Workers
of Rohtas Industries Ltd. Vs. Rohtas Industries Ltd. [1989] INSC 314 (24 October 1989)
Misra
Rangnath Misra Rangnath Sawant, P.B. Ramaswamy, K.
CITATION:
1990 AIR 481 1989 SCR Supl. (1) 615 1989 SCC Supl. (2) 481 JT 1989 Supl. 288
1989 SCALE (2)873
ACT:
Sick
Industrial Companies (Special Provisions) Act. 1985:
ss.4 & 10---Rohtas Industries Ltd.--Rehabilitation of--Directions far.
HEAD NOTE:
Four
large industrial units owned by the respondent company were closed down with
effect from September 9,
1984 resulting in
denial of employment to about 10,000 employees.
In the
writ petition, the workmen sought immediate payment of salary and wages for the
period since closure and compensation as per the amendment to the Industrial
Disputes Act in 1984 and payment of dues under the provident fund account,
gratuity etc. The High Court had in the meantime on May 22, 1986 appointed a provisional liquidator under the Companies Act.
This
Court on October 29, 1987 had directed the Central Government to make a reference
to the Board constituted in terms of s.4 of the Sick Industrial Companies Act,
1985, which had come into force, to frame a scheme as contemplated under s. 10
thereof for revival of the company and submit it for consideration of the Court
within four months time. On September 7, 1988,
the Court took note of the fact that the State of Bihar was inclined for nationalisation of
the company and directed a committee with the Industries Secretary to the Union
of India as its Chairman to be immediately constituted to work out the
modalities of nationalisation.
On December 13, 1988 the Court considered the report of
the committee indicating that three units, excepting paper and boards unit,
were viable and could be revived, and adjourned the matter to give an
opportunity to the parties to explore the possibilities of revival of the
viable units. Till August
8, 1989 no substantial
progress had been made. Thereafter the State of Bihar and the Union of India filed their statements separately
and the memorandum prepared by the Attorney General was also made available to
the Court.
In
this background the Court,
HELD:
1. Living to about 10000 families has been denied for over five years and apart
from national loss, the workmen have been 616 put to serious jeopardy. There is
a huge amount of wages outstanding to them. Several financial institutions have
large dues to recover from the company. The Trustees of the Debenture Trust
Deeds have also sought to intervene to maintain their claim. Apart from these,
the owners of the company have also pleaded that they are entitled to
compensation in the event of the properties of the company being taken away by
way of nationalisation. A lot of assets are fast becoming useless and will soon
become junk. If the company gets liquidated, the liabilities would turn out to
be far in excess of the assets and notwithstanding first or second charge on
the assets, the creditors may not appreciably benefit. It is, therefore, of
paramount importance that the company in respect of viable units should be
revived and allowed to come into production. [620D, A-C]
2.1
The State of Bihar is directed to appoint an authorised
officer to be the Rehabilitation Administrator. [620H]
2.2
The Provisional Liquidator appointed by the High Court shall hand over to the
Administrator all the assets of the company which he had taken over under
orders of that Court. The assets of the company not yet taken over shall vest
forthwith in the Administrator. [621A]
2.3
The assets of the company encumbered with financial and other institutions
shall not be available to be proceeded against for a period of one year, and
there shall be a moratorium for a period of one year in regard to proceedings
taken and pending or to be taken against the company hereafter, and limitation
shall remain suspended for the period. [621D-E]
2.4
The State Government of Bihar shall deposit within eight weeks an
amount of Rs. 15 crores with the Administrator against the cost of assets to be
taken over. A similar sum of Rs. 15 crores shall be advanced by the Union of
India to the State from out of plan assistance. The sum paid by the State shall
be utilised, in due course for payment of arrears of wages of the workers and
for disbursement of secured loans of financial institutions and other parties
for which security of the company's assets had been furnished. The
Administrator shall open an account with the lead nationalised bank for the
State operating at Dalmianagar into which the two sums of money shall be
credited. [621F-H]
2.5
The Administrator shah set up a Committee with a retired 617 High Court Judge,
a retired District Judge and an Accounts Officer to examine the claims of the
owners of the company and other parties including financial institutions within
six months and to report the matter to the Court for directions. [622A]
2.6 An
inventory of all the articles shall be made within four weeks. Steps shall be
taken to form a new company within four weeks. Appointment of technical
consultants and other competent officers shall be undertaken within two months.
The retrenched employees shall come back to work in phases. Steps shall be
taken to explore the viability of the paper unit within three months after the
company is recommissioned in respect of the three units. Liberty is given to the parties to apply in
the event of necessity. [622C-D & E]
2.7
The case shall remain pending, to be called again on March 1, 1990. [622H]
ORIGINAL
JURISDICTION: Writ Petition No. 5222 of 1985.
(Under
Article 32 of the Constitution of India) (With Writ Petition Nos. 443 and 754 of 1988) R.K. Garg, S.K. Verma,
P. Anshu Mishra and R.S. Singh for the Petitioners in Writ Petition No. 5222 of
1985.
