2013 (1) TMI 1064 - HC - Companies Law

Workers Denied Secured Creditor Interest Rates; Bonus and Notice Pay Not Statutory Dues.

Textile Labour Association Versus Official Liquidator Of New Rajpur Mills Ltd. (In Lqn.) & 4

The court dismissed both appeals, ruling that workers are not entitled to interest on their dues at the same rate as secured creditors under Section 529A ... - Issues Involved:1. Entitlement of workers to interest on unpaid wages at par with secured creditors under Section 529A of the Companies Act, 1956.2. Inclusion of bonus under the Payment of Bonus Act, 1965 as statutory dues under Section 530 of the Companies Act, 1956.3. Classification of notice pay under Section 25 of the Industrial Disputes Act, 1947 as statutory dues under Section 530 of the Companies Act, 1956.Issue-wise Detailed Analysis:1. Entitlement of Workers to Interest at Par with Secured Creditors:The primary issue was whether workers are entitled to interest on their dues at the same rate as secured creditors under Section 529A of the Companies Act, 1956. The appellants, representing workers' unions, argued that by virtue of the amendment in 1985, workers' dues are treated as secured and at par with secured creditors. They contended that the term 'pari passu' implies equal treatment in all aspects, including interest on dues. The appellants relied on precedents from the Andhra Pradesh High Court and the Hon'ble Supreme Court, which they interpreted as supporting their claim to interest at the same rate as secured creditors.The court, however, disagreed with this interpretation. It emphasized that while Section 529A entitles workers to receive their dues pari passu with secured creditors, this parity is limited to the payment of principal amounts and does not extend to interest. The court noted that the dictionary meaning of 'pari passu' indicates equality in payment, not in the nature of dues. The court upheld the decision of the Kerala High Court, which had previously ruled that workers are not entitled to interest at par with secured creditors. Consequently, the court held that workers are not entitled to interest on their dues at the rate applicable to secured creditors.2. Inclusion of Bonus as Statutory Dues:The second issue concerned whether the bonus payable under the Payment of Bonus Act, 1965, qualifies as statutory dues under Section 530 of the Companies Act, 1956. The appellants argued that bonus is a statutory obligation and should be treated as a statutory due. However, the court rejected this argument, referring to the definition of 'workmen's dues' under Section 529(3)(b) of the Companies Act, which does not include bonus. The court also cited the Hon'ble Supreme Court's decision in Hamdard (Wakf) Laboratories vs. Dy. Labour Commissioner, which clarified that wages do not include bonus. Therefore, the court concluded that bonus does not fall within the category of statutory dues under Section 530 and cannot be claimed pari passu with secured creditors.3. Classification of Notice Pay as Statutory Dues:The final issue was whether notice pay under Section 25 of the Industrial Disputes Act, 1947, should be classified as statutory dues under Section 530 of the Companies Act, 1956. The appellants contended that notice pay is a statutory obligation and should be treated as such. However, the court found no merit in this argument, reiterating that 'workmen's dues' as defined in the Companies Act do not encompass notice pay. Consequently, the court determined that notice pay does not qualify as a statutory due under Section 530.Conclusion:The court dismissed both appeals, affirming that workers are not entitled to interest on their dues at the same rate as secured creditors, and that neither bonus nor notice pay qualifies as statutory dues under the relevant sections of the Companies Act. The judgment emphasized the distinction between parity in payment and parity in the nature of claims, thereby upholding the original orders of the Company Court.