TMI Blog2013 (10) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... al Liquidator, taking that as the relevant date. Since this view taken by the Official Liquidator affects large number of workmen of the Mill under liquidation, and that the issue raises question of law of general importance, the learned counsel for the parties have advanced arguments at great length and have submitted written submissions. Their assistance is appreciated. 3. M/s Swadeshi Mills Co. Ltd. was one of the leading Mills in Mumbai. The Company, when it was in operation, had approximately 2970 employees. The Company had substantial immovable assets. The main asset being 48 acre land at Sion Chunabhatti in Mumbai. In the year 1997, one M/s Rally Brothers Convey filed Company Petition No. 1068 of 1997 for winding up of the Swadeshi Mills Co. Ltd. The Company made a reference to the Board of Industrial and Financial Reconstruction (BIFR). On 24 April 1998, the BIFR declared the Company as a sick undertaking, under the provisions of Sick Industrial Companies (Special Provisions) Act. The BIFR on 5 February 2001, recorded a prima facie opinion that the Company was not likely to make it's net worth match its cumulative losses within a reasonable time and that the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cut off date, 70% claim of the workmen were adjudicated and an amount of ₹ 11,19,05,200/- was admitted and paid by the Official Liquidator. 7. The company petitions came up for hearing on 5 September 2005. The Court alluded to the above mentioned events and noted that the business operations of the Company have ceased long back, the BIFR has already recorded prima facie opinion that the Company has become unviable, the plant and machinery is sold, thus the Company needs to be wound up. Accordingly, the Court ordered that the Company be wound up under the supervision of the liquidator by virtue of section 450(4) of the Companies Act. The date of winding up of the Company was thus 5 September 2005. 8. Before the Court proceeded to dispose of the petition, it considered the position of the High Power Committee. The court came to the conclusion that once an order of winding up of a company is passed, it would follow that the Official Liquidator is required to take over custody of the assets and deal with them in accordance with law. The Court observed that there was no other mechanism envisaged by the Companies Act and the Committee constituted by the State Government ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Company. Facts leading to the winding of the Company were enumerated. It was also mentioned that the Promoter group is in process of filing an application in the Court seeking permanent stay on the winding up in accordance with the provisions of the Act. The agreement between the Promoter Group and RMMS recorded that 30 September, 2001 should be taken as the relevant date. It was noted that there were 2807 workers / employees who were on the roll of the Company as on 30 September, 2001. List of the workers as on 30 September 2001 was annexed at Schedule I. The workers were to get payment as per formula set out in Schedule II. It was agreed that the Promoter group, upon execution of the memorandum of understanding would apply to the Court under relevant provisions of the Companies Act. It was agreed that the workmen would be paid on the basis of calculation as per schedule II, a sum of ₹ 30,000/-, upon giving authority and consent letter. The balance payment was to be made upon the Court passing an order of permanent stay. Thereafter the company application seeking permanent stay was filed by respondent no.2 and 3.The Company application filed by the respondent No.2 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by letter dated 16 May 2012 communicated the reasons and basis of computation. The reasons read as under: 1. ........... 2. We need not go into the legality or otherwise of de-facto closure, since we have admitted retrenchment compensation for the full tenure of service from the date of joining to the date of appointment of provisional liquidation. 3. As regards relevant date for the purpose of determining employees' dues, we have to state that Section 530(8)(C) clearly provides that in case of a company ordered to be wound up compulsorily, the date of appointment (or first appointment) of a Provisional Liquidator is the relevant date. If no such appointment was made, the date of winding up order becomes the relevant date. That this provision is not exclusive for the purpose of section 530 alone is enunciated in the Ahmadabad High Court decision in case of Jubilee Mills (Company Application 360 of 1998 In Company Petition 139 of 1996). 4. As regards the claim for Provident Fund Contribution Interest thereon it is stated that this amount, if due the same can only be claimed by Provident Fund Authorities. As regard claim for bonus it is stated that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariable Dearness Allowance), House Rent Allowance, Educational Allowance, and all other Allowances, and bonus @ 8.33%, with interest commercial rate on all of the above should there be surplus, minus the advance amounts paid earlier by the Official Liquidator; (c) For an order of this Hon'ble Court, directing the Official Liquidator to pay to the workmen, including the badli workmen, for the said period the Arrears of the employer's Provident fund contribution, contribution for the said period with statutory interest @ 12% as per the Employees' Provident Fund Miscellaneous Provisions Act, 1952 Act, plus statutory interest @ 12% on the employee s contribution for the same period. (d) For an order of this Hon'ble Court, directing the Official Liquidator to pay to the workmen, including the badli workmen, gratuity with statutory interest as per the Gratuity Act, 1972, and retrenchment / closure compensation as per s.25F r/w.S 2 (rr) of the Industrial Disputes Act, 1947, calculated not on the actual last drawn wage but on the wage which they would have been entitled to receive as on 05/09/2005, including all enhancements such as annual increments and periodic Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit of proof, or require further evidence in support of the debt and can also call upon the creditors if any further evidence if required. Under Rule 161, the Official Liquidator is also entitled to administer oath and take affidavit. 