Ajitsaria & Anr Vs. Bengal Chatkal Mazdoor Union & Ors  Insc 341
(24 May 2006)
Ar. Lakshmanan & R.V. Raveendran
Nos. 6257-6258 of 2004 Civil Appeal Nos. 5906 and 5907 of 2004 Dr. AR. Lakshmanan,
APPEAL NOS. 4101-4103 OF 2004 These appeals were filed against the final
judgments and orders dated 3.3.2004 of the High Court at Calcutta passed in APOT No. 271/2001, APOT
No. 162/2001 and APOT No. 272/2001. By the said final judgments and orders, the
Division Bench of the Calcutta High Court held that the appellants have to be
considered as members of the Nemani Group are not entitled to receive payments
on the ground that the said group being the profounders of scheme and on the
ground that the dues shown by themselves had not been adjudicated either by the
Court or by the Registrar.
NOS. 6257-6258 OF 2004 These special leave petitions were filed by M/s Niraj
Trading Company, a registered partnership firm represented by one of its
partner Shri Krishna Kumar Nemani and six others (known as Nemani Group).
These two special leave petitions were filed by members of the Nemani Group
against the Bengal Chatkal Mazdoor Union, the Official Liquidator, the
Registrar High Court and Baranagore Jute Factory and the other Mazdoor and
Employees Union. These petitions were filed against the final judgment and
order passed by the Division Bench of the High Court at Calcutta in APOT Nos.
227 of 2001 and 228 of 2001 dated 03.03.2004 whereby the Division Bench has
allowed the appeal of contesting respondent No.1 (Bengal Chatkal Mazdoor Union)
and set aside the order passed by the learned Single Judge dated 08.03.2001
which order had allowed the petitioners M/s Niraj Trading Company and others
of Nemani Group to receive one-fourth of the adjudicated claim from the
Registrar, Original Side of the High Court at Calcutta upon furnishing a Bank
Guarantee to the satisfaction of the said Registrar of the equivalent amount.
The said order was set aside by the Division Bench on the ground that the claim
of the petitioners had not been adjudicated and also by ignoring the earlier
orders dated 30.11.1998 and 01.12.1998 passed by the Division Bench of the High
Court which had held that the claims of the unsecured creditors including the
petitioners had been adjudicated.
APPEAL NOS. 5906 AND 5907 OF 2004 These appeals were filed by Bengal Chatkal Mazdoor
Union and Baranagore Jute Factory PLC Shramik Sabha respectively against Radheshyam
Ajitsaria, Ashok Ajitsaria, Official Liquidator and Registrar, High Court and
the Barnagore Jute Factory. The above appeals were filed against the final
judgments and orders of the High Court at Calcutta passed in APOT No. 271 of 2001, APOT No. 162 of 2001 and APOT No. 272
of 2001 dated 03.03.2004. The grievance of the appellants in these two appeals
are that the Division Bench while allowing the appeals did not consider the
case of the Unions and did not direct disbursement of the money to the workers
who were members of the Unions.
Jute Mills PLC (for short `the Company') was under the management of Jardine
Henderson Limited. On the failure of the jute factory to pay dues of several of
its creditors, various winding-up petitions were filed in the High Court under
the provisions of the Companies Act, 1956. By an order dated 28.10.1987, the
Company Judge directed winding-up of the Company. The Court appointed the
Official Liquidator with a direction to take possession of the assets of the
application was made by one - Shri Raj Kumar Nemani praying for stay of the
winding-up proceedings of the Company and for revival of the Company as per a
Scheme submitted and for appointment of an ad hoc Committee of Management to
run the affairs of the said Company. The six Unions agreed to the Scheme as it
was to the benefit of the workers. The learned Company Judge stayed the winding
up by order dated 15.9.1988 and appointed an ad-hoc Committee of Management to
re-open the mills, but however maintained the assets of the Company under the
Official Liquidator. One of the creditors filed an appeal against the order
dated 15.09.1998. An interim order was passed by the Division Bench of the High
Court appointing Joint Special Officers under whose supervision the Committee
of Management was to be constituted on an ad-hoc basis with other directions.
Kumar Nemani being aggrieved by the order dated 27.09.1988 passed by the
Division Bench filed a special leave petition before this Court on 07.10.1988
and this Court, by an order dated 30.11.1988 directed that the scheme proposed
by Raj Kumar Nemani supported by the workers and unsecured creditors be
accepted with a direction for implementation of detailed Scheme. The learned
Company Judge was directed to work out the Scheme.
order passed by this Court on 30.11.1988 reads as under:- "R.K. Nemani
& Anr. .. Appellants -Versus- Shiva & Co. & Others .. Respondents
ORDER Special leave granted. Heard, learned counsel for the parties.
regard to the scope of this appeal and having considered the report of the
Special Officer, dated 13th November 1988 made pursuant to the order of this
Court, we are of the opinion that the scheme supported by the workers and
unsecured creditors of Raj Kumar Nemani, be accepted and a detailed scheme on
that basis be formulated.
desirable that the scheme be implemented as soon as possible and the workers
and the creditors should be paid in accordance with the scheme, approved today.
Further, the appeal is disposed of with a direction to work out the scheme by
the learned Company Judge, Calcutta High Court, who is seized of the matter. It
is contended by some of the secured creditors that by the operation of the
scheme, the assets of the secured creditors should not be allowed to be
affected. This contention of the secured creditors may be agitated before the
Company Judge, if they are so entitled.
intervention applications are dismissed without prejudice to their rights, if
any, to applicants move the Company Judge, Calcutta High Court.
our appreciation of the work of the Special Officer and on the report he has
submitted. The remuneration of the Special Officer is filed at Rs.5,500/- and
to be paid out of the assets of the Company. The orders of the learned Single
Judge and the Division Bench are modified to the aforesaid extent.
appeal is disposed of accordingly. No order as to costs.
Mukharji) Sd/- (S. Ranganathan) New Delhi, 30th November,
learned Company Judge approved the Scheme on 16.6.1989. The Scheme, inter alia,
provides for payment of all unsecured creditors, workers, secured creditors,
statutory dues etc. On 02.05.1990, appellant No. 1 resigned from the Management
of the Company.
learned Company Judge, while considering several applications made by unsecured
creditors complaining that they were not paid by the Committee of Management,
made an order dated 16.12.1991 cancelling the Scheme, observing that the Scheme
had totally failed.
appeal preferred by the Committee of Management against the order dated
16.12.1991, the Division Bench of the High Court made an interim order dated
18.12.1981, reiterated on 24.3.1992 directing payment of 1% of the respective
claims to all creditors on or before 7.1.1992. The Bench also stayed the order
passed by the learned Company Judge dated 16.12.1991 ordering cancellation of
the Scheme. A special leave petition was filed against the order dated
24.03.1992 by one of the creditors.
