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TMI Blog2006 (5) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Company Judge can be ignored and/or overlooked on the ground that no enquiry was held by the Registrar? Held that:- Appeal allowed. It is crystal clear that finding of the Division Bench of the High Court, that the claim of the appellants have not been duly adjudicated is erroneous as claim of the appellants have duly been adjudicated by the Registrar, High Court, Original Side, with the help of the Chartered Accountant as would be evident from Certificate dated 15-3-2004 issued by the Registrar. Thus, the said order dated 3-3-2004 passed by the Division Bench as against these appellants is liable to be set aside. Thus the appellants are entitled for payment as pre-scheme unsecured creditors in view of the specific directions given by this Court on 31-3-1994. X X X X Extracts X X X X X X X X Extracts X X X X ..... rt at Calcutta passed in APOT No. 271 of 2001, APOT No. 162 of 2001 and APOT No. 272 of 2001, dated 3-3-2004. The grievance of the appellants in these two appeals are that the Division Bench while allowing the appeals did not consider the case of the Unions and did not direct disbursement of the money to the workers who were members of the Unions. Background Facts: 4. Baranagore Jute Mills PLC (for short 'the Company') was under the management of Jardine Henderson Limited. On the failure of the jute factory to pay dues of several of its creditors, various winding-up petitions were filed in the High Court under the provisions of the Companies Act, 1956. By an order dated 28-10-1987, the Company Judge directed winding-up of the Company. The Court appointed the Official Liquidator with a direction to take possession of the assets of the said Company. An application was made by one - Shri Raj Kumar Nemani praying for stay of the winding-up proceedings of the Company and for revival of the Company as per a Scheme submitted and for appointment of an ad hoc Committee of Management to run the affairs of the said Company. The six Unions agreed to the Scheme as it was to the benefit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 5,500 and to be paid out of the assets of the Company. The orders of the learned Single Judge and the Division Bench are modified to the aforesaid extent. The appeal is disposed of accordingly. No order as to costs. Sd/- (Sabyasachi Mukharji) Sd/- (S. Ranganathan) New Delhi 30th November, 1988." 7. The learned Company Judge approved the Scheme on 16-6-1989. The Scheme, inter alia, provides for payment of all unsecured creditors, workers, secured creditors, statutory dues etc. On 2-5-1990, appellant No. 1 resigned from the Management of the Company. 8. The learned Company Judge, while considering several applications made by unsecured creditors complaining that they were not paid by the Committee of Management, made an order dated 16-12-1991 cancelling the Scheme, observing that the Scheme had totally failed. 9. On an appeal preferred by the Committee of Management against the order dated 16-12-1991, the Division Bench of the High Court made an interim order dated 18-12-1991, reiterated on 24-3-1992 directing payment of 1 per cent of the respective claims to all creditors on or before 7-1-1992. The Bench also stayed the order passed by the learned Company Judge dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al within three months. 5. In the meanwhile payment to the unsecured creditors should proceed at the rate of 2 per cent p.m. from 1-3-1993 and not at 1 per cent. The difference for the past on that calculation shall be made good within three months from today. If there is failure to do so, it will be appropriate for the Division Bench to put that circumstance also into scale in deciding whether the order of the learned Single Judge setting aside the scheme should be interfered with in appeal or not..... 6. However, the order of the Division Bench staying the operation of the order dated 16-12-1991 of the learned Single Judge will continue unless the Division Bench itself considers it appropriate to modify the same in the light of any subsequent event. The Division Bench shall also be at liberty to consider any applications for the modification of the scheme. With these observations and directions the special leave petition is disposed of. Sd/- Sd/- (Virender K. Sharma) (S.R. Thite) Court Master Court Master" 10. By subsequent orders, this Court directed the Committee of Management to deposit Rs. 40 lakhs in two instalments which was to be deposited in the Registry of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months, it will be appropriate for the Company Court to replace the Committee of Management by an appropriate alternative mechanism. The amount of Rs. 40 lakhs in deposit in this Registry shall be transferred to the account of the Registrar (Original Side), High Court of Calcutta, together with accrued interest immediately after the present deposits mature. A grievance was aired by the petitioners that the Committee of Management is appropriating to itself the funds of the Company towards its alleged claims as unsecured creditor. Sri Santosh Hegde says this is impermissible. It is open to the petitioners to move the Company Judge in this regard. The contention of the Committee of Management on this point is also left open. The interlocutory applications are disposed of accordingly. Sd/- CJI Sd/- (S. Ratnavel Pandian) New Delhi, March 11, 1994." 