20. After the claim is so examined, the Official liquidator is required to communicate the acceptance or rejection of the proof to the claimants under Rule 163, which reads as under: 163 : Acceptance or rejection of proof to be communicated . After such investigation as he may think necessary, the Liquidator shall in writing admit or reject the proof in whole or in part. Every decision of the Liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the Creditor concerned by post under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is reject wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the Liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance. Where the Liquidator rejects a proof, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons as to why full amounts were not allowed and to disclose basis of adjudication including the date till the dues were calculated. The Official Liquidator replied by a letter dated 16 May 2012 giving reasons why the impugned decision was taken. The Official Liquidator gave reasons for arriving at the date till the dues were calculated and why the claim was not fully allowed by the Official Liquidator. Considering that the Official Liquidator has already given reasons by a letter dated 16 May 2012, upon so requested by the applicants, no purpose will now be served by setting aside the impugned orders and by directing the Official Liquidator to pass fresh orders giving reasons. Especially since decision in this judges summons will govern the the cases of other workmen. The learned counsel for the parties have therefore proceeded to address the Court on merits. The impugned adjudication done by the Official Liquidator will have to be read along with the reasons given by the Official 24. The main contention of the learned counsel for the applicant is that the Companies Act specifies only one date till the dues are to be calculated i.e. the date of order of winding up as provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of winding up, and not on any date prior thereto, as per Section 445(3) of the Companies Act, 1956, which expressly provides that the winding up order shall be deemed to be the notice of discharge to the employees, except where the business is continued. Rule 154 of the Companies (Court) Rules, 1959 provides that the value of all debts and claims against the company shall, as far as possible, be estimated according to the value thereof on the date of the order of the winding up. (d) The reference in section 530(8)(c) of the Companies Act, 1956, to the relevant date being the date of the appointment of the Provisional Liquidator, if appointed, has no application to workmen as section 530 (8)(bb) states that the expression employee does not include a workman. The Legislature has treated workmen and non-workmen employees in such an entirely different manner in industrial law, and placed workmen are on an entirely separate footing, as to make the two categories noncomparable. Section 529(3) of the Companies Act, the dues which the workmen are to get preference are much more than the dues which can be claimed by non-workmen employees under section 530. Under section 530, apart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge of the workmen illusory. (h) In the facts and circumstances, the action was not taken in provisional liquidation to effectively finally wind up the company. The immovable assets of the Company, including its main asset, the 48 acres of land at Sion Chunabhatti till date, has not been sold. (i) The payment of 75% of the earned wages was made against claims filed by the RMMS union, is without the knowledge and consent of the workmen, and these claims were admittedly only for the earned wages, and the RMMS have not only not filed any claims for dues of the workers with the Official Liquidator other than for these earned wages for the said period, but categorically stated that they will not. (j) Once the Order of winding up was passed the sale of the assets and the distribution thereof must be strictly according to the mandate of the Companies Act, 1956. The mere fact that under section 20(4) of SICA the BIFR is empowered to distribute the proceeds of a sale of assets as per section 529A even before an order of winding up has been made has no relevance in this matter as admittedly no such sale or distribution took place. Thus, in the facts and circumstances of this mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property, effects and actionable claims of the company; displace the Board of Directors and thereafter act on the company s behalf. (c) In the facts of the present case, the services of the workmen came to an end on the appointment of the Provisional Liquidator. From November 2000, the business of the Company was at standstill. BIFR had recommended that the Company be wound up. Even prior to the Provisional Liquidator, the Company had virtually ceased to exist. The Provisional Liquidator was not authorized to carry on business, the plant and machinery of the Company was in fact sold by the High Power Committee. Thus the services of the employees including the workmen must be deemed to have come to an end on the appointment of the Provisional Liquidator. (d) Gujarat High Court in Jubilee Mills1 held that the relevant date for computation of the workman s dues as well as the dues of the secured