Industries Ltd. Vs. State of Orissa & Ors  INSC 590 (28 November
Appeal is against a Judgment dated 7th April, 1995, by which the Appellant has been
directed to pay arrears of salary of the 4th Respondent for the period from
15.12.1981 to 2.8.1989. Briefly stated the facts are as follows: The 4th
Respondent was working as a Chief Welfare Officer under the 3rd Respondent Corporation.
His services were terminated by an order dated 15th December, 1981. The 4th Respondent preferred an appeal to the State
Government invoking its jurisdiction under the third Proviso to Rule 6(iv) of
the Orissa Welfare Officers (Recruitment and conditions of Service) Rules,
1970. After hearing parties the State Government set aside the order of
termination and directed reinstatement of Respondent No. 4. The 3rd Respondent
Corporation then insisted that reinstatement could be given effect to with effect
from the date of the appellate order and not from the date of order of
termination. The 4th Respondent then filed a writ petition in the High Court of
Orissa. The High Court directed that the 4th Respondent was to be allowed to
continue in the post of Chief Welfare Officer forthwith. The 4th Respondent,
therefore, joined the service again on 26th July, 1989. The 4th Respondent was still not
paid his arrears of salary as the 3rd Respondent had been declared sick under
the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985.
Therefore, the arrears could not be paid until the BIFR took a decision in the
matter. The BIFR sanctioned a Scheme on 21st December, 1990. Under this Scheme Mill No.3 i.e.
the Mill where Respondent No. 4 was working, was purchased by the State of Orissa. Respondent No. 3 then intimated
the 4th Respondent that the State of Orissa, after the purchase of Mill No. 3, had sold it to the Appellants. The
4th Respondent was informed that all liabilities would now be met by the
Appellants. When the 4th Respondent approached the Appellants for payment of
his dues, the Appellants claimed that they had not taken over the liability to
pay his dues and refused to pay the amount.
4th Respondent, therefore, filed a Writ Petition before the High Court at Orissa
that the Appellant be directed to pay his dues. During the pendency of this
Writ Petition the 4th Respondent attained the age of superannuation on 13th April, 1992. Therefore, the only relief that
was surviving was payment of arrears from the date of termination on 15th December, 1981 till superannuation on 13th April, 1992. In the Writ Petition the State of Orissa contended that the Appellants
having taken over all liabilities in terms of an MOU dated 20th April, 1991 had to pay the dues of the 4th
Respondent. The High Court by the impugned judgment has directed the Appellant
to pay dues as set out herein above.
only question contended before us is that it is not the Appellants but the
State of Orissa which is liable to pay the dues of
the 4th Respondent. On the other hand on behalf of the State of Orissa it has been contended that the
Appellants are liable to pay the amount. In order to determine who is liable to
pay the arrears of salary of the 4th Respondent one has to look at the Scheme,
which has been sanctioned by BIFR, and the correspondence and MOU between the
Appellants and the State of Orissa. Under
the Scheme which has been sanctioned by BIFR on 21st December, 1990, it is provided as follows : "Mill No. 3 Mill
No. 3 would be sold to the Orissa Government.
are certain liabilities, which relate to mill no. 3 such as Rs. 240 lakhs as
working capital advance and Rs.
as interest on the working capital advance, and certain State and Central
Government dues. While all the State and Central Government dues would be paid
by the Orissa State Government after the rehabilitation period and the interest
on working capital advance is being written off as a part of the revival of
TPM, the working capital advance of Rs. 240 lakhs and labour dues of Rs. 160 lakhs
would be paid by the Orissa State Government. An amount of Rs. 6 crores would
be the sale price of Mill No. 3 payable within 30 days by the State Government
to TPM for meeting the dues of labour being retrenched in respect of Mill No.
litigations relating to Mill No. 3 before different courts and authorities will
be taken over and pursued by the State Government purchasing the Mill. The Orissa
Government will also take over all liabilities due to the State Government and
the Central Excise duty payable in respect of Mill No. 3.