Court directed the appeal pending before the Division Bench of the High Court
to be disposed of expeditiously, while also directing payment to the unsecured
creditors to be made @ 2% per month from 01.03.1993. The said order dated
22.03.1993 in S.L.P.(C) No. 6505 of 1992 reads as follows:- "Acumen
Trading Corporation & Anr. .. Petitioners -Versus- Committee of Management
of Baranagore Jute Factory & Ors. ..Respondents Dated : 22nd March, 1993 Coram: Hon'ble The Chief Justice Hon'ble
Mr. Justice A.S. Anand
We have heard
counsel for all the parties.
By an order
dated 16th December
1991, the learned
Company Judge of the Calcutta High Court cancelled the scheme earlier
sanctioned on the ground that the terms of the scheme particularly in the
matter of the schedule of payments to the creditors had not been complied with.
order was carried up in appeal before the Division Bench of the High Court,
which by its order dated 24th
March 1992 now under
appeal, stayed the order of the learned single Judge. The Division Bench
directed that instead of payment of 2% p.m. to the unsecured creditors
contaminated by the scheme, there should be payment of 1% p.m. That was the
effect of the order dated 24th March 1992
of the Division Bench, when it referred to and incorporated its earlier order
dated 18th December
It is not
disputed that payments to the unsecured creditors have not proceeded strictly
in terms of the scheme. There is substantial short-fall. The parties who have
taken over the company under the scheme and who are liable to effect payments
to the creditors in terms of the scheme cannot take shelter behind the fact
that auditors of the company have not scrutinised the books of account of the
company. That is a matter over which the unsecured creditors have no control.
Till the auditor examine the books of account and report that the claim of the
extent of the claim of the unsecured creditors was not supportable, there could
be no suspension of the scheme of payments.
consideration of the matter it appears appropriate that the appeal before the
Division Bench of the High Court requires to be disposed of expeditiously. We
request the High Court to dispose of the appeal within three months.
In the meanwhile
payment to the unsecured creditors should proceed at the rate of 2% p.m. from 1st March 1993 and not at 1%. The difference for
the past on that calculation shall be made good within three months from today.
If there is failure to do so, it will be appropriate for the Division Bench to
put that circumstance also into scale in deciding whether the order of the
learned single Judge setting aside the scheme should be interfered with in
appeal or not.."
order of the Division Bench staying the operation of the order dated 16th December 1991 of the learned single Judge will
continue unless the Division Bench itself considers it appropriate to modify
the same in the light of any subsequent event. The Division Bench shall also be
at liberty to consider any applications for the modification of the scheme.
these observations and directions the special leave petition is disposed of. Sd/-
Sd/- (Virender K. Sharma) (S.R. Thite) Court Master Court Master" By
subsequent orders, this Court directed the Committee of Management to deposit Rs.
40 lacs in two instalments which was to be deposited in the Registry of this
Court. The said amount was kept in term deposits. On 11.03.1994, this Court set
aside the order of the Division Bench of the Calcutta High Court passed on
24.03.1992 reducing rate of payment from 2% to 1%.
Court also directed the Committee of Management to deposit from the month of
April, 1994 onwards a sum of Rs. 8 lacs per month with the Registry of Calcutta
High Court. Further directions were also issued while remanding the matter back
to the learned Company Judge for distribution of Rs. 40 lacs amongst the
creditors. The above order reads as follows:- "Acumen Trading Corporation
& Anr. .. Petitioners Versus Committee of Management of Baranagore Jute
Factory & Ors. .. Respondents ORDER We have heard counsel on both sides,
originally the learned Company Judge in the High Court directed the
"Committee of Management" to deposit sums equivalent to 2 per cent
per month calculated on the basis of the extent of unsecured indebtedness of
the company. Subsequently, there was a modification of this order as to the
rate of the payment reducing the extent from 2 per cent month 1 per cent per
month. This was done by the appellate bench.
unsecured creditors have come up against this order.
unsecured creditors claim that debts due and owing to them are in the neighbourhood
of Rs.3.4 crores and that it would take a long time for payment if only 1% per
month is paid.
meanwhile, the Committee of Management has deposited in the Registry of this
Court, a sum of Rs.40 lacs under directions of this Court. The said sums are in
term- deposits with the bank.
consideration of the matter, we set aside the order of the Division Bench
reducing the amount from 2 per cent per month to 1 per cent per month. The
Committee of Management shall from the month of April 1994 onwards, deposit
every month sum of Rs.8 lacs.
will be made in the High Court.
matter will now go back to the learned company Judge, Calcutta High Court who
will issue necessary directions as to the appropriation and distribution of Rs.
40 lacs now in deposit, amongst the creditors and also as to the distribution
of the sum of Rs. 8 lacs to be deposited every month by the Committee of
Management. It is made clear that if the Committee of Management commits
default in the matter of these deposits and fall in arrears for any two months,
it will be appropriate for the Company Court
to replace the Committee of Management by an appropriate alternative mechanism.
The amount of Rs.40 lacs in deposit in this Registry shall be transferred to
the account of the Registrar (Original Side), High Court of Calcutta, together
with accrued interest immediately after the present deposits mature.
grievance was aired by the petitioners that the Committee of Management is
appropriating to itself the funds of the Company towards its alleged claims as
unsecured creditor. Sri Santosh Hegde says this is impermissible. It is open to
the petitioners to move the Company Judge in this regard. The contention of the
Committee of Management on this point is also left open.
interlocutory applications are disposed of accordingly. Sd/- CJI Sd/- (S. Ratnavel
Pandian) New Delhi, March 11, 1994." On 13.12.1994, the learned
Company Judge appointed a new Committee of Management composed of the Jain-Jalan
group, while issuing necessary directions for deposit of Rs. 64 lacs by the
Jain-Jalan group with the Registrar of the High Court. The Company Judge also
directed certain lump sum payments to six substantial creditors, except Nemani
Group on the basis of the list approved in the Court's Scheme prior to cut- off
dates in October, 1987 before issuing advertisement inviting claims from
creditors, while directing payments to be made to certain parties.