creditors for the purpose of determining the ratio of the respective dues under Sections 529, 529A of the Companies Act is the date of first appointment of Provisional Liquidator and if no such appointment is made the date of the winding up. It is indeed settled law that wages would be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould, for example apply to the State Government for closure under Section 25-O of the Industrial Dispute Act. The plant and machinery of the Company also came to be sold by a High Power Committee. (d) Sub Section 3 of Section 445 states that the winding up order shall be deemed to be notice of discharge . This section does not say that the employment stands terminated on notice. Sub Section 3 of Section 445 only refers to the event of winding up being a deemed notice of discharge, and the deemed notice does not bring about termination or cessation. The deemed notice would operate only in the absence of any other actual event causing cessation of employment. The deeming fiction in Section 445 (3) does not require the Court to ignore to actual and factual state of affairs regarding a company. Section 445 (3) provides an outer limit beyond which employment cannot continue, but that does not mean that employment cannot cease prior to that date. (e) In the facts of the present case, at the instance of a secured creditor, a Company Application was moved and the Division Bench of this Court by its order dated 24th April 2002, stated that the union would supply the list of 12 watch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the decision of Jubilee Mills1 case Section 530 (8) (bb) was inserted only for this purpose and nothing more. 29. Thus the question is what should be the relevant date. According to the applicants it should be till 5 September 2005 i.e. the date of winding up order. According to the Official Liquidator it is 13 February 2002 i.e. the date on which the Provisional Liquidator was appointed with full powers. The decision of the Official Liquidator, which is not challenged by the respondent Nos.2 and 3, the date of 13 September 2001 agreed in the meeting before the High Power Committee is not taken as a basis. Though RMMS had agreed that the cut-off date would be 13 September 2001, the Official Liquidator has not gone by this date. Respondent Nos.2 and 3 have not challenged the decision of the Official Liquidator. Even in the argument this date is not seriously pressed in service. Thus the controversy will have to be now restricted to the appointment of Provisional Liquidator or the date of winding up as the relevant date. Furthermore, it has been urged by the learned counsel for the applicant that the RMMS had acted without the knowledge and consent of the workmen and a workmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation to the shareholders and prescribe certain standards. Based on the recommendation of the Committee, the Companies Act of 1956 was passed. Though the Companies Act of 1956 was based on the English companies Act of 1948, certain modifications were incorporated for the Indian conditions. The Companies Act does not per se deal with services, service conditions and termination of employees of the Company, especially that of workmen. The relationship of the Company as a master, and the workmen as servants, continued to be governed by relevant labour legislations. 32. Though the Companies Act was essentially framed to regulate the affairs of the company, the idea of a company as a mere economic and financial entity established only with a view to make profits, has under gone a sea change. A Company carrying on a industry is considered a tool to bring about maximization of social welfare and progress. The preamble to the Constitution of India contains the words ''Sovereign Socialist Secular Democratic Republic''. Pursuant to this objective several labour legislatures have been enacted to confer and ensure the rights of the workmen. On these principles the Apex Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, the Court shall forthwith cause intimation thereof to be sent to the 1[ Official Liquidator and the Registrar]. 445. Copy of winding up order to be filed with Registrar. (1) On the making of a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within 1[ thirty days] from the date of the making of 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 hundred rupees for each day during which the default continues. (1A) 2[ In computing the period of 1[ thirty days] from the date of the making of a winding up order under subsection (1), the time requisite for obtaining a certified copy of the order shall be excluded.] (2) On the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made. (3) Such order shall be deemed to be notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jarat High Court in the case of Jubilee Mills Ltd1. The learned counsel for the Official Liquidator and the learned counsel for respondent Nos.2 and 3 have placed strong reliance on this decision, more particularly the following observation - Relevant date for computing Workman s Dues and calculation of Interest- The relevant date for computation of the workman s dues as well as the dues of the secured creditors for the purpose of determining the ratio of the respective dues under Sections 529 and 529-A of the Companies Act is the date of first appointment of Provisional Liquidator and if no such appointment is made the date of winding up order as contemplated in Section 530(8)(c)(i) of the Act. Hence, in the first instance the Official Liquidator shall compute the dues of the workmen as covered by the claim for priority u/S 529 and 529-A of the Companies Act and the dues of the secured creditors as on the aforesaid relevant date . The learned Single Judge, observed that in view of Section 530(8)(c)(i) of the Act the relevant date will have to be considered as the appointment of Provisional Liquidator. The learned Judge held that for determination of the dues of secured c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a date of severance in relationship not on the basis of Section 530 (8) (c) but on the ground that by appointment of Provisional Liquidator with full powers in the facts of the present case has brought an end to the relationship between the Company and its workmen. Thus the Section 530 and the decision of Jubilee Mills Ltd1 is not relevant for this aspect, though the decision in Jubilee Mills Ltd1 is referred to in other contexts. 