Sick company wage liability: Board lacked power to compel the State to pay employees, and no legal duty arose from ownership alone.

Under the Sick Industrial Companies (Special Provisions) Act, 1985, the Board has no statutory power to direct a State Government to pay the wages of employees of a sick industrial company. The rehabilitation framework under Sections 15 to 20 contemplates inquiry, revival planning, reliefs, concessions and, if needed, winding up, but it does not create an enforceable obligation on the State to finance the company's wage bill by interim direction. Employees of a Government-owned or Government-controlled company are not Government servants, and State ownership or control does not itself impose liability for the company's salary obligations. Claims of workmen remain governed by the company-law framework and priority rules.

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Issues: Whether the Board for Industrial and Financial Reconstruction had jurisdiction under the Sick Industrial Companies (Special Provisions) Act, 1985 to direct the State Government to pay the wages of employees of a sick industrial company, and whether the State Government had any legal obligation to bear such liability.

Analysis: The statutory framework under Sections 15 to 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 provides for reference of a sick industrial company, inquiry, determination of practicability of revival, preparation of a rehabilitation scheme, and, if necessary, winding up. The scheme provisions contemplate financial assistance, reliefs, concessions, and sacrifices from identified sources, but do not confer any power on the Board to direct a State Government to meet the wage bill of the company's workers by an interim order. The company remained financially unviable, no acceptable revival package had emerged, and the State had withdrawn willingness to infuse further funds. The employees of a Government-owned or Government-controlled company are not Government servants, and the fact that the unit is a subsidiary of a Government company does not by itself create a legal obligation on the State to pay salaries of the company's employees. Claims of workmen are governed by the relevant company law framework and the priority attached to their dues, but not by any enforceable duty of the State to finance wages in such circumstances.

Conclusion: The direction issued by the Board requiring the State Government to pay the wages of the sick company's employees was without jurisdiction, and the State Government was not legally bound to make such payments. The challenge succeeded in favour of the appellant.

Ratio Decidendi: In proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, the Board cannot direct the State Government to pay wages of a sick company's employees in the absence of statutory authority, and ownership or control of the company by the State does not create a general legal duty to discharge the company's salary liabilities.

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