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2010 (3) TMI 680 - HC - Companies LawWhether the order of winding up is yet to be passed and consequently, the claim of the appellant in terms of section 529A of the Companies Act cannot be considered? Held that - The writ petition came to be dismissed on the primary ground that the company, viz., M/s. Nova Electromagnetic Ltd., Chennai-45 has not been impleaded as respondent. Since it was represented that the above said company had shifted its operation to New Delhi, this court vide order dated January 28, 2009, had directed the appellant herein to serve notice on the above said company having address at Door No. 506, Hemkunt Tower, 98, Nehru Palace, New Delhi-110 019 and also to the Chennai address of the said company. The private notice taken to the company at New Delhi was returned with an endorsement refused and the notice taken to the Chennai address was also returned with an endorsement Left . Affidavit of service was also filed to that effect by the appellant. Since the infirmity pointed out in the impugned order has been rectified, the said infirmity no longer survives. But in view of the above cited reasons, the prayer sought for by the appellant-union cannot be granted at present.
Issues Involved:
1. Viability of the rehabilitation scheme for M/s. Nova Electro Magnetics Ltd. 2. Eviction proceedings against the company under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. 3. Settlement of workers' dues under Section 529A of the Companies Act, 1956. 4. Applicability of the SARFAESI Act in the sale of the company's assets. 5. Legal standing and procedural requirements for the writ petition. Detailed Analysis: 1. Viability of the Rehabilitation Scheme for M/s. Nova Electro Magnetics Ltd. The company became sick and sought a reference before the BIFR, which appointed IDBI as the operating agency to examine the viability of rehabilitation proposals. The BIFR issued directions for the preparation of a rehabilitation scheme. However, the scheme was rejected by the BIFR and the appeal to AAIFR was also dismissed. The company challenged this in W.P. No. 11331 of 2003. 2. Eviction Proceedings Against the Company The first respondent (MEPZ) initiated eviction proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, due to rental arrears and failure to fulfill export obligations. The first respondent also canceled the lease and initiated proceedings under the SARFAESI Act, leading to the sale of the company's assets. 3. Settlement of Workers' Dues Under Section 529A of the Companies Act, 1956 The petitioner union claimed that workers' dues should have a first charge over the company's assets under Section 529A of the Companies Act. However, the third respondent (IDBI) argued that Section 529A applies only if the company is in liquidation, which was not the case here. The BIFR noted that workers' dues should be paid from the sale proceeds of the company's assets. 4. Applicability of the SARFAESI Act in the Sale of the Company's Assets IDBI initiated proceedings under the SARFAESI Act due to the company's default, leading to the sale of assets to M/s. Annam Steels P. Ltd. and M/s. Cognizant Technology Solutions India P. Ltd. The sale proceeds were distributed among secured creditors. The court reaffirmed that the SARFAESI Act overrides the Companies Act in cases of debt recovery, as per the Allahabad Bank v. Canara Bank ruling. 5. Legal Standing and Procedural Requirements for the Writ Petition The writ petition was initially dismissed because the company was not impleaded as a respondent. The court directed the petitioner to serve notice to the company at its New Delhi address, but the notice was refused. The court acknowledged that the company's non-response was likely an attempt to evade its responsibilities. Conclusion: The writ appeal was disposed of with the following directions: - M/s. Nova Electro Magnetics Ltd. is restrained from alienating or encumbering its assets until workers' dues are satisfied. - The petitioner union is permitted to initiate appropriate legal proceedings against the company. - Respondents Nos. 2 and 3 (IDBI and other banks) are encouraged to consider the plight of the workmen and explore the possibility of paying part of their dues from the sale proceeds. The court concluded that the prayer sought by the appellant-union could not be granted at present due to the non-liquidation status of the company and the pending adjudication of workers' dues.
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