41. The learned counsel for the applicants has relied upon decision of the Single Judge of this Court in Company Application (Lodging) No.224 of 1999 decided on 8 October 1999. The learned counsel for the applicants submitted that in this order the Court accepted the submission that the wages of the workers will have to be calculated up to the date of winding up. However in this order this proposition was not disputed by the respondents therein and in view thereof the Court proceeded to pass the order. In this order also there is no conscious finding on the issue at hand. 42. The learned counsel have raised several intricate legal issues and have expounded different facets. Before one gets into intricacies, the issue needs to be examined at a basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies Act but under labour legislations and/or contract. The learned counsel for the applicant also does not dispute the position that if there is cessation of the relationship under the terms of the services contract and/or by virtue of relevant provisions of labour legislations there is no question of resorting to Section 445(3). Therefore, the instances given by the learned counsel for the Official Liquidator and the learned counsel for the respondents do not lead to a proposition that the provisions of Companies Act, provides for cessation of services of workmen / employees prior to the date of winding up. Labour laws read with terms of contract may. The language of the Section 445(3) is plain and simple. It is settled law of interpretation that there is no need for external aids when the language of a statute is plain and simple, and unambiguous. 44. The learned counsel for the respondent Nos.2 and 3 submitted that Section 445 (3) is merely a deeming provision. It is submitted that a deeming fiction does not exclude the possibility of an event actually occurring earlier. It was submitted that subsection 445(3) only refers to the order of winding up being deemed discharge. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of MSM Satellite5 referred to this decision of the Appeal Court. Again the case before the learned Single Judge was of service of notice and interpretation of a clause in contract regarding deemed service of notice. The question before the learned Single Judge was whether factually the notice was served. 46. These decisions cited by the learned counsel for the respondent Nos.2 and 3, will be of little assistance for interpretation of the section 445 (3). In both these cases the question was service of notice which the parties would exchange. It is one thing to say that a deeming provision in a contract which creates a fiction as regards existence of a factual position may not apply if the factual position is stated to have occurred earlier, but it is another thing to say that an event which is deemed to have occurred by a virtue of provisions of law can occur earlier even though there is no specific provision to that effect. Statutory power cannot be created in this fashion. Existence of factual position and existence of legal position are entirely different concepts. 47. Section 445(3) clarifies that unless the business of the Company is continued, the order of win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntment of Provisional Liquidator. The Apex Court considered the provisions of Section 445(3) and held that the workmen upon winding up have a right to participate and oppose the order of winding up. In National Textile3 also the Provisional Liquidator was appointed but from the facts narrated therein and the arguments advanced and conclusions reached it does not appear that the Apex Court considered that the appointment of Provisional Liquidator would terminate the services of the workmen. The Apex Court concluded as under - 11. We are therefore of the view that the workers are entitled to appear at the hearing of the winding up petition whether to support or to oppose it so long as no winding up order is made by the court. The workers have a locus to appear and be heard in the winding up petition both before the winding up petition is admitted and an order for advertisement is made as also after the admission and advertisement of the winding up petition until an order is made for winding up the company. If a winding up order is made and the workers are aggrieved by it, they would also be entitled to prefer an appeal and contend in the appeal that no winding up order should hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t might prejudice them. The perusal of the decision does not indicate that the Apex Court referred to the prejudice that would be caused to the workmen as termination of their services. In fact, the argument made on behalf of workers was that if any interim order is made it will prejudice the workmen by freezing the resources of the Company so as to make it difficult to the Company to pay wages to the workmen or bring about stoppage in business of the Company or diminution of their wages. It is this prejudice that Apex Court stated that would be caused to the workmen on the appointment of Provisional Liquidator. In paragraph No.11 reproduced above the Apex Court made a clear distinction between rights of the workmen to be heard at the time of winding-up and at the time of