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TMI Blog2010 (3) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned order has been rectified, the said infirmity no longer survives. But in view of the above cited reasons, the prayer sought for by the appellant-union cannot be granted at present. - WRIT APPEAL NO 588 OF 2006 AND W.A.M.P. NOS 1219 AND 1220 OF 2006 - - - Dated:- 29-3-2010 - D. MURUGESAN AND M. SATHYANARAYANAN, JJ. N.G.R. Prasad and Row Reddy for the Appellant. K. Kumar, N.V. Srinivasan, Ms. Devi, J. Sathishkumar and Rangarajan Prabhakaran for the Respondent. JUDGMENT M. Sathyanarayanan, J. The writ petitioner is the appellant and aggrieved by the dismissal of the writ petition, has filed this writ appeal. 2. The facts in brief, which are necessary for the disposal of this writ appeal are as follows : The petitioner-union claims that it represents the interest of the workers who are working in the campus of Madras Export Processing Zone (MEPZ), at Tambaram and it also represents the workmen of M/s. Nova Electro Magnetics Ltd. 3. The said company became sick and sought a reference before the BIFR, which appointed the third respondent viz ., Industrial Development Bank of India (IDBI), as the operating agency to examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent and the business was also closed, it is to be presumed that the company had gone into liquidation. In view of the same, and in terms of section 529A of the Companies Act, their dues will have first charge over the assets of the company. For the said reasons, the petitioner union came forward to file a writ petition for the issuance of the mandamus directing respondents Nos. 1 to 3 not to remove the machinery and rawmaterials from the premises of the above said company without making concrete provision for the settlement of the statutory dues of the workmen. 8. This court had initially granted interim orders for a period of two weeks. 9. The first respondent, viz ., MEPZ, had filed its counter stating that the premises is a customs bonded Central Government industrial asset, taken on lease by 100 per cent, export oriented industrial units and their occupation is regulated by the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. It is also governed by the Foreign Trade (Development and Regulation) Act, 1992 and the Special Economic Zones Act, 2005 and the statutory rules made thereunder. 10. In terms of the provisions of the above said Acts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d officer of IDBI Ltd., on December 19, 2005. 12. For sale of the assets, bids from bidders were received and one bidder, viz ., M/s. Annam Steels P. Ltd., became the successful bidder in respect of the properties in question and the said sale was confirmed and sale certificate was issued on February 15, 2006. A sum of Rs. 839 lakhs were realised by way of sale and it has to be distributed among the banks, who had advanced loans in favour of the company. Therefore, for the said reasons, the third respondent prayed for dismissal of the writ petition. 13. Annam Steels P. Ltd., filed its counter stating among other things that it is a bona fide purchaser of valuable movable assets in good faith and it has also been issued sale certificate on February 15, 2006, by the third respondent and they also removed part of the machinery on March 9, 2006, upon permission being granted by the second respondent. Therefore, prayed for the dismissal of the writ petition. 14. M/s. Cognizant Technology Solutions India P. Ltd., who was also the purchasers of the assets of the company, had filed counter praying for dismissal of the writ petition. 15. The learned judge after taking int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rights of the employees under the Scheme are protected and the proceedings under the EPF Act do not come within the purview of the provisions of section 22(1) of the SICA. An amendment to the EPF Act was made by Act 33 of 1988 in terms whereof proviso to section 14B has been introduced. Under section 14B where an employer makes default in payment of any contribution to the fund, the Central Provident Fund Commissioner has been authorised to recover the damages by way of penalty not exceeding the amount of arrears. However, under the proviso appended thereto, the Central Board has been empowered to reduce the quantum of damages that may be required to be paid by a company in relation to an undertaking which is a sick industrial undertaking and in respect of which the scheme for rehabilitation has been sanctioned by the BIFR, subject to such terms and conditions as may be specified under the scheme. Parliament thus as a matter of legislative policy has enacted that the employer be granted a waiver of damages payable under section 14B where the undertaking of the employer is a sick industrial undertaking and the scheme for its rehabilitation has been sanctioned. There again, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile invoking its power under section 13(4) of the SARFAESI Act, ought to have explored the possibility of rehabilitation of the sick industry either by way of lease, assignment or through its own management before resorting to the extreme measure of selling the industry for the purpose of recovering its dues and the financial institutions ought to have considered whether such alternative measures would serve the purpose for recovering their dues. 24. The learned judge of this court in the said decision, has taken into consideration various decisions including the decision rendered by the hon'ble Supreme Court of India reported in [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 401 ( Allahabad Bank v. Canara Bank ) and held that if the submissions made by learned counsel appearing for the union are accepted then it would run contrary to the very object of the SARFAESI Act and defeat all its purposes and it would also run contrary to the ratio laid down by the hon'ble Supreme Court of India in [2004] 120 Comp. Cas. 373 ; [2004] 4 SCC 311 ; [2004] 2 CTC 759 ( Mardia Chemicals Ltd. v. Union of India ) . However, the learned judge on the facts of the case found that pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with notice and failed to respond to the same. Thereafter, a decision has been taken to sell the assets of the company by way of private treaty in which, six parties had participated and ultimately the properties were sold in favour of the seventh respondent herein and the total price realised from the sale of movable and immovable properties was aggregating to a sum of Rs. 839 lakhs. It is further contended that the entire sale proceeds are liable to be appropriated to satisfy the dues of the secured creditors and the claim of the appellant-union can be considered only in terms of the first proviso to section 13(9) of the SARFAESI Act. The said provision would come into operation only in the case of the company being in liquidation and the amount realised from the sale of the secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956. 