appeal against the said order dated 13.12.1994, the Division Bench allowed the
Jain-Jalan group to continue and carry on with the process of the Scheme, but
set aside the direction for preferential payment to six named unsecured
learned Company Judge by order dated 23.12.1996 also directed all unsecured
creditors to lodge their claims with the Registrar of the High Court. The
learned Company Judge, on the note of the Registrar, directed, inter alia, the
Registrar of the High Court to confine to the claims of those unsecured
creditors as on 28.10.1987 i.e. the date of winding-up order and the amounts
quantified against their names in the list of unsecured creditors appended to
the Company Application No.63 of 1987 affirmed on 27.4.1997. Pre-scheme
unsecured creditors including the appellants lodged their respective claims
with the Registrar on 27.02.1997. The Registrar submitted the second report
excluding the names of the appellants (Radheshyam Ajitsaria) while including
the name of the Nemani group. The Company Judge, on an application filed by the
appellants (Ajitsaria's group) directed the Registrar to hear to the
submissions of the appellants with regard to their exclusion. The appellants
made their submissions and filed written notes in support of their contentions
before the Registrar and thereafter the Registrar, on 23.04.1997, submitted a
report including names of the appellants (Ajitsaria's group) as persons
entitled to receive payments in terms of the Scheme. The Company Judge, by a
detailed judgment dated 9.9.1998 directed the Registrar to make payments of all
creditors as per the revised statement enclosed to the Supplementary (Second)
Report, except to the Nemani group. The Division Bench, in an appeal against
the order dated 09.09.1998 filed by Jardine Handerson Ltd., made an order on
30.11.1998/1.12.1998 set aside the Registrar's report insofar as the same
exceeded the amount mentioned in the list annexed to Company Appln. No.63 of
1987. The Registrar, despite the appellants not being held as part of the Nemani
group, however, did not make any payments to the appellants. The appellants
filed an application by way of Notice of Motion, inter alia, praying for
modification of the order dated 09.09.1998 and for a further direction not to
treat the appellants as part of the Nemani group with a further prayer for
immediate payment in terms of the sanctioned Scheme. On 08.03.2001, the learned
Company Judge directed payments to be made to the appellants, inter alia,
holding that the appellants were not the part of the Nemani group and that their
claims were already adjudicated upon and settled by the Registrar, Original
Chetan Chowdhury claiming himself to be one of the Directors of the Company
filed an appeal against the order dated 08.03.2001. The Division Bench, while
granting liberty to the appellants to withdraw the amount deposited against its
name/claim by furnishing a Bank Guarantee also recorded that it is not clear as
to why Chetan Chowdhury and his group could be in the possession of the Company
and listed the appeal for further directions.
14.05.2001, the appellants - Ajitsaria's group received payments from the
Registrar of the High Court upon furnishing the requisite Bank Guarantee.
Learned single Judge of the High Court passed an order on 19.12.2002, inter alia,
holding that the possession of the Company by the alleged Board of Directors
was wrongful, while directing the Official Liquidator to take possession of the
Company (in liquidation). Several appeals were preferred from the order. The
Division Bench, while staying the operation of the order dated 19.12.2002,
directed the Joint Special Officers to take possession.
Division Bench in appeals filed against the order dated 08.03.2001 made an
order dated 3.3.2004 directing re- adjudication of the claims of the appellants
which had already been adjudicated. According to the appellant, the Division
Bench without appreciating that the appeal itself was not maintainable having
been filed by 9 outsiders having no locus standi is not correct in directing
re-adjudication of the claims of the petitioner.
Bench also dis-allowed the appellant's rights to claim the said amount as a
member approved in the list of unsecured creditors distinct from the Nemani
group. Being aggrieved by the impugned judgment dated 3.3.2004, the appellants
filed the above appeals in this Court. This Court, on 08.04.2004, issued
notices in the special leave petitions and also directed that the Bank
Guarantee filed by the appellants with the Registrar of the High Court on the
original side shall be kept renewed until further orders. By order dated
12.07.2004, leave was granted.
Registrar of the High Court issued two certificates, inter alia, certifying
that the last instalment of Rs. 8 lacs was deposited on 8/9.12.1999 and also
certified that a sum of Rs.2,09,70,647.56 p. was lying with the Registrar in a
heard Mr. Jaideep Gupta, learned senior counsel appearing for the petitioners
in S.L.P.(C) Nos. 6257-6258 of 2004, Mr. Rana Mukherjee, learned counsel
appearing for the appellants in Civil Appeal Nos. 4101-4103 of 2004, Mr. Varinder
Kumar Sharma, learned counsel, Mr. S.K. Begaria, leaned senior counsel, Mr.
R.F. Nariman, learned senior counsel and Mr. Naresh Kumar, learned counsel
appearing for the respondents.
Gupta, learned senior counsel appearing for petitioner No.1, M/s Niraj Trading
Company and Raj Kumar Namani, petitioner No.4, submitted that the High Court
has erred in holding that the dues shown against the members of Nemani Group
were shown by themselves and that dues of the Nemani Group have not been
adjudicated by the High Court or by the Registrar. He would submit that the
High Court has failed to appreciate that the disbursement by Registrar took
place after submission of the third report dated 10.4.1997 and the payment to
pre-scheme unsecured creditors were available with the Registrar, Original
side. According to Mr. Jaideep Gupta, the Division Bench should not make any
discrimination amongst the same category of pre-scheme unsecured creditors
mentioned in the list annexed to the scheme of management who have lodged their
claims with the Registrar, Original side.
Gupta, learned senior counsel, submitted that the Judges of the Division Bench
have erroneously concluded that the petitioners were not part of the pre-scheme
creditors and that their names were not included in the list of pre-scheme
creditors filed along with C.A.No.63 of 1987 and that the Bench has also erred
in holding that the claims of the petitioner had not been adjudicated which was
clearly contrary to the report of the Registrar, original side, which was
accepted by both the Judges as well as the Division Bench. It was further
submitted that at the present stage the workers do not have a right to oppose
the payment to the Nemani Group out of the funds lying with the Registrar,
original side. In the light of the above, Mr. Jaideep Gupta submitted that
there is nothing on record justifying withholding of payments to be
petitioner-group, who undoubtedly were pre-scheme creditors and whose claims
had been finally adjudicated upon by the Registrar, original side, which
adjudication has been upheld both by the learned single Judge as well as by the
Division Bench. Further based on such adjudication all other unsecured creditors
have been paid, while only 25% of the total amount due and payable to the
petitioner- group has been directed to be paid by the learned single Judge by
the order dated 8.3.2001. The funds available at the hands of the Registrar is
far in excess not only of the 25% ordered to be paid but in excess of the
entire claim of the petitioner-group. It was also submitted by Mr. Jaideep
Gupta that a sum of Rs. 42 crores which was received by way of acquisition
compensation is now with the company. This apart, the assets are also lying
with the company. In these circumstances, it is submitted that it is only just
and proper that the order passed by the learned single Judge be upheld and
payments be made to the Nemani Group. It is also pertinent to notice that all
other unsecured creditors including Jardine Henderson (the original management
at the time when the winding up order was passed) and the Jain Jalan Group
(being in management after 1994) have been fully paid their dues as unsecured
creditors out of the funds in the hands of the Registrar, original side.
Gupta took us through the pleadings, annexures and orders passed thereon on
various occasions by different Courts.
Mukherjee, learned counsel, appearing for the appellants in Civil Appeal Nos.