appointment of Provisional Liquidator. At the time of appointment of Provisional Liquidator the workers were given right to be heard if they wished but it was made clear that it was not obligatory on the petitioner nor the Court to give notice of such application to the workmen. This distinction was based on different degrees of prejudice the workmen would suffer. Had it been the case that the services of the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d earlier, there is no specific provision in the Companies Act that appointment of Provisional Liquidator brings about a cessation of services. It is sought to be introduced by equating Provisional Liquidator with full powers, with the Official Liquidator. There may be little difference in their powers but their appointments are at different stages and have different legal effects. It is therefore, difficult to accept the proposition that appointment of Provisional Liquidator with full powers brings about cessation of services of the workmen 53. It has been sought to be contended by the respondent Nos.2 and 3 and the Official Liquidator that the facts of the present case would show that for all practical purposes the services had come to end upon appointment of the Provisional Liquidator. It is contended that the operation of the Company had ceased sometime in November 2000, BIFR had recommended winding up in February 2001, plant and machinery was sold, the Provisional Liquidator was not allowed to carry on business, thus for all practical purposes the relationship between the employer and employee had come to an end. It was also contended that powers of the Board of directors h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards the claim of the workmen. The learned Single Judge observed as under - 11.4 Hence, the question is what was the purpose for which the legislature enacted Section 25-O of the Industrial Disputes Act and particularly sub-section (6) thereof and whether Sections 529 and 529-A of the Companies Act fall within the field covered by Section 25-O(6) of the Industrial Disputes Act. Under subsection (2) of Section 25-O of the Industrial Disputes Act, the Government may grant or refuse to grant the employer permission to close down an undertaking of an industrial establishment, after giving an opportunity of - hearing to the employer, workmen and persons interested in such closure, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors. Absence of any such application of the employer under sub-section (1) or refusal of such permission by the Government under sub-section (2) would clearly indicate an absence of genuine and adequate reasons for closure and will also indicate the interests of the general public in having the activities of the undertaking continued. In other words, wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act which can indicate even the slightest intention that Legislature did not intend the legal fiction to be carried to its logical conclusion. 56. In the present case there is no permission taken under S.25- O. The services therefore deemed to have been continued. It is sought to be contended however that the judgment in the case of Jubilee Mills is not a good law in view of the decision of the Division bench of this Court in the case of Bombay Metropolitan Transport Corporation Ltd. vs Employees of BMTC Ltd. (CIDCO) and others (1991 Company Cases Vol.71 page 473). The facts in the matter before the Division bench were that the Corporation sought an order of winding up on the ground that it was unable to pay its debts. The petition was dismissed by the learned Company Judge on the ground that the permission to close down the undertaking Under Section 25-O of the Industrial Disputes Act was refused and therefore there can be no winding up. The learned Single Judge held that provisions of Industrial Disputes Act would prevail over the Companies Act and the petition for winding up had been filed by the Corporation itself. The Division bench allowed the appeal on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicants is right in contending that thus this cannot be construed as an admission that the service of the workmen had come to an end and lower the cutoff date for computation of dues. I have thus come to a conclusion that under the Companies Act there is no other eventuality than Section 445(3) that is the date of winding up for discharge of workmen. The eventuality may occur before the winding up by specific acts on behalf of the employer under the terms of contract read with relevant labour laws. The appointment of liquidator has different legal impact than Official Liquidator and by implication the appointment of Provisional Liquidator cannot amount to discharge of workmen. The Official Liquidator has calculated the dues up to the date of appointment of Provisional Liquidator and now will have to calculate the dues up to the date of winding up. 59. The learned counsel for the applicants has relied upon decision of the Apex Court in the case of Bank of Maharashtra Vs Pandurang Keshav Gorwadkar2. In the said case the Company was closed in 1992 and a reference to BIFR was made. Proceedings before Debt Recovery Tribunal were filed. Workmen / employees made an application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the applicant. 