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TMI Blog2005 (3) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... n hypothecation of all goods, raw materials, stocks of tobacco including movable properties situated at Biccavolu in the State of Andhra Pradesh. 3. The Appellant herein on or about 15-9-1987 filed a suit in the Calcutta High Court for recovery of Rs. 2,69,54,228.15 along with interest at the rate of 18.5% p.a. against the company. In the same year, an application for winding-up of the said company was filed before the Company Judge of the Calcutta High Court, which was marked as CP No. 621 of 1987. The Appellant in the said suit filed an interlocutory application; whereupon the Joint Receivers were appointed for making inventory of hypothecated goods lying in the factories of the company at Agarpara in the State of West Bengal and Biccavolu. Upon such inventory having been made, the stock of tobacco lying in the godown at Guntur and Biccavolu were ordered by a learned Single Judge of the High Court to be sold by auction and the Joint Receivers were directed to keep separate accounts of the sale proceeds of the goods in the two godowns. The said sale was later on confirmed and the sale proceeds of Rs. 135 lacks was directed to be deposited in a fixed deposit with the Appellant. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partially. This Court by an order dated 9-1-1998, requested the High Court to dispose of the pending appeal and directed that the interim stay granted on 14-1-1994 would continue for a period of seven months; whereupon by reason of a judgment and order dated 19-3-2002, the appeal preferred by the Appellant herein was dismissed by the Division Bench, stating : "Having regard to the above facts, circumstances, materials on record and the legal aspects as discussed above we find no infirmity in the impugned order passed by the learned Company Judge. There is no merit in the appeal. The appeal is accordingly dismissed. The order under appeal is affirmed subject to the following directions. We direct the Joint Receivers to draw the sum of Rs. 38 lakhs from the fixed deposit made with the appellant Andhra Bank and pay the amount to the Joint Special Officers in terms of the order dated 12th October, 1993 passed by the learned Single Judge for disbursement of salary to the officers, staff and workers of New Tobacco Co. Ltd. The Joint Receivers are directed to encash the fixed deposit receipts only after their maturity, if the same have not already matured and will continue to hold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this Court in Allahabad Bank's case (supra). Drawing our attention to the auditor's report, Mr. Rao would submit that it would appear therefrom that a sum of Rs. 6.8 crores has already been paid to the workmen in terms of the settlement arrived at by and between the purchaser and the workmen and, thus, the High Court must be held to have committed a manifest error in passing the impugned order. As regard the purported agreement entered into by and between the Appellant and the aforementioned Duncan Agro Industries Limited, Mr. Rao drew our attention to the following statements made in the Rejoinder Affidavit : "With reference to paragraphs 6, 7, 7(a) and 7(b) of the affidavit, it is stated that the same are not germane to the issues in the SLP. It is stated that pursuant to the said agreement, dated 11th December, 1996 between M/s. Duncan Agro Industries Limited and the petitioner bank, the latter received Rs. 135 lakhs on 30th December, 1996. The balance amount of Rs. 135 lakhs, M/s. DAIL have deposited Rs. 45 lakhs in a 'No Lien' deposit account in their own name with the petitioner bank. Shares worth Rs. 90 lakhs in the year 1996 are also lying deposited with the bank in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allahabad Bank's case (supra). It was urged that keeping in view the fact that the Bank claimed its security only in relation to Rs. 135 lakhs whereas the claim of the workmen was more than Rs. 19 crores, and having regard to the provisions contained in section 529 of the Companies Act, the impugned order does not cause any prejudice to the Appellant. In any event, having regard to the purport and object of sections 529 and 529A of the Act, this Court should not interfere with the impugned judgment. Reliance, in this connection, has been placed on Jay Laxmi Salt Works (P.) Ltd. v. State of Gujarat [1994] 4 SCC 1. Drawing our attention to the following statements made in paragraph 6 of the Affidavit filed before this Court, the learned Counsel would contend that the Appellant should not be permitted to take a different stand in its Rejoinder : "I also respectfully submit that M/s. Duncan Industries Ltd. formerly known as Duncan Agro Industries Ltd. from which the New Tobacco Company was transferred and amalgamated in 1984, the said Duncan Industries Ltd. has also paid the Bank's suit amount of Rs. 270 lakhs to the Bank with a clause that in the event of adjustment of sale proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies under the RDB Act, the Tribunal and the Recovery Officers are conferred exclusive jurisdiction in their respective spheres? (2) Whether for initiation of various proceedings by the banks and financial institutions under the RDB Act, leave of the Company Court is necessary under section 537 before a winding-up order is passed against the company or before provisional liquidator is appointed under section 446(1) and whether the Company Court can pass orders of stay of proceedings before the Tribunal, in exercise of the powers under section 442? (3) Whether after a winding-up order is passed under section 446(1) of the Companies Act or a provisional liquidator is appointed, whether the Company Court can stay proceedings under the RDB Act, transfer them to itself and also decide questions of liability, execution and priority under section 446(2) and (3) read with sections 529, 529A and 530 etc. of the Companies Act or whether these questions are all within the exclusive jurisdiction of the Tribunal? (4) Whether in case it is decided that the distribution of monies is to be done only by the Tribunal, the provisions of section 73 CPC and sub-sections (1) and (2) of section 529, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors (like Allahabad Bank) under section 529A read with proviso (c) to section 529(1) can arise before the Tribunal only if Canara Bank has stood outside