11. On 13-12-1994, the learned Company Judge appointed a new Committee of Management composed of the Jain-Jalan group, while issuing necessary directions for deposit of Rs. 64 lakhs by the Jain-Jalan group with the Registrar of the High Court. The Company Judge also directed certain lump sum payments to six substantial creditors, ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an application by way of Notice of Motion, inter alia, praying for modification of the order dated 9-9-1998 and for a further direction not to treat the appellants as part of the Nemani group with a further prayer for immediate payment in terms of the sanctioned Scheme. On 8-3-2001, the learned Company Judge directed payments to be made to the appellants, inter alia, holding that the appellants were not the part of the Nemani group and that their claims were already adjudicated upon and settled by the Registrar, Original Side. 14. One Shri Chetan Chowdhury claiming himself to be one of the Directors of the Company filed an appeal against the order dated 8-3-2001. The Division Bench, while granting liberty to the appellants to withdraw the amount deposited against its name/claim by furnishing a Bank Guarantee also recorded that it is not clear as to why Chetan Chowdhury and his group could be in the possession of the Company and listed the appeal for further directions. 15. On 14-5-2001, the appellants - Ajitsaria's group received payments from the Registrar of the High Court upon furnishing the requisite Bank Guarantee. Learned Single Judge of the High Court passed an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicated by the High Court or by the Registrar. He would submit that the High Court has failed to appreciate that the disbursement by Registrar took place after submission of the third report dated 10-4-1997 and the payment to pre-scheme unsecured creditors were available with the Registrar, Original side. According to Mr. Jaideep Gupta, the Division Bench should not make any discrimination amongst the same category of pre-scheme unsecured creditors mentioned in the list annexed to the scheme of management who have lodged their claims with the Registrar, Original side. 20. Mr. Jaideep Gupta, learned senior counsel, submitted that the Judges of the Division Bench have erroneously concluded that the petitioners were not part of the pre-scheme creditors and that their names were not included in the list of pre-scheme creditors filed along with C.A. No. 63 of 1987 and that the Bench has also erred in holding that the claims of the petitioner had not been adjudicated which was clearly contrary to the report of the Registrar, original side, which was accepted by both the Judges as well as the Division Bench. It was further submitted that at the present stage the workers do not have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar dated 8-3-2001. According to Mr. Rana Mukherjee, the appellants' firm Radheyshyam & Co. and Indian Agency never formed part of Nemani Group and the same would be evident from the letters written by the workers' Union and submitted before the Company Court. The appellants are the unsecured creditors of the Company who were entitled to receive payment in terms of the Scheme at the rate of 2 per cent p.m. at the entire payment in terms of the said Scheme without interest was to be disbursed to them within a span of four years and two months and accordingly, the entire amount became due and payable in the year 1993 itself. There is also no allegation upon the appellants to disburse excess payments to themselves as has been alleged against Raj Kumar Nemani, therefore, the appellants stand on a different footing from the Nemani Group of Companies/firms who have been made entitled to receive only 25 per cent of their claim upon furnishing of bank guarantee. It was also submitted that the appellants have received their dues as certified by the Registrar of the Calcutta High Court under orders of the said Court upon furnishing a bank guarantee which has been kept alive. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation and hope that their outstanding dues as well as current dues would be paid by Nemani Committee as specifically provided in the Scheme. Similar was the position when the Jain-Jalan Committee was in management. However, when they came to know about filing of applications by Sri Raj Kumar Nemani and by Sri Radheyshyam Ajitsaria and their group concerns before the learned Single Judge of the High Court for payment of their dues out of the funds accumulated under the Scheme, the Unions moved two separate applications bearing C.A. No. 9 of 1999 and C.A. No. 10 of 1999 before the learned Single Judge praying, inter alia, for not directing any such payment without first paying to the workers. Arguing further, the learned senior counsel, submitted that all unsecured creditors excepting the appellants have already been paid. In the aforesaid circumstances and in terms of the Scheme, the amounts lying with the Registrar of the High Court are required to be utilized for paying the workers' dues. According to him, the Division Bench of the High Court correctly held that the release of any amounts to the Members of the Nemani Group at this stage is not appropriate. However, the Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 529A of the Companies Act, 1956 for the proposition that the priority is to be given to the dues of the workers. Though the winding up order has been stayed, the provisions of section 529A of the Companies Act, 1956 will apply in letter if not in spirit. According to him, the provision is applicable in a winding up of an insolvent company and as per section 441 of the Companies Act, 1956, winding up is deemed to commence upon the presentation of the petition for winding up. Further, in case the money is disbursed without regard to section 529A of the Companies Act, 1956, and ultimately the stay of the winding up is lifted, there would be an effective annulment of the legislative mandate provided in section 529A of the Companies Act, 1956. He also invited our attention to section 