2001 (8) TMI 1299 - HC - Companies Law

Court Grants Petitioner's Motions for Fund Release & Machinery Sale Restraint

The court granted the petitioner's motions, directing the release of funds to employees and restraining the sale of machinery pending BIFR's consideration ... Preparation and sanction of schemes Issues Involved:1. Direction to BIFR to deposit funds for unpaid wages.2. Restraint on dismantling/selling machinery and other reliefs.3. Validity and enforcement of settlement agreements.4. Prohibition on asset disposal under Section 22A of SICA.5. Disbursement of funds to employees.Detailed Analysis:1. Direction to BIFR to deposit funds for unpaid wages:The petitioner-trade union sought a direction to the BIFR to deposit Rs. 2,76,04,000 with interest for unpaid wages of 660 workmen. The respondent mill company and its representative union opposed this, suggesting the funds should be part of an overall settlement involving voluntary retirement. The court noted the history of the case, including previous orders directing the mill company to clear wage arrears and the failure of a Voluntary Retirement Scheme (VRS). The court emphasized that the funds should be released to the employees, allowing them to choose between accepting the funds as unpaid wages or under the VRS, subject to BIFR's final determination.2. Restraint on dismantling/selling machinery and other reliefs:The petitioner also sought to restrain the respondents from dismantling or selling machinery and requested police protection and disclosure of machinery buyers. The court observed that the revival proceedings were pending before BIFR, which had directed the company to seek permission for asset disposal. The court held that the machinery should not be sold until the revival proposal was considered by BIFR, thus granting the restraint sought by the petitioner.3. Validity and enforcement of settlement agreements:The respondent-company argued that a binding settlement under the Bombay Industrial Relations Act (B.I.R. Act) had been reached with the representative union, which should govern the disbursement of funds. The petitioner contended that the revival scheme was still under consideration, and the funds should be released as unpaid wages. The court acknowledged the settlement but emphasized that the disbursement of funds should be flexible, allowing employees to choose the purpose of the funds, subject to BIFR's final decision.4. Prohibition on asset disposal under Section 22A of SICA:The court examined whether there was a prohibition on asset disposal under Section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). It noted that BIFR had directed the company to seek permission for asset disposal as part of the revival proposal. The court concluded that the conditions under Section 22A were fulfilled, prohibiting the sale of assets without BIFR's consent during the preparation or consideration of the revival scheme.5. Disbursement of funds to employees:The court directed that the funds, after deducting a claim amount of Rs. 10,43,483, be transferred to the Prothonotary and Senior Master of the High Court for distribution to the employees. It specified that the funds should be released as ad hoc payments, subject to BIFR's determination on whether the payments were for wages or VRS. The court also made provisions for the disputed amounts of 29 workmen, directing that these amounts be kept separately and that the petitioner could apply for their release.Conclusion:The court granted the petitioner's motions, directing the release of funds to employees and restraining the sale of machinery pending BIFR's consideration of the revival proposal. The court emphasized the need for flexibility in the disbursement of funds, allowing employees to choose the purpose of the payments, subject to BIFR's final decision. The court also rejected the request for a stay of the order.