Worker wage claims take priority over pledged closed-industry stock despite relief undertaking notification

Wages and emoluments earned by workers up to closure were given priority over pledged finished stock of the closed industry, because the stock represented the product of their labour and their subsistence was at stake. The stock was directed to be sold to satisfy those dues, while the secured creditors' interests were not treated as defeating worker payment where other sufficient securities existed. The notification declaring the undertaking a relief undertaking under the Bihar Relief Undertakings (Special Provisions) Act, 1981 could not be used to obstruct payment of workers' claims from the sale proceeds.

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Issues: Whether the proceeds of pledged finished stock could be directed to be sold for payment of workers' wages and dues accrued up to the date of closure, and whether the notification declaring the undertaking a relief undertaking under Section 3 of the Bihar Relief Undertakings (Special Provisions) Act, 1981 could prevent such sale and payment.

Analysis: The workers had remained unpaid despite earlier directions, and the stock lying with the closed industry represented the product of their labour. Although the finished goods were pledged with banks and the financial institutions had a priority claim over the stock, the Court held that the wages and emoluments earned up to closure could not be denied priority in the circumstances, especially where the workers' subsistence was at stake. The Court also noted that the banks had other sufficient securities and that the relief undertaking notification could not be used to defeat payment of workers' dues. A humane and practical approach was adopted to ensure immediate relief to the workers while leaving room for revival of the industry.

Conclusion: The stock was directed to be sold, the workers were entitled to be paid their dues up to the date of closure from the sale proceeds, and the relief undertaking notification did not bar such payment.

Final Conclusion: The decision protects workers' wage claims against the proceeds of the closed industry's finished stock and permits liquidation of that stock for payment of dues up to closure, notwithstanding the relief undertaking notification.

Ratio Decidendi: Where closed-industry stock represents the product of workers' labour, wages and dues accrued up to closure may be given priority for payment from the sale proceeds, and a relief undertaking notification cannot be invoked to obstruct that payment when the financial interests of secured creditors are otherwise protected.

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