11(1) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 and section 94 of the Employees' State Insurance Act, 1948 which also provide for a first priority to these dues in respect of a company in winding up. 26. Section 11(2) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 is reproduced hereunder: "11(2) Without prejudice to the provisions of sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the above proposition: 1.Balvantrai Chimanlal Trivedi v. M.N. Nagrashna AIR 1960 SC 407 2.Bulaki v. Lal Dhar [1997] 9 SCC 274, para 3 3.Union of India v. Kulamoni Mohanty [1999] 1 SCC 185 paras 4, 6 4.Taherakhatoon v. Salambin Mohammad [1999] 2 SCC 635 para 20 5.Chandra Singh v. State of Rajasthan [2003] 6 SCC 545 paras 39 & 45 6.State of Punjab v. Savinderjit Kaur [2004] 4 SCC 58 paras 16 & 17 28. Mr. Naresh Kumar, learned counsel appearing for Baranagore Jute Factory PLC [R-4 in SLP(C) Nos. 6257-6258 of 2004] furnished details in regard to the payment of arrears of wages of the workers of the Mill, payment to the statutory creditors, arrears of gratuity etc. According to him, Nemani - Ajitsaria Group committed several offences; that they did not make payment on receipt of arrears dues and statutory dues as per the Scheme and that default in making current payment of wages and other statutory dues and they siphoned huge sums of money while they were running the Jute Mills. He submitted, at the request of a section of the workers, Directors of the Company, to control the Jute Mills and immediately thereafter filed an application before the High Court stating the backgrou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... background, the questions of law that require determination in the instant Civil appeals and the SLP are as under: (a)Whether the Division Bench of the High Court was entitled to allow the appeal without first deciding the maintainability of the appeals as directed in terms of the order dated 29-3-2001? (b)Whether the Division Bench of the High Court was entitled to withhold the payment of the pre-scheme unsecured creditors in view of the specific direction given by this Court on 31-3-1994? (c)Whether the Division Bench was entitled to direct re-adjudication of the claims, which were already adjudicated contrary to the order passed by the Division Bench of the High Court on 30-11-1998 and 1-12-1998? (d)Whether the workers can have any stake and have right to receive any payment from the fund lying with the Registrar, original side of the High Court of Calcutta which was specially earmarked for the pre-scheme unsecured creditors as defined in the Scheme? (e)Whether the finding and decision of the learned Company Judge can be ignored and/or overlooked on the ground that no enquiry was held by the Registrar? 31. We have carefully considered the elaborate and lengthy submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m does not and cannot arise. Moreover, the order in no uncertain term provides that the payments made pursuant to such order i.e., order dated 11-3-1994 were to be disbursed amongst creditors. 33. We have already noticed that the Nemani Group was replaced by the Jain Jalan Committee of Management. The learned Single Judge, by order dated 13-12-1994, directed that the Nemani Group be replaced and the Jain-Jalan Group may take over the Committee of Management subject to payment of Rs. 64 lakhs and further directed payments to substantial creditors except the Nemani Group. This order was carried up in appeal before the Division Bench and the Division Bench by an order dated 25-1-1995 set aside the order for preferential payments to certain creditors and left the issue relating to payments to the Nemani Group open. The learned Single Judge, by an order dated 26-8-1996, in view of the substantial funds having accumulated in the hands of the Registrar, Original side directed the parties to file their claims as directed by this Court and further directed the Registrar to adjudicate the claims in accordance with law. The learned Single Judge by its order dated 23-12-1996 clarified that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no change in circumstances or additional material on record justifying the direction for payment to the Nemani Group and further that they had filed C.A. Nos. 9 and 10 of 1999 giving details of their dues. Insofar as the change in circumstances is concerned, by the time the order dated 8-3-2001 was passed, all other unsecured creditors had been paid of and still substantial sums were available for disbursement. As regards the pending applications are concerned, this Court has noticed, during the course of hearing, that the said applications were really in the nature of intervention applications. In spite of the above, the Division Bench of the High Court has erroneously concluded that the petitioners-Nemani Group were not part of the pre-scheme creditors and/or that their names were not included in the list of pre-scheme creditors filed along with C.A. No. 63 of 1987. The Division Bench also erred in holding that the claims of the petitioners-Nemani Group had not been adjudicated which, in our opinion, was clearly contrary to the report of the Registrar, which was accepted by both the learned Single Judge as well as by the Division Bench. The above facts clearly go to show and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en upheld both by the learned Single Judge as well as by the Division Bench. It is also not in dispute that the funds available at the hands of the Registrar is far in excess not only of the 25 per cent ordered to be paid but in excess of the entire claim of the petitioner-Nemani Group. In view of the above, we are of the opinion that the claim of the Nemani Group and Niraj Trading Company has to be upheld and accepted and the payment should be ordered to. 35. In the result, SLP(C) Nos. 6257-6258 of 2004 are allowed and the impugned judgment and order dated 3-3-2004 in APOT Nos. 227 & 228 of 2001 common with APOT No. 271 of 2001 passed by the Division Bench is set aside. The claim made by Radheyshyam Ajitsaria In C.A. Nos. 4101-4103 of 2004 36. We have already discussed in detail in paragraphs supra about the facts and circumstances of the above appeals and the various proceedings taken out by the parties and the orders passed thereto. 