2009 (3) TMI 860 - HC - Companies Law

Rehabilitation scheme sanctioned by the BIFR - whether the proceedings before the Labour Court initiated by the petitioners by way of T. applications are to be quashed and set aside and/or they are to be suspended till the consent from the BIFR is obtained? Held that - The impugned judgment and order passed by the Industrial Tribunal in suspending the proceedings of the T. applications filed by the respective petitioners deserves to be quashed and set aside and the Labour Court is required to be directed to proceed further with the adjudication of the T. applications and after the award is declared, the effect of section 22 of the SICA can be considered. However, there is no justification to suspend the proceedings before the Labour Court which have been initiated way back in the year 1985 and to stay the further proceedings and adjudication thereof. The present petition succeeds. The impugned order passed by the Industrial Tribunal at Nadiad in Revision Application (ICM) No. 1 of 2004 is hereby quashed and set aside.

Issues Involved:

1. Suspension of proceedings under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
2. Applicability of Section 22 of the SICA to pending proceedings.
3. Justification for staying the proceedings initiated by workmen in 1985.
4. Consideration of financial implications under Section 22 of the SICA.

Issue-wise Detailed Analysis:

1. Suspension of proceedings under Section 22 of the SICA:

The petitioners challenged the order of the Industrial Tribunal, Nadiad, which suspended the proceedings of T. Application No. 62 of 1985 and other allied matters until the petitioners obtained consent from the Board for Industrial and Financial Reconstruction (BIFR). The Industrial Tribunal's decision was based on Section 22 of the SICA, which bars the continuation of certain proceedings against a sick company without BIFR's consent.

2. Applicability of Section 22 of the SICA to pending proceedings:

The petitioners argued that Section 22 of the SICA should not apply to the adjudication of the T. applications, as the proceedings were initiated in 1985, long before the respondent-company approached the BIFR in 2000. The petitioners contended that the bar under Section 22 of the SICA would only come into play during the execution of an order having financial implications, not during the adjudication phase. They cited Supreme Court decisions in Eagle Flask Industries Ltd. v. Talegaon Dabhade Municipal Council and Jay Engg. Works Ltd. v. Industry Facilitation Council to support their argument that adjudication should proceed without delay.

3. Justification for staying the proceedings initiated by workmen in 1985:

The petitioners emphasized that they had been out of employment since 1985 and that further delay in adjudicating their claims would cause undue hardship. They argued that the respondent-company's approach to the BIFR in 2000 and the subsequent sanctioning of a rehabilitation scheme in 2002 should not affect the ongoing adjudication of their T. applications. The petitioners asserted that the Labour Court should continue with the adjudication and only consider the applicability of Section 22 of the SICA at the execution stage.

4. Consideration of financial implications under Section 22 of the SICA:

The respondent-company, represented by Mr. Kamal Trivedi, argued that the Industrial Tribunal rightly suspended the proceedings to protect the rehabilitation scheme sanctioned by the BIFR. They contended that any proceedings with financial implications should be stayed to avoid jeopardizing the scheme's implementation. The respondent-company cited decisions from the Gujarat High Court in Abad Dairy v. Manjibhai Dhanjibhai and Morarji Desai Textile Labour Co-operative Industries Ltd. v. Thakorebhai Dhulabhai Patel to support their position.

Judgment:

The court concluded that the bar under Section 22 of the SICA applies only when there are financial implications and an award is sought to be executed. The court referred to the Supreme Court's decisions in Eagle Flask Industries Ltd. and Jay Engg. Works Ltd., which held that adjudication could proceed, and the bar under Section 22 would apply only at the execution stage.

Therefore, the court quashed the Industrial Tribunal's order suspending the proceedings and directed the Labour Court, Nadiad, to proceed with the adjudication of the T. applications. The Labour Court was instructed to decide and dispose of the applications within six months, considering the long delay since 1985. The effect of Section 22 of the SICA would be considered only after the award was declared.

Conclusion:

The court allowed the petition, set aside the Industrial Tribunal's order, and directed the Labour Court to adjudicate the T. applications expeditiously. The rule was made absolute to this extent, with no order as to costs.

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