TaxTMI 
TaxTMI 
2013 (10) TMI 1474
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....g up. The Official Liquidator has paid them till the date of the appointment of Provisional Liquidator, taking that as the relevant date. Since this view taken by the Official Liquidator affects large number of workmen of the Mill under liquidation, and that the issue raises question of law of general importance, the learned counsel for the parties have advanced arguments at great length and have submitted written submissions. Their assistance is appreciated. 3. M/s Swadeshi Mills Co. Ltd. was one of the leading Mills in Mumbai. The Company, when it was in operation, had approximately 2970 employees. The Company had substantial immovable assets. The main asset being 48 acre land at Sion Chunabhatti in Mumbai. In the year 1997, one M/s Rally Brothers & Convey filed Company Petition No. 1068 of 1997 for winding up of the Swadeshi Mills Co. Ltd. The Company made a reference to the Board of Industrial and Financial Reconstruction (BIFR). On 24 April 1998, the BIFR declared the Company as a sick undertaking, under the provisions of Sick Industrial Companies (Special Provisions) Act. The BIFR on 5 February 2001, recorded a prima facie opinion that the Company was not likely to make it....
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....alf of the employees with the Official Liquidator. Considering 30 September 2001 as the cut off date, 70% claim of the workmen were adjudicated and an amount of Rs. 11,19,05,200/- was admitted and paid by the Official Liquidator. 7. The company petitions came up for hearing on 5 September 2005. The Court alluded to the above mentioned events and noted that the business operations of the Company have ceased long back, the BIFR has already recorded prima facie opinion that the Company has become unviable, the plant and machinery is sold, thus the Company needs to be wound up. Accordingly, the Court ordered that the Company be wound up under the supervision of the liquidator by virtue of section 450(4) of the Companies Act. The date of winding up of the Company was thus 5 September 2005. 8. Before the Court proceeded to dispose of the petition, it considered the position of the High Power Committee. The court came to the conclusion that once an order of winding up of a company is passed, it would follow that the Official Liquidator is required to take over custody of the assets and deal with them in accordance with law. The Court observed that there was no other mechanism envisa....
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....in the Memorandum that the RMMS was representing majority of the workers/employees of the Company. Facts leading to the winding of the Company were enumerated. It was also mentioned that the Promoter group is in process of filing an application in the Court seeking permanent stay on the winding up in accordance with the provisions of the Act. The agreement between the Promoter Group and RMMS recorded that 30 September, 2001 should be taken as the relevant date. It was noted that there were 2807 workers / employees who were on the roll of the Company as on 30 September, 2001. List of the workers as on 30 September 2001 was annexed at Schedule I. The workers were to get payment as per formula set out in Schedule II. It was agreed that the Promoter group, upon execution of the memorandum of understanding would apply to the Court under relevant provisions of the Companies Act. It was agreed that the workmen would be paid on the basis of calculation as per schedule II, a sum of Rs. 30,000/-, upon giving authority and consent letter. The balance payment was to be made upon the Court passing an order of permanent stay. Thereafter the company application seeking permanent stay was filed by....
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....8 employees of the head office of the Company. 14. The Official Liquidator, by letter dated 16 May 2012 communicated the reasons and basis of computation. The reasons read as under: "1. .............. 2. We need not go into the legality or otherwise of de-facto closure, since we have admitted retrenchment compensation for the full tenure of service from the date of joining to the date of appointment of provisional liquidation. 3. As regards relevant date for the purpose of determining employees' dues, we have to state that Section 530(8)(C) clearly provides that in case of a company ordered to be wound up compulsorily, the date of appointment (or first appointment) of a Provisional Liquidator is the relevant date. If no such appointment was made, the date of winding up order becomes the relevant date. That this provision is not exclusive for the purpose of section 530 alone is enunciated in the Ahmadabad High Court decision in case of Jubilee Mills (Company Application 360 of 1998 In Company Petition 139 of 1996). 4. As regards the claim for Provident Fund Contribution & Interest thereon it is stated that this amount, if due the same can o....
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....er 2000 to 05/09/2005, which they would have been entitled to had the undertaking not been closed down, (including all increments on basis wage and periodic enhancement of Variable Dearness Allowance), House Rent Allowance, Educational Allowance, and all other Allowances, and bonus @ 8.33%, with interest commercial rate on all of the above should there be surplus, minus the advance amounts paid earlier by the Official Liquidator; (c) For an order of this Hon'ble Court, directing the Official Liquidator to pay to the workmen, including the badli workmen, for the said period the Arrears of the employer's Provident fund contribution, contribution for the said period with statutory interest @ 12% as per the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 Act, plus statutory interest @ 12% on the employee's contribution for the same period. (d) For an order of this Hon'ble Court, directing the Official Liquidator to pay to the workmen, including the badli workmen, gratuity with statutory interest as per the Gratuity Act, 1972, and retrenchment / closure compensation as per s.25F r/w.S 2 (rr) of the Industrial Disputes Act, 1947, calculate....
