2006 (5) TMI 192 - SC - Companies Law

Supreme Court Upholds Pre-Scheme Creditors' Rights, Orders Immediate Payments

Radheshyam Ajitsaria Versus Bengal Chatkal Mazdoor Union

The Supreme Court allowed the appeals by the Nemani Group and Radheysham Ajitsaria, upholding their entitlement as pre-scheme unsecured creditors. The ... Whether the Division Bench of the High Court was entitled to allow the appeal without first deciding the maintainability of the appeals as directed in terms of the order dated 29-3-2001? Whether the Division Bench of the High Court was entitled to withhold the payment of the pre-scheme unsecured creditors in view of the specific direction given by this Court on 31-3-1994? Whether the Division Bench was entitled to direct re-adjudication of the claims, which were already adjudicated contrary to the order passed by the Division Bench of the High Court on 30-11-1998 and 1-12-1998? Whether the workers can have any stake and have right to receive any payment from the fund lying with the Registrar, original side of the High Court of Calcutta which was specially earmarked for the pre-scheme unsecured creditors as defined in the Scheme? Whether the finding and decision of the learned Company Judge can be ignored and/or overlooked on the ground that no enquiry was held by the Registrar? Held that:- Appeal allowed. It is crystal clear that finding of the Division Bench of the High Court, that the claim of the appellants have not been duly adjudicated is erroneous as claim of the appellants have duly been adjudicated by the Registrar, High Court, Original Side, with the help of the Chartered Accountant as would be evident from Certificate dated 15-3-2004 issued by the Registrar. Thus, the said order dated 3-3-2004 passed by the Division Bench as against these appellants is liable to be set aside. Thus the appellants are entitled for payment as pre-scheme unsecured creditors in view of the specific directions given by this Court on 31-3-1994. Issues Involved:1. Maintainability of the appeals.2. Entitlement to payment of pre-scheme unsecured creditors.3. Direction for re-adjudication of already adjudicated claims.4. Workers' right to receive payments from the fund earmarked for pre-scheme unsecured creditors.5. Validity of the findings and decisions of the Company Judge regarding the adjudication of claims.Detailed Analysis:Issue 1: Maintainability of the AppealsThe Division Bench of the High Court allowed the appeal without first deciding its maintainability as directed in the order dated 29-3-2001. The Supreme Court found this to be erroneous, emphasizing the necessity of addressing the maintainability before proceeding with the merits of the appeal.Issue 2: Entitlement to Payment of Pre-Scheme Unsecured CreditorsThe Supreme Court upheld the claims of the Nemani Group and Radheyshyam Ajitsaria as pre-scheme unsecured creditors. The Court noted that the funds available with the Registrar were specifically earmarked for unsecured creditors as per the scheme sanctioned in 1989. It was held that there was no justification for withholding payments to these creditors, whose claims had been finally adjudicated by the Registrar and affirmed by both the Single Judge and the Division Bench.Issue 3: Direction for Re-Adjudication of Already Adjudicated ClaimsThe Division Bench's direction for re-adjudication of the claims, which had already been adjudicated by the Registrar, was found to be contrary to the earlier orders dated 30-11-1998 and 1-12-1998. The Supreme Court held that re-adjudication was unnecessary and erroneous, as the claims had been properly adjudicated and accepted by the relevant judicial authorities.Issue 4: Workers' Right to Receive Payments from the Fund Earmarked for Pre-Scheme Unsecured CreditorsThe Court concluded that the workers did not have the right to claim payments from the fund specifically earmarked for pre-scheme unsecured creditors. The scheme provided separate arrangements for the payment of workers' dues, and the funds in question were intended solely for unsecured creditors. The Court emphasized that the workers' dues should be addressed by the current management of the company, which was operating under the same scheme.Issue 5: Validity of the Findings and Decisions of the Company JudgeThe Supreme Court upheld the findings and decisions of the Company Judge, who had directed payments to be made to all creditors as per the revised statement, except to the Nemani Group initially due to allegations of excess payments. The Court found that the Company Judge's decisions were based on proper adjudication by the Registrar and were in line with the scheme's provisions.Conclusion:1. The appeals filed by the Nemani Group and Radheyshyam Ajitsaria were allowed.2. The Division Bench's order directing re-adjudication of claims was set aside.3. The Registrar was directed to make payments to the pre-scheme unsecured creditors, including the Nemani Group and Radheyshyam Ajitsaria, immediately.4. The workers' claims were to be addressed by the current management of the company, which was responsible for paying the dues as per the scheme.5. The funds lying with the Registrar were specifically earmarked for the pre-scheme unsecured creditors and could not be diverted to pay workers' dues.The Supreme Court directed the Registrar to release the bank guarantees furnished by the appellants and to ensure the payment of the other dues such as PF, ESI, Welfare Fund, arrears of wages, gratuity, and bonus to the workers, depending on the availability of funds with the company.