G.B. Pai
and S.K. Sinha for the Petitioners in Writ Petition No.754 of 1988.
K. Parasaran,
Attorney General, G. Ramaswamy, Additional Solicitor General, Ms. A. Subhashini,
Probir Mitra and K. Swamy for the Respondents.
The
following Order of the Court was delivered:
Workmen
of Rohtas Industries Limited situated at Dalmianagar in District Rohtas within
the State of Bihar sent a letter addressed to Hon'ble the Chief Justice of this
Court on 8th of July, 1985, alleging that the Company had four units, namely,
paper and boards, cement, asbestos and vegetable ghee plant; the management
closed down the industries with effect from 9th of September, 1984, and have
denied employment to about 10,000 employees. It was prayed that there should be
immediate restoration of electricity to the colony, payment 618 of salary and
wages for the period since closure should be directed and compensation as per
the amendment to the Industrial Disputes Act in 1984 and dues under the
provident fund account, gratuity etc. should also be directed to be paid.
This
letter was registered as a writ petition and notice was issued. In the meantime
by order dated 22.5. 1986, the Patna High Court appointed a Provisional
Liquidator under the Companies Act. In the writ proceedings before this Court
the employers, the Provisional Liquidator, the State of Bihar and the Union of India have, in due
course, appeared.
On
27.4.1987, the Court made an interim order in the matter of payment of
arrear-wages by sale of assets. On 22.7.1987, the Court took note of the fact
that the proposal for restructuring of the Company was afoot in terms of its
suggestion and stated that claims of the financial institutions would be
considered later. On October
28, 1987, the Court
stated:
"This
Court had issued notice to the Union of India and learned Attorney General to
ascertain if it is possible to revive the company which has suddenly gone sick.
Learned Attorney General states that in the meantime Sick Industrial Companies
(Special Provisions) Act, 1985 which received assent of the President on 8th
January, 1986 has come into force and a Board in terms of section 4 thereof has
now been constituted. He suggests that a reference may be made to that Board
and the Board may be called upon to frame the Scheme as contemplated under
section 18 of the Act for revival of the company and instead of allowing the
Scheme to be dealt with further under the Act, the Board may be called upon to
submit its Report along with the Scheme for consideration of this Court. He
also submits that in the special facts of the case there is no necessity to
subject the Scheme to a statutory appeal.
Counsel
for the petitioners agrees that an effort may be made as per the suggestion of
the learned Attorney General." The Central Government made a reference to
the Board within one week as directed by the Court and the Board was given four
months' time to frame the Scheme. On 7.9.1988, this Court took note of the fact
that the State of Bihar was inclined for nationalisation of
the Company. The Union of India filed an affidavit that if any proposal is
mooted for nationalisation, it would be supported. This Court stated in this
order of 7.9.1988:
619
"On examining the matter in this background we are of the view that it is
in the interest of everyone that the industrial establishment should be revived
and sooner it is the better.
In
these circumstances, we direct that a Committee with the Industries Secretary
of the Union of India as its Chairman be immediately constituted to work out
the modalities of nationalisation. The Committee should consist of the
Secretary, Industries, Government of Bihar, senior representatives of the
creditor financial institutions, Finance Secretary of Government of India or
his representative and representative of Reserve Bank of India. The Committee should examine the
matter and submit its report within six weeks ........... " On 9.8.1989,
the Court took note of the report by saying:
"The
report submitted to this Court indicates that three units excepting paper unit
are viable and can be revived. On the 13th of December, 1988, this Court considered the report
and adjourned the matter to give an opportunity to the parties to explore the
modalities of revival of the three viable units. No substantial progress has
been made as we find. By the adjourned date the modalities should be discussed
and finalised and reported to the Court so that an order can be made to revive
the three units.
The
report indicated that in regard to paper unit, the Committee was not of the
opinion that it was viable. Learned Attorney General and Mr. Pal had been
requested by the Court to explore the possibilities of revival of the paper
unit. Ms. Subhashini on behalf of the learned Attorney General states that
given two weeks' time further discussions shall be held and a complete decision
may be reached as regards the paper unit .......... " A joint memorandum
was filed by the Union of India and the State of Bihar on 12.9.1989 which the Court rejected on account of the
fact that there was no clear and definite indication in the memorandum as to
revival. Thereafter, the State of Bihar and the Union of India have filed their statements separately and a
copy of the memorandum prepared by the learned Attorney General and circulated
has also been filed before us. We have also heard learned counsel for the
parties in the matter.
620 It
is not disputed that there is a huge amount of wages outstanding to the
workmen. Several financial institutions have large dues to recover from the
Company. The Trustees of the Debenture Trust Deeds have also sought to
intervene in this Court to maintain their claim. Apart from these, the owners
of the Company have also pleaded that they are entitled to compensation in the
event of the properties of the Company being taken away by way of nationalisation.