37. In view of the discussion made above, the following conclusion can be arrived at: (i)Appellant No. 1 remained as a member of the Committee of management only for a brief period of 11 months having resigned on 2-5-1990. Appellant No. 2 never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... event since the Company is functioning as a going concern on and from the date of implementation of the Scheme of Arrangement as formulated and approved by the High Court as well this Court, the question of the workers at this stage when the winding-up proceedings have been permanently stayed under section 466 of the Companies Act, 1956 to state to have a better claim by virtue of section 529A of the Companies Act, 1956 does not and cannot arise. The workers having a priority over creditors can come into play only the winding-up process is in motion and the Official Liquidator take steps to formalize winding- up. In the instant case, after the Scheme had been sanctioned, the question of winding-up would arise only if the order of permanent stay granted was to be lifted on any party's complaining of failure of the Scheme or inability on the part of the Company to make payments either in terms of the scheme or otherwise. The contention to the contrary raised by Mr. Nariman has no force. 40. Likewise, the reliance upon the provisions of the ESI and the EPF Act are inapposite inasmuch as by virtue of orders of this Court as also noted by the Division Bench of the High Court that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the claim of the appellants on the ground that they have not received the payment. On the other hand, the workers have not made any claim from the money which has been received by the respondent No. 4 as compensation approximately to the tune of Rs. 41 crores for acquisition of the land by the National High-Way Authority of India for 17 acres valued at Rs. 41 crores reported in Competent Authority v. Barangaore Jute Factory [2005] 13 SCC 477. Thus it is crystal clear that the Workers' Union have been set-up by the present committee of management so as to obstruct the payment to these appellants. 47. In our considered opinion, the impugned judgment and order warrants interference by this Court under Article 136 of the Constitution of India as the appellants have been wrongfully excluded from receiving the payments though all other creditors similar to the status of the appellants have received their payment long back thus there has been denial of justice. 48. Insofar as the argument of Shri K.P. Bagaria, learned senior counsel appearing on behalf of other Workers' Union with regard to the liability of making payments towards Provident fund dues and the judgment reported in 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points of time have been allowed to recover their entire dues as unsecured creditors out of this fund without reference to the workers dues and or other statutory dues. At no stage, whatsoever, have any part of the said fund been utilized by the High Court for payment of any of the workers dues or other dues. The said fund; in our opinion, therefore, cannot have a different character merely when it comes to the dues of the present petitioners. 52. It is important to note that by orders of Court, the company (in liquidation) was not in fact wound up but was allowed to continue as a going concern. This was undoubtedly in the interest of the workers. So long as the company continued as a going concern, the workers not only continued to get their wages and other benefits and also retained their rights to be reimbursed out of the assets of the Company in the event that the assets have to be sold in winding up. In fact, the fixed assets of the Company are enormously valuable. It has land in excess of 50 acres in prime locations out of which 17 acres was acquired by the National High-way Authority upon payment of compensation of Rs. 41 crores recently to the present Company. The dues of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Management. They would be paid out of the funds generated in the course of carrying on business of the said Company. If anything remained unpaid, the liability would pass on under the provisions of the scheme itself to the Committee of Management which replace them. In the first instance, the Committee of Management was taken over by the Jain-Jalan Group and it is now alleged that now it is taken over by Ghetan Choudhary. Outstanding liabilities under the scheme, therefore, remain the liability of the Company and the subsequent Committees were also required to discharge their liabilities under the Scheme. In our view, it is a deliberate attempt here to cast the entire liability under the Scheme on to the Members of the Committee constituted under the present petitioners in special leave petition Nos. 6257-58 so that the subsequent Committees can avoid their responsibilities and obligations under the scheme. To take one example, if there is any outstanding amount by way of Provident Fund, the same is just as such charged on the compensation money realized by the present Management. The present Management in collusion with the Union leaders are, therefore, necessitated in project ..... X X X X Extracts X X X X X X X X Extracts X X X X
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