60. To conclude, the relevant date for computing workman s dues will be the date of winding up as per Section 445(3) and not the appointment of Provisional Liquidator. The Official Liquidator will have to recalculate the dues of the workmen accordingly. WAGES TO BE PAID 61. In this regard the learned counsel for the applicants has submitted as follows - (a) The workmen are entitled to dues from the date of defacto illegal closure till the date of the winding up order dated 5.9.2005, with all allowances and increments including enhancement of dearness allowances etc. with interest at commercial rate, plus gratuity and retrenchment/closure compensation calculated as on the date of winding up. The workmen are entitled to all annual increments and periodic increases in Dearness Allowance, annual bonus for entire period at least at the statutory minimum rate of 8.33 %; and HRA, LTA, and all other allowances which the workmen were receiving when the Company was running. (b) The Official Liquidator has erroneously adjudicated the claim on the basis of the last drawn wage in September 2000 and although he has granted wages up to the date of appointmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.2 3 have not challenged the adjudication of the Official Liquidator, therefore this issue does not arise in this matter. There is also no such requirement under the provisions of the Companies Act, 1956, including sections 529 529A and section 25-O(6) of the Industrial Disputes Act, 1947. (h) The amount payable to the provident fund (PF) authorities should be paid to the PF authorities immediately and should not be subject to pari passu distribution under section 529 A of the Companies Act, 1956, or the Provident fund Commissioner may be permitted to place a claim before the Official Liquidator for the same. (i) Section 25-O (1) contemplates that an employer who intends to close down an undertaking, would have to apply to the appropriate Government for permission to close down at least 90 days before the intended date of closure. Where such closure permission has been granted or deemed to be granted, then the workmen would be entitled to closure compensation as stipulated in Section 25-O(8). (j) If closure permission has not been granted, or not been applied for, then under Section 25-O(6), the closure would be deemed to be illegal .In the present case, no such permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make any contribution towards provident fund under the provisions of the Employees Provident Fund Act. 63. Mr. Devitre and Mr.Tulzapurkar, learned senior Advocates for the respondent No.2 and 3 submitted: (a) Bonus is specifically excluded from the definition of wages as defined under Section 2(rr) of ID Act, 1947. There is no question of computing bonus for the purposes of determining the workman s dues as defined under Section 529 of the Companies Act, 1956. (b) Section 2(rr) of the ID Act, 1947 defines the term wages specifically excludes any pension or provident fund as well as gratuity payable to the workmen. In fact, Section 529 of the Companies Act categorically provides that only the sums that are due to any workmen from the aforesaid funds maintained by the Company will rank pari passu with the dues of the secured creditors and no other. Same argument will also squarely apply as far as gratuity is concerned. As far as interest is concerned, if provident fund and gratuity itself are not to be included for the purpose of workmen dues as per Section 529 of the Companies Act, 1956 of the Companies Act, there is no question of awarding interest on the same. The rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 appointing the Provisional Liquidator. In view of the aforesaid there is no retrenchment which takes place at all when a company is ordered to be wound up. The retrenchment compensation cannot be granted. or taken into consideration for the purposes of calculating the workmen dues as contemplated under Section 529 of the Companies Act. The applicants treat retrenchment and closure as interchangeable concepts which admittedly under law they are not. 64. The Official Liquidator in the impugned adjudication has held that -(a) claim for provident fun contribution and interest can only be claimed by provident fund authorities, (b) bonus cannot be granted for more than one year (c) recess allowance and conveyance allowance cannot be granted, lump sum amount and House rent allowances are included (d) Gratuity will be paid till 13 February 2002, (e) Gratuity and Bonus is calculated with last drawn basic retrenchment compensation, notice paid leave salary, arrears of salary is computed with reference to total (last drawn salary) including house rent allowance and lump sum allowances. 65. It is sought to be urged by the learned counsel for the applicants that the wages, have not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the employment. The definition of wages under various Labour Laws are sought to be pressed in service to contend that wages mean all sums of money capable of being computed in terms of employment. It is sought to be contended that it is not necessary to be restricted by the definition of wages under Industrial Disputes Act or Payment of Wages Act and considering the background of the Act that the term wages needs to be interpreted. It is sought to be contended that the phrase wages should be given usual ordinary and natural meaning. 68. On behalf of Official Liquidator it is stated that the Official Liquidator has included only those emoluments under the term wages which have been permissible and what is permissible is qualified by learned Single Judge of this Court in the decision of Engineering Workers Association7. Before the learned Single Judge in the case of Engineering Workers Association7, the issue arose as to the claim of statutory rate of interest under payment of Gratuity Act, payment of Bonus and contribution of employer's share to the provident fund authorities. In this context, the learned Single Judge considered the provisions of Section 529 and Section 530 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature has given the workman s dues (as defined in section 529(3) (b)) along with the dues of the secured creditors overriding priority even over the dues mentioned in section 539(1) of the Act including dues payable to the employees (i.e. other than workmen-see section 539(8) (bb)), the Legislature must be treated to have consciously accepted the narrower definition of the term wages under the Industrial Disputes Act. 70. In Jubilee Mills1 the learned Single Judge observed as under : 1) For the purposes of priority under Sections 529 529-A and 530 of the Companies Act, 1956 (hereinafter referred to as the priority under the Act ), the wages/salary payable to the workmen under Section 529(3)(b)(i) includes not only the unpaid wages/salary for the period up to the date of closure, but also for the period of illegal closure. 