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....onvenient speed, examine every proof of debt lodged with him and grounds of the debt. The Official liquidator is entitled to ask for production of the vouchers, if any referred to in the affidavit of proof, or require further evidence in support of the debt and can also call upon the creditors if any further evidence if required. Under Rule 161, the Official Liquidator is also entitled to administer oath and take affidavit. 20. After the claim is so examined, the Official liquidator is required to communicate the acceptance or rejection of the proof to the claimants under Rule 163, which reads as under: "163 : Acceptance or rejection of proof to be communicated. After such investigation as he may think necessary, the Liquidator shall in writing admit or reject the proof in whole or in part. Every decision of the Liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the Creditor concerned by post under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is reject wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a credito....
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.... this course of action in the present application however would be a needless exercise as the applicants, after receiving the Notice of Admission of proof, through their advocate made a detailed representation on 25 April 2012 to indicate reasons as to why full amounts were not allowed and to disclose basis of adjudication including the date till the dues were calculated. The Official Liquidator replied by a letter dated 16 May 2012 giving reasons why the impugned decision was taken. The Official Liquidator gave reasons for arriving at the date till the dues were calculated and why the claim was not fully allowed by the Official Liquidator. Considering that the Official Liquidator has already given reasons by a letter dated 16 May 2012, upon so requested by the applicants, no purpose will now be served by setting aside the impugned orders and by directing the Official Liquidator to pass fresh orders giving reasons. Especially since decision in this judges summons will govern the the cases of other workmen. The learned counsel for the parties have therefore proceeded to address the Court on merits. The impugned adjudication done by the Official Liquidator will have to be read along ....
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....matter of Textile Labour Association v/s. Official Liquidator, Ahmadabad (Jubilee Mills)( (2000) 99 Com Cases 189). The section 530(8)(b) however, does not apply to workmen. (c) The wages and dues of workmen are to be calculated till the order of winding up, and not on any date prior thereto, as per Section 445(3) of the Companies Act, 1956, which expressly provides that the winding up order shall be deemed to be the notice of discharge to the employees, except where the business is continued. Rule 154 of the Companies (Court) Rules, 1959 provides that the value of all debts and claims against the company shall, as far as possible, be estimated according to the value thereof on the date of the order of the winding up. (d) The reference in section 530(8)(c) of the Companies Act, 1956, to the relevant date being the date of the appointment of the Provisional Liquidator, if appointed, has no application to workmen as section 530 (8)(bb) states that the expression employee does not include a workman. The Legislature has treated workmen and non-workmen employees in such an entirely different manner in industrial law, and placed workmen are on an entirely separate footi....
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....the secured creditors. The Statement of Objects and Reasons of the amending Act of 1985 makes the position clear. To hold that the dues of the workmen should only be calculated up to the date of appointment of the Provisional Liquidator, would be to render the pari passu charge of the workmen illusory. (h) In the facts and circumstances, the action was not taken in provisional liquidation to effectively finally wind up the company. The immovable assets of the Company, including its main asset, the 48 acres of land at Sion-Chunabhatti till date, has not been sold. (i) The payment of 75% of the earned wages was made against claims filed by the RMMS union, is without the knowledge and consent of the workmen, and these claims were admittedly only for the earned wages, and the RMMS have not only not filed any claims for dues of the workers with the Official Liquidator other than for these earned wages for the said period, but categorically stated that they will not. (j) Once the Order of winding up was passed the sale of the assets and the distribution thereof must be strictly according to the mandate of the Companies Act, 1956. The mere fact that under sectio....
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....tion. (b) Section 450(3) of the Act provides that unless the Court restricts the powers of the Provisional Liquidator, he would have all the powers that a Liquidator would have in the winding up of the Company. Unless the powers of the Provisional Liquidator are limited he would take custody of all the property, effects and actionable claims of the company; displace the Board of Directors and thereafter act on the company's behalf. (c) In the facts of the present case, the services of the workmen came to an end on the appointment of the Provisional Liquidator. From November 2000, the business of the Company was at standstill. BIFR had recommended that the Company be wound up. Even prior to the Provisional Liquidator, the Company had virtually ceased to exist. The Provisional Liquidator was not authorized to carry on business, the plant and machinery of the Company was in fact sold by the High Power Committee. Thus the services of the employees including the workmen must be deemed to have come to an end on the appointment of the Provisional Liquidator. (d) Gujarat High Court in Jubilee Mills1 held that the relevant date for computation of the workman's due....
