1987 (4) TMI 370 - SC - Companies Law

Arrears of salaries and wages due to the workers from May, 1984, onwards - Held that - We direct that stocks which are lying with the industry valued at Rs. 91,77,000 shall immediately be disposed of and out of this, the wages and other dues of the workers for the period from May, 1984, till 8th July, 1984, shall be met. The balance, if any, will be utilised for meeting other pressing demands in the discretion of the official liquidator subject to orders of the Court. We are sure that the official liquidator will ensure that the disposal fetches the best of rates. We may also make it clear that issuance of the notification by the Bihar State Government will not come in the way of sale of these assets and payment to the workers. We direct that this shall be completed within two months from today. The case may come for further directions in third week of July.

Summary

Issues:
Non-payment of salaries to workers despite court orders; Industry declared sick under Bihar Relief Undertakings Act; Dispute over priority of payment between workers and financial institutions; Proposal to sell stocks to pay workers; Concerns over impact on industry revival scheme.

Analysis:
The judgment by the Supreme Court addressed several critical issues. Firstly, it highlighted the non-payment of salaries to workers despite court orders directing payment in three installments from May 1984 onwards. The State of Bihar declared the industry as a sick industry under the Bihar Relief Undertakings Act, raising concerns about the enforceability of worker payments. However, the State conceded that worker salaries should be paid.

A key dispute arose regarding the priority of payment between workers and financial institutions holding pledged goods. The financial institutions argued for a prior claim over the sale proceeds of the finished products, while the workers' representatives emphasized the workers' contribution to producing the stocks. The Court recognized the workers' rights to wages and emoluments up to the closure of the industry in July 1984.

The judgment also considered a proposed scheme to revive the industry and the potential financial challenges that may arise. The Court acknowledged the importance of ensuring workers' subsistence and living standards, leading to the decision that the stocks valued at Rs. 91,77,000 should be sold to pay the workers their dues up to the closure date. The Court directed the official liquidator to ensure the best rates for the disposal of assets and allowed the State Bank to adjust insurance payments against its claims.

In conclusion, the Court balanced the interests of workers and financial institutions by prioritizing worker payments while considering the implications for the industry's revival scheme. The judgment emphasized the importance of ensuring workers' welfare and directed the prompt sale of assets to meet their dues. The Court expressed hope that the Central Government would support the industry's revival efforts, indicating a broader perspective on the situation's resolution.