2010 (12) TMI 1072 - HC - Companies Law

Winding up - Preferential payments - Appellants were erstwhile employees of IRCC, company under liquidation

Issues Involved:
1. Applicability of the Gujarat pattern for calculating VRS compensation.
2. Estoppel and cessation of the employer-employee relationship post-VRS payment.
3. Validity of claims raised post-liquidation notice.
4. Comparison of benefits under different VRS schemes.
5. Internal notes and their relevance in legal claims.

Issue-wise Detailed Analysis:

1. Applicability of the Gujarat Pattern for Calculating VRS Compensation:
The appellants, former employees of IRCC, claimed that their retirement benefits were not calculated as per the Office Memorandum dated 5-5-2000, which was modeled on the Gujarat pattern. They argued that ex gratia compensation should be calculated on a 26-day month instead of a 30-day month. The Liquidator rejected this claim, stating that the Gujarat pattern was not adopted by IRCC. The Court noted that the Office Memorandum allowed enterprises to adopt different VRS schemes based on their financial status. IRCC, a loss-making enterprise, had opted for a scheme different from the Gujarat pattern, which was approved by the Ministry of Surface Transport. The Court held that the appellants were not entitled to compensation based on the 26-day month as the approved scheme provided a different calculation method.

2. Estoppel and Cessation of the Employer-Employee Relationship Post-VRS Payment:
The appellants had applied for VRS on 30-6-2000, their applications were accepted on 3-7-2000, and they received payments on 30-9-2000 without any protest. The Court applied the principle of estoppel, stating that the appellants ceased to be employees of IRCC once they accepted the VRS payments. The Supreme Court in A.K. Bindal v. Union of India emphasized that VRS is a package deal meant to bring about a complete cessation of the jural relationship between the employer and the employee. The Court reiterated that once the VRS payment is accepted, the employee cannot agitate for past rights or claims.

3. Validity of Claims Raised Post-Liquidation Notice:
The appellants raised their claims only after the advertisement by the liquidator on 18-6-2004. The Court noted that the appellants had accepted the VRS payments in 2000 and raised no objections until the liquidation notice. This delay and the acceptance of payments without protest further supported the application of estoppel against the appellants.

4. Comparison of Benefits Under Different VRS Schemes:
The Court examined the various VRS schemes mentioned in the Office Memorandum dated 5-5-2000. Paragraph 2 dealt with financially sound enterprises, Paragraph 3 with marginal profit or loss-making enterprises, and Paragraph 5 with sick and unviable units like IRCC. IRCC had adopted a scheme that provided benefits distinct from those in Paragraph 5, including an enhanced ex gratia payment from 45 days to 60 days of emoluments for each completed year of service. The Court concluded that the appellants received benefits higher than those stipulated in Paragraph 5, and thus their claim for additional compensation was unfounded.

5. Internal Notes and Their Relevance in Legal Claims:
The appellants relied on an internal note dated 4-12-2002 from the personnel department. The Court dismissed the relevance of this note, explaining that it was an internal view of the Deputy Manager (Personnel) and not an official position. The liquidator and the Officer on Special Duty did not accept this view, and it was alleged that the note was motivated by personal financial gain. The Court held that such internal notes could not form the basis for legal claims.

Conclusion:
The Court found no merit in the appeals and dismissed them. The appellants' claims were rejected based on the applicability of the approved VRS scheme, the principle of estoppel, and the fact that the benefits received were higher than those stipulated in the relevant Office Memorandum.

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