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2016 (2) TMI 817 - HC - Companies LawRight of dissenting workmen - Adjudication of claims of workmen and secured creditors of the company (In liquidation) by Official Liquidator - Whether the dissenting workmen are bound by the consent terms or whether they are entitled to be paid in accordance with Sections 529 and 529A of the Companies Act, 1956? - Held that - Only such of the dissenting workmen of the Company who became members of the Workers co-operative in terms of the scheme sanctioned by BIFR and actually worked with the Company till 31 December 1998 are entitled to be paid wages upto the date of the winding up order. Others are not entitled to any wages with effect from 20 September 1991. There is no question of the workmen getting any notice pay under Section 25-N of the Industrial Disputes Act by virtue of Section 25-O introduced by the Maharashtra amendment. Notwithstanding the fact that such worker did not work for the entire period specified in Sub-section (1) and to the extent he had not actually availed of such leave, he will be entitled to wages in lieu of the unavailed leave. Sub-section (3) does not provide for wages in lieu of leave generally, but only in the contingencies referred to therein. So far as accumulation of unavailed leave is concerned, Subsection (5) enables a maximum accumulation of leave of thirty days by carrying forward earned leave. The leave that can, thus, be encashed under Section 79 of the Factories Act is only the earned or accumulated leave during the calender year upto a maximum of thirty days under conditions of Sub-section (3). The rate of such wages has to be as per Section 80 of the Factories Act. As held by this Court in the case of Swadeshi Mills (2016 (2) TMI 645 - BOMBAY HIGH COURT ), bonus is not included in the category of wages under Sections 529 and 529A of the Companies Act and cannot be accorded any priority. The dissenting workmen in the present case accept this position, though they would like to keep their option to claim bonus in the event of availability of surplus funds so as to satisfy nonpriority debts of the Company (in liquidation). On gratuity, all parties including the Official Liquidator agree that gratuity would be payable. The consent terms provide for such gratuity. So does the adjudication made by the Official Liquidator. The dissenting workmen would accordingly have to be paid gratuity in accordance with law. Gratuity, however, in the present case has become due and payable only at the date of the winding up order. Any interest post winding up order is governed by Rule 179 of the Companies (Court) Rules. Such interest at a rate not exceeding four per cent per annum is payable only in the event of there being a surplus after payment in full of all claims admitted to proof. There is no question of awarding any interest on gratuity, in the premises, as preferential payment under Sections 529 and 529A of the Companies Act. If and when there is a surplus, a claim for interest on gratuity can be considered, but not otherwise The Official Liquidator is directed to adjudicate the claims of the Applicants in the Company Applications herein on the basis of this order and after taking into account the documentary evidence available on record and verifying the respective claims. The Official Liquidator shall enlist the assistance of any advocate and / or chartered accountant on his panel for the purpose of such adjudication. The costs of such advocate and / or chartered accountant shall be defrayed from the funds of the Company (in liquidation) available with the Official Liquidator.At any time during the course of such adjudication or after adjudication but before disbursal of payment on the basis thereof, the Official Liquidator shall give an option to each of the Applicants to accept their dues in accordance with and on the principles of the consent terms taken on record in full and final settlement of their claims against the Company (in liquidation).
Issues Involved:
1. Whether the dissenting workmen are bound by the consent terms or entitled to payment under Sections 529 and 529A of the Companies Act, 1956. 2. The date up to which dissenting workmen are entitled to wages. 3. Entitlement to notice pay, leave wages, bonus, gratuity, and interest on these dues. Detailed Analysis: Issue 1: Binding Nature of Consent Terms The dissenting workmen argued they were not bound by the consent terms agreed upon by the registered union and the secured creditors and sought payment according to Sections 529 and 529A of the Companies Act, 1956. The court found that these workmen were not represented by the union that signed the consent terms and had consistently objected to them. The court concluded that dissenting workmen must be paid based on their legal entitlements under Sections 529 and 529A, as the Company Court had kept their entitlements open during the sanctioning of the consent terms. Issue 2: Date Up to Which Wages Are Payable The court had to determine the date up to which wages should be calculated. The registered union had taken 31 December 2002 as the cut-off date, while dissenting workmen argued for 24 October 2008, the date of the winding-up order. The court held that under Section 445(3) of the Companies Act, the contract of employment ends with the winding-up order. However, only those workmen who became members of the workers' cooperative and worked until 31 December 1998 were entitled to wages up to the winding-up order date. Others who did not join the cooperative were not entitled to wages post-20 September 1991. Issue 3: Entitlement to Notice Pay, Leave Wages, Bonus, Gratuity, and Interest - Notice Pay: The court ruled that the dissenting workmen were not entitled to notice pay under Section 25-N of the Industrial Disputes Act as amended by the Maharashtra Act, due to repugnancy with the central law. - Leave Wages: Under Section 79 of the Factories Act, leave wages or encashments are due only for earned or accumulated leave up to a maximum of thirty days. The court held that dissenting workmen were entitled to leave wages in accordance with this provision. - Bonus: The court confirmed that bonus is not included in the category of wages under Sections 529 and 529A and thus cannot be accorded priority. Dissenting workmen could claim bonus only if surplus funds were available. - Gratuity: The court agreed that gratuity was payable to dissenting workmen as provided by law, and this was also covered under the consent terms and the Official Liquidator's adjudication. - Interest: Interest on wages was payable under Rules 156 and 157 of the Companies (Court) Rules at a rate not exceeding four percent per annum up to the winding-up order date. Post-winding-up interest on gratuity and other dues would be governed by Rule 179 and payable only if there was a surplus after settling all claims. Conclusion and Orders: The court directed the Official Liquidator to adjudicate the claims of the dissenting workmen based on the court's findings and documentary evidence. The Official Liquidator was to complete this within three months and offer the dissenting workmen an option to accept their dues as per the consent terms. The applications were disposed of with no order as to costs.
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