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2013 (1) TMI 226 - HC - Companies LawWinding up proceedings - rights of Secured Creditors and workmen - almost 11 years have passed since the date on which the order for winding up of the company (i.e. 27.12.2001) came to be passed - Held that - A plain reading of the Sec. 2(s) of the Act of 1947 clarifies that except the persons who stand covered under the exclusion clause all persons employed to do manual unskilled, skilled, technical, operational, clerical or even supervisory work for hire or reward are covered within the meaning of the term workmen.According to the said section, those persons who are mainly employed in managerial or administrative category (i.e. such duty should not be incidental to main duty) and/or those who are employed in supervisory category with wages exceeding prescribed limit stand excluded from the term workmen and consequently they would stand excluded for the purpose of section 529, section 529 A and section 530 of the Act. Therefore the submission that all those persons who were drawing Basic wages exceeding Rs. 2000/- should have been excluded, without having regard to the issue as to whether they were employed mainly in managerial or administrative capacity or were employed in supervisory capacity with wages exceeding prescribed limit, or not is not in consonance with the relevant provision. As the matter is required to be examined from the perspective that the company in liquidation was an engineering undertaking and that therefore while excluding the persons from the purview of the term workmen , regard is required to be had to the definition under section 2(s) of the Act of 1947. Differently put all persons who were employed in supervisory category would not stand excluded only because they were employed in supervisory category unless each was drawing wages exceeding prescribed limit. Similarly merely because a person was drawing wages exceeding prescribed limit, he would not stand excluded (according to section 2(s) of Act of 1947), unless he was employed in supervisory category. Of course all persons employed mainly and purely in administrative or managerial capacity/category, would stand excluded. Out of the total claim amount which is determined by the chartered accountant i.e. quantification of workmen s claim, the amount allowed towards claim for wages towards privilege leave/earned leave shall be taken out. The said claim is not permissible for purpose of disbursement under Section 529A, and could not have been included in the quantification of workmen s claim. Therefore, to that extent correction shall be carried out by the chartered accountant. It is also held that in certain circumstances the secured creditors can come before the Company Court and claim priority over other creditors even though the said creditor is standing outside the winding up. On the premise that the secured creditor is standing outside the winding or that it has not relinquished its security, the disbursement under section 529-A of the Act cannot be denied to the secured creditors on the said ground, when the property over which the said secured creditors has a charge and such charge is registered under Section 125 of the Act is sold by the official liquidator and sale proceeds are received by official liquidator and are put up for disbursement under section 529-A of the Act. Creditors other than the workmen are concerned their inter-se rights (including right of priority in receiving disbursement) based on the nature and extent of charge held by them are not obliterated vis-a-vis the workmen. The provisions under section 529 and section 529-A of the Act do not, in any manner, admit or support the contention that while determining the distribution ratio for the purpose of distribution amongst the secured creditors and the workers, the debt of the secured creditors holding second charge should be excluded. The claim/debt of the secured creditors holding second charge is not to be excluded at the time of determining the distribution ratio for the purpose of distribution/payment between the secured creditors and the workmen. Workmen s claim that the dues of the mutual fund do not enjoy first charge over the properties and therefore the said claim should not have been included - As the objection against inclusion of the debt of secured creditors holding second charge is rejected, the aforesaid objection also stands rejected. The distribution ratio will have to be respondent-calculated and shall have to be determined afresh. Thus, the chartered accountant shall complete the entire process within two weeks and for that purpose official liquidator shall forward appropriate intimation with copy of this order to the chartered accountant. Two weeks time is granted to the secured creditors and the workmen to submit the details with supporting documents, to point out case of particular workmen, if any, in whose cases any error with regard to date of birth (and consequently in determining date of superannuation) or date of joining or date of death (in cases where any workman has died) or with regard to the wage as on relevant date (basic wage or VDA/FDA) have actually occurred. The chartered accountant shall verify as to whether cases of any person employed as senior engineer, senior engineer (project), senior programmer and senior officer treating basic wage of more than Rs. 2000/- or not and if any case of such category is found then claim of such person shall be taken out of the total claim of workmen and necessary correction shall be accordingly made. Claim of State Bank of Patiala - the claim in the sum of Rs. 27,19,360/- which is allowed by the chartered accountant vide report dated 17.2.2009 is not permissible at this stage of disbursement under Section 529A of the Act and that therefore the said amount will have to be taken out from the total claim amount quantified by the chartered accountant for State Bank of Patiala and necessary correction shall be made by the chartered accountant.
Issues Involved:
1. Relief sought by the applicant unions. 2. Factual background and procedural history. 3. Objections by secured creditors. 4. Objections by workmen. 5. Calculation of claims and disbursement ratio. Detailed Analysis: Relief Sought by the Applicant Unions: The applicant unions, "Gujarat Steel Tube Employees Union" and "Gujarat Mazdoor Sabha," sought directions for the official liquidator to comply with previous court orders, specifically the order dated 27.9.2007, and to file reports and make final disbursements based on such reports. They also requested the court to direct the official liquidator to file necessary reports and propose a final disbursement ratio. Factual Background and Procedural History: The company was ordered to be wound up on 27.12.2001, and the official liquidator was appointed. The sale of assets, excluding land, was confirmed on 27.11.2003 for Rs. 12.31 Crores. Various applications were filed seeking disbursement from the realized amount, and the court ordered interim disbursement of Rs. 35 Crores in a 50:50 ratio between secured creditors and workers. The court also directed the official liquidator to refer documents to a chartered accountant for re-verification and submit a fresh report for final disbursement. Multiple reports were submitted by different chartered accountants, leading to conflicting conclusions and recommendations. Objections by Secured Creditors: Secured creditors raised several objections, including: - Errors in considering the total number of workmen and their actual salary. - Inclusion of certain items/heads (e.g., earned leave, leave encashment) which should not have been included. - Incorrect verification of dates of birth, joining, and retirement. - Inclusion of claims of staff members drawing wages exceeding Rs. 2000/-. - Discrepancies in the calculation of wages and gratuity. - Claim for liquidated damages, trusteeship fees, and penal/compound interest. The court addressed these objections by examining the reports and relevant provisions. It concluded that the chartered accountant's calculations were based on relevant records and applicable provisions. However, the court directed the chartered accountant to exclude claims for privilege/earned leave for the period of closure and to verify claims of staff members drawing basic wages exceeding Rs. 2000/-. Objections by Workmen: Workmen raised objections regarding: - The inclusion of claims of secured creditors holding second charge. - The calculation of their claims, including the inclusion of heat allowance and other benefits. - Specific objections against the claims of State Bank of Patiala and mutual funds. The court rejected the objection regarding the exclusion of secured creditors holding second charge, citing provisions under Sections 529 and 529A of the Companies Act and relevant case law. The court also directed the chartered accountant to verify specific claims and make necessary corrections. Calculation of Claims and Disbursement Ratio: The court directed the chartered accountant to make necessary corrections in the reports, including: - Exclusion of claims for privilege/earned leave for the period of closure. - Verification of claims of staff members drawing basic wages exceeding Rs. 2000/-. - Exclusion of the claim of Rs. 27,19,360/- by State Bank of Patiala. - Inclusion of Rs. 50,000/- paid by Bank of Baroda towards expenses. The chartered accountant was instructed to recalculate the disbursement ratio and submit a fresh report to the official liquidator, who would then file a fresh report with the court for final disbursement. Conclusion: The court addressed the objections raised by both secured creditors and workmen, providing detailed directions for corrections and verification. The final disbursement would be based on the corrected reports, ensuring compliance with relevant legal provisions and previous court orders.
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