Workers receive Rs 14.6 crore settlement from liquidated company after decades of unpaid dues

The Delhi HC disposed of an appeal regarding disbursement of funds to workers from a company under liquidation. The court balanced equities between secured creditors and thousands of workers deprived of dues for decades. A One Time Settlement of Rs.14,64,88,422/- was accepted as full and final payment to 2018 union workers. The court directed the Official Liquidator to credit the company account with all amounts from the Common Pool Fund from asset sales between November 2005 and August 2013. All worker claims would be finally satisfied upon receipt of settlement amounts, with no further claims permitted.

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Issues Involved:
1. Compliance with the order dated 7th August 2014.
2. Status of the sick company declaration and winding-up proceedings.
3. Claims and settlements of workers and creditors.
4. Distribution of funds among workers and creditors.
5. Specific treatment of 2018 workers under the One Time Settlement (OTS).
6. Role and actions of the Official Liquidator.
7. Final directions and modifications to previous orders.

Issue-wise Detailed Analysis:

1. Compliance with the order dated 7th August 2014:
Leave was sought by various advocates to hand over affidavits in compliance with the order dated 7th August 2014. The affidavits were taken on record, and it was submitted that there was no impediment for the court to proceed with the order.

2. Status of the sick company declaration and winding-up proceedings:
The respondent company, M/s Jhalani Tools (India) Limited, approached the Board for Industrial and Financial Reconstruction (BIFR) in 1987 for its declaration as a sick company. The BIFR recommended winding up the company in 2000, which led to the registration of Company Petition No.18/2001. The company was found to be indebted and unable to pay its debts, leading to the appointment of the Official Liquidator.

3. Claims and settlements of workers and creditors:
The appellant, M/s Jhalani Tools Workers Union, entered into a One Time Settlement (OTS) for 2018 workers, agreeing on a claim of Rs.59 crores, with Rs.13 crores to be paid in lumpsum. This settlement was scrutinized by a committee led by Mr. Justice S.N. Dhingra, which found the workers entitled to Rs.14,64,88,422/-.

4. Distribution of funds among workers and creditors:
The Official Liquidator was directed to disburse funds among workers and creditors based on a pro-rata basis. The learned Company Judge held that workers of different units could not be treated differently and directed a pro-rata distribution of funds.

5. Specific treatment of 2018 workers under the One Time Settlement (OTS):
The appellant-union contended that the 2018 workers agreed to the OTS to receive a lumpsum amount, which was beneficial for the company and creditors. The Official Liquidator had already made payments to some workers under the OTS. The court accepted the OTS amount of Rs.14,64,88,422/- as full and final payment to these workers.

6. Role and actions of the Official Liquidator:
The Official Liquidator was directed to take over the company's assets and records, invite claims, and manage the sale proceeds. A significant portion of the funds was transferred to the Common Pool Fund, which the court directed to be restored to the company's account for disbursement.

7. Final directions and modifications to previous orders:
The court issued several directions, including:
- Crediting the company's account with amounts from the Common Pool Fund.
- Releasing Rs.14,64,88,422/- to the appellant for disbursement to 2018 workers.
- Ensuring disbursement of amounts to workers and maintaining records.
- Proceeding with pro-rata distribution to other workers and creditors.
- Modifying the order dated 13th August 2014 concerning the 2018 workers.
- Binding the One Time Settlement and today's orders only to the 2018 workers.
- Scrutinizing claims of other workers by Mr. Justice S.N. Dhingra Committee.

The appeal and all pending applications were disposed of in these terms, with a copy of the order provided to the parties.

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