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1988 (9) TMI 356

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....nt and swift decision making on the part of the BIFR (Board for Industrial and Financial Reconstruction constituted under the Sick Industrial Companies (Special Provisions) Act of 1985, (Act).) and the IDBI (Industrial Development Bank of India). And with the consensus of all the parties (which is the most heartening feature) who have risen above narrow individual interests by not opposing the workers' scheme in order to promote the larger National interest of reviving the industry, augmenting the National product and providing employment to hundreds of starving workers (three of whom became martyrs to the cause by committing suicide). 2. Internal discord gave rise to disputes and litigations between different branches of a family headed by a pioneering and successful industrialist Shri Ramjibhai Kamani in the wake of his demise, which culminated in SLP No. 15228 of 1983 wherein all the concerned members of the family were impleaded. When the said matter came up before this Court it was impressed upon the parties that the internecine conflict between the warring factions deserved to be speedily resolved, not only in their own interest, and for saving the name and honour of the....

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....n of misfortune heaped on them. 3. The plight of the workers notwithstanding, they exhibited exemplary conduct on their part, and the Kamani Employees Union (KEU) extended its hand of co-operation to the Kamani family group as has been noticed by the learned Mediator in his minutes dated July 2, 1986 :- "the bona fide s of the applicant workers would be clear from the fact that in spite of the fact that no wages have been paid to them for the last 14 months, yet, in order to demonstrate their spirit of co-operation, the workers, through their union, had offered in writing to co-operate with the management. and accept deferred payment of unpaid wages. The applicants repeat and reiterate that offer. The workmen always were, and still are ready and willing to accept the arrears of unpaid wages with increase of production and creation of surplus. I shall be happy if the authorities who have to take a decision in this matter could find their way to accepting the request of the workers who have not received wages for about 16 months now. As regards the two proposals given by the workers, neither of them was found acceptable by any of the Kamani family groups present; they tho....

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....his Court, dated October 13, 1987 in CMP 3805/87 (reported in 1987(5) JT 150), this Court directed the BIFR to file a feasibility report with respect to the scheme presented by the workers for the revival of KTL. This Court also directed the BIFR to hear the workers as well as the different groups of Kamani family before making its recommendations. As per this direction the Board held a number of hearings which were attended inter alia, by representatives of KEU, Financial Institutions, Banks, State Government, Central Government and different groups of the Kamani family. IDBI, an apex institution in the field of term lending and one of the operating agencies of BIFR, was entrusted with the examination of KEU's scheme particularly with regard to technical health of the plant and time required to run it, various assumptions made in respect of the parameters of costs/prices, estimates of production pattern vis-a-vis projection of future demand, correctness of cost of production, working capital requirement, projected operating cash surplus etc. IDBI submitted its report which was discussed in the subsequent hearings and the views of the concerned agencies, such as, Banks, State G....

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....ion's scheme are not sustained the said scheme shall be dealt with according to law." Pursuant to the direction of this Court, the Board afforded a hearing to all the concerned parties on 20th May, 1988 and after having examined the submissions made by the various groups of Kamani family, Banks, State Government and Central Government, prepared a Draft Scheme for revival of KTL. The said Draft Scheme was circulated to all the parties concerned and short particulars thereof were also published in two news dailies for the information of the shareholders, the creditors and the employees etc. in general. The parties were given due notice for making suggestions raising objections with respect to the Scheme. On receipt of various suggestions/objections the Board held its hearing on 28-7-88 for considering the same. After hearing all the parties, and after having examined all the written/oral submissions made, the Board had financed, and sanctioned the scheme as per its decision dated 6th September, 1988 which has now been placed before this Court for further orders in the light of the submissions of the concerned parties. 5. Two questions arise in the context of the Workers&#3....

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....ry to examine the issue as to whether or not there was any justification for not presenting the Scheme before the stipulated deadline. Even though it is too late to examine the applicant's scheme it is not considered appropriate to shut out consideration of the scheme only on the ground that it is being presented so late and the workers' scheme has already been sanctioned much earlier. In case the applicant is able to persuade the Court that the Scheme presented by him is preferable to the Workers' scheme in the larger interest of all concerned, the decision rendered by the BIFR could possibly be set aside and the Scheme presented by the applicant could possibly be remitted to the BIFR for considering the whole matter afresh. Of course it would cause great hardship to all concerned more particularly. because the Scheme sanctioned by BIFR on 6th September, 1988 comes into force with 'immediate effect'. It has also to be realised that the matter would be delayed by several months at the cost of the suffering workers. These are considerations which are more than adequate to discourage and deter the Court from undertaking any such exercise. All the same we have hear....