4101-4103 of 2004 submitted that appellant No.1 remained as a member of the
Committee of management only for a period of 11 months having resigned on
2.5.1990 and that appellant No.2 never participated in the management and
affairs of the company (in liquidation) and no one including the workers made
any claim and/or grievance against the appellants at any point of time.
said fact has been duly noticed and recognized in various Court orders
including the order of the Division Bench dated 30.11.1998 and 1.12.1998 and
the order of the Registrar dt. 8.3.2001. According to Mr. Rana Mukherjee, the
appellants' firm Radheyshyam & Co. and Indian Agency never formed part of Nemani
Group and the same would be evident from the letters written by the workers' Union and submitted before the Company Court. The appellants are the unsecured
creditors of the Company who were entitled to receive payment in terms of the
Scheme @ 2% p.m. at the entire payment in terms of the said Scheme without
interest was to be disbursed to them within a span of four years and two months
and accordingly the entire amount became due and payable in the year 1993
itself. There is also no allegation upon the appellants to disburse excess
payments to themselves as has been alleged against Raj Kumar Nemani, therefore,
the appellants stand on a different footing from the Nemani Group of
Companies/firms who have been made entitled to receive only 25% of their claim
upon furnishing of bank guarantee. It was also submitted that the appellants
have received their dues as certified by the Registrar of the Calcutta High
Court under orders of the said Court upon furnishing a bank guarantee which has
been kept alive.
to Mr. Rana Mukherjee, the main judgment and order warrants interference by
this Court as the appellants have been wrongly excluded from receiving the
payments though all other creditors similar to the status of the appellants
have received their payments long back. Thus accordingly to him, there has been
denial of justice.
S.K. Bagaria, learned senior counsel appearing for the Baranagore Jute Factory
PLC Shramik Sabha, submitted that the Scheme was sanctioned and approved by the
High Court and by this Court primarily taking into consideration the workers'
interests and that the workers and their Unions supported the Scheme and the
Scheme provided for payment of pre-scheme outstanding dues and current dues of
the workers. According to him, Nemani Committee defaulted in making payment of
wages, provident fund, ESI, gratuity etc. not only towards the outstanding
pre-scheme arrears but also the current dues during its period of management.
In addition to the defaults committed by Nemani Committee in payment of the
said outstanding pre- scheme dues, the said Committee also defaulted in paying
the workers; current dues during its period of management. It was further
submitted that all other pre-scheme unsecured creditors who lodged their claims
with the Registrar of the High Court, have already received their payments and
as against the aforesaid, the workers have hardly received a small fraction of
their outstanding dues for the pre-scheme period and over and above that, their
huge dues got mounted for the current periods during which Nemani Committee was
in management. The Scheme being primarily for the benefits of the workers and
unsecured creditors and all other unsecured creditors excepting the appellants
having already been paid, it is in the interest of justice and in terms of the
Scheme that the amounts accumulated under the Scheme be directed to be utilized
for paying the workers' dues and statutory liabilities on account of Provident
Fund, ESI, wages, bonus, gratuity, STL etc. He invited out attention to Section
11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952
which provides that the amounts due from an employer shall be deemed to be the
first charge on the assets of the establishment and shall be paid in priority
to all other debts. It was submitted that the workers and their Unions supported
the scheme in expectation and hope that their outstanding dues as well as
current dues would be paid by Nemani Committee as specifically provided in the
was the position when the Jain-Jalan Committee was in management. However, when
they came to know about filing of applications by Sri Raj Kumar Nemani and by
Sri Radheyshyam Ajitsaria and their group concerns before the learned single
Judge of the High Court for payment of their dues out of the funds accumulated
under the Scheme, the Unions moved two separate applications bearing C.A.No.9
of 1999 and C.A.No.10 of 1999 before the learned single Judge praying, inter alia,
for not directing any such payment without first paying to the workers.
further, the learned senior counsel, submitted that all unsecured creditors
excepting the appellants have already been paid. In the aforesaid circumstances
and in terms of the Scheme, the amounts lying with the Registrar of the High
Court are required to be utilized for paying the workers' dues.
to him, the Division Bench of the High Court correctly held that the release of
any amounts to the Members of the Nemani Group at this stage is not
appropriate. However, the Division Bench of the High Court erred in not
directing for payment of the workers' dues out of the amounts accumulated under
the Scheme and lying with the Registrar as has been contended by Shramik Sabha
in the appeal filed by it (C.A.No.5907/2004).
further submitted that as stated in C.A.No.5907 of 2004 filed by Shramik Sabha,
the Division Bench should have directed for utilizing the balance amount lying
with the Registrar, Original side, High Court of Calcutta for payment of
workers' dues and statutory liabilities on account of the Provident Fund, ESI,
wages, Gratuity, bonus etc. It was further submitted that a period of 18 years
has passed since approval of the Scheme by this Court on 30.11.1988 and it will
be fully in terms of the Scheme as well as Section 11(2) of the Employees'
Provident Fund and Miscellaneous Provisions Act, 1952, if the funds lying with
the Registrar are utilized for payment of the workers' dues including those on
account of outstanding Provident Fund dues mentioned above.
R.F. Nariman, learned senior counsel appearing for the Bengal Chatkal Mazdoor
Union, submitted that as per the scheme, the workers were to be paid in a time
arrears of back wages were to be cleared within five months of the restarting
of the mill. Several other dues, namely, gratuity, ESI, Provident Fund, Welfare
Fund etc. were also to be cleared in the manner prescribed under the Scheme.
However, these payments were not made by the Nemani Group and instead a large
sum of money was paid to themselves.
alleged that the failure to pay the amounts is squarely on account of the Nemani
Group and at the time when these arrears were mounting, they were paying
themselves a greater sum of money than was due under the Scheme. The appellants
cannot be allowed to take advantage of their own wrong. Mr. R.F. Nariman
further submitted that the Scheme has to be read as a whole and in case payment
is not made under one part of the Scheme, i.e. to the workers, the same Scheme
cannot be relied upon to make a payment to the unsecured creditors. In this
context, he relied on the judgment of this Court in the case of Workers vs. Rohtas
Industries, (1987) 2 SCC 588 where this Court held that the claims of the
workers have a priority even above those of secured creditors. Mr. R.F. Nariman
drew out attention to Section 529 A of the Companies Act, 1956 for the
proposition that the priority is to be given to the dues of the workers. Though
the winding up order has been stayed, the provisions of Section 529 A of the
Companies Act, 1956 will apply in letter if not in spirit. According to him,
the provision is applicable in a winding up of an insolvent company and as per
Section 441 of the Companies Act, 1956, winding up is deemed to commence upon
the presentation of the petition for winding up. Further, in case the money is disbursed
without regard to Section 529A of the Companies Act, 1956, and ultimately the
stay of the winding up is lifted, there would be an effective annulment of the
legislative mandate provided in Section 529A of the Companies Act, 1956.
also invited our attention to Section 11(1) of the Employees' Provident Fund
and Miscellaneous Provisions Act, 1952 and Section 94 of the Employees' State
Insurance Act, 1948 which also provide for a first priority to these dues in
respect of a company in winding up.
