1999 (5) TMI 535 - HC - Companies Law

Winding up Debts of all descriptions to be admitted to proof, Overriding preferential payments

Issues Involved:
1. Unpaid wages/salary for the period of illegal closure.
2. Ad hoc interim relief.
3. Retrenchment compensation.
4. Accrued holiday remuneration.
5. Compensation under the Workmen's Compensation Act, 1923.
6. Gratuity.
7. Bonus.
8. Notice pay.
9. Definition of "workmen" under section 529(3)(a).
10. Interest on dues of workmen/employees or secured creditors.

Summary:

(1) Unpaid wages/salary for the period of illegal closure:
The court concluded that the expression "all wages or salary ... in respect of services rendered to the company" u/s 529(3)(b)(i) includes wages payable for the period of illegal closure. The statutory fiction in section 25-O(6) of the Industrial Disputes Act must be read into the Companies Act, implying that workmen are entitled to wages for the period of illegal closure as if the undertaking had not been closed down.

(2) Ad hoc interim relief:
Ad hoc interim relief awarded by the industrial court is considered part of wages/salary under section 529(3)(b)(i). This relief, although termed interim, was intended to form part of the remuneration payable to the workmen.

(3) Retrenchment compensation:
Retrenchment compensation payable under any provisions of the Industrial Disputes Act is included in "workmen's dues" u/s 529(3)(b)(i). The period of illegal closure is to be included in the length of service for computing such compensation.

(4) Accrued holiday remuneration:
Accrued holiday remuneration payable to any workman on termination of employment before or by the winding-up order includes claims for the period immediately prior to closure but not for the period of closure, whether legal or illegal.

(5) Compensation under the Workmen's Compensation Act, 1923:
There is no controversy, and such compensation is admissible for priority u/s 529(3)(b)(iii).

(6) Gratuity:
Gratuity under the Payment of Gratuity Act, 1972, is covered by section 529(3)(b)(iv) irrespective of whether the company maintained a gratuity fund. The period of illegal closure is included in the qualifying period for computing gratuity.

(7) Bonus:
The claim for bonus, whether under the Payment of Bonus Act, 1965, or otherwise, is not admissible for priority under the Act. The court emphasized the narrower definition of "wages" under the Industrial Disputes Act over the wider definition under the Payment of Wages Act.

(8) Notice pay:
Notice pay under the Industrial Disputes Act or any other law is not admissible for priority under the Act. The Companies Act contemplates automatic discharge without the need for notice under sections 25F, 25FFA, and 25FFF of the Industrial Disputes Act.

(9) Definition of "workmen" under section 529(3)(a):
For textile companies in liquidation in Gujarat, "workmen" includes all employees except those in managerial, administrative, or supervisory capacities drawing basic wages exceeding Rs. 2,000. The court adopted a formula excluding eleven specific categories of employees.

(10) Interest on dues of workmen/employees or secured creditors:
The relevant date for computation of dues is the date of the first appointment of a provisional liquidator or the date of the winding-up order. No interest is awarded for the period after the relevant date unless there is a surplus. Interest prior to the relevant date is allowed only if the debts carry interest as per the contract terms.

Order:
The Textile Labour Association to resubmit claims for workmen's dues within two months. The official liquidator to verify and process these claims, and objections by secured creditors to be submitted within one month. Interim disbursement of 10% of revised claims to workmen and secured creditors, with specific conditions for secured creditors. The official liquidator is authorized to incur necessary expenses for these directions.

← Previous Next →