2011 (10) TMI 511 - HC - Companies Law

Appeal successful: Haryana Financial Corp. ordered to pay workmen's compensation with interest.

Raj Kumar Versus Ravindra Pharmaceuticals (P.) Ltd.

The appeal was accepted, and the order of the learned Company Judge was set aside. The Court directed the Haryana Financial Corporation to pay the entire ... winding up – preferential payment - compensation payable to the workmen or their dependents in the case of an unfortunate event of losing life by the workmen – whether claim of secured creditors, the claim of the workmen should to be satisfied on pari passu basis – Held that:- workmen's dues as defined in sub-section (3) (iii) to Section 529 of the Act, will not include the compensation awarded under the Workmen's Compensation Act prior to the sale of the assets of the company. The measures introduced by Section 529-A, cannot be extended to abate the claim of the dependants of the deceased workmen. The Act gives priority of payment in terms of Section 14-A of the Act. - Appeal allowed. Issues Involved:1. Satisfaction of Award of compensation under the Workmen's Compensation Act, 1923.2. Pari passu basis of claim settlement with other secured creditors.3. Preferential payment in terms of Section 14-A of the Workmen's Compensation Act, 1923.4. Conflict between the provisions of the Workmen's Compensation Act, 1923, the Companies Act, 1956, and the State Financial Corporation Act, 1951.Detailed Analysis:1. Satisfaction of Award of Compensation under the Workmen's Compensation Act, 1923:The appellants, legal heirs of six workmen who died in an accident, were awarded a total sum of Rs. 5,34,298/- with interest by the Commissioner under the Workmen's Compensation Act, 1923 on 20.12.1993. The Company was taken over by the Haryana Financial Corporation under Section 29 of the State Financial Corporation Act, 1951 due to defaults, and the Company was ordered to be wound up on 4.2.1994. The appellants' claim for satisfaction of the Award was dismissed by the learned Company Judge, who held that the dues were to be satisfied on a pari passu basis with other secured creditors.2. Pari Passu Basis of Claim Settlement with Other Secured Creditors:The learned Company Judge's order dated 10.8.1999 stated that the workmen's claims should be satisfied on a pari passu basis with the claims of other secured creditors. The appellants filed an appeal, arguing that they were not heard before the order was passed. The appeal was withdrawn with liberty to move the Company Court for payment of compensation independently of the pari passu basis.3. Preferential Payment in Terms of Section 14-A of the Workmen's Compensation Act, 1923:The appellants sought preferential payment under Section 14-A of the Workmen's Compensation Act, which states that compensation due to workmen shall be a first charge on the assets transferred by the employer. The learned Company Judge declined this claim, leading to the present appeal. The appellants argued that the social welfare nature of the Workmen's Compensation Act should prevail over the general provisions of the Companies Act, 1956.4. Conflict Between the Provisions of the Workmen's Compensation Act, 1923, the Companies Act, 1956, and the State Financial Corporation Act, 1951:The Court examined whether the Workmen's Compensation Act, 1923, as a special legislation for the welfare of workmen, should prevail over the Companies Act, 1956, and the State Financial Corporation Act, 1951. The Court noted that Section 14-A of the Workmen's Compensation Act provides a first charge on assets transferred by the employer for compensation due to workmen, which is a special provision compared to the general provisions of the Companies Act.The Court referred to various precedents, including the Supreme Court's rulings in Life Insurance Corporation of India v. D.J. Bahadur, R.S. Raghunath v. State of Karnataka, and Maharashtra State Cooperative Bank Ltd. v. Assistant Provident Fund Commissioner, which emphasized the priority of social welfare legislation over general laws.The Court concluded that Section 14-A of the Workmen's Compensation Act, being a special provision, should prevail over the general provisions of the Companies Act and the State Financial Corporation Act. The compensation awarded to the workmen or their dependents should be given priority over other debts, including those of secured creditors.Judgment:The appeal was accepted, and the order of the learned Company Judge was set aside. The Court directed the Haryana Financial Corporation to pay the entire amount of compensation with interest to the dependents of the workmen within three months, in accordance with the Award by the Commissioner under the Workmen's Compensation Act.