11(2) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952
is reproduced hereunder:
prejudice to the provisions of sub- section(1), if any amount is due from an
employer whether in respect of the employees' contribution (deducted from the
wages of the employee) or the employer's contribution, the amount so due shall
be deemed to be the first charge on the assets of the establishment, and shall,
notwithstanding anything contained in any other law for the time being in force,
be paid in priority to all other debts." While interpreting the provisions of
Section 11(2) of the Employees' Provident Fund and Miscellaneous Provisions Act,
1952 and while noting that the Provident Fund Act is a piece of welfare
legislation have accorded priority to these dues over other dues. In this
context, he cited the following rulings:
& Assistant Provident Fund Commissioner vs. Kerala Financial Corporation,
2002(95) FLR 1024 paras 7,10,13,14 (High Court of Kerala)
Exchange of India Ltd. Rep. By its authorized signatory A. Sabastian vs. The
Assistant Provident Fund Commissioner Employees' Provident Fund Organisation
and the Managing Director, Premier Securities Ltd. (W.P. Nos. 24857 and 25609
of 2001, para 32) High Court of Madras.
Bank, Padubidri, Dakshina Kannada vs. Regional Provident Fund Commissioner,
Sub-Regional Office, Balmatta, Mangalore and Ors. 1999(5) Kar.L.J.459, para 7
(Karnataka High Court) At the very least, by virtue of Section 11(2), the
claims of the Provident Fund authorities are akin to secured claims and,
therefore, have a priority over the unsecured claims and that the amount of
money lying with the Registrar is far less than the arrears of the Provident
Fund department and, therefore, in consonance with the legislative mandate
embodied in Section 11(2) of the Employees' Provident Fund and Miscellaneous
Provisions Act, 1952, the money should first be paid to the provident fund
authorities before they are disbursed to unsecured creditors. Concluding his
arguments, Mr. R.F. Nariman submitted that in the present case, substantial
justice has been done to the workers and no interference by this Court is
called for. When dealing with an appeal under Article 136 of the Constitution
of India, this Court comes to the conclusion that there is no failure of
justice, it is not bound to decide and interfere even when a question of
jurisdiction of the original Court of Tribunal is raised and even if the
impugned judgment is wrong. The following rulings have been cited for the above
Trivedi vs. M.N. Nagrashna, AIR 1960 SC 407
Bulaki vs. Lal Dhar,
(1997) 9 SCC 274, para 3
Union of India
vs. Kulamoni Mohanty, (1999) 1 SCC 185 paras 4,6
vs. Salambin Mohammad, (1999) 2 SCC 635 para 20
vs. State of Rajasthan, (2003) 6 SCC 545 paras 39 & 45
State of Punjab vs. Savinderjit Kaur, (2004) 4 SCC
58 paras 16 & 17
Kumar, learned counsel appearing for Baranagore Jute Factory PLC (R-4 in SLP(C)
Nos. 6257-6258 of 2004, furnished details in regard to the payment of arrears
of wages of the workers of the Mill, payment to the statutory creditors,
arrears of gratuity etc. According to him, Nemani Ajitsaria Group committed
several offences; that they did not make payment on receipt of arrear dues and
statutory dues as per the Scheme and that default in making current payment of
wages and other statutory dues and they siphoned huge sums of money while they
were running the Jute Mills. He submitted, at the request of a section of the
workers, Directors of the Company, to control the Jute Mills and immediately
thereafter filed an application before the High Court stating the background
under which the Management took control of the Jute Mills and also prayed for
liberty from the High Court to take steps for revival of the Company. The High
Court appointed a Special Officer with certain directions. He also furnished
other details subsequent to the appointment of the special Officer. He invited
our attention to the report filed by the Special Officer as per the directions
of the Division Bench, details about the status of the Company and the details
regarding the company's writ disputing the arrear, PF liability and their reply
to the allegations made by the Nemani Group. According to him, the funds are
meant for disbursement.
never the intention of the High Court to allow Nemani Group to run the mill for
their own personal gain without complying and/or paying the workers and other
creditors. The defaults and/or evasion made by them is their personal liability
as has categorically been clarified by the judgment dated 19.11.1994 passed by
the High Court. He further submitted that the arrears of wages of the Workers
of the Mill have since been reduced by the Committee of Management by payment
of Rs.22 lacs on account of arrears of wages for two weeks and Rs.17 lacs on
account of 50% of the arrears of bonus for the year 1985-86 and that the
arrears of wages now stands at Rs.54 lacs and at Rs.17 lacs on account of the
balance of the arrears of bonus aggregating to Rs.71 lacs which would be paid
by the Committee of Management.
regards payment to the statutory creditors, it was submitted that the Committee
of Management will pay the aforesaid arrears of statutory dues which have
accrued during the previous management. Likewise, the arrears of gratuity
payable to the workers/employees who have already retired or superannuated or
resigned or ceased to be in service of the company have accumulated during the
period of previous management to the tune of Rs. 36 lacs approximately. It was
submitted that the Committee of the Management will arrange for payment of such
amount of gratuity to such workers. It is to the credit of the present
management that they have apparently succeeded in turning the Company and
resurrecting the Jute Mills. While the workers have jointly supported the
achievement of the present Management, the statutory creditors have also come
out in support of the present management.
above background, the questions of law that require determination in the
instant Civil appeals and the S.L.P. are as under:
Division Bench of the High Court was entitled to allow the appeal without first
deciding the maintainability of the appeals as directed in terms of the order
Division Bench of the High Court was entitled to withhold the payment of the
pre- scheme unsecured creditors in view of the specific direction given by this
Court on 31.3.1994?
Division Bench was entitled to direct re-adjudication of the claims, which were
already adjudicated contrary to the order passed by the Division Bench of the
High Court on 30.11.1998 and 1.12.1998?
workers can have any stake and have right to receive any payment from the fund
lying with the Registrar original side of the High Court of Calcutta which was
specially earmarked for the pre-scheme unsecured creditors as defined in the
finding and decision of the learned Company Jude can be ignored and/or
overlooked on the ground that no enquiry was held by the Registrar? We have
carefully considered the elaborate and lengthy submissions made by the
respective counsel appearing on either side with reference to the pleadings, annexures
filed and the orders passed by the Company Court, the High Court and of this Court.
already noticed, Baranagore Jute Factory petitioners in S.L.P.) Nos. 6257-6258
of 2004, was ordered to be wound up on October 28, 1987. The petitioners' group comprises
M/s Raj Kumar
Krishna Kumar, HUF;
Raj Kumar Nemani;
Krishna Kumar Nemani and
Raj Kumar Jain
constituted the largest group of creditors of the Jute Factory and were
accordingly included in the list of pre-scheme creditors prepared and filed in
C.A.No.63 of 1987 at S.Nos. 1 to 7 by the erstwhile management i.e. M/s Jardine
the winding up order was passed, a Scheme was propounded to run the Jute Mill
and for this pupose, a Committee of Management was proposed to be constituted
of M/s Niraj Trading Company commonly referred to as the Nemani Group.
said scheme propounded by the Nemani Group provided for payments to workers,
electricity dues, statutory creditors and unsecured creditors. This comparmentalised
payment mechanism was adopted to ensure that everybody was paid in accordance
with and under the Scheme. The said scheme was approved both by the High Court
as well as by this Court on November 30, 1988.
