TaxTMI 
TaxTMI 
2006 (4) TMI 261
X X X X Extracts X X X X
X X X X Extracts X X X X
....nitarian grounds. Civil Appeal Nos. 6171-6172/1999 has been preferred against the order of the High Court of Delhi whereby the writ petition preferred by the State of Uttar Pradesh against the order of BIFR dated 27-8-1997, as affirmed by the Appellate Authority vide its order dated 6-5-1998, was rejected. Civil Appeal No. 6217/1999 has been preferred against the interim order of the High Court of Judicature at Allahabad, Bench at Lucknow dated 23-12-1998 directing the State of Uttar Pradesh to pay salary to the workers of M/s. UPTRON, as directed by the BIFR till the State Government takes final decision in the matter relating to revival/rehabilitation proposal made by it. 2. A few facts which are relevant may be noticed at the threshold. M/s. UPTRON is a company incorporated under the Companies Act, 1956 and is a subsidiary of U.P. Electronics Corporation, a company wholly owned and controlled by the State of Uttar Pradesh. UPTRON became, a sick industry since its net worth became negative and, therefore, a Reference was made under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as 'SICA'). The Reference was made on 22-1-1994....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s noticed earlier, C.A. Nos. 6171-6172/1999 have been preferred against the aforesaid order of the High Court of Delhi. 3. From the order of the BIFR dated 28-8-1998 it would appear that there was a proposal submitted by the State of U.P. for the revival of M/s. UPTRON. The Operating Agency was directed to examine the proposal and hold a Joint meeting and submit its report by 17-7-1998. It also appears that the Operating Agency prepared a background note to be considered in the joint meeting wherein it was estimated that a sum of Rs. 171.04 crores was required for the revival of the sick industrial unit. The fund was to be provided by the Government of Uttar Pradesh. The joint meeting considered the proposals of the Government of Uttar Pradesh in the light of the background note prepared by the Operating Agency and though no final decision was taken, the financial institutions and the banks took time to consider the matter particularly by reference to the working capital loans after receiving the concrete proposal from M/s. UPTRON. Ultimately, the State Bank of India on behalf of the consortium of banks did not respond and it appears that no further development took place. The O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he M/s. UPTRON Employees Union - respondent No. 1 herein and two other associations of the workers and officers of M/s. UPTRON filed a writ petition before the High Court of Judicature at Allahabad, Lucknow Bench, Lucknow wherein it was stated that the Cabinet of Uttar Pradesh had taken a decision of closure of M/s. UPTRON on 1-12-1998 as appeared from the press reports. The press report showed that M/s. UPTRON had incurred a loss to the tune of Rs. 330 crores which was not the correct figure. Having regard to the fact that financial institutions were willing to waive a part of the liability, the loss if any was only Rs. 93 crores. Reliance was placed on a photocopy of news item published on 2-12-1998 in the Hindustan Times a local daily. In the writ petition it was prayed that a writ of mandamus be issued restraining the Government of U.P. from implementing the Cabinet decision of 1-12-1998. It was also prayed that a writ of mandamus be issued restraining the opposite parties from closing the Company without waiting for the decision of BIFR. It was also prayed that a suitable direction be issued to the opposite party to honour the order of BIFR dated 27-8-1997 for payment of salar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....revival/rehabilitation of M/s. UPTRON. It is suggested that in the circumstances the BIFR may, if so advised, wind up M/s. UPTRON since the State Government is not in a position to provide the requisite funds for its revival. 9. In view of the submissions urged before us it is necessary to notice the relevant provisions of the SICA. There is no dispute about the fact that M/s. UPTRON is a sick company within the meaning of that term in SICA. A 'Sick industrial company' has been defined under section 3(o) of the Act to mean, an industrial company (being a company registered for not less than five years) which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth. There is no dispute that the net worth of M/s. UPTRON is negative. Under section 15 of SICA if an industrial company has become sick an obligation is cast upon its Board of Directors to make a Reference to the BIFR for determination of the measures which shall be adopted with respect to the company. This has to be done in the manner and within the period prescribed by section 15. On receiving such a Reference, the BIFR is required by section 16 of the Act to make such inquiry ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses within a reasonable time while meeting all its financial obligations, and that the company as a result thereof is not likely to become viable in future, and that it is just and equitable that the company should be wound up, shall forward its opinion to the concerned High Court, which on the basis of the opinion of the Board, may order winding up of the sick industrial company in accordance with the provisions of the Companies Act. 11. None of the provisions noticed above provide that while considering a scheme for revival, the BIFR has authority to direct payment of wages to the workers of the sick industrial company. It is quite apparent that though the matter has remained under consideration of the BIFR since the year 1994 no viable acceptable proposal has so far been received. At one time the State of Uttar Pradesh had shown some interest in reviving the sick unit but now by its letter dated 12-1-1999 it has made its position clear that it is not in a position to induct the necessary funds. In fact, it had suggested that the unit may be wound up. 12. Learned counsel appearing on behalf of the State of Uttar Pradesh has referred to the decisions of this Court in the cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot be able to function and may have to close down which will inevitably have disastrous consequences for the employees themselves. 13. The same legal position has been reiterated by this Court in the case of Officers and Supervisors of I.D.P.L. (supra), this Court observed in paras 7 and 8 as under:- "7. In the above background, the question which arises for consideration is whether the employees of public sector enterprises have any legal right to claim revision of wages that though the industrial undertakings or the companies in which they are working did not have the financial capacity to grant revision in pay scale, yet the Government should give financial support to meet the additional expenditure incurred in that regard. 8. He have carefully gone through the pleadings, the annexures filed by both sides and the orders passed by the BIFR and the judgments cited by the counsel appearing on either side. Learned counsel for the contesting respondent drew our attention to a recent judgment of this Court in A.K. Bindal v. Union of India [2005] 5 SCC 163 in support of her contention. He have perused the said judgment. In our opinion, since the employees of Government compani....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces, where a large number of employees employed in a large number of Government corporations and undertakings were not paid their dues for years together. Invoking the principles enshrined in Articles 21 and 23 of the Constitution, this Court directed the State of Bihar to deposit a sum of Rs. 50 crores before the High Court for disbursement of the salaries to the employees of the corporations. It also vested a discretion in the High Court to direct disbursement of some funds to the needy employees on ad hoc basis so as to enable them to sustain themselves for the time being. There was also a clear direction that the rights of the workmen shall be considered in terms of section 529A of the Companies Act. There are observations in the Judgment of this Court to the effect that the Government companies/public sector undertakings being "State" would be constitutionally liable to respect life and liberty of all persons in terms of Article 21 of the Constitution. They, therefore, must do so in cases of their own employees. The Government of the State of Bihar for all intent and purport is the sole shareholder. Although in law, its liability towards the debtors of the company may be conf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith the matters before them and concluded the proceedings. It is most unfortunate that a sick industrial company which needs immediate attention and treatment has to wait for 12 years with no result in sight. The BIFR must be conscious of the fact that in the sick industrial companies the liabilities accumulate as time passes and, therefore, the condition of the sick unit becomes worse day after day. If a proceeding before the BIFR is not concluded within a reasonable time, it becomes counter productive because rather than reviving the sick industrial unit it makes it more sick and, therefore, it becomes even more difficult to revive such an undertaking. One can well imagine what may be the dues now payable to the workmen and employees of the sick industrial company in this case. If no one was willing to submit a viable proposal in the year 1994, it will be even more difficult today to secure a proposal for the revival of the company. The pendency of the proceedings before the BIFR for almost 12 years has made the situation worse. The networth of the sick unit was negative to begin with and as of date the dues to the workmen and the interest etc. payable to other creditors may have....