As
already noted, the Company has been closed down for more than five years now. A
lot of assets are fast becoming useless and will soon become junk. Several
attempts were made to dispose of some of the stocks held by the Official
Liquidator but for one reason or the other it has not been possible to complete
the sale and though this Court had directed that the sale proceeds would be utilised
for payment of arrears-wages, that has not been feasible. Claims have been laid
against the Company and are perhaps awaiting adjudication. 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 or second charge on the assets,
the creditors may not appreciably benefit. This Court cannot lose sight of the
fact that living to about 10,000 families had been denied for over five years
and apart from national loss, the workmen have been put to serious jeopardy. In
these circumstances, we are satisfied that it is of paramount importance that
the Company in respect of the viable units should be revived and allowed to
come into production. Unless there be a moratorium in regard to the liabilities
of the Company for a reasonable time, the attempt to revive the Company in
respect of the three units is bound to be frustrated upon the intervention of
the creditors, whereas once the company is revived and big commercial
activities are carried on, profit is bound to be earned and a conscientious and
prudent administration would certainly, in due course, provide adequate funds
for satisfaction of the debts. At present the question is one of priorities. It
has to be prudently decided as to which ones should be allowed to go ahead and
which should be made to wait.
In
this background and on the basis of the memoranda filed by the State of Bihar
and the Union of India and the note prepared by learned Attorney General and
made available to us by Mr. Pal for the other side with the Attorney General's
consent, we give the following directions:
1. The
State of Bihar shall appoint an authorised officer
from the Senior IAS cadre with appropriate commercial background 621 to be the
Rehabilitation Administrator.
2. The
Provisional Liquidator appointed by the High Court of Patna shall hand over to
the Administrator all the assets of the Company which he has taken over under
orders of the Court. Such assets of the Company which have not yet been taken
over by the Provisional Liquidator shall upon the appropriate officer being
designated vest in him forthwith and he is clothed with the necessary power
under our present orders to take such steps as are necessary to take over
possession of such assets of the Company. In the event of a dispute arising out
of the decision of the Administrator that the asset is of the company and is to
be taken over by the Administrator, an appeal shall be maintainable before a
Division Bench of the Patna High Court and the Judges to constitute such Bench
shall be nominated by the learned Chief Justice. For convenience the same
Judges shall continue on the nominated Bench for a reasonable period.
3. The
assets of the Company encumbered with financial and other institutions shall
not be available to be proceeded against for a period of one year from today
and there shall be a moratorium for a period of one year in regard to
proceedings taken and pending or to be taken against the Company hereafter and
limitation shall remain suspended for the period under our orders of today. It
would be open to the Court on being moved to extend the moratorium.
4. The
costs of the entire assets to be taken over by the State Government of Bihar as
per the book value and the dues against the company are estimated to be within
the limit of Rs. 15 crores. The State Government of Bihar has undertaken before
us to deposit the amount of Rs. 15 crores with the Administrator within eight
weeks from today. A similar amount of Rs. 15 crores shall be advanced by the
Union of India to the State of Bihar from out
of plan assistance for the State. The sum of Rs. 15 crores paid by the State
Government shall be utilised, in due course, for payment of arrears of wages to
the workers and for disbursement of secured loans of financial institutions and
other parties for which security of the Company's assets had been furnished.
The Administrator shall open an account with the lead nationalised Bank for the
State of Bihar operating at Dalmianagar into which the two sums of money being Rs.
15 crores each shall be credited.
622
5. The
Administrator shall set up one Committee with a retired High Court Judge, a
retired District Judge and an Accounts Officer with at least five years'
experience as Financial Advisor to the State Government to examine the claims
of the owners of the Company and other parties including financial
institutions. This should be done within six months from now. Once the list of
creditors is settled with all reasonable particulars, the matter should be
reported to this Court for directions and it shall be open to this Court to
finally indicate the figure at which each such claim shall be settled.
An
inventory of all the articles shall be made within four weeks from now. Steps
shall be taken to form a new company within four weeks from now.
Appointment
of technical consultants and other competent officers shall be undertaken
within two months hence.
The
asbestos, cement and vanaspati plants shall be commissioned after effecting
such repairs as may be necessary.
The
retrenched employees shall come back to work in phases. The first phase shall
admit a thousand workers, the second phase shall admit an equal number and in
the third phase, such number of further workers as may be necessary to run the
industries in a viable way shall be finalised. All expeditious steps as may be
possible shall be taken to provide employment.
Steps
shall be taken to explore the viability of the paper unit within three months
after the Company is recommissioned in respect of the three units. Liberty is given to the parties to apply in
the event of necessity but it is made clear that no extension in regard to
payment of the fifteen crores of rupees by the State Government and the Union
Government shall be granted. Every attempt should be made by all concerned to
give effect to the order keeping its true purport and spirit in view. We do not
intend to leave doubts in any one's mind that the purpose of our order is to
revive the Company and make it work viably. Everyone charged with the
responsibility of implementing the order of the Court shall, therefore, be
expected to work in such a way as would fulfil that purpose.
We
direct that the case shall remain pending in this Court and shall not be taken
to have been disposed of by this order. Call the case on 1st of March, 1990.
P.S.S.
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