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.... with all powers under the provisions of the Companies Act, 1956. The business of the Company had come to a complete standstill in November, 2000. On the appointment of the Provisional Liquidator with all powers, the powers of the Directors to manage the Company also came to an end. In these circumstances, there was legally no employer who could, for example apply to the State Government for "closure" under Section 25-O of the Industrial Dispute Act. The plant and machinery of the Company also came to be sold by a High Power Committee. (d) Sub Section 3 of Section 445 states that the winding up order shall be deemed to be notice of discharge". This section does not say that the employment stands terminated on notice. Sub Section 3 of Section 445 only refers to the event of winding up being a deemed notice of discharge, and the deemed notice does not bring about termination or cessation. The deemed notice would operate only in the absence of any other actual event causing cessation of employment. The deeming fiction in Section 445 (3) does not require the Court to ignore to actual and factual state of affairs regarding a company. Section 445 (3) provides an outer limit beyo....
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.... Gujarat High Court vide its order dated 6th August, 2012 in Company Application No. 264 of 2008 in Company Petition No. 7 of 2001 Gujarat Steel Tubes Employees Union and 1. Vs. Official Liquidator of Gujarat Steel Tubes Limited (In Liquidation) and 7 Ors. has followed another judgment of the Hon'ble Gujarat High Court in Company Application No. 174 of 2006 which has referred to the decision of Jubilee Mills1 case Section 530 (8) (bb) was inserted only for this purpose and nothing more. 29. Thus the question is what should be the relevant date. According to the applicants it should be till 5 September 2005 i.e. the date of winding up order. According to the Official Liquidator it is 13 February 2002 i.e. the date on which the Provisional Liquidator was appointed with full powers. The decision of the Official Liquidator, which is not challenged by the respondent Nos.2 and 3, the date of 13 September 2001 agreed in the meeting before the High Power Committee is not taken as a basis. Though RMMS had agreed that the cut-off date would be 13 September 2001, the Official Liquidator has not gone by this date. Respondent Nos.2 and 3 have not challenged the decision of the Official Liqui....
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....ated were regarding formation and management of the Company, maintenance of minimum standards of behavior, fullest possible disclosures, transparency in accounts, equal representation for shareholders, provision for investigation into the affairs of the Company. The object of the Companies Act inter alia, was to bring transparency in the affairs of the Companies, give representation to the shareholders and prescribe certain standards. Based on the recommendation of the Committee, the Companies Act of 1956 was passed. Though the Companies Act of 1956 was based on the English companies Act of 1948, certain modifications were incorporated for the Indian conditions. The Companies Act does not per se deal with services, service conditions and termination of employees of the Company, especially that of workmen. The relationship of the Company as a master, and the workmen as servants, continued to be governed by relevant labour legislations. 32. Though the Companies Act was essentially framed to regulate the affairs of the company, the idea of a company as a mere economic and financial entity established only with a view to make profits, has under gone a sea change. A Company carrying ....
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....der it thinks fit in respect of the winding up. 34. Sections 444 and 445 in Chapter III, Part VII state the effect of the winding up order. These two sections being material for the controversy at hand, they are reproduced below. "444. Order for winding up to be communicated to Official Liquidator and Registrar. Where the Court makes an order for the winding up of a company, the Court shall forthwith cause intimation thereof to be sent to the 1[ Official Liquidator and the Registrar]. 445. Copy of winding up order to be filed with Registrar. (1) On the making of a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within 1[ thirty days] from the date of the making of the order. If default is made in complying with the foregoing provision, the petitioner, or as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each day during which the default continues. (1A) 2[ In computing the period of 1[ thirty days] from the date of the ....
