TaxTMI 
TaxTMI 
2006 (5) TMI 192
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....cheme and on the ground that the dues shown by themselves had not been adjudicated either by the Court or by the Registrar. SLP Nos. 6257-6258 of 2004 2. These special leave petitions were filed by M/s. Niraj Trading Company, a registered partnership firm represented by one of its partner - Shri Krishna Kumar Nemani and six others (known as Nemani Group). These two special leave petitions were filed by members of the Nemani Group against the Bengal Chatkal Mazdoor Union, the Official Liquidator, the Registrar, High Court and Baranagore Jute Factory and the other Mazdoor and Employees' Union. These petitions were filed against the final judgment and order passed by the Division Bench of the High Court at Calcutta in APOT Nos. 227 of 2001 and 228 of 2001, dated 3-3-2004 whereby the Division Bench has allowed the appeal of contesting respondent No. 1 (Bengal Chatkal Mazdoor Union) and set aside the order passed by the learned Single Judge dated 8-3-2001 which order had allowed the petitioners - M/s. Niraj Trading Company and others of Nemani Group to receive one-fourth of the adjudicated claim from the Registrar, Original Side of the High Court at Calcutta upon furnishing a Bank....
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....al Officers under whose supervision the Committee of Management was to be constituted on an ad hoc basis with other directions. 5. Mr. Raj Kumar Nemani being aggrieved by the order dated 27-9-1988 passed by the Division Bench filed a special leave petition before this Court on 7-10-1988 and this Court, by an order dated 30-11-1988 directed that the scheme proposed by Raj Kumar Nemani supported by the workers and unsecured creditors be accepted with a direction for implementation of detailed Scheme. The learned Company Judge was directed to work out the Scheme. 6. The order passed by this Court on 30-11-1988 reads as under:- "R.K. Nemani & Anr. ..... Appellants -Versus- Shiva & Co. & Others .....Respondents ORDER Special leave granted. Heard, learned counsel for the parties. Having regard to the scope of this appeal and having considered the report of the Special Officer, dated 13-11-1988 made pursuant to the order of this Court, we are of the opinion that the scheme supported by the workers and unsecured creditors of Raj Kumar Nemani, be accepted and a detailed scheme on that basis be formulated. It is desirable ....
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....rs to be made at the rate of 2 per cent per month from 1-3-1993. The said order dated 22-3-1993 in SLP(C) No. 6505 of 1992 reads as follows:- "Acumen Trading Corporation & Anr .....Petitioners -Versus- Committee of Management of Baranagore Jute Factory & Ors. .....Respondents Dated : 22nd March, 1993 Coram:Hon'ble The Chief Justice Hon'ble Mr. Justice A.S. Anand ORDER 1. We have heard counsel for all the parties. 2. By an order dated 16-12-1991, the learned Company Judge of the Calcutta High Court cancelled the scheme earlier sanctioned on the ground that the terms of the scheme particularly in the matter of the schedule of payments to the creditors had not been complied with. That order was carried up in appeal before the Division Bench of the High Court, which by its order dated 24-3-1992 now under appeal, stayed the order of the learned Single Judge. The Division Bench directed that instead of payment of 2 per cent p.m. to the unsecured creditors contaminated by the scheme, there should be payment of 1 per cent p.m. That was the effect of the order dated 24-3-1992 of the Division Bench, when it referred ....
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.... Court also directed the Committee of Management to deposit from the month of April, 1994 onwards a sum of Rs. 8 lakhs per month with the Registry of Calcutta High Court. Further directions were also issued while remanding the matter back to the learned Company Judge for distribution of Rs. 40 lakhs amongst the creditors. The above order reads as follows:- "Acumen Trading Corporation & Anr .....Petitioners -Versus- Committee of Management of Baranagore Jute Factory & Ors. .....Respondents ORDER We have heard counsel on both sides, originally the learned Company Judge in the High Court directed the "Committee of Management" to deposit sums equivalent to 2 per cent per month calculated on the basis of the extent of unsecured indebtedness of the company. Subsequently, there was a modification of this order, as to the rate of the payment reducing the extent from 2 per cent per month to 1 per cent per month. This was done by the appellate Bench. The unsecured creditors have come up against this order. The unsecured creditors claim that debts due and owing to them are in the neighbourhood of Rs. 3.4 crores and that it would ....
