2019 (8) TMI 496 - HC - Companies Law

Eligibility of wages to dissenting workmen - company under liquidation - Several claims were lodged by the dissenting workmen before the official liquidator for adjudication - Whether the consent terms are binding upon the dissenting workmen? - HELD THAT - The submission that the dissenting workmen were well aware of the then impending consent terms or they allowed the consent terms to be taken on record, or, for that matter, the consent terms were accepted in the presence of the learned counsels representing the dissenting workmen are of no avail. In the face of the provisions contained in section 529 and 529 A of the Companies Act, 1956, the dissenting workmen cannot be deprived of their statutory and legitimate right to participate in the product of their labour and effort, which becomes disbursible, in the wake of winding up, on the basis of such submissions of tacit consent or waiver. The finding recorded by the learned Company Judge that the consent terms do not bind dissenting workmen, in the circumstances, appears to be impeccable. Thus, we are not impelled to take a different view of the matter. Whether the dissenting workmen are entitled to wages up to the date of the winding up order, i.e., 24th October 2008? - HELD THAT - The date of the appointment of the Provisional Liquidator, i.e., 30th September 2005, after admission of the company petition, pursuant to an opinion rendered by BIFR under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 would be the appropriate date for calculating the claims of the dissenting workmen. The Provisional Liquidator came to be appointed much after the confirmation of the sale of the assets of the company and realization of the proceeds thereof. We make it clear that we have not prescribed the date of appointment of the Provisional Liquidator as the cut off date as the mandate flowing from the provisions of the Companies Act, 1956, but having regard to the fact that, by the said date, the company was rendered a shell and its assets were converted into corpus, for the purpose of liquidation - answered partly in the affirmative. Whether the determination of the entitlement of the dissenting workmen under various items, i.e., notice pay, leave wages, bonus, gratuity and interest by the learned Company Judge is justifiable? - HELD THAT - As regards the closure compensation, we find that the issue has not been dealt with by the learned Company Judge, apparently, for the reason that it was not agitated before the learned Judge. We do not find it appropriate to deal with the said issue of entitlement of the appellant, Mrs. Triveni Kulkarni for closure compensation, for the first time, in exercise of appellate jurisdiction, especially when the appellant did not care to canvas the issue across the bar and the rival union has chosen not to question the disposition made by the learned Judge by the impugned order. As the amount is lying un disbursed on account of non adjudication of the claims, in view of pendency of the proceedings before this Court, we are of the view that said issue raised by an individual workman should not detain the Official Liquidator from adjudicating the claims and disbursing the due amounts to the workmen any more. We are thus not persuaded to interfere with the impugned order as regards the entitlement of the workmen under the specific items. Appeal allowed in part.

Summary

Issues Involved:
1. Binding efficacy of the consent terms upon the dissenting workmen.
2. Date up to which the dissenting workmen are entitled to wages.
3. Entitlement of the dissenting workmen under various items like notice pay, leave wages, bonus, gratuity, and interest.

Detailed Analysis:

Issue 1: Binding Efficacy of the Consent Terms Upon the Dissenting Workmen
The learned Company Judge found that the dissenting workmen were not bound by the consent terms executed between Kamani Employees Union and the creditors. The dissenting workmen were entitled to adjudication of their claims in accordance with Sections 529 and 529A of the Companies Act, 1956. The Judge noted that the issue of entitlement of the dissenting workmen was specifically kept open in previous orders. The appellant union could not provide material evidence that the dissenting workmen had accepted the consent terms. The dissenting workmen were not party to the consent terms, nor was there evidence that the appellant union had the authority to represent them. The dissenting workmen cannot be deprived of their statutory and legitimate right to participate in the product of their labor based on tacit consent or waiver. Thus, the consent terms do not bind the dissenting workmen.

Issue 2: Date Up to Which the Dissenting Workmen Are Entitled to Wages
The learned Company Judge determined that the dissenting workmen were entitled to wages up to the date of the winding-up order, i.e., 24th October 2008, based on Section 445(3) of the Companies Act, 1956. However, the appellate court found that there cannot be a straitjacket formula that the date under Section 445(3) is the only cut-off date for calculating workmen's dues. The appellate court considered the peculiar facts and circumstances of the case, including the sale of the company's assets in 2004, leaving the company as a shell. The appellate court concluded that the appropriate date for calculating the claims of the dissenting workmen should be 29th September 2005, the date of the appointment of the Provisional Liquidator, rather than the date of the winding-up order.

Issue 3: Entitlement of the Dissenting Workmen Under Various Items
The rival union did not press any grounds questioning the legality, propriety, and correctness of the directions issued by the learned Company Judge regarding the entitlement of the workmen under specific items like notice pay, leave wages, etc. The appellant Ms. Triveni Kulkarni challenged the disposition regarding notice pay and closure compensation. The learned Judge ascribed sound reasons for negativing the claim for notice pay based on the provisions of Section 25-O of the Industrial Disputes Act. The issue of closure compensation was not dealt with by the learned Company Judge, and the appellate court did not find it appropriate to deal with this issue for the first time in appellate jurisdiction. The appellate court confirmed the impugned order regarding the entitlement of the workmen under specific items.

Conclusion:
The appellate court partly allowed Appeal No. 163 of 2016 and modified the impugned order to the extent that the dissenting workmen shall be entitled to wages up to 29th September 2005, instead of 24th October 2008. The rest of the impugned order was confirmed. Appeal No. 618 of 2016 was dismissed. No costs were awarded.