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Workers Vs. Rohtas Industries Ltd. [1994] INSC 278 (2 May 1994)

Kuldip Singh (J) Kuldip Singh (J) Agrawal, S.C. (J)

CITATION: 1994 AIR 2211 1994 SCC Supl. (2) 359 1994 SCALE (2)762

ACT:

HEAD NOTE:

ORDER

1. M/s Rohtas Industries Ltd. (hereinafter referred to as 'the Company') owns an industrial complex at Dalmianagar in the State of Bihar having units for manufacturing cement, paper, vanaspati, asbestos and vulcanised fibres. It was employing about 10,000 workers. The Company started having troubles in 1982-83 and ultimately the industrial units were closed with effect from 9-9-1984. The workmen moved this Court by filing this writ petition under Article 32 of the Constitution. This is how this Court has been concerned with the affairs of this undertaking.

2. Proceedings for the winding up of the Company have also been started and the same are pending before the Patna High Court wherein a Provisional Liquidator has been appointed.

During the pendency of this petition, the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 Under Article 32 of the Constitution of India 360 (hereinafter referred to as 'the Act') came into force which provide for the establishment of the Board for Industrial and Financial Reconstruction (for short 'the Board') with power to enquire into and determine the incidence of sickness in industrial companies and devise suitable remedial measures through appropriate schemes or other proposals and for proper implementation thereof. On 28-10- 1987, the Court passed an order whereby the Central Government was directed to make a reference to the Board for framing a scheme as contemplated under Section 18 of the Act for revival of the Company. The Board submitted a report wherein it was indicated that three of the units of the Company, viz., cement, asbestos and vanaspati could be revived as the same appear to be viable but the paper unit could not be revived. Keeping in view the said report of the Board as well as the statements filed on behalf of the State of Bihar and the Union of India and the memorandum prepared by the learned Attorney General and filed before this Court, the Court passed an order dated 28-10-1989 whereby the State of Bihar was directed to appoint an authorised officer from the senior IAS cadre with appropriate commercial background to be the Rehabilitation Administrator and the State Government agreed to deposit a sum of Rs 15 crores to enable him to pay the arrears of wages to the workers and for disbursement of secured loans of financial institutions and the parties for which security of Company's assets had been furnished. By the said order it was directed that the asbestos, cement and vanaspati units shall be commissioned after effecting such repairs as may be necessary and steps shall be taken to explore the viability of the paper unit within three months after the Company is recommissioned in respect of three units. The considerations which weighed with the Court in passing this order were that a lot of assets of the Company were fast becoming useless and will soon become junk and though several attempts were made to dispose of some of the stocks held by the Provisional Liquidator but for one reason or the other it had not been possible to complete the sale and if the Company is not revived and gets liquidated the liabilities would turn out to be far in excess of the assets and notwithstanding first and second charge on the assets, the creditors may not appreciably benefit. The Court also took note of the fact that living to about 10,000 families has been denied for over five years and apart from national loss, the workmen have been put to serious jeopardy and that it was of paramount importance that tile Company in respect of the viable units should be revived and allowed to come into production. In accordance with the said directions, the State of Bihar designated an officer who took over as the Rehabilitation Commissioner and paid a sum of Rs 15 crores. The necessary repairs were carried out and vanaspati plants were able to start functioning which started providing employment to about 2900 workers. But viability of the units could not be achieved and losses have continued to mount. When the matter was taken up on 7-5- 1993, Shri Kapil Sibal, learned Senior Counsel appearing for the Rehabilitation Commissioner, stated that in order to keep the units which are already functioning as going concerns, it is necessary to invest another sum of Rs 10 crores and the Court expressed the hope that keeping in view the urgency of the matter the State of Bihar will consider the request made by the Rehabilitation Commissioner for the contribution of the funds. On 3-9-1993, an affidavit of Shri S.N. Sinha, Commissioner and Secretary, Department of Industries, Government of Bihar, was filed wherein it was stated that due to 361 resource constraints and financial difficulties, the State Government is not in a position to contribute/advance any amount to the Rohtas Industries for its operation and that the State Government is not in a position to take any liabilities of the Company. It was further stated that the State Government have no objection to privatise the Rohtas Industries and that the State Government has decided to invite private entrepreneurs through advertisement for running it. The learned counsel appearing for the State Government expressed the inability of the State Government to nationalise the industry. Having regard to the aforesaid stand of the State Government, the Court on 8-9-1993 passed an order wherein it was observed that the best course would be to dispose of the whole undertaking but in order to ensure that the undertaking fetches an adequate price it is necessary that it should be disposed as a running concern.

Keeping in view the need of the Rehabilitation Commissioner for funds for making the units functioning, the Court directed the State of Bihar to advance a sum of Rs 10 crores as a loan to the Company for the resumption of the production in the units amount of Rs IO crores it was directed that the Union of India shall advance to the State of Bihar a sum of Rs 10 crores from out of the Plan Assistance for the State or any other account. By the said order, it was also directed that the Commissioner and Secretary, Department of Industries, Government of Bihar shall publish an advertisement inviting offers for the purchase of the entire industrial undertaking of the Company as a running concern. In pursuance of the said order Rs 10 crores have been made available to the Rehabilitation Commissioner.