2) Ad-hoc interim relief as awarded by the Industrial Court is a part of the wages/salary covered by the expression workman s dues as defined by Section 529(3)(b)(i) of the Companies Act. 3) Retrenchment Compensation payable to the workmen under any of the provisions of the Industrial Disputes Act is covered by the expression workman s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Company is wound up and is in charge of the liquidator. When the Company is wound up and the liquidator is appointed, it is not expected to honour every commitment. The claim can be made against the Official Liquidator but the Companies Act does not oblige him to honour every claim in full even if it is proved. The liquidator cannot be directed to make payments to the creditors as if the Company is operational and functional. When it comes to disbursement of amounts by the Official Liquidator, the dues which are to be disbursed have been specified. It is not that the workmen have no remedies for the dues which are not covered by the definition of workman s dues. The 'workman s dues' will get priority and the other dues will have to await adjudication and settlement. Therefore, some part of the dues have been given priority over other creditors or contributories because those claims should be expeditiously settled and other part of the claim can award adjudication. So it is not that the entire claim made by the workmen will have an overriding priority. The learned Single Judge in the case of Engineering Workers Association7 has observed that while balancing the priorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any or unless the company at the commencement of winding up has under a contract with the Insurers, as is mentioned in Section 14 of the Workmens Compensation Act, 1923, rights capable of being transferred and vested in the workmen, then, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of death or disability of any workmen, are also included in workmens dues. At the same time, sums due to any workmen from a Provident Fund, Pension Fund, Gratuity Fund and/or any other fund for the welfare of the workers maintained by the company, are also included. Thus, workmens dues being ranked higher in priority have been defined with a view to obviate payment of all sums due to them. Such of the sums which as a part of the welfare measure and consistent with the concept of a living wage have been included. So also, compensation for injury in voluntary winding up or under contract of insurance is also included. Thus, the intention is to award monies due for services rendered and remuneration earned as of right so also death or disablement compensation or terminal dues, should be paid so that the workmen does not suffer adversely because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds provident fund but has stated that the Provident Fund Commissioner has not made its claim. The stand taken by the Official Liquidator in this regard cannot be faulted with. The view as regards Provident Fund cannot be claimed by the applicants / workmen directly but the claim will have to be made by the provident fund authorities. The Official Liquidator however should move the provident fund authorities and assist the workmen in recovery of their dues. The Official Liquidator cannot merely take a stand that the provident fund dues will be paid as and when an application is made by the provident fund Commissioner. Even if the Commissioner has not moved an application the Official Liquidator should move the provident fund authorities and ensure that all the deposit is due and payable. If any orders are required for that purpose the Official Liquidator will move the Court expeditiously in any case not later than three weeks from today. 75. As far as the issue of retrenchment compensation and gratuity is concerned, the same has been granted by the Official Liquidator. However, in view of the findings given above they will have to be reconsidered. The Official Liquidator will ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicants but it is stated that assets of the Company are sufficient to pay the interest. But that will not alter the legal position regarding the stage at which the interest needs to be paid. 77. The next issue to be considered is whether the applicants / workmen should be called upon to prove as to whether they were gainfully employed elsewhere before admitting their claims. This point has not been raised by the Official Liquidator. The Official Liquidator in the impugned order, affidavit in reply as well as in the Written submissions has not raised this ground. The respondent Nos.2 and 3 creditors have raised this ground. The learned counsel for respondent No.2 and 3 have relied upon the decision of the Apex Court in the case of Kendriya Vidyalaya Sanghatan and other Vs S.C.Sharma9 to contend that it is settled law that if a worker is gainfully employed elsewhere during the relevant period when he is not in service then he cannot be paid back wages. It is contended that the onus lies upon workers to prove that they are not gainfully employed elsewhere. Firstly, this ground is not taken by the Official Liquidator. There is no challenge to the decision of the Official Liquidato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company for one year. Standing Order 19 (b) of the Standing Orders for Operatives for Cotton Textile Mills framed under the provisions of the Bombay Industrial Relations Act, 1946, makes it clear that a positive act of discharge is necessary. No such act of discharge has been carried out. Badli workers are entitled to get retrenchment compensation both under section 25B as it then stood before being amended in 1964 and after the amendment. As regards entitlement of Badli workers for gratuity, Section 4 r/w. section 2-A of the Payment of Gratuity Act states that every person who has completed 5 years of service shall come within the definition of employee and that where he/she has completed 240 days in a particular year he shall be eligible to be treated as in service in that year. The 240 days can only apply to the 5th year of service, that is, any workman who has completed 4 years of service and has worked for 240 days in the 5th year would be eligible for gratuity. 