2024 (6) TMI 912 - HC - Companies Law

Workmen cannot claim statutory interest under Rule 156 after final settlement from unsecured assets

Gopal Mahto, Nand Keshwar Prasad Versus The Official Liquidator, Jharkhand, The Chief Manager, UCO Bank (A Government of India Undertaking), The General Manager, Stressed Assests Stabilization Fund (SASF), Maharashtra, The General Manager, Industrial Finance Corporation of India Limited (IFCI), Kolkata, The Managing Director, Edelweiss Asset Reconstruction Company Limited (EARC) Mumbai, BIFR (Board for Industrial and Financial Reconstruction) New Delhi, UMI Special Steel Ltd.,

The Jharkhand HC dismissed appeals challenging denial of statutory interest under Rule 156 of Companies (Court) Rules, 1959. The court held that Section ... Grant of statutory interest in accordance with Rule 156 of the Companies (Court) Rules, 1959 - scope of the Section 483 of the Companies Act, 1956 - pari passu principle for interest payment between secured creditors and workmen - HELD THAT:- Section 483 confers the right to appeal and forum for the same in respect of any order made in the matter of the winding up of a company by the High Court having jurisdiction in the matter - Further, it is settled position of law that while exercising the power of appeal under the provision of law, the appellate court is to exercise the power of appellate jurisdiction if the order is passed on erroneous consideration of the factual aspect. The purpose of Section 529-A is to ensure that the workmen should not be deprived of their legitimate claims in the event of the liquidation of the company and the assets of the company would remain charged for the payment of the workers' dues and such charge will be pari passu with the charge of the secured creditors. In the light of the definition of the “vested right”, it is evident that right accrues to person or persons attached to an institution or building or anything whatsoever, meaning thereby, if an incumbent is claiming a vested right, he is to substantiate before the court of law that the right has been created in his favour by an order passed by the competent authority in accordance with law. It is evident that in the instant case, the workmen never raised the claim of interest and no such claim of interest was ever adjudicated upon. The payments have been made to the workmen in priority against sale proceeds of unsecured assets of the company in compliance of the order dated 12th August 2016. It has been accepted by the parties and has attained finality. The section 483 of the Act 1956, confers power of the widest amplitude on the appellate court so as to do complete justice between the parties and such power is unfettered by consideration of facts like who has filed the appeal and whether the appeal is being dismissed, allowed or disposed of by modifying the judgment appealed against. The object sought to be achieved by conferment of such power on the appellate court is to avoid inconsistency, inequity, inequality in reliefs granted to the parties concern. This Court, after having discussed the issue and taking in to consideration the settled proposition of law and coming back to the impugned order passed by the learned Single Judge, is of the view that if the learned Single Judge has declined to interfere with the prayer made in the interlocutory application for grant of statutory interest, the same cannot be said to suffer from an error. The instant Company appeals are hereby dismissed. Issues Involved:1. Entitlement of workmen to statutory interest under Rule 156 of the Companies (Court) Rules, 1959.2. Applicability of pari passu principle for interest payment between secured creditors and workmen.3. Scope of appellate jurisdiction u/s 483 of the Companies Act, 1956.Summary:Entitlement of workmen to statutory interest under Rule 156 of the Companies (Court) Rules, 1959:The workmen filed I.A. No. 7469/2016 seeking statutory interest on the amount of Rs. 8,51,01,000/- from the sale proceeds of unsecured assets of the company in liquidation, which was kept in a fixed deposit account since 2008. The Company Court rejected this prayer, and the workmen appealed. The court analyzed Rule 156, which allows creditors to prove for interest not exceeding four percent per annum on debts overdue at the date of the winding-up order. However, the court noted that the workmen did not claim interest when the debt was adjudicated by the Official Liquidator. Therefore, Rule 156 was deemed inapplicable.Applicability of pari passu principle for interest payment between secured creditors and workmen:The appellants argued that both secured creditors and workmen should be treated pari passu u/s 529 of the Companies Act, 1956, and thus, workmen should receive interest on their debts if secured creditors did. The court acknowledged that while workmen and secured creditors are pari passu concerning the principal amount, this does not extend to interest payments. The interest for secured creditors is part of the loan contract, whereas the workmen's arrears of salary do not inherently include interest unless explicitly claimed and adjudicated.Scope of appellate jurisdiction u/s 483 of the Companies Act, 1956:The court examined the scope of appellate jurisdiction u/s 483, which allows appeals from any order made in the winding-up of a company. The court emphasized that the appellate jurisdiction should correct any erroneous consideration of factual aspects by the lower court. However, in this case, since the claim for interest was not raised or adjudicated at the initial stage, and the order dated 12th August 2016 had attained finality without being challenged, the appellate court found no error in the Single Judge's decision to reject the workmen's claim for statutory interest.Conclusion:The appeals were dismissed, and the court upheld the decision that workmen are not entitled to statutory interest under Rule 156 of the Companies (Court) Rules, 1959, as the claim was not raised initially and the principle of pari passu does not apply to interest payments in this context.