim through their Union on 30/12/2003. In 2004, HPC sold the movab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lculated upto September, 2001 i.e. the date on which the Mill and the Head Office were closed by the Company. Finally, winding up order was passed in Company Petition No.1068 of 1997 and other Company Petitions on 05/09/2005. On 25/08/2006, the learned Company Court Judge revoked the order of appointment of HPC and consequently immovable property was not sold by the HPC. On 24/01/2011, Memorandum of Understanding was signed by the Company and the Union in respect of the Head Office Employees. 13 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iled a Petition in this Court for setting aside the order of winding up and deposited about ₹ 86 crores for that purpose in this Court. However, the High Court did not accept the said proposal and the amount was refunded to Grandview Estates Private Limited who then have filed an SLP in the Supreme Court, which is pending. 15. The Official Liquidator thereafter started adjudication process inter alia of fixing of dues of the workmen. The Official Liquidator held that the workers were entit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ppellant - Grandview Estates Private Limited and Forbes & Company Limited have challenged this order by filing this appeal. 17. It is a well settled position in law that in the Letters Patent Appeal filed under Clause 15 of the Letters Patent, the Court can interfere with the order passed by the learned Single Judge only if it is found that the impugned order is patently illegal or perverse. The Apex Court in Wander Ltd and Another vs. Antox India P. Ltd.1 has observed in para 14 1 1990(Supp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mon in Charles Osenton & Co. v. Jhanaton [1942 AC 130) '….the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case. The appellate judgment does not seem to defer to this principle. 18. Keeping in view the aforesaid principle, we now proceed to examine the rival submissions. 19. Both, the learn .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hich the workers are entitled to get their wages including other entitlements - (a) Whether as per Section 445(3) from the date of actual winding up order of the Company Court Judge? Or (b) Whether from the date on which the Provisional Liquidator is appointed by the Company Court Judge with full powers to sell the property of the Company? Or (c ) Any other date prior to the date of actual winding up of the Company by the Company Court Judge when there is cessation of work and the workers stop r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he scheme of distribution of assets, workers did not get any priority in distribution. Only secured creditors were first entitled to receive their claim and after this amount was paid, all others were then paid ratably according to the amount which was available for distribution. 23. Prior to this amendment, workers, employees and officers had a priority only to the extent of section 530(1)(b) and they were entitled to get only four months' salary out of a year. The said provision prescribed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

w, therefore, on the combined reading of Sections 529, 529A and 530, on the basis of section 530(1)(d), it could not be said that the cut off date for payment of workers' dues is the date of appointment of the Provisional Liquidator. However, we will separately examine whether independently of Section 530, that date would still be considered as a cut off date on the ground that because of cessation of work, workers are not entitled to get workers' dues after the Provisional Liquidator wa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the estates of persons adjudged insolvent: [Provided that the security of very secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,- (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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: [Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to [pay his portion of the expenses] incurred by the liquidator 9including a provisional liquidator, if any) for the preservation of the security before its realization by the secured credi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947); (b) workmen's dues , in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely :- (i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation payable to any workman under any of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

p, under such a contract with insurers as is mentioned in section 14 of the Wormen's Compensation Act, 1923 (8 of 1923) rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company; (iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, mainta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me being in force, in the winding up of a company - (a) workmen's dues : and (b) debts due to secured creditors to the extent such debts rank under clause (c ) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.] 530. Preferenti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r the purposes of this section- (a)........ (b)........ (bb) the expression employees' does not include a workman; and] (c ) the expression relevant date' means- (i) in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and (ii) in any case .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the order. If default is made in complying with the foregoing provision, the petitioner, or as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to [one thousand rupees] for each day during which the default continues. [(1A) In computing the period of [thirty days] from the date of the making of a winding up order under sub-section (1) the time requisite for obtaining a certified copy of the order shall be exclu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

passed by the company Court Judge was the cut off date from which workers were entitled to get their legal dues. 27. On the other hand, it has been urged on behalf of the workmen that since section 445(3) was the only provision under the Companies Act which provided for the legal cessation or retrenchment of workers from their work, that date alone has to be deemed to be the date on which the employer-employee relationship came to an end in the absence of the Company or Official Liquidator obtai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g fiction which is sought to to be introduced in Section 445(3) cannot be treated as a last date from which the workers dues are to be calculated and if there are any other relevant dates which are prior to passing of the order of winding up which disclose the stoppage of rendering of services by the workers and cessation of work due to that, such a dates also would have to be taken into consideration by the Official Liquidator. Secondly, it is submitted that the Official Liquidator has rightly .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f relationship of employer-employee. He relied on the judgment of Carne & Anr. vs. Debono2 in support of this submission and also relied on para 25 at page 30 of the judgment of the learned Single Judge dated 23/03/2009 in MSM Satellite (Singapore) Pte. Ltd. vs. Board of Control for Cricket in India (Arbitration Petition (L) No.284 of 2009). 30. On the other hand, Ms. Jane Coax appearing for the workmen submitted that the view taken by the learned Single Judge is correct and elaborately take .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

