2006 (4) TMI 261 - SC - Companies Law

Whether the employees of public sector enterprises have any legal right to claim revision of wages that though the industrial undertakings or the companies in which they are working did not have the financial capacity to grant revision in pay scale, yet the Government should give financial support to meet the additional expenditure incurred in that regard? Held that - Appeal allowed. This Court did not lay down any principle of law of universal application and passed appropriate orders only in the compelling circumstances noticed by it. We are, therefore, satisfied that in respect of a sick industrial company, even if it be a subsidiary of a Government company, there is no legal obligation cast upon the State Government to pay the wages due to the workmen. The rights of workmen are governed by the relevant provisions of the Companies Act where their claim has been accorded priority. Moreover, in any view of the matter we find nothing in SICA which authorises the BIFR to pass an interim order directing the State Government in such circumstances to pay the wages due to the employees of the sick industrial company. We, therefore, allow all these appeals and set aside the impugned orders.

Issues Involved:
1. Jurisdiction of BIFR to direct the State Government to pay wages to workers of a sick company.
2. Legal obligations of the State Government towards the employees of a sick industrial company.
3. Timeliness and effectiveness of BIFR proceedings.

Issue-wise Detailed Analysis:

1. Jurisdiction of BIFR to Direct the State Government to Pay Wages:
The primary contention raised by the State of Uttar Pradesh was the lack of jurisdiction of the Board of Industrial and Financial Reconstruction (BIFR) to direct the State Government to pay wages to the workers of a sick company. The court examined the relevant provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and found that none of the provisions authorized the BIFR to pass such an order. Specifically, the court noted that sections 15, 16, 17, 18, and 19 of SICA did not provide any authority to BIFR to direct the State Government to pay the wages due to the workers of a sick industrial company. The court concluded that BIFR overstepped its jurisdiction by issuing such a directive.

2. Legal Obligations of the State Government Towards Employees of a Sick Industrial Company:
The court addressed whether the State Government had any legal obligation to pay the wages of the employees of a sick industrial company, even if it was a subsidiary of a government company. The court referred to previous judgments, including A.K. Bindal v. Union of India and Officers and Supervisors of I.D.P.L. v. Chairman and M.D., I.D.P.L., which established that employees of government companies are not government servants and thus do not have a legal right to claim that the government should pay their salaries. The court reiterated that the responsibility to pay the employees lies with the company, not the government, and emphasized the importance of considering the economic viability of the employer in such matters.

3. Timeliness and Effectiveness of BIFR Proceedings:
The court expressed concern over the prolonged pendency of the proceedings before the BIFR, which had been ongoing since August 1994 without any viable solution. The court highlighted the adverse effects of such delays, noting that the financial condition of the sick industrial company worsens over time, making it more challenging to revive the company. The court underscored the need for timely resolution of such cases to prevent further deterioration of the company's financial health and to protect the interests of the creditors and employees. The court directed the BIFR to dispose of the proceedings within six months and urged the High Court to expedite the related writ petition.

Conclusion:
The court allowed the appeals and set aside the impugned orders, concluding that the BIFR lacked jurisdiction to direct the State Government to pay the wages of the employees of a sick industrial company. The court emphasized that the responsibility to pay the wages lies with the company and not the government. Additionally, the court stressed the importance of timely resolution of proceedings under SICA to prevent further financial deterioration of sick industrial companies. The BIFR was directed to conclude the proceedings within six months, and the High Court was urged to expedite the related writ petition.

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