Offices/Branch and Sales Offices i. Employees of Corporate, Branch and Sales
Offices who have been on duty after 3.11.85 will be paid their arrears dues
upto the date of sanction of the scheme;
Those who have reached superannuation dates before the date of sanction of the scheme,
will get their normal retirement benefits for which they are entitled to;
About 90 employees of these offices other than those who have reached
superannuation will stand retrenched with effect from the date of sanction of
the scheme. They will be entitled to due compensation, and funds have been
provided for this purpose." Thus it is clear that under the Scheme it was
the State of Orissa who was to pay the arrears due to employees of the
Corporate Branch and Sales Offices upto the date of sanction of the Scheme i.e.
upto 21st December, 1990. The correspondence between the Appellants and the
State of Orissa consists of letters dated 5th March, 1991, 13th March, 1991 and 16th
March, 1991. Under the
letters dated 5th
March, 1991 and 13th March, 1991, the Appellants offer to purchase
Mill No. 3 on the terms and conditions mentioned in the letters. The State of Orissa by the letter dated 16th March, 1991 accepts those terms and conditions.
terms and conditions are then incorporated in an MOU, which is signed between
the parties on 20th
relevant clauses of the MOU are clauses (1), (2) and (3), which reads as follows
: "1. That the State Government hereby agrees to transfer the assets of
TPM-3 situated at Choudwar, Distt. Cuttack, State of Orissa in favour of BILT
for a total sum of Rs. 12,00,00,000/- (Rupees twelve crores only) alongwith all
other/deferred liabilities as detailed in Clause 3 of this MOU hereinafter, so
as to discharge the liability of TPM-3, Bank's working capital dues, workers'
dues as per the award of BIFR and the pending dues of the State and Central
BILT shall pay Rs. 6,00,00,000/- (Rupees six crores only) within 7 (seven) days
from the date of signing of this MOU as advance towards and being the part
payment of total sum agreed as above.
The BILT shall pay the balance amount of Rs. 6 Crores after it receives the
requisite permission under the MRTP Act for the acquistion of the assets of the
said TPM-3 from the concerned Authority duly constituted under the said Act and
the State Government hereby assures that it will provide its good offices to
BILT and will endeavour so that BILT's application to obtain requisite approval
under the MRTP Act for acquiring the assets of TPM-3 is expeditiously granted.
That the award dated 21.12.1990 passed by the BIFR has provided that an amount
of Rs. 1.6 Crores is to be paid to the workman of TPM-3 for the period till
January 31, 1989 and whereas in acocrdance with the letter
No.7956/I-IX-HI-28/91dated the 21st March, 1991 issued by the State Government
BILT has started the process of direct negotiations with the workman of TPM-3
for a settlement in respect of their claims and wages for the period after
January 31, 1989, the parties hereto hereby declare that it is their intention
and objective that a just and fair settlement should be reached with the
workmen thereby covering all the issues pertaining to the terms of employment
of workmen for the period commencing on and from the 1st February, 1989 till
the date of revival of TPM-3.
also agreed by the State Government that it will issue appropriate directions
to the Labour Deptt. To assist and extend full cooperation to BILT enabling
them to arrive at a peaceful and amicable settlement.
That the award of the BIFR being Annexure -I on pages 5 and 10 thereof has
spelt out the amount of consideration payable for the assets and to meet the
liabilities of TPM-3 and in accordance with which the parties hereto hereby
mutually agree that the liabilities of the TPM have to be discharged as under
:- Description Amount a. The sale price of TPM-3 Rs. 6@@ IIIIII Crores b.
Working capital advance being payable Rs. 2.40 Crores to the banks.@@
JJJJJJJJJJJJJ c. Dues payale to the State Government Rs. 7 Crores and the
Central Government. This amount has not been quantified but is estimated to be
in the region of Rs. 7 Crores.