can now turn to the main point which the purchaser himself urged. It is clear on the master's finding that time was of the essence for the completion of the contract on 5 February. That being so, it is surprising to find no completion statement and no attempt to agree the sum due on completion until 10 minutes past 10 on that morning, apart from a telephone communication the previous day. What is more, in the respects that I have mentioned, the completion statement was wholly defective. What .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hey failed to send in good time a completion statement specifying the right amount due. He also relied on special condition 12(h) which deems any notice given by other parties under the agreement to have been served on the expiration of 48 hours after it had been posted. Applying that to the faxed completion statement, he said it had to be deemed not to have been received until two days after the crucial date of 5 February. I have no doubt that he is wrong on that latter ground. Clause 12(h) is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he next working day is also not applicable because here also deeming provision does not come into play in view of the actual receipt of notice by the petitioner. The respondent has also relied upon the decision in Carne & Anr. vs. Debono, reported in (1988) 1 WLR 1107 wherein the Court of Appeal while considering a similar clause to the effect 12(h): Any notice given by either party to the other under the provisions of this agreement shall be in writing and shall be deemed to have been serve .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

come in operation and factually if it can be shown that it would be set in motion on some other date then that date also would operate as a cut off date. 33. In our view, therefore, if the other dates are not applicable in the facts and circumstances of the case then, in that case, the date of winding up would be the date on which the relationship of employer-employee would come to an end and from that date workmen would be entitled to get their legal dues. Therefore, there cannot be any strait .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

take into consideration whether in the facts of the present case, the learned Single Judge was right in coming to the conclusion that the date of order of winding up was the date on which the workmen became entitled to claim their dues. 35. Mr. Virag Tulzapurkar, the learned Senior Counsel appearing on behalf of the Appellants has pointed out various dates from which it could be said that there was cessation of services rendered. He submitted that the workers are entitled to their legal dues. He .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

legally rendered by them. He then pointed out various dates from which they had stopped rendering services. Firstly, he pointed out that from 01/08/2000 the Mill and the Head Quarters had stopped functioning. Thereafter, in 2001 HPC was appointed which was authorized to sell some movable assets. Part of the movable assets was sold and therefore after having sold the movable assets, and HPC having received ₹ 15.53 crores, there was no question of workers rendering their services particular .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o be in service. Thirdly, he submitted that, in any case, the Company court Judge appointed a Provisional Liquidator with all powers to sell movable and immovable assets. He submitted that from that date, in any case, there was a complete cessation of work and, therefore, the Official Liquidator had rightly held the said date to be the cut off date. 36. The learned Senior Counsel for the Appellants in response to the submissions made by the learned Counsel for workmen submitted that section 25-O .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erent fields. 37. Mr. Sen, the learned Senior Counsel appearing on behalf of the Official Liquidator adopted the arguments made by the learned Senior Counsel appearing on behalf of the Appellants. In addition, he relied on the Judgment of the Apex Court in Bank of Maharashtra vs. Pandurang Keshav Gorwardkar and Others5 and also on the judgment of the learned Single Judge of this Court in Engineering Workers, High Court, Bombay Association vs. The Official Liquidator6 at paras 38 and 39 on page 6 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r the secured creditors' dues. The import of the said amendment was to give equal status to workers as that of secured creditors. In a winding up proceedings, there could be two possible results viz (1) that after selling the assets of the Company and distributing the assets for paying off liabilities, the Company may still have surplus amount or in the alternative the liabilities would outweigh the amount realized by the sale of assets in which case even though both, workers and secured cre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

winding up of the Company as the order from the date of which the workers dues would have to be calculated. In our view, such purposive interpretation or purposes & objectives approach could harmonize the intention of the legislature in giving paripasu benefit to workers alongwith the secured creditors. 39. In the present case the facts which are undisputed are as under:- The Appellants before this Court are not only the secured creditors but also the majority shareholders. The Appellant No. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, in 2006 and 2007 the debts of the only two secured creditors, IDBI and Bank of Baroda, were assigned to the Appellant No.2, as also the debts of 70 out of the 146 unsecured creditors. Given the extent of the immovable assets yet to be sold, which include 48 acres of prime land in the heart of Mumbai City, after the sale of these assets there will be a surplus even after payment is made from the proceeds to the workmen and creditors. In this situation as per section 475 of the Companies Act, 19 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cut-off date is taken as the appointment of the Provisional Liquidator. The dues of the secured creditor in the present matter grew at a phenomenal rate even after the de facto closure of the factory/ BIFR recommendation etc due to the fact that their decree from the DRT has grant in 2003 an amount, as of 13/01/2003, of ₹ 27,46,04,358.24 (Rs 22,14,17,645/- + ₹ 5,31,86,713.24) with future interest @ 16% p.a with quarterly rests. Given this staggering rate of interest, by 2011 this amo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ajority shareholder of the Company and whose SLP is pending in the Apex Court, if it is permitted to develop this property it would make substantial profit by developing the said land since it is a developer and builder and earn profit and also get its dues as per the decree passed by DRT wherein they are entitled to get the decretal amount with compound interest. Taking into consideration these facts, in our view, the legislative intention therefore would be taken to its logical conclusion. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version