winding-up and realised amounts and if it shows that out of the amounts privately realised by it, some portion has been rateably taken away by the liquidator under clauses (a) and (b) of the proviso to section 529(1). It is only then that it can claim that it is to be reimbursed at the same level as a secured creditor with priority over the realisations of other creditors lying in the Tribunal. None of these conditions is satisfied by Canara Bank. Thus, Canara Bank does not belong to the class of secured creditors covered by section 529A(1)(b). Therefore, the result is that Canara Bank cannot rely on the words in section 19(19) viz., "to be distributed among its secured creditors" for claiming any amount lying in the Tribunal towards its security nor can it claim priority as against Allahabad Bank. If none of the conditions required for applying section 19(19) and section 529A is, therefore, satisfied, then the claim of Canara Bank before the Tribunal can only be on the basis of principles underlying section 73 CPC. There being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the winding up of a company- (a)workmen's dues; and (b)debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions. 529. Application of insolvency rules in winding-up of insolvent companies.-(1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to- (a)debts provable; (b)the valuation of annuities and future and contingent liabilities; and (c)the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent: Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o all the creditors. The submission of Mr. Gupta is that in a situation of this nature, what was necessary to be considered by the learned Single Judge was to find out the amount in relation whereto the appellant was raising its claim as a secured creditor, namely, Rs. 135 lakhs vis-a-vis the aggregate of the amount of the workmen's dues of Rs. 19 crores and the claim of any other secured creditor was not required to be taken into consideration. We cannot accept the said contention. The illustration appended to clause (c) of sub-section (3) of section 529 is a clear pointer to the effect that the amount of debts due to the secured creditors should be taken into consideration for the purpose of ascertaining the workmen's portion of security. 15. The language of section 529A is also clear and unequivocal, in terms whereof the workmen's due or the debts due to the secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues shall have priority over all other debts. Once the workmen's portion is worked out in terms of proviso (c) of sub-section (1) of section 529, indisputably the claim of the workmen as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by other creditors whose moneys are lying in the Tribunal. 16. While determining the Point No. 6, however, a stray observation was made to the effect that the "workmen's dues" have priority over all other creditors, secured and unsecured because of section 529A(1)(a). Such a question did not arise in the case as the Allahabad Bank was indisputably an unsecured creditor. Such an observation was, thus, neither required to be made keeping in view the fact situation obtaining therein nor does it find support from the clear and unambiguous language contained in section 529A(1)(a). We have, therefore, no hesitation in holding that finding of this Court in Allahabad Bank's case (supra) to the aforementioned extent does not lay down the correct law. 17. The court also wrongly placed reliance on National Textile Workers' Union v. P.R. Ramakrishnan [1983] 1 SCC 228. The question which arose therein was only as regard the right of the workers be heard in the winding up proceeding. The said decision was, therefore, not applicable. Determination 18. By reason of the order dated 12-10-1993, the learned Single Judge while issuing various directions, directed : "Andhra Bank is directed to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting sections 529 and 529A did not lay down the law that the claim of the workers ranked higher in priority than the secured creditors. It merely states that for achieving the purpose for which the said amendment was made, it is necessary that the amended provisions must apply to all available securities which form part of the assets of the company in liquidation on the date of the amendment. 22. Submission of Mr. Gupta, that the impugned order having been passed by the learned Single Judge in the year 1993, the considerations which prevailed at that time only should be considered, cannot be accepted as it is trite that even the appellate court while passing its order may take into consideration, the subsequent events. 23. In Rajesh D. Darbar v. Narasingrao Krishnaji Kulkarni[2003] 7 SCC 219, this Court noticed : "4. The impact of subsequent happenings may now be spelt out. First, its bearing on the right of action, second, on the nature of the relief and third, on its importance to create or destroy substantive rights. Where the nature of the relief, as originally sought, has become obsolete or unserviceable or a new form of relief will be more efficacious on account of develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable order like the impugned one may be judged upon taking into consideration the subsequent events. Subsequent events as pointed out by Mr. Rao, furthermore, are not disputed. 24. The learned Company Judge in its order dated 8-5-2002 has noticed that a substantive amount has been paid to the workers towards their past dues. Payments have also been made not only to the statutory authorities but also to the secured creditors and the Special Officers. The workmen since the sale of the assets of the company as a working concern, have received substantial amounts towards their past dues and are being paid their current dues. A situation of starvation of the workmen does no longer prevail. The order passed by the learned Single Judge cannot moreover be sustained on amongst others, the ground of not assigning any reason in support thereof. The Division Bench of the High Court also relied on the observation made in paragraph 76 of this Court's judgment in Allahabad Bank's case (supra). It did not advert independently to any other contention of the parties. 25. The contention of Mr. Gupta that Debts Recovery Tribunal having been established in the West Bengal on 27-4-1994, the dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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