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2016 (2) TMI 777
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.... as the Liquidator of M/s.Prasad Mills Ltd. (the company in liquidation, hereinafter referred to as "the Company") and the properties and assets of the Company came into his possession. In the year 1988, the movable properties of the Company, namely, the stock of goods, plant and machinery and the superstructure of the building, were put to sale by the Official Liquidator. It is stated that, as per the information available to the applicant, the movable assets were sold and the land admeasuring about 36971.25 sq.mtrs., is still available with the Official Liquidator. Opponents Nos.1 and 2 have come out with a proposed Scheme of Compromise between the secured creditors, statutory creditors, workmen and equity shareholders. It is the case of the applicant that during the proceedings leading up to the proposed Scheme, the said opponents, in collusion with the Textile Labour Association ("TLA", for short), which is the Representative Union under the Gujarat Industrial Relations Act, 1946 ("the GIR Act", for short) got the meeting dispensed with, by filing an affidavit dated 26.07.2008, deposed by one Shri Jagjivan Khimjibhai, giving consent to the Scheme. According to the applicant, th....
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....revival of the Company but to get the benefit of the steep rise in the market price of the land of the Company, which cannot be permitted at the cost of the interest of the workmen. The concerned opponents have never shown any efforts to revive the Company. Clause5.9 of the Scheme contains a condition that if the manufacturing of textiles is not viable by the Sponsor, the company shall diversify into such other business activities that may be found to be suitable, viable, permissible and in accordance with law. As per clause5.14, a condition has been imposed in the Scheme that if it is not sanctioned before 30.03.2009, the Scheme would stand revoked. That the said date has already elapsed and the Scheme has yet not been sanctioned. In this view of the matter, it would be in the interest of the workmen to raise objections regarding the viability of the Scheme, which they can do only if impleaded. 4.4 That due to the steep rise in the price of the land of the Company, it would be possible to satisfy the claims of all the workers upon its sale. There would be a balance amount available, which could be further distributed towards interest and other dues. This can only be done if pro....
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....iquidator would invite, after publishing appropriate advertisement, claims from all workmen and such claims would be verified in light of relevant provisions. However in present case the petitioner has, without placing on record any supporting material, claimed that there are no claims from workmen. On the other hand official liquidator has asserted that claim and dues in the sum of about Rs. 2.54 crores are outstanding. 10.11 Duty is cast on the court to be extra cautious as regards claim of workmen and it is court's duty and obligation to ensure that all precautions and measures are taken to ascertain as to whether there are any unpaid dues or claims payable to the workmen, or not. The Court is the guardian for the workmen and their interests and claim, in the winding up proceedings and / or proceedings connected with winding - up process or arising therefrom. When the petitioners claim one thing and the official liquidator assets another - particularly opposite and contrary to petitioner's claim, then court would prefer, in absence of any cogent evidence establishing petitioner's claim to accept and rely on liquidator's assertions. 10.12 If ther....
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....ore, only the Representative Union is authorized to represent the workmen and no other recognized union or individual can do so. In the present case, as the TLA is the Representative Union, all the workmen, including those forming the applicant Committee, are represented by the TLA which has already given its consent to the Scheme. As the TLA is the only Representative Union, the applicant cannot claim to be the representative of the workmen. In fact, the applicant has no locus standi to file the application. 5.1 It is further submitted by the learned Senior Counsel that, it is not clear who, or what, the applicant is and when it was formed or incorporated. Neither is it clear under which law the applicant has been formed. Under the GIR Act, which is applicable in the present case, the law does not permit any other body except the Representative Union to represent the workmen. 5.2 It is pointed out that in the causetitle of the application, the applicant is described as "Prasad Mills Kamdar Samiti, through its Convener Shri Shamsuddin Shaikh". However, in the causetitle of the affidavit in support of the Judges Summons, at running Page4, Shri Shamsuddin Shaikh is described as....
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....upport of the submissions that only the Representative Union can represent the workmen and take a binding decision on their behalf, the learned Senior Counsel has relied heavily upon the judgment of the Supreme Court in the case of Shivanand Gaurishankar Baswanti Vs. Laxmi Vishnu Textile Mills and others, reported in AIR 2009 SC 825. 5.6 The relevant extracts of the said judgment are reproduced below : "29. Again, who has approached this Court? Neither a secured nor an unsecured creditor. Nor a representative of a labour union. Nor even a person acting pro bono publico . As already adverted to earlier, PIL Writ Petition at the instance of the appellant was dismissed by the High Court and the said decision was never challenged by him. Here is an employee who is also one of the workers, who has been paid his dues. He accepted the amount of Rs. 62,555/and issued 'No Objection Certificate' (No Dues Certificate) no doubt by putting an endorsement "Accepted under Protest". He has urged that the workmen have not been paid their dues and injustice had been done to them. To us, even there, the appellant is not right. A Representative Union has taken a decision w....
