2014 (9) TMI 1285 - HC - Companies Law

Seeking directions to disburse the amount to the workers out of the available funds in the account of the company between the secured creditors and workers based on a calculation - HELD THAT - The order is being passed to balance equities especially amongst the thousands of workmen of the appellant union who are languishing and deprived of their legitimate dues for decades. In these facts it cannot be denied that in the instant case interest of justice mandates that the amounts of the company including not only the principal amount received from the sale of its assets but also the accruals thereon in the nature of interest etc. be restored to the credit of the company and be made available for full and final disbursement between the creditors of the company. There is no objection to the acceptance of the One Time Settlement as well as the entitlement of 2018 workers who were members of the appellant union in the sum of Rs.14, 64, 88, 422/- as full and final payment to these workers. The same is hereby accepted. The parties have stated on affidavits that they would not have any objection to the disbursement of One Time Settlement amount to the appellant. The parties shall remain bound by the consent which they have given before us on affidavit. All claims of the appellant-Union s 2018 workers shall stand finally satisfied upon receipt of the disbursement of the amount in terms of the One Time Settlement to them. It shall not be open for them to make any other or further claim after they receive the amounts thereof which shall be in full and final settlement of all claims. The Official Liquidator shall credit the account of the company with all amounts credited to the Common Pool Fund from the sale proceeds of the units of the company under liquidation after 1st November 2005 till 13th August 2013 - Appeal disposed off.

Summary

Issues Involved:
1. Compliance with the order dated 7th August 2014.
2. Status of the sick company declaration and winding-up proceedings.
3. Claims and settlements of workers and creditors.
4. Distribution of funds among workers and creditors.
5. Specific treatment of 2018 workers under the One Time Settlement (OTS).
6. Role and actions of the Official Liquidator.
7. Final directions and modifications to previous orders.

Issue-wise Detailed Analysis:

1. Compliance with the order dated 7th August 2014:
Leave was sought by various advocates to hand over affidavits in compliance with the order dated 7th August 2014. The affidavits were taken on record, and it was submitted that there was no impediment for the court to proceed with the order.

2. Status of the sick company declaration and winding-up proceedings:
The respondent company, M/s Jhalani Tools (India) Limited, approached the Board for Industrial and Financial Reconstruction (BIFR) in 1987 for its declaration as a sick company. The BIFR recommended winding up the company in 2000, which led to the registration of Company Petition No.18/2001. The company was found to be indebted and unable to pay its debts, leading to the appointment of the Official Liquidator.

3. Claims and settlements of workers and creditors:
The appellant, M/s Jhalani Tools Workers Union, entered into a One Time Settlement (OTS) for 2018 workers, agreeing on a claim of Rs.59 crores, with Rs.13 crores to be paid in lumpsum. This settlement was scrutinized by a committee led by Mr. Justice S.N. Dhingra, which found the workers entitled to Rs.14,64,88,422/-.

4. Distribution of funds among workers and creditors:
The Official Liquidator was directed to disburse funds among workers and creditors based on a pro-rata basis. The learned Company Judge held that workers of different units could not be treated differently and directed a pro-rata distribution of funds.

5. Specific treatment of 2018 workers under the One Time Settlement (OTS):
The appellant-union contended that the 2018 workers agreed to the OTS to receive a lumpsum amount, which was beneficial for the company and creditors. The Official Liquidator had already made payments to some workers under the OTS. The court accepted the OTS amount of Rs.14,64,88,422/- as full and final payment to these workers.

6. Role and actions of the Official Liquidator:
The Official Liquidator was directed to take over the company's assets and records, invite claims, and manage the sale proceeds. A significant portion of the funds was transferred to the Common Pool Fund, which the court directed to be restored to the company's account for disbursement.

7. Final directions and modifications to previous orders:
The court issued several directions, including:
- Crediting the company's account with amounts from the Common Pool Fund.
- Releasing Rs.14,64,88,422/- to the appellant for disbursement to 2018 workers.
- Ensuring disbursement of amounts to workers and maintaining records.
- Proceeding with pro-rata distribution to other workers and creditors.
- Modifying the order dated 13th August 2014 concerning the 2018 workers.
- Binding the One Time Settlement and today's orders only to the 2018 workers.
- Scrutinizing claims of other workers by Mr. Justice S.N. Dhingra Committee.

The appeal and all pending applications were disposed of in these terms, with a copy of the order provided to the parties.