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....s deal with preferential payments and overriding preferential payments. Section 529-A gives overriding preference to workman's dues and the debts due to secured creditors to the extent as such debt under clause (c) of the proviso to sub-section 1 of Section 529. These are some of the relevant provisions of the Companies Act . 39. The Official Liquidator has relied upon the decision of the learned Single Judge of Gujarat High Court in the case of Jubilee Mills Ltd1. The learned counsel for the Official Liquidator and the learned counsel for respondent Nos.2 and 3 have placed strong reliance on this decision, more particularly the following observation - "Relevant date for computing Workman's Dues and calculation of Interest- The relevant date for computation of the workman's dues as well as the dues of the secured creditors for the purpose of determining the ratio of the respective dues under Sections 529 and 529-A of the Companies Act is the date of first appointment of Provisional Liquidator and if no such appointment is made the date of winding up order as contemplated in Section 530(8)(c)(i) of the Act. Hence, in the first instance the Official Liquidator sh....
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....Jubilee Mills Ltd1 did not consider the Section 530(8)(bb). The learned counsel for the Official Liquidator however submitted that the Official Liquidator has calculated the dues of the workmen till the date of appointment of Provisional Liquidator on the ground that it brings an end to the services of the workmen. The learned counsel for the Official Liquidator submitted that the appointment of Provisional Liquidator is taken as a date of severance in relationship not on the basis of Section 530 (8) (c) but on the ground that by appointment of Provisional Liquidator with full powers in the facts of the present case has brought an end to the relationship between the Company and its workmen. Thus the Section 530 and the decision of Jubilee Mills Ltd1 is not relevant for this aspect, though the decision in Jubilee Mills Ltd1 is referred to in other contexts. 41. The learned counsel for the applicants has relied upon decision of the Single Judge of this Court in Company Application (Lodging) No.224 of 1999 decided on 8 October 1999. The learned counsel for the applicants submitted that in this order the Court accepted the submission that the wages of the workers will have to be cal....
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....is the only contingency for severance of relationship. There is however a fundamental flaw in this submission. All these contingencies arise under the service contract and/or by operation of provisions or steps taken under under labour legislations. The cessation of employment by removal, superannuation, dismissal, contract of employment coming to an end, resignation, termination, closure, do not arise from provisions of the Companies Act but under labour legislations and/or contract. The learned counsel for the applicant also does not dispute the position that if there is cessation of the relationship under the terms of the services contract and/or by virtue of relevant provisions of labour legislations there is no question of resorting to Section 445(3). Therefore, the instances given by the learned counsel for the Official Liquidator and the learned counsel for the respondents do not lead to a proposition that the provisions of Companies Act, provides for cessation of services of workmen / employees prior to the date of winding up. Labour laws read with terms of contract may. The language of the Section 445(3) is plain and simple. It is settled law of interpretation that there i....
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....under the agreement is deemed to have been served on expiration of 48 hours after it had been posted. It is in that context that the Appeal bench held that the specific term of the contract was a deeming provision which did not exclude the possibility of proving an earlier receipt. The Appeal Court found that in fact such notice was served and therefore there was no question of employing a deeming provision. The learned Single Judge in the case of MSM Satellite5 referred to this decision of the Appeal Court. Again the case before the learned Single Judge was of service of notice and interpretation of a clause in contract regarding deemed service of notice. The question before the learned Single Judge was whether factually the notice was served. 46. These decisions cited by the learned counsel for the respondent Nos.2 and 3, will be of little assistance for interpretation of the section 445 (3). In both these cases the question was service of notice which the parties would exchange. It is one thing to say that a deeming provision in a contract which creates a fiction as regards existence of a factual position may not apply if the factual position is stated to have occurred earlie....
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.... the legislature has sought to achieve. Again the dicta of the Apex Court in National Textile3 needs to be kept in mind. 49. In fact appointment of Provisional Liquidator does seem to be contemplated as termintion by the Apex Court as in the National Textile3 case. In this case both events were before the Apex Court, the appointment of Provisional Liquidator and order of winding up. Before the Company was wound up there was an appointment of Provisional Liquidator. The Apex Court considered the provisions of Section 445(3) and held that the workmen upon winding up have a right to participate and oppose the order of winding up. In National Textile3 also the Provisional Liquidator was appointed but from the facts narrated therein and the arguments advanced and conclusions reached it does not appear that the Apex Court considered that the appointment of Provisional Liquidator would terminate the services of the workmen. The Apex Court concluded as under - "11. We are therefore of the view that the workers are entitled to appear at the hearing of the winding up petition whether to support or to oppose it so long as no winding up order is made by the court. The workers have ....