The said scheme was finally approved and passed by the High Court with the
support of the secured creditors as well as the workers. Thereafter some
unsecured creditors approached the High Court for payment under the scheme and
especially since pursuant to order of the High Court, the payment under the
scheme stood reduced from 2% as envisaged under the scheme to 1%. The matter
was carried up in appeal to this Court and this Court directed the Nemani Group
to deposit a sum of Rs.40 lacs as and by way of an interim measure.
order dated 11.3.1994, this Court set aside the order of the High Court
reducing the amount from 2% to 1% and further directed the Committee to deposit
Rs.8 lakhs per month. The amount of Rs.40 lakhs deposited by the Nemani Group
was directed to be transferred to the High Court. It is pertinent to mention
that at this stage no grievance was made by the workers and as such the
question of consideration of their claim does not and cannot arise. Moreover,
the order in no uncertain term provides that the payments made pursuant to such
order i.e. order dated 11.3.1994 were to be disbursed amongst creditors.
have already noticed that the Nemani Group was replaced by the Jain Jalan
Committee of Management. The learned single Judge, by order dated 13,12,1994,
directed that the Nemani Group be replaced and the Jain-Jalan Group may take
over the Committee of Management subject to payment of Rs.64 lacs and further
directed payments to substantial creditors except the Nemani Group. This order
was carried up in appeal before the Division Bench and the Division Bench by an
order dated 25.1.1995 set aside the order for preferential payments to certain
creditors and left the issue relating to payments to the Nemani Group open. The
learned single Judge, by an order dated 26.8.1996, in view of the substantial
funds having accumulated in the hands of the Registrar, Original side directed
the parties to file their claims as directed by this Court and further directed
the Registrar to adjudicate the claims in accordance with law. The learned
single Judge by its order dated 23.12.1996 clarified that only pre-scheme
unsecured creditors appended to the company's application being C.A.No.63 of
1987 affirmed on 27.4.1987 were to be considered for payment. The Registrar,
Original side was further given the liberty to requisition the services of a
Chartered Accountant to adjudicate upon the claims of the unsecured creditors.
Thereafter, reports were prepared by the Registrar.
third and final report dated 23.4.1997 of the Registrar was accepted by the
High Court. In the said report, it was categorically recorded that full and
final adjudication of the net claim of pre-scheme unsecured creditors will
appear as per the schedule set out hereinbelow. The names of the members of the
Nemani Group were included at S.Nos. 60 to 66 and an amount of Rs. 2,29,34,500/-
was adjudicated to be outstanding as far as the Nemani Group is concerned.
learned single Judge by order dated 9.9.1998 accepting the final adjudication
made by the Registrar directed payments to be made to all the other unsecured
creditors except the Nemani Group on the ground that the Nemani Group had made
larger payments to members of its group in comparison to other unsecured creditors.
This order was subsequently affirmed by the Division Bench in an appeal filed
by Jardine Henderson. The Division Bench while disposing of the said appeals
upheld the adjudication made by the Registrar, subject to adjustments.
Group filed C.A.No.627 of 1998 for modification of the order dated 9.9.1998. On
8.3.2001, the learned single Judge disposed of C.A.No.627 of 1998 filed by Nemani
Group for modification of the order dated 9.9.1998. The learned single Judge,
after noticing that all other unsecured creditors had been paid of and even
thereafter substantial funds were left in the hands of the Registrar, directed
payment of 25% and/or one fourth of their settled claim after adjustment of
payments already made. Appeals were preferred by the workers' Union and respondent No.4 (Jute Factory) under the new
Management of Chetan Choudhary. The Division Bench while admitting the appeal
by an order dated 29.3.2001 directed that the Nemani Group be allowed to
withdraw the monies subject to furnishing a Bank Guarantee of the like amount.
Further doubts as to the locus standi of Chetan Choudhary to represent the
Company were also raised and the same were kept open. The workers contended
that there was no change in circumstances or additional material on record
justifying the direction for payment to the Nemani Group and further that they
had filed C.A.Nos. 9 and 10 of 1999 giving details of their dues. In so far as
the change in circumstances is concerned, by the time the order dated 8.3.2001
was passed, all other unsecured creditors had been paid of and still
substantial sums were available for disbursement. As regards the pending
applications are concerned, this court has noticed, during the course of hearing,
that the said applications were really in the nature of intervention
applications. In spite of the above, the Division Bench of the High Court has
erroneously concluded that the petitioners-Nemani Group were not part of the
pre-scheme creditors and/or that their names were not included in the list of pre-scheme
creditors filed along with C.A.No. 63 of 1987. The Division Bench also erred in
holding that the claims of the petitioners-Nemani Group had not been
adjudicated which, in our opinion, was clearly contrary to the report of the
Registrar, which was accepted by both the learned single Judge as well as by
the Division Bench.
above facts clearly go to show and administer that the workers do not have a
right to oppose the payment to all unsecured creditors out of the funds lying
with the Registrar, Original Side, High Court. The reasons for our conclusion
are as under:
By order of this
Court the said funds are meant for disbursement only for unsecured creditors.
Separate arrangements have been made under the scheme for payment of other dues
including workers dues. The said scheme sanctioned in 1989 is still in
operation and the present Committee of Management is operating under the same
Since 1994, i.e.
after the Petitioner Group was superceded by the Jain Jalan Group, no demands
of any nature relating to any outstanding payments were ever raised by the
In any event, it
has been clearly recorded in the order dated November 18, 2004 whereby the said
Chetan Choudhary Group has been allowed to continue in management, that the
said Chetan Choudhary Group is being allowed to be continued on the same terms
and conditions as under the original sanctioned scheme, thus making them liable
to make payments of all dues past or present.
company being a running concern, the alleged dues of the workers cannot be
claimed against any specific member of the management committee.
dues if any, are against the company and not against any individual members of
the Committee of Management. There is no question therefore of holding up payment
due to the unsecured creditors on the ground that workers dues are alleged to
the company still continues to function, Section 529-A of the Companies Act
cannot be pressed into service by the workers. The protection of section 529-A
is available only when a company has been wound up, Official Liquidator has
taken over the assets and disbursements are being made by the Official
Liquidator in course of the winding up of the company. There is no question of
the worker claiming a preferential right or payment while a company is running
and carrying on business in the usual course and incurring daily expenses and
light of the above, Mr. Jaideep Gupta, learned senior counsel, submitted that
there is nothing on record justifying withholding of payments to the Nemani
Group, who undoubtedly were pre-scheme creditors and whose claims had been
finally adjudicated upon by the Registrar which adjudication has been upheld
both by the learned single Judge as well as by the Division Bench. It is also
not in dispute that the funds available at the hands of the Registrar is far in
excess not only of the 25% ordered to be paid but in excess of the entire claim
of the petitioner-Nemani Group.
view of the above, we are of the opinion that the claim of the Nemani Group and
Niraj Trading Company has to be upheld and accepted and the payment should be
result, S.L.P(c) Nos. 6257-6258 of 2004 are allowed and the impugned judgment
and order dated 3.3.2004 in APOT Nos. 227 & 228 of 2001 common with APOT
No. 271 of 2001 passed by the Division Bench is set aside.
claim made by Radheyshyam Ajitsaria and Anr. In C.A.Nos. 4101-4103 of 2004 We
have already discussed in detail in paragraphs supra about the facts and
circumstances of the above appeals and the various proceedings taken out by the
parties and the orders passed thereto.
view of the discussion made above, the following conclusion can be arrived at:
remained as a member of the Committee of management only for a brief period of
11 months having resigned on 2.5.1990. Appellant No.2 never participated in the
management and affairs of the company, no one including the workers made any
claim and/or grievance against the appellants at any point of time.
are unsecured creditors of the Company who were entitled to receive payment in
terms of the scheme at the rate of 2% per month and the entire payment in terms
of the said scheme without interest was to be disbursed to them within a span
of four years and two months and accordingly the entire amount became due and
payable in the year 1993 itself.