An advertisement was also published and in response to the same 14 offers were received. The maximum offer was for Rs 15 crores for the entire complex. Since the total assets of the company have been assessed by the Rehabilitation Commissioner at about Rs 250 crores, the Court in the order dated 3-3-1994 observed that it is not possible for the Court to even consider any of the 14 offers received by the State of Bihar. Thereafter on 29-3-1994 a proposal has been submitted by the Rohtas Industries Workers' Cooperative Society Ltd. to purchase the industrial undertaking with its allied and sister concerns and to run the same on a moratorium basis for three years only through the Workers' Cooperative Society which postulates grant of certain exemptions, reliefs and concessions as provided under Section 18 of the Act.

3. On 25-4-1994, Shri B.B. Singh, learned counsel appearing for the State of Bihar, placed before us a statement indicating the line of action for revival of the Rohtas Group of Industries which has been agreed upon during the course of discussion that was held at Patna by Shri B.B. Singh with the Chief Minister of Bihar in the presence of the Chief Secretary to the Government of Bihar, the Principal Secretary to the Chief Minister of Bihar, the Industrial Development Commissioner, the Rehabilitation Commissioner and the Director Technical Development.

The said line of action as agreed upon at the said discussion is as under:

" (i) Considering the valuation of the Rohtas Group of Industries, it was felt that no viable offer is likely to be received for outright purchase as is evident from the offers received so far.

(ii) The State Government have already indicated to the Hon'ble Supreme Court that the State was not in a position to take over the responsibility of managing the affairs of Rohtas Industries either as a 362 Government or Public Undertaking, nor it is in favour of running it through its officers on deputation.

(iii) It was felt that public auction of assets or liquidation of the Company also do not offer any viable solution particularly from the standpoint of the interest of the workers as also the running of this complex.

(iv) It was agreed that the only viable option currently available is to entrust the management of Rohtas Industries on a long-term lease basis to some reputed industrial house/entrepreneurs.

(v) It was decided that in order to identify the industrial house/entrepreneur/workers' cooperative etc. to manage and run the Rohtas Industries on long-term management lease, newspapers advertisement should be taken out inviting suitable offers. Personal contract/negotiation should also be carried out to identify and to evolve an appropriate revival package.

(vi) It was indicated that the exercise should be completed by the Committee already constituted by the Hon'ble Supreme Court in January 1994 comprising the Chief Secretary, Industrial Development Commissioner and Rehabilitation Commissioner, It was further agreed that Development Commissioner and Financial Commissioner, Government of Bihar should also be included in the Committee with the approval of Hon'ble Court.

(vii) It was agreed that the Committee would complete the exercise and present its recommendations in regard the choice of the industrial houses/entrepreneurs as well as the terms of lease before the Hon'ble Court within three months."

4. According to the Status Note as on 31-3-1994 submitted by the Rehabilitation Commissioner on 18-4-1994 none of the units is in operation presently and the total number of ex- employees who were employed as on 15-1-1994 was 3108. The salaries of the workmen for the months of February and March have not been paid. A sum of Rs 553.52 lakhs is lying as balance an stocks of raw material/finished goods valued at Rs 259.52 lakhs are lying. The current liabilities are to the tune of Rs 490.90 lakhs.

5. On a careful consideration of the whole matter we are of the opinion that the best course would be to revive the reference which was made to the Board by the Central Government in pursuance of the order of the Court dated 28- 10-1987 because the Board which is an expert body, would be in a better position to examine the matter in its various aspects and form an opinion about the viability of the various units of the industrial undertaking and the possibility of their revival, and if the Board comes to the conclusion that the units are viable and can be revived it can frame a scheme in accordance with the provisions of the Act. It is, therefore, directed that the reference that has already been made by the Central Government to the Board in pursuance to the directions given by this Court in the order dated 28-10-1987, be revived and a report be submitted by the Board to the Court in relation to the following matters:

(a) Whether the Company is capable of being rehabilitated in a manner that it can operate profitably so that its net wealth would ultimately become positive and the units become financially stable and self-supporting.

(b) The short-term measures, if any, which can be taken immediately.

(c) The long-term measures required to rehabilitate the Company.

363

6. Questions regarding matters (b) and (c) would arise only if the Board is satisfied on question (a) that the Company is capable of being rehabilitated. As a short-term measure, the Board may consider whether it will be advisable to grant all or some of the units to some promoters on a leave and licence basis for running the units with the promoter paying a fixed licence fee with or without a further share in profits and obtaining the unit on licence for a fixed period without taking over the past liabilities.

For long-term, the Board may consider rehabilitating the unit either on a "stand alone" basis, or by an amalgamation with some healthy company or by a sale of some of the units.

The proposal submitted by the Rohtas Industries Workers' Cooperative Society may also be considered by the Board.

The Board shall submit its report to the Court within a period of three months.

7. In the meanwhile it is directed that:

(1) The Rehabilitation Commissioner shall continue in office till an order relieving him is passed by the Court.

(2) The Rehabilitation Commissioner shall pay the wages of the employees for the months of February and March 1994 which remain unpaid as well as the wages for the months of April and May 1994. No wages will be paid for the period subsequent to 31-5-1994, (3) The units which are lying closed may be operated till 31-5-1994. The finished goods and the raw material left on 31-5-1994 be sold in the market.

(4) The Rehabilitation Commissioner shall maintain the essential services such as- (a) security for the maintenance of the units against any pilferage and/or theft;

(b) electricity supply to the quarters of the workers and maintenance of office/factories;

(c) maintenance of essential infrastructure for the office and the industrial complex.

(5) The moratorium against the units of the Company which had been extended till 8-3-1994 is further extended for a period of six months from that day till 8-9-1994.

8. The matter be listed after three months. A copy of this order be sent to the Secretary of the Board.

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