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....ted that it is a basic and fundamental rule that if the services of anyone are to be terminated then they must be heard. The position before the Apex Court was clear that it is the order of winding-up that terminates the services of the workmen. As far as appointment of Provisional Liquidator is concerned, the Apex Court held that workmen need to be heard even at the time of appointment of the Provisional Liquidator if they so wish because it might prejudice them. The perusal of the decision does not indicate that the Apex Court referred to the prejudice that would be caused to the workmen as termination of their services. In fact, the argument made on behalf of workers was that if any interim order is made it will prejudice the workmen by freezing the resources of the Company so as to make it difficult to the Company to pay wages to the workmen or bring about stoppage in business of the Company or diminution of their wages. It is this prejudice that Apex Court stated that would be caused to the workmen on the appointment of Provisional Liquidator. In paragraph No.11 reproduced above the Apex Court made a clear distinction between rights of the workmen to be heard at the time of wi....
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....ice of discharge for all the workmen. Thereafter the distribution of dues is done as per Section 529 (A) and Section 530 of the Act. Thus, there is no question of equating provisional liquidation and final liquidation as having the same effect for the purpose of cessation of service. Question is not whether provisional liquidation and final liquidation are the same, question is what is the status of the Company, who is the employer. As stated earlier, there is no specific provision in the Companies Act that appointment of Provisional Liquidator brings about a cessation of services. It is sought to be introduced by equating Provisional Liquidator with full powers, with the Official Liquidator. There may be little difference in their powers but their appointments are at different stages and have different legal effects. It is therefore, difficult to accept the proposition that appointment of Provisional Liquidator with full powers brings about cessation of services of the workmen 53. It has been sought to be contended by the respondent Nos.2 and 3 and the Official Liquidator that the facts of the present case would show that for all practical purposes the services had come to end ....
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.... for permission to close or retrench the employees as per Section 25-O and 25-N of the Industrial Disputes Act. As per Section 25-O(6) and 25-N(27) of the Industrial Disputes Act, if no application is made to the State Government the employees are entitled to their dues as if there has been no closure or retrenchment. In the case of Jubilee Mills1, the learned Single Judge considered the provisions of Section 25-O and the implication thereof as regards the claim of the workmen. The learned Single Judge observed as under - "11.4 Hence, the question is what was the purpose for which the legislature enacted Section 25-O of the Industrial Disputes Act and particularly sub-section (6) thereof and whether Sections 529 and 529-A of the Companies Act fall within the field covered by Section 25-O(6) of the Industrial Disputes Act. Under subsection (2) of Section 25-O of the Industrial Disputes Act, the Government may grant or refuse to grant the employer permission to close down an undertaking of an industrial establishment, after giving an opportunity of - hearing to the employer, workmen and persons interested in such closure, having regard to the genuineness and adequacy of the ....
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....ses there is a period of actual closure without permission under sub-sections (2) or (3) of Section 25-O of the Industrial Disputes Act, when the workmen are ready and willing to offer their services, but the employer has no work to offer. Wages is what the employer is bound to give the workmen when they offer their services. There is nothing in the provisions of Section 25-O of the Industrial Disputes Act or Section 529(3)(b)(i) of the Companies Act which can indicate even the slightest intention that Legislature did not intend the legal fiction to be carried to its logical conclusion." 56. In the present case there is no permission taken under S.25- O. The services therefore deemed to have been continued. It is sought to be contended however that the judgment in the case of Jubilee Mills is not a good law in view of the decision of the Division bench of this Court in the case of Bombay Metropolitan Transport Corporation Ltd. vs Employees of BMTC Ltd. (CIDCO) and others (1991 Company Cases Vol.71 page 473). The facts in the matter before the Division bench were that the Corporation sought an order of winding up on the ground that it was unable to pay its debts. The petition was....
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....d to calculate the dues till 13 February 2002 i.e. till the date of appointment of Provisional Liquidator. Secondly, the said submission ignores the hard realities. It has been urged by the learned counsel for the applicants that workmen were left with no source of livelihood to support their families who had not paid wages since the year 2000, and it was out of desperation that the Provident fund amounts were withdrawn. The learned counsel for the applicants is right in contending that thus this cannot be construed as an admission that the service of the workmen had come to an end and lower the cutoff date for computation of dues. I have thus come to a conclusion that under the Companies Act there is no other eventuality than Section 445(3) that is the date of winding up for discharge of workmen. The eventuality may occur before the winding up by specific acts on behalf of the employer under the terms of contract read with relevant labour laws. The appointment of liquidator has different legal impact than Official Liquidator and by implication the appointment of Provisional Liquidator cannot amount to discharge of workmen. The Official Liquidator has calculated the dues up to the ....
