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Issues: (i) Whether the Debts Recovery Tribunal has jurisdiction to adjudicate and quantify the workmen's claims against a company in liquidation for the purpose of distribution of sale proceeds under the recovery certificate. (ii) Whether, after a winding up order or appointment of a provisional liquidator, the workmen's dues acquire a pari passu charge over the security of secured creditors and how the sale proceeds are to be distributed.
Issue (i): Whether the Debts Recovery Tribunal has jurisdiction to adjudicate and quantify the workmen's claims against a company in liquidation for the purpose of distribution of sale proceeds under the recovery certificate.
Analysis: The statutory scheme of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 confers exclusive jurisdiction on the Debts Recovery Tribunal to adjudicate bank and financial institution claims and on the Recovery Officer to execute the recovery certificate. However, the Act does not confer power on the Tribunal to determine the substantive dues of workmen of the debtor company. Section 19(19) is a distribution provision that operates after adjudication of the bank's claim and does not itself authorise the Tribunal to adjudicate workmen's claims. Once the company is in liquidation, the liquidator is the competent authority to determine workmen's dues under the supervision of the company court.
Conclusion: The Debts Recovery Tribunal cannot adjudicate the workmen's claims; such claims must be determined by the liquidator.
Issue (ii): Whether, after a winding up order or appointment of a provisional liquidator, the workmen's dues acquire a pari passu charge over the security of secured creditors and how the sale proceeds are to be distributed.
Analysis: On winding up, Sections 529 and 529A of the Companies Act, 1956 create a statutory pari passu charge in favour of workmen to the extent of the workmen's portion in the security of every secured creditor. That position applies even where the assets were sold in execution of a DRT recovery certificate, if final disbursement had not been completed before liquidation intervened. The relevant date for apportionment is the date of the winding up order, and distribution of proceeds realised under the recovery certificate must be made by the Debts Recovery Tribunal in accordance with the mandate of Section 529A, while the liquidator determines the workmen's dues.
Conclusion: Workmen are entitled to pari passu treatment from the date of winding up or provisional liquidation, and the proceeds are to be distributed accordingly.
Final Conclusion: The impugned directions of the High Court were set aside, and the matter was remitted for further action consistent with the principle that workmen's claims are to be adjudicated by the liquidator, while distribution of realised sale proceeds must respect the statutory pari passu charge.
Ratio Decidendi: In the winding up of a company, the liquidator alone determines workmen's dues, while the Debts Recovery Tribunal's role is confined to sale and distribution of realised proceeds in accordance with Section 529A of the Companies Act, 1956, which gives workmen a statutory pari passu charge over the security of secured creditors to the extent of their workmen's portion.
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