At all material
times, there was no dispute with regard to the fact that Nemani Group of
Company consisted of seven companies/firms which are distrinct and separate
from the appellants.
said fact has been duly noticed and recognized in various Court orders
including the order of the Division Bench of the High court dated
30.11.1998/1.12.1998 and the order of the learned single Judge dated 8.3.2001.
There is no
allegation upon the appellants of disbursing excess payments to themselves as
has been alleged against Raj Kumar Nemani, therefore, the appellants' stand on
a different footing from the Nemani Group of companies/firms who have been made
entitled to receive only 25% of their claim upon furnishing of bank guarantee.
appellants have received their dues as certified by the Registrar of the High
Court under orders of the High court upon furnishing a bank guarantee which has
been kept alive.
as the workers' claim in concerned, the scheme which was accepted by this Court
on 30.11.1998 contained disbursement of the payment to all the creditors in the
said scheme. The said scheme clearly mentioned the manner in which the
creditors are entitled to receive the payment. The statutory dues, such as
Provident Fund, E.S.I. and workers' dues on account of wages salary are to be
liquidated in the manner as provided therein and unsecured creditors were made
entitled to receive payment @ 2% per month save and except initial payment @
5%. The said scheme was supported by the workers. Unlike unsecured creditors,
at no point of time workers had come up before the company Judge or before this
Court alleging that payments have not been made to them pursuant to and in
terms of the scheme, though the workers all along appeared in the proceedings.
event since the Company is functioning as a going concern on and from the date
of implementation of the Scheme of Arrangement as formulated and approved by
the High Court as well this Court, the question of the workers at this stage
when the winding-up proceedings have been permanently stayed under Section 466
of the Companies Act, 1956 to state to have a better claim by virtue of Section
529A of the Companies Act, 1956 does not and cannot arise. The workers having a
priority over creditors can come into play only the winding-up process is in
motion and the Official Liquidator take steps to formalize winding-up. In the
instant case, after the Scheme had been sanctioned, the question of winding-up
would arise only if the order of permanent stay granted was to be lifted on any
party's complaining of failure of the Scheme or inability on the part of the
Company to make payments either in terms of the scheme or otherwise. The
contention to the contrary raised by Mr. Nariman has no force.
the reliance upon the provisions of the ESI and the EPF Act are inapposite
inasmuch as by virtue of orders of this Court as also noted by the Division
Bench of the High Court that the amount to be paid at the rate of Rs. 8 lacs
per month as directed by this Court was to be kept secured for payment to un-
secured creditors only, the workers are therefore estopped from resorting to
taking recourse to the provisions of Section 11(2) of the EPF Act since the
same was available to them even at the time this Court had directed the said
sum to be earmarked for payments to un-secured creditors.
view of the fact, that the manner in which the unsecured creditors are entitled
to receive the payment has been specified and more particularly, when all the
pre-scheme un-secured creditors who have lodged their claims with the
Registrar, High Court, Calcutta have received payment, there cannot be a
justification in withholding the payment of the appellants and petitioners who
were also entitled to receive payment as other pre- scheme un-secured
view, the provisions as contained under section 529A of the Companies Act, 1956
are not applicable in the facts and circumstances of the case as the order of
winding-up has been stayed and the company is being run under the scheme as a
Committee of Management is being replaced by another Committee of Management on
the same terms and conditions with an object to implement the same scheme. Thus
the dues of the creditors including the workers and other statutory dues are to
be paid by the Committee of Management. Even, at present the company is being
run by a committee of Management and are now supported by the workers as would
appear from the order dated 18.11.2004.
apart from the report of the Joint Special Officers dated 20th August, as
submitted by respondent No.4 before this Court it would further appear that the
present committee of Management in implementation of the said scheme, is making
payments of arrears as well as current dues of the workers.
as the provision as contained under section 11 sub- clause 2 of the Employees
Provident Fund & Miscellaneous Provisions Act, 1952 are concerned, the
same, in our opinion, would not debar the appellants to receive their payments
as the appellants have been made entitled to receive the payments in terms of
the scheme and charge if any, would crystallize over the assets of the company
and not upon the money of the appellants.
interesting to notice that the workers on the one hand are opposing the claim
of the appellants on the ground that they have not received the payment. On the
other hand, the workers have not made any claim from the money which has been
received by the respondent No.4 as compensation approximately to the tune of
Rs.41 crores for acquisition of the land by the National High-Way Authority of
India for 17 acres valued at Rs. 41 crores reported in Competent Authority vs. Barangore
Jute Factory & Ors., (2005) 13 SCC 477. Thus it is crystal clear that the
Workers' Union have been set-up by the present
committee of management so as to obstruct the payment to these appellants.
considered opinion, the impugned judgment and order warrants interference by
this Court under Article 136 of the Constitution of India as the appellants
have been wrongfully excluded from receiving the payments though all other
creditors similar to the status of the appellants have received their payment
long back thus there has been denial of justice.
as the argument of Shri K.P. Bagaria, learned senior counsel appearing on
behalf of other Workers' Union with regard to the liability of making payments
towards Provident fund dues and the judgment reported in 1995 Volume I CLJ page
89, it is not in dispute that the appellants were not parties to the
proceedings in which the said judgment was delivered, and it was Mr. Raj Kumar Nemani
who had been held to be liable by the High Court to pay provident fund dues. The
liability to pay Provident Fund dues remains with the company which is still
run a going concern.
as the outstanding amounts are concerned, these very unions had sworn
affidavits filed in July, 1993 before the High Court stating that the Nemani
group after taking over management has paid substantial part of their dues.
as the scheme is concerned, the said scheme was initially for a period of 8
years and the amounts mentioned therein were to be liquidated over the years
and not immediately upon the scheme coming into force. The payments which were
to be made immediately upon implementation of the scheme, were accordingly
made. The petitioner group was replaced midway into the scheme and did not
complete the entire tenure of the scheme.
new Committee of Management (Jain-Jalan) which replaced the petitioner group,
took over the management on the same terms and conditions as contained in the
scheme, thereby assuming and/or taking over the entire responsibility of
payment of all outstanding amounts including workers dues and other employee
benefits including Provident Fund.