81. Learned counsel for the Official Liquidator submitted that as regards Badli worker the Supreme Court in Prakash Cotton Mills Pvt. Ltd. Vs. Rashtriya Mills Mazdoor Sangh AIR 1986 SC 1514, while considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear of continuous service under an employer is laid- off, whether continuously or intermittently, he shall be paid by the employer for all days during which he is so laid- off, except for such weekly holidays as may intervene, compensation which shall be equal to fifty per cent. of the total of the basic wages and dearness allowance that would have been payable to him had he not been so laid- off: Provided that if during any period of twelve months, a workman is so laid- off for more than forty- five days, no such compensation shall be payable in respect of any period of the lay- off after the expiry of the first forty- five days, if there is an agreement to that effect between the workman and the employer: Provided further that it shall be lawful for the employer in any case falling within the foregoing proviso to retrench the workman in accordance with the provisions contained in section 25F at any time after the expiry of the first forty- five days of the lay- off and when he does so, any compensation paid to the workman for having been laid- off during the preceding twelve months may be set off against the compensation payable for retrenchment. 25B. Definition of continuous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of continuous service in the establishment. 25M. Prohibition of lay- off .- (1) No workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment to which this Chapter applies shall be laid- off by his employer except 1[ with the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereinafter in this section referred to as the specified authority), obtained on an application made in this behalf, unless such lay- off is due to shortage of power or to natural calamity, and in the case of a mine, such lay- off is due also to fire, flood, excess of inflammable gas or explosion]. (2) . (3) Where the workman (other than badli workmen or casual workmen) of an industrial establishment, being a mine, have been laid- off under sub- section (1) for reasons of fire, flood or excess of inflammable gas or explosion, the employer, in relation to such establishment, shall, within a period of thirty days from the date of commencement of such lay- off, apply, in the prescribed manner, to the appropriate Government or the specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It may be that the Company may not have to pay closure compensation to the three categories of employees, as mentioned by the Industrial Court, but that does not mean that the Company has to pay compensation to the Badli workmen in place of these categories of employees. In this connection, we may refer to Section 25C of the Industrial Disputes Act, 1947 which excludes a Badli workman or a casual workman from the benefit of compensation in the case of layoff. 16. In the circumstances, although we uphold the order of the Industrial Court for payment of compensation to the regular employees of the appellant at the rate fixed by it, we are unable to subscribe to the view that the compensation which would have been payable to the three categories of employees, should be paid to the Badli workmen. In other words, we hold that Badli workmen have no right to claim compensation on account of closure. 86. Accordingly, the Apex Court set aside the order of Industrial Court granting compensation to the Badli workers. Apex Court made a distinction between entitlement of Badli workers and regular workmen upon closure and held Badli workers will not be entitled. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i workers will have to be thus decided in realm of pure conjecture .Question of law can be not be considered unless factual foundation laid to that effect. 89. The Official Liquidator has solely relied on the decision of the Apex Court in the case of Prakash Cotton Mills10 and Section 25-C of the Industrial Disputes Act, and has refused to consider any other aspect. The effect of decision of Apex Court in Digwadih Colliery11 and the learned Single Judge Gangaram Atamaram12 to the effect that upon completion of stipulated number of days the Badli workers will cease to be treated as such and will have to be treated as permanent, has not been considered. Though no final view on this position is being expressed still it will not be proper to take away from the Badli workers even the opportunity to rely upon the provisions and the case law. 90. It will be thus open to the badli workmen to contend that they have completed stipulated number of days and the official liquidaor to consider the same. If upon this exercise being carried out the Official Liquidator comes to a finding that a particular badli workman has completed stipulated number of days, then only question will arise as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