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....ing claims from creditors, while directing payments to be made to certain parties. 12. An appeal against the said order dated 13-12-1994, the Division Bench allowed the Jain-Jalan group to continue and carry on with the process of the Scheme, but set aside the direction for preferential payment to six named unsecured creditors. 13. The learned Company Judge by order dated 23-12-1996 also directed all unsecured creditors to lodge their claims with the Registrar of the High Court. The learned Company Judge, on the note of the Registrar, directed, inter alia, the Registrar of the High Court to confine to the claims of those unsecured creditors as on 28-10-1987 i.e., the date of winding-up order and the amounts quantified against their names in the list of unsecured creditors appended to the Company Application No. 63 of 1987 affirmed on 27-4-1997. Pre-scheme unsecured creditors including the appellants lodged their respective claims with the Registrar on 27-2-1997. The Registrar submitted the second report excluding the names of the appellants (Radheshyam Ajitsaria) while including the name of the Nemani group. The Company Judge, on an application filed by the appellants (Ajitsa....
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....Official Liquidator to take possession of the Company (in liquidation). Several appeals were preferred from the order. The Division Bench, while staying the operation of the order dated 19-12-2002, directed the Joint Special Officers to take possession. 16. The Division Bench in appeals filed against the order dated 8-3-2001 made an order dated 3-3-2004 directing re-adjudication of the claims of the appellants which had already been adjudicated. According to the appellant, the Division Bench without appreciating that the appeal itself was not maintainable having been filed by 9 outsiders having no locus standi is not correct in directing re-adjudication of the claims of the petitioner. The Bench also disallowed the appellant's rights to claim, the said amount as a member approved in the list of unsecured creditors distinct from the Nemani group. Being aggrieved by the impugned judgment dated 3-3-2004, the appellants filed the above appeals in this Court. This Court, on 8-4-2004, issued notices in the special leave petitions and also directed that the Bank Guarantee filed by the appellants with the Registrar of the High Court on the original side shall be kept renewed until furth....
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....ve, Mr. Jaideep Gupta submitted that there is nothing on record justifying withholding of payments to the petitioner-group, who undoubtedly were pre-scheme creditors and whose claims had been finally adjudicated upon by the Registrar, original side, which adjudication has been upheld both by the learned Single Judge as well as by the Division Bench. Further based on such adjudication all other unsecured creditors have been paid, while only 25 per cent of the total amount due and payable to the petitioner-group has been directed to be paid by the learned Single Judge by the order dated 8-3-2001. The funds available at the hands of the Registrar is far in excess not only of the 25 per cent ordered to be paid but in excess of the entire claim of the petitioner-group. It was also submitted by Mr. Jaideep Gupta that a sum of Rs. 42 crores which was received by way of acquisition compensation is now with the company. This apart, the assets are also lying with the company. In these circumstances, it is submitted that it is only just and proper that the order passed by the learned Single Judge be upheld and payments be made to the Nemani Group. It is also pertinent to notice that all other....
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....excluded from receiving the payments though all other creditors similar to the status of the appellants have received their payments long back. Thus accordingly to him, there has been denial of justice. 23. Mr. S.K. Bagaria, learned senior counsel appearing for the Baranagore Jute Factory PLC Shramik Sabha, submitted that the Scheme was sanctioned and approved by the High Court and by this Court primarily taking into consideration the workers' interests and that the workers and their Unions supported the Scheme and the Scheme provided for payment of pre-scheme outstanding dues and current dues of the workers. According to him, Nemani Committee defaulted in making payment of wages, provident fund, ESI, gratuity etc. not only towards the outstanding pre-scheme arrears but also the current dues during its period of manage- ment. In addition to the defaults committed by Nemani Committee in payment of the said outstanding pre-scheme dues, the said Committee also defaulted in paying the workers; current dues during its period of management. It was further submitted that all other pre-scheme unsecured creditors who lodged their claims with the Registrar of the High Court, have already ....
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....heme and lying with the Registrar as has been contended by Shramik Sabha in the appeal filed by it (C.A. No. 5907/2004). It was further submitted that as stated in C.A. No. 5907 of 2004 filed by Shramik Sabha, the Division Bench should have directed for utilizing the balance amount lying with the Registrar, Original side, High Court of Calcutta for payment of workers' dues and statutory liabilities on account of the Provident Fund, ESI, wages, Gratuity, bonus etc. It was further submitted that a period of 18 years has passed since approval of the Scheme by this Court on 30-11-1988 and it will be fully in terms of the Scheme as well as section 11(2) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, if the funds lying with the Registrar are utilized for payment of the workers' dues including those on account of outstanding Provident Fund dues mentioned above. 24. Mr. R.F. Nariman, learned senior counsel appearing for the Bengal Chatkal Mazdoor Union, submitted that as per the scheme, the workers were to be paid in a time bound schedule. The arrears of back wages were to be cleared within five months of the restarting of the mill. Several other dues, namel....