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....e date of sale". The Apex Court has noted that as far as ratio at which sale proceeds are to be distributed, the relevant date will be date of winding up order. Thereafter the Apex Court has also referred to the date of winding up interchangeably with Provisional Liquidator. Thus though the decision does not finally conclude the controversy at hand as the issue was not directly in question, the observations quoted above support the interpretation placed by the applicant. 60. To conclude, the relevant date for computing workman's dues will be the date of winding up as per Section 445(3) and not the appointment of Provisional Liquidator. The Official Liquidator will have to recalculate the dues of the workmen accordingly. WAGES TO BE PAID 61. In this regard the learned counsel for the applicants has submitted as follows - (a) The workmen are entitled to dues from the date of defacto illegal closure till the date of the winding up order dated 5.9.2005, with all allowances and increments including enhancement of dearness allowances etc. with interest at commercial rate, plus gratuity and retrenchment/closure compensation calculated as on the date of winding up. The....
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....been closed down. (g) Thus the phrase services rendered must be read in the context of the deeming fiction under section 25-O(6) of the Industrial Disputes Act to include wages for the entire period of the illegal closure, without prejudice to the argument that the amounts due are due under the latter part of Section 529(3)(b)(i) as compensation payable under the Industrial Disputes Act, 1947. Furthermore, the Official Liquidator has not imposed no such condition and the respondent No.2 & 3 have not challenged the adjudication of the Official Liquidator, therefore this issue does not arise in this matter. There is also no such requirement under the provisions of the Companies Act, 1956, including sections 529 & 529A and section 25-O(6) of the Industrial Disputes Act, 1947. (h) The amount payable to the provident fund (PF) authorities should be paid to the PF authorities immediately and should not be subject to pari passu distribution under section 529 A of the Companies Act, 1956, or the Provident fund Commissioner may be permitted to place a claim before the Official Liquidator for the same. (i) Section 25-O (1) contemplates that an employer who intends ....
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....ng Workers Association7, has also taken this view while holding that bonus would not be workman's dues under Section 529(3)(b)(i) entitled to priority under Section 529A. (c) No claim has been made by the Provident Fund Commissioner before the Official Liquidator on account of provident fund dues, interest thereupon or damages. Therefore no occasion arose for the Official Liquidator to adjudicate any sums on this account. After his appointment as Provisional Liquidator, the Official Liquidator, not being an employer, is not liable to make any contribution towards provident fund under the provisions of the Employees Provident Fund Act. 63. Mr. Devitre and Mr.Tulzapurkar, learned senior Advocates for the respondent No.2 and 3 submitted: (a) Bonus is specifically excluded from the definition of wages as defined under Section 2(rr) of ID Act, 1947. There is no question of computing bonus for the purposes of determining the workman's dues as defined under Section 529 of the Companies Act, 1956. (b) Section 2(rr) of the ID Act, 1947 defines the term wages specifically excludes any pension or provident fund as well as gratuity payable to the workmen. In fact,....
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....losure is under orders of the Court. (f) The legislature has given priority or pari passu charge to only some of the components of workman's dues. In any event, the applicability of Section 25-O is itself questionable in the facts of the present case. There is no voluntary intention to close the Company. In the present case there is only closure of one unit whilst the other units continue to operate. (g) In the present case, the services of workmen have not been terminated by the employer but in fact have come to an end by virtue of the order dated 13th February 2002 appointing the Provisional Liquidator. In view of the aforesaid there is no retrenchment which takes place at all when a company is ordered to be wound up. The retrenchment compensation cannot be granted. or taken into consideration for the purposes of calculating the workmen dues as contemplated under Section 529 of the Companies Act. The applicants treat retrenchment and closure as interchangeable concepts which admittedly under law they are not. 64. The Official Liquidator in the impugned adjudication has held that -(a) claim for provident fun contribution and interest can only be claimed by pro....
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....erence need not be restricted by the definition of wages in Section 2(rr) of the Industrial Disputes Act or Section 2(VI) of the Payment of Wages Act. It is the contention of the applicants that any part of workers remuneration that is capable of being quantified in terms of money, including bonus would be wages for the purpose of Section 529(3)(b)(I) and will be entitled to priority Under Section 529-A. It is sought to be contended by the applicants that term wages has deliberately not been defined so as to include all the amounts paid by the employer to the employee in respect of the employment. The definition of wages under various Labour Laws are sought to be pressed in service to contend that wages mean all sums of money capable of being computed in terms of employment. It is sought to be contended that it is not necessary to be restricted by the definition of wages under Industrial Disputes Act or Payment of Wages Act and considering the background of the Act that the term wages needs to be interpreted. It is sought to be contended that the phrase wages should be given usual ordinary and natural meaning. 68. On behalf of Official Liquidator it is stated that the Official L....