pertinent to note that the fund which is the subject- matter of the present
proceedings was created only for the purpose of payment of unsecured creditors
under the scheme framed by the High Court and accepted and affirmed by this
Court by two orders dated 17.12.1993 and 11.03.1994. This Court affirmed that
the amount of Rs. 8 lacs per month out of the revenues of the Company would be
kept aside in the hands of the Registrar, Original side and pay to the
unsecured creditors alone @ 2% per month. Admittedly, the said corpus has been
treated by successive orders of this Court and the High Court as being the dues
of the unsecured creditors alone. None of these orders were ever appealed
against or set aside. It is too late in the day to contend that the said fund
would also be utilized for payment of workers dues and or other statutory dues
for which the scheme made separate arrangements. Both Jardine Henderson and
Jain- Jalan Committee who were in management of this Company at various points
of time have been allowed to recover their entire dues as unsecured creditors
out of this fund without reference to the workers dues and or other statutory
dues. At no stage, whatsoever, have any part of the said fund been utilized by
the High Court for payment of any of the workers dues or other dues.
said fund, in our opinion, therefore, cannot have a different character merely
when it comes to the dues of the present petitioners.
important to note that by orders of Court, the company (in liquidation) was not
in fact wound up but was allowed to continue as a going concern. This was
undoubtedly in the interest of the workers. So long as the company continued as
a going concern, the workers not only continued to get their wages and other
benefits and also retained their rights to be reimbursed out of the assets of
the Company in the event that the assets have to be sold in winding up. In fact,
the fixed assets of the Company are enormously valuable. It has land in excess
of 50 acres in prime locations out of which 17 acres was acquired by the
National High-way Authority upon payment of compensation of Rs. 41 crores
recently to the present Company. The dues of workers are, therefore, in no
jeopardy whatsoever. When the Company continues as a going concern, it is the
dues of the unsecured creditors which are most vulnerable and it is for that
purpose this Court by its various orders ensured that a separate fund should be
created for the unsecured creditors. In our opinion, it is fair and proper that
the funds so created should only be utilized for the purpose of the unsecured
creditors and not workers dues and other dues.
contended by the respondent that for the purposes of Sections 441 and 529A of
the Companies Act, the phrase "in winding up" should refer to
"in the course of winding up". In our view, this cannot be the
position because, if so, no part of the fixed or movable or any other assets of
the Company including raw material and working capital can be alienated by the
Company in the usual course of its business activities only such time as the
winding up proceedings are permanently stayed. This would mean that no order
could ever be made exploring the possibility of running the Company as a going
concern during the pendency of the winding up proceedings. Such an
interpretation would not only contrary to the interest of the workers and the
industry as a whole but would not be pragmatic and would be contrary to long
settled practice in the Company jurisdiction.
judgments were cited by counsel for the workers' union. None of the judgments
cited on behalf of the workers' union under Section 11(2) are applicable to the
facts of the present case. These are cases where a dispute arose as to who had
first charge on the assets of the employer which is not at all the issue
arising in the present context. It was argued that the present petitioners (Niraj
Trading Company Group) are responsible for heavy outstanding which was
specifically denied by learned counsel for the petitioners as most mis-leading
and contrary to the provisions of the scheme itself. Our attention was also
drawn to the findings recorded by learned single Judge that despite such tall
claims, the workers had not been able to provide proof of the specific details
claimed by them. It was stated by learned single Judge that except for certain
bald statements the objectors did not provide details in support of their
allegation. In our view, dues under the many heads were not to be paid
personally by the Members of the Committee of the Management.
would be paid out of the funds generated in the course of carrying on business
of the said Company. If anything remained unpaid, the liability would pass on
under the provisions of the scheme itself to the Committee of Management which
replace them. In the first instance, the Committee of Management was taken over
by the Jain-Jalan Group and it is now alleged that now it is taken over by Chetan
Choudhary. Outstanding liabilities under the scheme, therefore, remain the
liability of the Company and the subsequent Committees were also required to
discharge their liabilities under the Scheme. In our view, it is a deliberate
attempt here to cast the entire liability under the Scheme on to the Members of
the Committee constituted under the present petitioners in special leave
petition Nos. 6257-58 so that the subsequent Committees can avoid their
responsibilities and obligations under the scheme. To take one example, if
there is any outstanding amount by way of Provident Fund, the same is just as
such charged on the compensation money realized by the present Management. The
present Management in collusion with the Union leaders are, therefore,
necessitated in projecting that the outstanding Provident Fund dues, if any,
should come out of the fund lying in the hands of the Registrar, Original side,
rather than out of the compensation money which has been realized by the
present Management at the time of acquisition of the fixed assets of the
Company. It is to be noted that only 25% of the dues of the petitioner, as
unsecured creditors, have been directed to be released under the orders of the
High Court. These dues relate back to 1987. The present petitioners who were
suppliers of jute to this mill have been unable to realize their dues of 1987
till today whereas all other unsecured creditors have been able to do so. It
is, therefore, just and proper that at least at the present stage, the dues should
not be held back any further.
event, it is crystal clear that finding of the Division Bench of the High
Court, that the claim of the appellants have not been duly adjudicated is
erroneous as claim of the appellants have duly been adjudicated by the
Registrar, High Court, Original Side, with the help of the Chartered Accountant
as would be evident from Certificate dated 15th March, 2004 issued by the
Registrar. Thus, the said order dated 3.3.2004 passed by the Division Bench as
against these appellants is liable to be set aside.
the foregoing reasons, we hold
appellants in C.A.Nos. 4101-4103 of 2004 and the petitioners in S.L.P.(C) Nos.
6257 and 6250 of 2004 are entitled for payment as pre- scheme unsecured
creditors in view of the specific directions given by this Court on 31.3.1994.
Division Bench was not entitled to direct readjudication of the claims which
were already adjudicated, contrary to its own orders dated
The fund lying
with the Registrar, original side, High Court of Calcutta was specially
earmarked for the pre-scheme unsecured creditors as defined in the Scheme.
Registrar of the
High Court is directed to effect payment immediately to both the creditors.
result, C.A.Nos. 4101-4103 of 2004 and S.L.P.) Nos. 6257-6258 of 2004 are
allowed and the orders passed by the Division Bench of the High Court which are
impugned in these appeals and petitions are set aside and the C.A.Nos. 5906 and
5907 of 2004 filed by Barangore Jute Factory and Bengal Chatkal Mazdoor Union
(CITU) shall stand dismissed. However, there shall be no order as to costs.
stated that both the appellants in C.A.Nos. 4101- 4103/2004 and petitioners in
S.L.P.)Nos. 6257-6258 of 2004 have already furnished the bank guarantee and have
received the payment upon furnishing the requisite bank guarantee. The
Registrar of the High Court is directed to release the bank guarantee to the
respective parties forthwith.
Company is directed to pay the other dues such as PF, ESI, Welfare Fund,
arrears of wages, gratuity, bonus etc. to the workers depending upon the
availability of the funds with it.
appeals and special leave petitions are disposed of accordingly. No costs.