Dues payable to the workmen for the Rs. 1.60 Crores period upto 31.1.1989.@@
JJJJJJJJJJJJJJJJJJJJJJ e. Dues payable as a consequence of certain
proceedings/litigations relating to TPM-3 pending before different
Courts/Authorities. This amount has Yet not been estimated.
reimburse the amount of Capital Gains Tax if any arising as a result of sale of
TPM-3. In the absence of any adjudication order as may be passed hereafter by
the concerned Income Tax Authority, the liability under this head is not
capable of being quantified/estimated and as such is undertaken to be payable
in toto in principle.
the dues in respect of the claims and wages of the workmen of TPM-3 for the
period subsequent to 31.1.1989 will be determined by direct negotiations with
the workmen and such liability is undertaken in principle to be paid by BILT
accordingly. Further, in accordance with the terms of the said award and the
terms as contained in the Letter of Acceptance No.7006/I-IX-III-28/91 dated
16.3.1991 issued by the State Government to BILT, BILT shall pay the balance
dues of the State Government, if any, free of interest to the State Government
and Central Excise dues to the Central Government free of interest after the
expiry of 10 (ten) years from the date of commencement of production by BILT at
the said TPM-3. Further, it is made absolutely clear that the total
consideration of Rs. 12 Crores mentioned in Clause No. 1 above, is included in
the break up shown in clause No. 3 above, which represents the total estimated
liability of BILT." Clause 10 is also relevant. It reads as follows ;
the State Government hereby clarifies that save and except the liabilities as
are mentioned in the letter dated 5.3.91 (vide Annexure - IV) and letter dated
13.3.1991 (vide Annexure - V) addressed by BILT to the State Government, no
other liability shall accrue to BILT as a consequence of its purchasing the
said TPM-3." Thus it is only the liabilities which are mentioned in the
letters dated 5th
March, 1991 and 13th March, 1991 and the liabilities mentioned in
clause (3), which are to be borne by the Appellant. All other liabilities
remain to be discharged by the State of Orissa. Liabilities mentioned in clause (3) of the MOU are those agreed to be
taken by the Appellants in the letters dated 5th March, 1991 and 13th
March, 1991. Reading
of clauses (1) and (3) shows that the liability to make payment to the 4th
Respondent has not been passed on to or taken over by the Appellants. It was
sought to be suggested that under the letter dated 5th March, 1991, the Appellants were to pay all dues of the workers upto
December 1998. It was submitted that the term "worker" would also
include the 4th Respondent though he was not a workman. We are unable to accept
this submission. Even in the letter of 5th March, 1991, it is clarified that the dues of
the workmen are to the extent of Rs. 1.60 Crores. This liability of Rs. 1.60 Crores
is the same as had been set out in the Scheme as being labour dues of Rs. 160 lakhs.
liability is the same as that provided in clause 3(ii) of the MOU. It could not
be disputed that Appellants have paid this sum of Rs. 1.60 Crores to the
Workmen. The claim of Respondent No. 4 is in addition to and over and above the
claim of the Workmen in the sum of Rs. 1.60 crores.
liability of the arrears of salary payable to the 4th Respondent was not taken
over by the Appellants even though under the Scheme the State of Orissa had
taken over the liability to pay all dues of the employees upto the date of the
sanction of the Scheme. Thus dues of employees upto December 1990 were payable
by the State of Orissa. This would include arrears of
salary payable to the 4th Respondent. In this view of the matter the High Court
was wrong in directing the Appellants to pay this amount. To that extent the order
of the High Court is required to be and is set aside. It is clarified that the
amounts due to the 4th Respondent are payable by the State of Orissa. At this stage it must be mentioned
that there was a dispute as to whether the 4th Respondent continued to
discharge his duty after 2nd
August, 1989. As this
was a disputed question of fact the High Court only directed payment of arrears
for the period from 15.12.1981 till 2.8.1989. We see no reason to vary that
portion of the judgment of the High Court. The arrears of salary which will be
payable by the State of Orissa to the 4th Respondent will only be
for the period from 15.12.1981 till 2.8.1989. The same must be paid as
expeditiously as possible. The Appeal stands disposed of accordingly. There
will be no order as to costs.