TMI Blog2016 (2) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... to wages in lieu of the unavailed leave. Sub-section (3) does not provide for wages in lieu of leave generally, but only in the contingencies referred to therein. So far as accumulation of unavailed leave is concerned, Subsection (5) enables a maximum accumulation of leave of thirty days by carrying forward earned leave. The leave that can, thus, be encashed under Section 79 of the Factories Act is only the earned or accumulated leave during the calender year upto a maximum of thirty days under conditions of Sub-section (3). The rate of such wages has to be as per Section 80 of the Factories Act. As held by this Court in the case of Swadeshi Mills (2016 (2) TMI 645 - BOMBAY HIGH COURT ), bonus is not included in the category of wages under Sections 529 and 529A of the Companies Act and cannot be accorded any priority. The dissenting workmen in the present case accept this position, though they would like to keep their option to claim bonus in the event of availability of surplus funds so as to satisfy nonpriority debts of the Company (in liquidation). On gratuity, all parties including the Official Liquidator agree that gratuity would be payable. The consent terms provide fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidation), in accordance with Sections 529A and 530 of the Companies Act, 1956 and payment of dividend accordingly. Company Application No.620 of 2011 is an application by a trade union claiming to represent 63 members, who were workmen of the company (In liquidation), also for adjudication of the claims of workmen. It also seeks quashing of an adjudication made by Official Liquidator in respect of 11 workmen set out in a resubmitted report, being OLR No.158 of 2010, of the Official Liquidator and re-adjudication of the claims on the basis of an order and judgment passed by the Industrial Court in Complaint (ULP) No.144 of 2005 dated 2 July 2005. 2. The facts of the case may be briefly set out as follows: (i) In or about 1991, KMA Ltd. (in liquidation) (hereinafter referred as the company ) was referred to BIFR in a suo motu reference. On 16 April 1993, BIFR passed an order approving a scheme of rehabilitation for the company. The scheme envisaged taking over of the management of the company by a workers' cooperative. Under the scheme, each worker was entitled to become a member of the cooperative and also continue as an employee of the company upon payment of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and order, the Industrial Court, Mumbai, crystalised the claims of workmen. Similarly, by an order dated 17 August 2005, the DRT adjudicated the claims of banks and financial institutions. (vi) On 30 September 2005, this Court appointed a provisional liquidator of the company. (vii) Kamani Employees Union, which was the registered trade union of the workmen of the company as well as the company and the consortium of banks and financial institutions of the company, challenged the orders of the Industrial Court and DRT. Three writ petitions, one by the Company, one by the Union and one by the lead bank on behalf of the Consortium of banks, were filed in this behalf. In 2007-08, negotiations were held between the banks and the registered trade union regarding the claims of workmen as well as secured creditors. Consent terms specifying the amounts payable to both workmen and secured creditors including the consortium of banks were arrived at. At general body meetings of the union, resolutions accepting the culmination of negotiations and approving draft consent terms to be filed in terms thereof, were approved. Workmen signed affidavits accepting the amounts set out in the conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espective dues in accordance with the consent terms. Thereafter, in or about May 2009, 8 dissenting workmen from Bangalore unit approached the union and requested for payment in accordance with the consent terms. Even this payment was allowed subsequently by an order passed by this Court. From August 2009 onwards, various claims were filed by dissenting workmen from Mumbai and Bangalore units. Several meetings were held before the Official Liquidator for adjudication of these claims. On 5 May 2010, the Official Liquidator presented a report, seeking extension of time for adjudication as also directions to the parties to provide copies of claims and make submissions on the claims. On 6 May 2010, the Company Court allowed the report. Several further meetings were thereafter held before the Official Liquidator for adjudication of the claims of dissenting workmen. A resubmitted report was filed by the Official Liquidator, being resubmitted OLR No.158 of 2010, submitting inter alia that the amounts payable under the consent terms being higher than the adjudicated amounts, the dissenting workmen be paid their dues in accordance with the consent terms. (xi) In or about October / Novemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsent terms and must be paid in accordance with the adjudication originally made by the Industrial Court or at any rate, on the principles of that adjudication and in the alternative, in accordance with their entitlement in law under Sections 529A and 530 of the Companies Act, 1956. They submit that whilst their dues other than preferential dues under Section 529A can wait (and which they would like to be kept open) till there is availability of surplus of funds, their dues under Section 529A be determined and paid from the amount set apart for the purpose. Ms.Doshi, on behalf of the registered Union, opposes the applications. She submits that the dissenting workmen cannot oppose the consent terms. Many of them have given affidavits accepting the consent terms. She submits that even otherwise in the facts of the case, the consent terms need to be adhered to. She opposes the basis on which Mr.Ganguly and Mr.Naidu calculate their entitlements under Section 529A. Based on these rival submissions, the following questions broadly arise for the consideration of this Court : (a) Whether the dissenting workmen are bound by the consent terms or whether they are entitled to be paid in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Industrial Court further held that the complainant union would be entitled to an order of wages, privilege leave encashment, L.T.A. with interest as claimed together with gratuity with 10 per cent interest and bonus with 6 per cent interest plus interest claimed on the provident fund amount of employees' contributions. The Industrial Court also directed that the workmen, who were in employment, were entitled to monthly wages till subsistence of the contract of employment. This order inter alia was the subject matter of challenge in the writ petitions, namely, Writ Petition Nos.285 of 2006, 195 of 2006 and 459 of 2007. In accordance with the consent terms arrived at by the registered union and the secured creditors, the Division Bench hearing the writ petitions disposed of the petitions. The consent terms provide for distribution of assets of the Company in a particular manner amongst workmen and secured creditors. The distribution inter se amongst workmen is provided for in an annexure prepared by the registered union and forming part of the consent terms. With these terms being put in place, the dues provided for by the order of Industrial Court necessarily get varied. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es under Sections 529 and 529A. The registered Union, in the consent terms, has taken '31 December 2002' as the date upto which wages ought to be calculated. That was presumably on the footing that the substratum of the Company no longer subsisted after the sale of its assets under orders of the Court. (The consent order for sale of all movable and immovable assets of the Company at Mumbai and Bangalore was passed by this Court in Writ Petition No.1512 of 2002 on 20 December 2012.) On the other hand, the dissenting workmen root for '24 October 2008' as the relevant date, contending that the contract of employment between a company and its workmen subsists till the date of the winding up order and that is the date upto which the wages ought to be computed. (The Company Court ordered the company to be wound up on 24 October 2008.) 9. On the relevant date upto which workmen's dues in winding up need to be calculated, it is to be noted that under Section 445(3) of the Companies Act, 1956, the contract of the Company (in liquidation) with its employees comes to an end on the passing of the winding up order. No discharge of workmen at any time earlier can be shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R for sale of assets. 10. In these circumstances, it is only those workers, who became members of the workers' co-operative by fulfilling the terms of the scheme such as conversion into equity of 50 per cent wages due from the year 1991 and waiver of balance 50 per cent and payment of amounts of ₹ 20,000/- (for the Mumbai unit) and ₹ 15,000/- (for the Bangalore unit), who are entitled to wages under the scheme. The others, who did not become such members and who did not work, cannot claim to have continued as workmen of the Company. A scheme sanctioned by BIFR under SICA has the effect of altering contracts of the Sick Industrial Company with its shareholders, creditors, guarantors and employees. Under Section 18(8) of SICA, such scheme is binding on the shareholders, creditors, guarantors and employees. The Company in the present case offered to provide employment to those workmen who agreed to join the Workers' cooperative on the terms of the sanctioned scheme. Those who did not so join must be treated as having refused to offer themselves for service and accordingly, ceased to be workmen. They cannot now demand wages after 20 September 1991, i.e. the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject would be that the State Act will prevail in the State, the predominance of such State law may, however, be taken away if the parliament thereafter legislates under the proviso to Clause (2) of Article 254. The proviso empowers the Union legislature to repeal or amend a repugnant State law even though it has become valid by virtue of the President's assent. Parliament may repeal or amend a repugnant State law, either directly, or by itself enacting a law repugnant to the State law with respect to the 'same matter'. In that case, the State law would become void as soon as the subsequent law of Parliament creating repugnancy is made even though such subsequent law does not expressly repeal a State law. The question which would always arise in such case is whether the subsequent law is with respect to the 'same matter'. Mr Naidu submits that Section 25-O of the Act applicable in Maharashtra, which confers an additional benefit on the workmen of a closed undertaking, is not in any event repugnant to the subsequently enacted Section 25-O of the Union law. I am afraid that is not quite correct. As held by a Full Bench of our Court in the case of Britannia Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the part of the year that he actually worked. Sub-section (3) deals with both these consequences. It provides that notwithstanding the fact that such worker did not work for the entire period specified in Sub-section (1) and to the extent he had not actually availed of such leave, he will be entitled to wages in lieu of the unavailed leave. Sub-section (3) does not provide for wages in lieu of leave generally, but only in the contingencies referred to therein. So far as accumulation of unavailed leave is concerned, Subsection (5) enables a maximum accumulation of leave of thirty days by carrying forward earned leave. The leave that can, thus, be encashed under Section 79 of the Factories Act is only the earned or accumulated leave during the calender year upto a maximum of thirty days under conditions of Sub-section (3). The rate of such wages has to be as per Section 80 of the Factories Act. 15. As held by this Court in the case of Swadeshi Mills (supra), bonus is not included in the category of wages under Sections 529 and 529A of the Companies Act and cannot be accorded any priority. The dissenting workmen in the present case accept this position, though they would like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Sections 529 and 529A of the Companies Act. If and when there is a surplus, a claim for interest on gratuity can be considered, but not otherwise. The same reasoning would apply to other items such as notice pay and leave wages. 18. Before we conclude, it must be clarified that since the majority of workmen of the Company (in liquidation) have taken their dues in accordance with the consent terms taken on record in the writ petitions referred to above and accepted by the Company Court, an option needs to be given to the dissenting workmen to accept their respective dues in accordance with the consent terms. 19. In the light of the foregoing discussion, the following order is passed : (i) The Official Liquidator is directed to adjudicate the claims of the Applicants in the Company Applications herein on the basis of this order and after taking into account the documentary evidence available on record and verifying the respective claims; (ii) The Official Liquidator shall enlist the assistance of any advocate and / or chartered accountant on his panel for the purpose of such adjudication. The costs of such advocate and / or chartered accountant shall be defrayed from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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