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....ration and gratuity as all these items are already covered by the definition of "wages" in section 2(vi)(b) and (d) under the Payment of Wages Act. The very fact that the Legislature has made separate provisions for these items indicates that the Legislature was adopting the narrower definition of "wages" under the Industrial Disputes Act and, therefore, gratuity, pension and provident fund which are specifically excluded from the definition of "wages" under the Industrial Disputes Act, are separately provided for in sections 529(3)(b) and 530 of the Companies Act. Moreover, when the Legislature has given the workman's dues (as defined in section 529(3) (b)) along with the dues of the secured creditors overriding priority even over the dues mentioned in section 539(1) of the Act including dues payable to the employees (i.e. other than workmen-see section 539(8) (bb)), the Legislature must be treated to have consciously accepted the narrower definition of the term "wages" under the Industrial Disputes Act. " 70. In Jubilee Mills1 the learned Single Judge observed as under : "1) For the purposes of priority under Sections 529 529-A and 530 of the Companies Act, 1956 (hereinafte....
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....ment of Provisional Liquidator land if no such appointment is made the date of winding up order as contemplated in Section 530(8)(c)(i) of the Act. Hence, in the first instance the Official Liquidator shall compute the dues of the workmen as covered by the claim for priority u/S 529 and 529-A of the Companies Act and the dues of the secured creditors as on the aforesaid relevant date." 71. The learned Single Judge in the case of Engineering Workers Association7, emphasized the distinction between the claims to be made against the Company when it is not in liquidation and when the Company is wound up and is in charge of the liquidator. When the Company is wound up and the liquidator is appointed, it is not expected to honour every commitment. The claim can be made against the Official Liquidator but the Companies Act does not oblige him to honour every claim in full even if it is proved. The liquidator cannot be directed to make payments to the creditors as if the Company is operational and functional. When it comes to disbursement of amounts by the Official Liquidator, the dues which are to be disbursed have been specified. It is not that the workmen have no remedies for the due....
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....ble to him for services rendered to the company and payable under the provisions of Industrial Disputes Act, 1947. Similarly, whenever the Legislature thought that dues other than wages or salary are payable as workmen's dues, it has included them, such as, all accrued holiday remuneration payable to any workman or in case of his death to any person in his right, on the termination of his employment before or by the effect of winding up order or resolution. Further, if the company is wound up voluntarily, merely for the purpose of reconstruction or amalgamation in another company or unless the company at the commencement of winding up has under a contract with the Insurers, as is mentioned in Section 14 of the Workmens Compensation Act, 1923, rights capable of being transferred and vested in the workmen, then, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of death or disability of any workmen, are also included in workmens dues. At the same time, sums due to any workmen from a Provident Fund, Pension Fund, Gratuity Fund and/or any other fund for the welfare of the workers maintained by the company, are also included. ....
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....oyees provident fund contribution from October 2000 to 5 September 2005. The learned counsel for the applicants submitted that the Apex Court in the decision of E.P.F Commissioner Vs O.L. of Esskay Pharmaceuticals(2011 III CLR 954) that the amounts due to Employees Provident Fund authorities will have first charge on the assets of the Company. There is no dispute on this position in view of the clear dicta of the Apex Court in the case of E.P.F Commissioner8. The Official Liquidator in its impugned communication and in the affidavit in reply has not refused to pay the dues as regards provident fund but has stated that the Provident Fund Commissioner has not made its claim. The stand taken by the Official Liquidator in this regard cannot be faulted with. The view as regards Provident Fund cannot be claimed by the applicants / workmen directly but the claim will have to be made by the provident fund authorities. The Official Liquidator however should move the provident fund authorities and assist the workmen in recovery of their dues. The Official Liquidator cannot merely take a stand that the provident fund dues will be paid as and when an application is made by the provident fund C....
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....lution as the case may be, up to the date of declaration of the final dividend, at a rate not exceeding 4 per cent per annum, on the admitted amount of the claim, after adjusting against the said amount the dividends declared as on the date of the declaration of each dividend. Perusal of the above quoted rule clearly indicates that the interest cannot be claimed by the applicant as a matter of priority but will have to await the disbursement of the admitted claims. The view taken by the Official Liquidator in this regard is correct. This position is not seriously disputed by the applicants but it is stated that assets of the Company are sufficient to pay the interest. But that will not alter the legal position regarding the stage at which the interest needs to be paid. 77. The next issue to be considered is whether the applicants / workmen should be called upon to prove as to whether they were gainfully employed elsewhere before admitting their claims. This point has not been raised by the Official Liquidator. The Official Liquidator in the impugned order, affidavit in reply as well as in the Written submissions has not raised this ground. The respondent Nos.2 and 3 creditors ha....