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....wages of the employee) or the employer's contribution, the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts." While interpreting the provisions of section 11(2) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 and while noting that the Provident Fund Act is a piece of welfare legislation have accorded priority to these dues over other dues. In this context, he cited the following rulings: 1.Recovery Officer & Assistant Provident Fund Commissioner v. Kerala Financial Corpn. 2002 (95) FLR 1024 paras 7, 10, 13, 14 (High Court of Kerala) 2.National Stock Exchange of India Ltd. Rep. By its authorized signatory A. Sabastian v. Assistant Provident Fund Commissioner, Employees' Provident Fund Organisation and the Managing Director, Premier Securities Ltd. [W.P. Nos. 24857 and 25609 (Mad.) of 2001, para 32]. 3.Manager, Vijaya Bank, Padubidri, Dakshina Kannada v. Regional Provident Fund Commissioner, Sub-Regional Office, Balmatta, Mangalore1999 (5) Kar. L.J. 459, para 7 (Kar. High Court) ....
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....ty from the High Court to take steps for revival of the Company. The High Court appointed a Special Officer with certain directions. He also furnished other details subsequent to the appointment of the Special Officer. He invited our attention to the report filed by the Special Officer as per the directions of the Division Bench, details about the status of the Company and the details regarding the company's writ disputing the arrear, PF liability and their reply to the allegations made by the Nemani Group. According to him, the funds are meant for disbursement. It was never the intention of the High Court to allow Nemani Group to run the mill for their own personal gain without complying and/or paying the workers and other creditors. The defaults and/or evasion made by them is their personal liability as has categorically been clarified by the judgment dated 19-11-1994 passed by the High Court. He further submitted that the arrears of wages of the Workers of the Mill have since been reduced by the Committee of Management by payment of Rs. 22 lakhs on account of arrears of wages for two weeks and Rs. 17 lakhs on account of 50 per cent of the arrears of bonus for the year 1985-86 an....
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....e to the pleadings, annexures filed and the orders passed by the Company Court, the High Court and of this Court. 32. As already noticed, Baranagore Jute Factory - petitioners in SLP C Nos. 6257-6258 of 2004, was ordered to be wound up on 28-10-1987. The petitioners' group comprises of (i) Niraj Trading Company; (ii) Banwarilal Anup Kumar, HUF; (iii) M/s. Raj Kumar Krishna Kumar, HUF; (iv) Raj Kumar Nemani; (v) Nemani Trading Company; (vi) Krishna Kumar Nemani; and (vii) Raj Kumar Jain constituted the largest group of creditors of the Jute Factory and were accordingly included in the list of pre-scheme creditors prepared and filed in C.A. No. 63 of 1987 at S. Nos. 1 to 7 by the erstwhile management i.e., M/s. Jardine Henderson Ltd. After the winding up order was passed, a Scheme was propounded to run the Jute Mill and for this purpose, a Committee of Management was proposed to be constituted of M/s. Niraj Trading Company commonly referred to as the Nemani Group. The said scheme propounded by the Nemani Group provided for payments to workers, electricity dues, statutory creditors and unsecured creditors. This comparmentalised payment mechanism was adopted to ensure that everybody....
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....ation being C.A. No. 63 of 1987 affirmed on 27-4-1987 were to be considered for payment. The Registrar, Original side was further given the liberty to requisition the services of a Chartered Accountant to adjudicate upon the claims of the unsecured creditors. Thereafter, reports were prepared by the Registrar. The third and final report dated 23-4-1997 of the Registrar was accepted by the High Court. In the said report, it was categorically recorded that full and final adjudication of the net claim of pre-scheme unsecured creditors will appear as per the schedule set out hereinbelow. The names of the members of the Nemani Group were included at S. Nos. 60 to 66 and an amount of Rs. 2,29,34,500 was adjudicated to be outstanding as far as the Nemani Group is concerned. 34. The learned Single Judge by order dated 9-9-1998 accepting the final adjudication made by the Registrar directed payments to be made to all the other unsecured creditors except the Nemani Group on the ground that the Nemani Group had made larger payments to members of its group in comparison to other unsecured creditors. This order was subsequently affirmed by the Division Bench in an appeal filed by Jardine Hen....
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....ayment to all unsecured creditors out of the funds lying with the Registrar, Original Side, High Court. The reasons for our conclusion are as under : (a)By order of this Court the said funds are meant for disbursement only for unsecured creditors. Separate arrangements have been made under the scheme for payment of other dues including workers dues. The said scheme sanctioned in 1989 is still in operation and the present Committee of Management is operating under the same scheme. (b)Since 1994, i.e., after the Petitioner Group was superseded by the Jain Jalan Group, no demands of any nature relating to any outstanding payments were ever raised by the Workers. (c)In any event, it has been clearly recorded in the order dated 18-11-2004 whereby the said Chetan Choudhary Group has been allowed to continue in management, that the said Chetan Choudhary Group is being allowed to be continued on the same terms and conditions as under the original sanctioned scheme, thus making them liable to make payments of all dues past or present. (d)Therefore, the company being a running concern, the alleged dues of the workers cannot be claimed against any specific member of the management....