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....the representative of employees". The section thus puts an embargo on appearance of any employee except through the representative of employees. 36. Section 14 empowers Registrar to register a 'Representative Union' for any 'Industry' in any 'Local Area'. ***** 37. It is thus clear that Representative Unio n is having priority and 'preference' over other Unions to appear on behalf of employees of such industry in the area. ***** 38. The aforesaid provisions came up for consideration before this Court in Girja Shankar Kashi Ram v. Gujarat Spinning and Weaving Co. Ltd., (1962) Supp 2 SCR 890. In that case, 'G' closed its business and sold its assets to 'T'. The old company discharged all its workmen when it closed the business. The new company restarted the business and employed all the workmen of the old company. At the time of closure of 'G', a dispute was pending between the company and its workmen with respect to bonus. A 'Representative Union' of the Textile Workers in the city of Ahmedabad filed an application before the Labour Appellate Tribunal wherein the dispute was pending and the ma....
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....ction 42(4), to appear on his own behalf and the ban which is placed by Section 27A will apply equally to such an employee. In order however to soften the rigour of the provisions of Section 27A, for it may well be that the representative of employees may not choose to appear in many proceedings started by an employee under S. 42(4), exceptions are provided in Ss. 32 and 33. The scheme of these three provisions clearly is that if the Representative Union appears, no one else can appear and carry on a proceeding, even if it be begun on an application under S. 42 (4) but where the Representative Union does not choose to appear there are provisions in Ss. 32 and 33 which permit others to appear in proceedings under the Act. ***** 41. The Court also held that bona fides or mal a fides of the representative Union has nothing to do with the complete ban imposed by the Act on the appearance of any one else except the representative of employees under Section 30 of the Act. 42. It was argued that if such interpretation i s accepted, there would be tyranny of the Representative Union. This Court, however, negatived even that argument and observed that the socalled tyranny ....
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....r who has filed the affidavit consenting to the Scheme on 26.07.2008. The allegations of malafides by the deceased Jagjivan Khimjibhai, who expired in November, 2013, have not been made good by the applicant. The said allegations, therefore, cannot stand in face of the clear dictum of the Supreme Court. 5.8 In addition thereto, the learned Senior Counsel has relied upon the judgment dated 27.02.2013, passed by a Division Bench of this Court (Coram: Hon'ble Mr. Justice Ravi R. Tripathi and Hon'ble Mr.Justice R.D.Kothari) in Civil Application No.11829/2010 in Letters Patent Appeal No.110/2009 and connected matters, wherein it is held as below : "4. Be that as it may, the question which falls for consideration of this Court is whether under Bombay Industrial Relations Act, any employee, an individual workman or group of workmen or for that reason any other Union, is having any locus standi to prosecute the proceedings. 5. Learned Senior Advocate Mr.S.I.Nanavati appearing for the respondent mill company invited attention of the Court to a decision of the Honble the Apex Court in the matter of Santuram Khudai Vs. Kimatrai Printers and Processors Pvt. Ltd. & Ors., re....
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....ons 32 and 33 of the Act which taken together impose an absolute ban on the appearance of any individual employee in any proceeding under the Act where the representative union chooses to appear act as representative of the employees 5.6 Learned Senior Advocate for the mill company submitted that only to satisfy the conscience of the Court, more particularly when the Court is examining the matter under its discretionary powers must be satisfied on the point that there is no injustice meted out to the workers who have come to this Court, it will be appropriate to put it on record that the mill company had more than 2500 workers, of which almost 2500 workers have taken benefit under the settlement arrived at between the Representative Union and the mill company. Earlier, the present applicants were in a group of about 800 workers, but later on, many of them having found that the settlement is in the interest of the workers, have taken the benefits following the terms and conditions of settlement and as on date, only 150 workers are left who have not agreed to take the benefit under the settlement. 5.7. ***** 5.8 ***** 6. The Court has no hesitation....
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....Act, which operates as a saving section, would not relieve the Representative Union of any liability incurred by it before the cancellation of its registration. From all angles, therefore, the prayer of the applicant for joining is misconceived. 5.12 Referring to Section529A of the Companies Act, it is submitted that this section comes into play when the Company Court is considering the consequences of winding up and distribution of the sale proceeds. In the present case, the Company Petition is for the revival of the Scheme, therefore, this section has no relevance. 5.13 That, though it is true that the secured creditors have been fully paid up, however, such payment has not been made from the Company's assets. They have been paid by the Sponsor, that is, opponent No.2 herein. The reliance of the applicant on the provisions of Section529A of the Companies Act is, therefore, misplaced. 5.14 Learned Senior Counsel would further submit that the Sponsors are in oral understanding and discussion with the TLA to pay more dues to the workmen, owing to the depreciation of the value of the rupee. However, any final figure cannot be stated as of now, as it is not clear when the Sch....