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.... applicant. 4. The workers themselves have agreed (1) to make wage sacrifice of 25% for the first year of operations and 15% for the next two years. In other words the workers have agreed to forego 15% to 25% of the wages which they would be otherwise entitled to having regard to the fact that it is workers own Scheme calculated to benefit them at least in future; (2) to deferment of annual increments for two years as also; (3) to rationalisation of the staff pattern by persuading the workers to be retrenched on payment of compensation in the larger interest of the workers and to restrict the workers to 600 ; (4) to forego dues subsequent to 31-12-85; (5) to deferment of pre-stoppage Clues till other dues are paid off. 4. The workers would not agree to forego any part of their wages or make a wage sacrifice to enable the applicant to take over the unit. Nor the workers would accept deferment of dues or to rationalization of staff pattern or retrenchment. Learned counsel for KEU has stated that they are not at all prepared to do so. 5. The secured creditors have agreed to convert 50% of dues into interest free loan repayable within 10 years and a moratorium of one year for 50% of....

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.... position to raise such resources. The Scheme is a manifestation of the 'hope' and 'desire' of the applicant and no more. There is little doubt about the fact that no useful purpose will be served by granting the request of the applicant in these circumstances. Even so we would have considered the matter further if the applicant had satisfied this Court about his bona fide s and provided an assurance that delay will not be, to the detriment or prejudice of the workers or at their cost. An enquiry was accordingly made from the learned counsel for the applicant whether the applicant was prepared to deposit a sum of ₹ 1 crore representing about 15% of the arrears of wages which have by now become payable to the workers to enable the Court to examine the matter notwithstanding the aforesaid shortcomings. The learned counsel for the applicant frankly stated that the applicant was not in a position to deposit such a sum. In fact he did not even mention that the applicant was prepared to deposit a lesser sum in order to show his good faith and bona fide s and in order to protect the legitimate interests of the workers. Counsel wanted the Court to consider the Scheme ....

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.... with power to direct the transfer of the shares to the employees in this behalf. Thus the authority and competence of the Board to issue a direction for the transfer of the shares to the employees has the full backing of the benevolent legislation enacted especially in order to restructure or revive the sick undertakings. In the course of the discussion in the earlier part of this order we have referred to the abortive efforts made by the learned Mediator and the members of the different family groups of Kamanis for selling 90% of the shares of KTL It however appears that no purchaser was coming forth. The aforesaid exercise however shows the willingness and preparedness of the concerned members of the Kamani group to transfer their shares on their own even without a directive. Their willingness is however irrelevant since the BIFR is clothed with the authority and competence to reduce the value of the shares from ₹ 10/- per share to Re. 1/- per share and direct the transfer of the shares to the employees. A point was made before the BIFR for the transfer of the shares as regards the order reducing the value of the share and the direction to transfer the shares at the reduce....

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....he obligations incurred by the guarantors towards the Banks. Since the Scheme is being framed under the statutory authority and directive in order to revive the same in the larger public interest and inasmuch as there is a necessary declaration contained in Section 2 of the Act which attracts the applicability of Article 31C of the Constitution, the decision rendered by the BIFR is unassailable and unimpeachable. Besides, the Scheme has been framed as per the direction and mandate of this Court in exercise of its inherent jurisdiction and its constitutional jurisdiction under Article 142 of the Constitution and therefore the framing of the Scheme and the enforcement of the sanctioned Scheme does not detract from or have any impact on the obligation incurred by the guarantors in regard to the debts incurred by KTL in the past. The concerned Banks were and are bound by the directives and mandates. Having given our anxious consideration to the decision rendered by BIFR sanctioning the Scheme taking into account all the factors we fully agree with the reasoning and conclusion of BIFR and hereby stamp the Scheme with the imprimatur of this Court. 1. Section 18(2)(f) : "the reduct....

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....985 does envisage the revival of sick units by the workers who had been rendered unemployed, it is (as far as is known) for the first time that the legislative intent reflected in the relevant provisions of the Act to encourage workers' schemes is being given a concrete shape in this manner. It is perhaps for the first time that such a Scheme sponsored by the suffering employees themselves has come to be sanctioned. Under the circumstances a very heavy burden rests on the shoulders of KEU and the concerned employees. Tens of thousands of similarly situated workers would be watching with anxious eyes the outcome of this bold experiment undertaken by the workers of KTL. On their success or failure will depend the future hope and destiny of tens of thousands of similarly situated workers. Success of this venture will instil new confidence and enable the workers to try to build their own future with their own hands albeit at some initial sacrifice. Failure will be visited with disastrous consequences. We, therefore, not only hope and trust that KEU and the concerned workers will make themselves fully aware of this crucial factor, but also beseech them to rise to the occasion and in....