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....fairs of the company, no one including the workers made any claim and/or grievance against the appellants at any point of time. (ii)The appellants are unsecured creditors of the Company who were entitled to receive payment in terms of the scheme at the rate of 2 per cent per month and the entire payment in terms of the said scheme without interest was to be disbursed to them within a span of four years and two months and accordingly the entire amount became due and payable in the year 1993 itself. (iii)At all material times, there was no dispute with regard to the fact that Nemani Group of Company consisted of seven companies/firms which are distinct and separate from the appellants. The said fact has been duly noticed and recognized in various Court orders including the order of the Division Bench of the High Court dated 30-11-1998/1-12-1998 and the order of the learned Single Judge dated 8-3-2001. (iv)There is no allegation upon the appellants of disbursing excess payments to themselves as has been alleged against Raj Kumar Nemani, therefore, the appellants' stand on a different footing from the Nemani Group of companies/firms who have been made entitled to receive on....
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....he rate of Rs. 8 lakhs per month as directed by this Court was to be kept secured for payment to unsecured creditors only, the workers are therefore estopped from resorting to taking recourse to the provisions of section 11(2) of the EPF Act since the same was available to them even at the time this Court had directed the said sum to be earmarked for payments to unsecured creditors. 41. In view of the fact, that the manner in which the unsecured creditors are entitled to receive the payment has been specified and more particularly, when all the pre-scheme unsecured creditors who have lodged their claims with the Registrar, High Court, Calcutta have received payment, there cannot be a justification in withholding the payment of the appellants and petitioners who were also entitled to receive payment as other pre-scheme unsecured creditors. 42. In our view, the provisions as contained under section 529A of the Companies Act, 1956 are not applicable in the facts and circumstances of the case as the order of winding-up has been stayed and the company is being run under the scheme as a going concern. 43. One Committee of Management is being replaced by another Committee of Mana....
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....ume I CLJ page 89, it is not in dispute that the appellants were not parties to the proceedings in which the said judgment was delivered, and it was Mr. Raj Kumar Nemani who had been held to be liable by the High Court to pay provident fund dues. The liability to pay Provident Fund dues remains with the company which is still run a going concern. 49. Insofar as the outstanding amounts are concerned, these very unions had sworn affidavits filed in July, 1993 before the High Court stating that the Nemani group after taking over management has paid substantial part of their dues. 50. Insofar as the scheme is concerned, the said scheme was initially for a period of 8 years and the amounts mentioned therein were to be liquidated over the years and not immediately upon the scheme coming into force. The payments which were to be made immediately upon implementation of the scheme, were accordingly made. The petitioner group was replaced midway into the scheme and did not complete the entire tenure of the scheme. The new Committee of Management (Jain-Jalan) which replaced the petitioner group, took over the management on the same terms and conditions as contained in the scheme, thereb....
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....f workers are, therefore, in no jeopardy whatsoever. When the Company continues as a going concern, it is the dues of the unsecured creditors which are most vulnerable and it is for that purpose this Court by its various orders ensured that a separate fund should be created for the unsecured creditors. In our opinion, it is fair and proper that the funds so created should only be utilized for the purpose of the unsecured creditors and not workers dues and other dues. 53. It was contended by the respondent that for the purposes of sections 441 and 529A of the Companies Act, the phrase "in winding up" should refer to "in the course of winding up". In our view, this cannot be the position because, if so, no part of the fixed or movable or any other assets of the Company including raw material and working capital can be alienated by the Company in the usual course of its business activities only such time as the winding up proceedings are permanently stayed. This would mean that no order could ever be made exploring the possibility of running the Company as a going concern during the pendency of the winding up proceedings. Such an interpretation would not only contrary to the intere....
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....rojecting that the outstanding Provident Fund dues, if any, should come out of the fund lying in the hands of the Registrar, Original side, rather than out of the compensation money which has been realized by the present Management at the time of acquisition of the fixed assets of the Company. It is to be noted that only 25 per cent of the dues of the petitioner, as unsecured creditors, have been directed to be released under the orders of the High Court. These dues relate back to 1987. The present petitioners who were suppliers of jute to this mill have been unable to realize their dues of 1987 till today whereas all other unsecured creditors have been able to do so. It is, therefore, just and proper that at least at the present stage, the dues should not be held back any further. 55. In any event, it is crystal clear that finding of the Division Bench of the High Court, that the claim of the appellants have not been duly adjudi-cated is erroneous as claim of the appellants have duly been adjudicated by the Registrar, High Court, Original Side, with the help of the Chartered Accountant as would be evident from Certificate dated 15-3-2004 issued by the Registrar. Thus, the said ....