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....t. It is submitted that while winding up the Company, the TLA, which is the Representative Union, has submitted the claims of all the workers, including those of the applicant. The said claims were got verified by the Official Liquidator through a Chartered Accountant. Certain plants and machinery were sold. As per the ratio worked out by the Chartered Accountant, the workmen were paid. Thereafter, no amount has been paid to anybody, including the secured creditors. The Sponsor has paid the secured creditors from its own pocket and it cannot be said that the Official Liquidator has made any such payment. 8. In rejoinder, Mr.Anshin H. Desai, learned advocate for the applicant has attempted to distinguish the judgment of the Supreme Court in Shivanand Gaurishankar Baswanti Vs. Laxmi Vishnu Textile Mills and others (Supra.), by submitting that the said judgment was rendered on the facts of that case. He submits that in the case before the Supreme Court, everything was over when the Court was moved as the Scheme had been sanctioned, whereas the present is a case where there is no question of delay, as the Consortium which is objecting to the impleadment of the applicant has no locus....
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....e assets of the company in liquidation. It is with that perspective that the Court must have due regard to matters of public interest, commercial morality and to whether there exists a bonafide intention to revive the business of the company. 23. Applying the test which has been enunciated by the Supreme Court in Meghal Homes (supra), we are of the view that the exercise of the discretion by the learned Single Judge was correct and proper. The object and purpose of the Company application is not to revive the business of the Company. The whole purpose is to dispose of the assets by embarking upon real estate construction and development. The company application before the learned Single Judge has proceeded on the basis that what the Appellants would do is to diversify the business of the company into real estate by amending the objects clause of the Memorandum of Association of the company. Admittedly, the company had not carried on any real estate business in the past. Though a faint attempt was made during the course of the hearing, relying upon Clauses 4, 12, 16 and 26 of the Memorandum of Association to show that the objects clause permitted carrying on of real estate ....
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....to the extent of the workmen dues. The purpose of Section 529A 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. There is no other statutory provision overriding the claim of the secured creditors except Section 529A. This Section overrides preferential claims under Section 530 also. Under Section 529A the dues of the workers and debts due to the secured creditors are to be treated pari passu and have to be treated as prior to all other dues." 9.3 The learned advocate for the applicant has further relied upon the judgment of the Supreme Court in Jitendra Nath Singh Vs. Official Liquidator and others, reported in (2013) 1 SCC 462, wherein the Supreme Court has held as below : "The first limb of the proviso to Section 529(1) of the Companies Act creates a statutory charge over the security of every secured creditor to the extent of the workmen's portion. In other words, every property of asset of an insolvent company, which is bei....
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.... such industry in such local area. Section14 is regarding the registration of the Representative Union after following the procedure envisaged therein. It is not disputed by the applicant that the TLA is the Representative Union under Section14 of the GIR Act. What is being canvassed by the applicant is that the registration of the TLA has been cancelled by an order dated 26.02.2014, passed by the Deputy Registrar under the Trade Unions Act, 1926. Though the order of cancellation has been stayed by the Industrial Tribunal vide its order dated 16.06.2014, it is the case of the applicant that the said stay order imposes certain conditions, such as, the TLA cannot take a policy decision without the permission of the Court. This is one of the grounds on which the applicant states that it ought to be joined as partyrespondent to the Company Petition. 12. Another ground taken by the applicant is the loss of faith and confidence in the TLA which, according to it, has not taken the majority of the workmen into confidence and has, in collusion with the Sponsor of the Scheme, given its sanction to the Scheme vide an affidavit dated 26.07.2008, deposed by Shri Jagjivan Khimjibhai, one of the ....
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.... binding nature of a decision taken by the Representative Union has now been settled by the Supreme Court in Shivanand Gaurishankar Baswanti Vs. Laxmi Vishnu Textile Mills and others (Supra.). The Apex Court has laid down certain principles that squarely cover the issue in hand. The relevant paragraphs of the said judgment have already been reproduced hereinabove. This judgment has been rendered after taking into consideration various other judgments of the Supreme Court. The law with regard to a Representative Union is now settled and has been clearly stated by the Supreme Court, as below : "32. Even this contention has no force. The learned counsel for the Union, in our opinion, is right in submitting that under the Bombay Industrial Relations Act, 1946, it is the 'Representative Union' which has all powers to enter into a settlement on behalf of workers in the industry and it is only that Union which can take a decision under 1946 Act. The said decision would bind not only the members of the Union, but also to those workers who are not members of such Union. 33. ***** 34. ***** 35. ***** 36. ***** 37. ***** 3....
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....ubmissions advanced on behalf of the applicant that its impleadment is necessary to represent the case of the workmen and protect their interest. 22. A contention has been raised that the majority of the workmen comprising the applicant Committee do not have faith in the TLA. Allegations of malafide have also been made regarding the act of sanction by the TLA, to the Scheme. In this regard, the Supreme Court has held, in Shivanand Gaurishankar Baswanti Vs. Laxmi Vishnu Textile Mills and others (Supra.), as below : 42. The Court also held that bona fides or mala fides of the representative Union has nothing to do with the complete ban imposed by the Act on the appearance of any one else except the representative of employees under Section 30 of the Act." (emphasis supplied) 23. In view of the above settled position of law enunciated by the Supreme Court, which squarely covers the legal issues arising in the present application, it follows that the applicant has no right to appear or act in the proceedings under the GIR Act, where the Representative Union has entered appearance and has acted as a representative of the employees. 24. The allegations of malafide an....