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....ces of the workmen came to an end on 5 September 2005. STATUS OF BADLI WORKMEN 80. The learned counsel for the applicants submitted that as regards the entitlement to retrenchment compensation of Badli workers, is concerned, reading of section 25F r/w 25B of the Industrial Disputes Act, 1947, shows that the criterion for entitlement to retrenchment compensation is completion of uninterupted service of one year. Uninterupted service does not require that the worker should have worked on every day of that one year. It only requires for him/her to have been on the rolls of the company for one year. Standing Order 19 (b) of the Standing Orders for Operatives for Cotton Textile Mills framed under the provisions of the Bombay Industrial Relations Act, 1946, makes it clear that a positive act of discharge is necessary. No such act of discharge has been carried out. Badli workers are entitled to get retrenchment compensation both under section 25B as it then stood before being amended in 1964 and after the amendment. As regards entitlement of Badli workers for gratuity, Section 4 r/w. section 2-A of the Payment of Gratuity Act states that every person who has completed 5 years of ser....
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.... Orders which have been made applicable to mill workers. Reliance is also placed on the decision of the learned Single Judge of this Court in the case of Gangaram Atmaram Vishwasrao Vs National Textile Corporation(1996 (1) BCR 465). 84. In this context Section 25-C, Section 25-B and Section 25-M of the Industrial Disputes Act need to be noted. 25C. Right of workmen laid- off for compensation.- Whenever a workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid- off, whether continuously or intermittently, he shall be paid by the employer for all days during which he is so laid- off, except for such weekly holidays as may intervene, compensation which shall be equal to fifty per cent. of the total of the basic wages and dearness allowance that would have been payable to him had he not been so laid- off: Provided that if during any period of twelve months, a workman is so laid- off for more than forty- five days, no such compensation shall be payable in respect of any period of the lay- off after the expiry of ....
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.... (ii) he has been on leave with full wages, earned in the previous years; (iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and (iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.] Explanation.--" Badli workman" means a workman who is employed in an industrial establishment in the place of another workman whose name is borne on the muster rolls of the establishment, but shall cease to be regarded as such for the purposes of this section, if he has completed one year of continuous service in the establishment. 25M. Prohibition of lay- off.- (1) No workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment to which this Chapter applies shall be laid- off by his employer except 1[ with the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereinafter in this section referred to as the specified authority), o....
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....y the learned Counsel for the appellant that the Badli employees could not be said to have been deprived of any work to which they had no right and, consequently, they are not entitled to any compensation for the closure. Indeed, the Industrial Court has itself observed that to allow the claim of Badli workmen would be tantamount to penalising the appellant. In spite of the said observation, the Industrial Court directed payment of compensation to the Badli workmen in place of certain categories of regular employees. We fail to understand how the Industrial Court can direct payment of compensation to the Badli workmen when, admittedly, such Badli workmen, as noticed already, have no right to be employed. It may be that the Company may not have to pay closure compensation to the three categories of employees, as mentioned by the Industrial Court, but that does not mean that the Company has to pay compensation to the Badli workmen in place of these categories of employees. In this connection, we may refer to Section 25C of the Industrial Disputes Act, 1947 which excludes a Badli workman or a casual workman from the benefit of compensation in the case of layoff. 16. ....
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....tipulated days of service, there is no factual foundation laid in the present application nor there is any adjudication by the Official Liquidator. The applicant has not specified in the application as to which applicant is the Badli workmen and no data or documents are placed on record to arrive at a conclusion as to whether the concerned applicant has completed the stipulated number of days of service. The Official Liquidator has also not considered the legal position which is sought to be pressed into service by the learned counsel for the applicants as regards claim of Badli workers to be treated as permanent after completing stipulated number of days service. Legal issue as regards the entitlement of the Badli workers will have to be thus decided in realm of pure conjecture .Question of law can be not be considered unless factual foundation laid to that effect. 89. The Official Liquidator has solely relied on the decision of the Apex Court in the case of Prakash Cotton Mills10 and Section 25-C of the Industrial Disputes Act, and has refused to consider any other aspect. The effect of decision of Apex Court in Digwadih Colliery11 and the learned Single Judge Gangaram Atamara....