2024 (5) TMI 1154 - HC - Companies Law

Rejection of drant of statutory interest in accordance with Rule 156 of the Companies (Court) Rules, 1959 in favour of the workmen - workmen and the secured creditor have been treated to be pari passu, in view of the provision of Section 529 of the Companies Act - Interpretation of Rule 156 of the Companies (Court) Rules, 1959. Effect of Section 529 of the Act 1956 - HELD THAT - The effect of Sections 529 and 529-A is that the workmen of the company become secured creditors by operation of law to the extent of the workmen's dues provided there exists secured creditor by contract. If there is no secured creditor then the workmen of the company become unsecured preferential creditors under Section 529-A to the extent of the workmen's dues - The purpose of Section 529-A is to ensure that the workmen should not be deprived of their legitimate claims in the event of the liquidation of the company and the assets of the company would remain charged for the payment of the workers' dues and such charge will be pari passu with the charge of the secured creditors. Further, there is no other statutory provision overriding the claim of the secured creditors except Section 529-A. This section overrides preferential claims under Section 530 also. Under Section 529-A, the dues of the workers and debts due to the secured creditors are to be treated pari passu and have to be treated as prior to all other dues - it appears that the arrears of amount have been paid in favour of the workmen. But, the amount has been paid in favour of the workmen only with respect to the arrears of salary. After the subsequent time having been elapsed, one interlocutory application being I.A. No.7469 of 2016 has been filed seeking therein the statutory interest which is to be paid in favour of the workmen also on the ground that the secured creditor and the workmen are to be treated as pari passu. Whether the workmen claim parity with respect to the payment of interest on the basis of principle of pari passu, will be said to be acceptable? - HELD THAT - In the light of the definition of the vested right , it is evident that right accrues to person or persons attached to an institution or building or anything whatsoever, meaning thereby, if an incumbent is claiming a vested right, he is to substantiate before the court of law that the right has been created in his favour by an order passed by the competent authority in accordance with law. It is evident that in the instant case, the workmen never raised the claim of interest and no such claim of interest was ever adjudicated upon. The payments have been made to the workmen in priority against sale proceeds of unsecured assets of the company in compliance of the order dated 12th August 2016. It has been accepted by the parties and has attained finality - Moreover, at the time of making claim before the Company Court for arrear of the salary, there was no claim for making payment of the interest upon the said arrear which also suggests that the workmen are well aware with the fact that they are not entitled for the interest, otherwise, the issue of interest would have been raised at the very inception by raising the said issue in the interlocutory application which has been filed for arrears of the salary. Further, it is evident that the section 483 of the Act 1956, confers power of the widest amplitude on the appellate court so as to do complete justice between the parties and such power is unfettered by consideration of facts like who has filed the appeal and whether the appeal is being dismissed, allowed or disposed of by modifying the judgment appealed against. The object sought to be achieved by conferment of such power on the appellate court is to avoid inconsistency, inequity, inequality in reliefs granted to the parties concern. The instant Company appeals are hereby dismissed.

Summary

Issues Involved:
1. Whether the workmen can claim parity with respect to the payment of interest on the basis of the principle of pari passu.
2. Whether the prayer of the workmen for grant of statutory interest in accordance with Rule 156 of the Companies (Court) Rules, 1959 is tenable in law and facts.

Summary of Judgment:

Issue 1: Parity in Payment of Interest Based on Pari Passu Principle:

The appellants argued that the Company Court failed to appreciate their claim for interest, despite the provision of Section 529 of the Companies Act, 1956, which treats secured creditors and workmen as pari passu. They contended that since secured creditors received interest, workmen should also be entitled to interest on their delayed payments. However, the Court noted that the principle of pari passu applies to the distribution of assets but does not extend to the payment of interest. The Court highlighted that the interest paid to secured creditors is part of the loan contract, whereas the workmen's claim for interest is not based on any contractual obligation.

Issue 2: Grant of Statutory Interest Under Rule 156 of the Companies (Court) Rules, 1959:

The appellants claimed statutory interest under Rule 156, which allows creditors to claim interest on overdue debts. The Court examined the context of Rule 156 within the chapter "Debts and Claims against Company" and concluded that this rule does not provide for interest claims at this stage for workmen. The Court emphasized that the workmen's claims were adjudicated without any claim for interest, and the order dated 12th August 2016, which settled their claims, was not challenged and thus attained finality. Therefore, the subsequent claim for interest was not tenable.

Analysis and Conclusion:

The Court reiterated that the workmen and secured creditors are treated as pari passu for the distribution of assets but not for the payment of interest. The Court further explained that the interest claimed by secured creditors is part of the loan contract, whereas the workmen's claim for interest lacks such contractual basis. The Court also clarified that Rule 156 does not support the workmen's claim for interest at this stage. The judgment of the Hon'ble Supreme Court in Vijay Industries was distinguished as it involved a specific contractual clause for interest, which was not present in the workmen's case. The appeals were dismissed, and the Court upheld the order rejecting the workmen's claim for statutory interest.