30. It is also contended by the third respondent that in respect of the company, viz ., M/s. Nova Electromagnetic Ltd., the order of winding up is yet to be passed and consequently, the claim of the appellant in terms of section 529A of the Companies Act cannot be considered. The seventh re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal and the Recovery Officer in respect of debts payable to banks and financial institutions and there can be no interference by the company court under section 442 read with section 537 or under section 446 of the Companies Act, 1956. In respect of the monies realised under the RDB Act, the question of priorities among the banks and financial institutions and other creditors can be decided only by the Tribunal under the RDB Act and in accordance with section 19(19) read with section 529A of the Companies Act and in no other manner. The provisions of the RDB Act, 1993, are to the above extent inconsistent with the provisions of the Companies Act, 1956, and the latter Act has to yield to the provisions of the former. This position holds good during the pendency of the winding up petition against the debtor company and also after a winding up order is passed. No leave of the company court is necessary for initiating or continuing the proceedings under the RDB Act, 1993 . . . Where the defendant-company is a company against which no winding up order is passed, the company, in our view, is like any other defendant and if in such a situation a question of priority arises b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hes to come before the official liquidator has to prove his debt and he can prove his debt only if he relinquishes his security for the benefit of the general body of creditors. In that event, he will rank with the unsecured creditors and has to take his dividend as provided in section 529(2). Till today, the Canara Bank has not made it clear whether it wants to come under this category." 35. Therefore, as per the ratio laid down in the above cited decision in the event of non passing of the winding up order, the adjudication has to be made with regard to the priority on the basis of the principles underlying section 73 of the Civil Procedure Code. Under section 73 of the Civil Procedure Code sharing in the sale proceeds is permissible only if a person seeks a share obtained in a decree or an adjudication from the Tribunal and also has complied with other conditions laid down under section 73 of the CPC. 36. In [2000] 102 Comp. Cas 1 ; [2000] 7 SCC 291 ( A. P. State Financial Corporation v. Official Liquidator ) , A. P. State Financial Corporation had invoked the provisions of section 29 of the State Financial Corporation Act, 1951, against two companies and since both c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssu right of the workmen. The High Court's opinion that it was not necessary for the financial corporation to approach the court for permission to stay outside the winding up proceedings . . . was uncalled for as we have stated that the power under section 29 of the Act of 1951 can be exercised subject to the above provisions of the Companies Act." 37. The decisions relied on by learned counsel appearing for the appellant are not applicable to the facts and circumstances of the case. In [2006] 134 Comp. Cas. 33 (Mad.); [2006] 4 LLN 41 [FB] ( Gowri Spinning Mills (P.) Ltd. v. Assistant Provident Fund Commissioner ) , in the light of the provisions of the EPF Act and the scheme framed thereunder, it has been held that the proceedings under the EPF Act, do not come within the purview of section 22(1) of the SICA and the amendment for EPF Act was also made wherein the proviso to section 22(1) was introduced and in terms of the said Act the Provident Fund Commissioner was authorised to recover the damages. 38. In [2008] 144 Comp. Cas. 600 (Mad.) ; [2008] 3 LLN 290 ( Palani Andavar Cotton and Synthetic Spinners Ltd. v. Solyraj ) , recovery of back-wages under section 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel appearing for the IDBI and other banks, the said amount is inadequate to cover the entire dues and no surplus amount is available for further distribution. Even though the appellant union claims that the workers dues at the time of filing the writ petition are to the tune of Rs. 2.48 crores, it has not been made clear how the said amount has been quantified. In fact C. P. No. 519 of 1997 filed by the appellant-union before the Labour Court, Chennai under section 33C(2) of the Industrial Disputes Act for computation of money value payable to the workmen is yet to reach finality. The appellant herein, as per the direction of this court, also took notice to M/s. Nova Electromagnetic Ltd., having its office at New Delhi and it refused to receive notice. 42. The decision heavily relied on by learned counsel appearing for the appellant reported in [2000] 102 Comp. Cas. 1 ; [2000] 7 SCC 291 ( A. P. State Financial Corporation v. Official Liquidator ) , is also not applicable to the facts of this case as it came to be decided on the facts and circumstances of that case and that apart, winding up proceedings were pending at the time of taking out applications by APSFC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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