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TMI Blog2016 (2) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... o possible results viz (1) that after selling the assets of the Company and distributing the assets for paying off liabilities, the Company may still have surplus amount or in the alternative the liabilities would outweigh the amount realized by the sale of assets in which case even though both, workers and secured creditors had priority would have to accordingly rateably get their share out of assets and whatever remains would be distributed ratably amongst the other creditors. Therefore, in our view, the Official Liquidator would have to then consider whether there would be any surplus of assets over liabilities to see whether paripasu benefit could be given to the workers and take it to its logical conclusion. The Official Liquidator in such a case therefore would have to consider the last order of actual winding up of the Company as the order from the date of which the workers dues would have to be calculated. In our view, such purposive interpretation or “purposes & objectives” approach could harmonize the intention of the legislature in giving paripasu benefit to workers alongwith the secured creditors. Since the immovable property of Svadeshi Mills admittedly has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 when they accepted their provident fund dues but from the date of appointment of Provisional Liquidator i.e. 13/02/2002. The Official Liquidator held that the workers were entitled to get their dues from 13/02/2002 when the Provisional Liquidator was appointed. Being aggrieved by the said order, the workers preferred a Petition before the Company Court. 5. The learned Single Judge relying on the provisions of section 445 sub-clause (iii) held that the workers were entitled to get their dues from the date of official winding up of the Company. The Appellant Grandview Estate Private Ltd is a secured creditor of the Company and it has challenged this order on the ground that if the order of the learned Single Judge is implemented, it would get less money towards its dues since substantial portion would have to be paid to the workers if their dues are calculated from 05/09/2005 and not from 13/02/2002. The other Appellant Forbes Company Ltd also has challenged the same order on similar grounds. 6. Brief facts which are relevant for the purpose of deciding the above appeals are as under:- 7. Svadeshi Mills Company Limited ( the Company ) was engaged in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session of the factory and office premises in July 2002 and on 17/09/2003, sale of movable assets was confirmed by the Company Court. Thereafter, on 18/10/2003, the Official Liquidator issued an advertisement inviting claims from creditors including the claims of workers. The workers filed their claim through their Union on 30/12/2003. In 2004, HPC sold the movable assets and realized an amount of ₹ 15.53 crores. 12. This amount was disbursed by the Official Liquidator for reimbursement of the cost of security agencies, other related expenses, part payment of the dues of the workers and employees and statutory dues and dues of secured creditors. Employees of the Mill were paid from the proceeds from the sale of movable assets 75% only of the claim for unpaid earned wages upto September, 2001. Employees of Head Office were paid 75% plus gratuity calculated upto September, 2001 i.e. the date on which the Mill and the Head Office were closed by the Company. Finally, winding up order was passed in Company Petition No.1068 of 1997 and other Company Petitions on 05/09/2005. On 25/08/2006, the learned Company Court Judge revoked the order of appointment of HPC and consequently im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) Private Ltd vs. Pothan Joseph (1960) 3 SCR 713 : AIR 1960 SC 1156 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was available for distribution. 23. Prior to this amendment, workers, employees and officers had a priority only to the extent of section 530(1)(b) and they were entitled to get only four months' salary out of a year. The said provision prescribed that the period of four months was to be calculated 12 months before the relevant date . The relevant date has been defined under section 530(8)(c) to mean the date on which the Provisional Liquidator was appointed by the Company Court Judge. After insertion of Section 529-A, Section 530 was amended and after clause 8(b), clause (bb) was added and it was clarified that the Section was not applicable to workmen. Consequently, the workmen were brought out of the purview of Section 530. In our view, therefore, on the combined reading of Sections 529, 529A and 530, on the basis of section 530(1)(d), it could not be said that the cut off date for payment of workers' dues is the date of appointment of the Provisional Liquidator. However, we will separately examine whether independently of Section 530, that date would still be considered as a cut off date on the ground that because of cessation of work, workers are not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proportion as the workmen's portion in relation to the security bears to the value of the security.] [(3) For the purposes of this section, section 529A and section 530,- (a) workmen , in relation to a company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947); (b) workmen's dues , in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely :- (i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947); (ii) all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order resolution; (iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of the appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and (ii) in any case where subclause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company. 25. It will also be relevant to have a look at section 445 which reads as under:- 445. Copy of winding up order to be filed with Registrar (1) On the making of a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within [thirty days] from the date of the making of the order. If default is made in complying with the foregoing provision, the petitioner, or as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to [one thousand rupees] for each day during which the default continues. [(1A) In computing the period of [thirty days] from the date of the making of a winding up order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written submissions of the Appellants in para 5.4 viz (a) to (k). He submitted that therefore the learned Single Judge has erred in holding that the date of winding up was the only date on which there was legal cessation of relationship of employer-employee. He relied on the judgment of Carne Anr. vs. Debono(1988) 1 WLR 1107 at page 1112) in support of this submission and also relied on para 25 at page 30 of the judgment of the learned Single Judge dated 23/03/2009 in MSM Satellite (Singapore) Pte. Ltd. vs. Board of Control for Cricket in India (Arbitration Petition (L) No.284 of 2009). 30. On the other hand, Ms. Jane Coax appearing for the workmen submitted that the view taken by the learned Single Judge is correct and elaborately taken us through the Rule 154 and other Rules framed under 1959 Rules and also other relevant provisions of the Act. 31. In our view, to some extent, there is a substance in the submission made by the learned Senior Counsel appearing on behalf of the Appellants that the date under section 445(3) cannot be the last date from which there would be cessation of employer-employee relationship. In Carne and Another vs. Debono(1988) 1 W.L.R. 1107) in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering a similar clause to the effect 12(h): Any notice given by either party to the other under the provisions of this agreement shall be in writing and shall be deemed to have been served at the expiration of 48 hours after it has been posted.... has held that the deeming provision does not exclude the possibility of proving the earlier receipt. It is not a statement that for all purposes, the document shall only be treated as having received at a particular time. 32. There cannot be any dispute regarding the said proposition. The deeming fiction clause which is introduced in any provision may not necessarily mean that, that date alone would be date on which the provision would come in operation and factually if it can be shown that it would be set in motion on some other date then that date also would operate as a cut off date. 33. In our view, therefore, if the other dates are not applicable in the facts and circumstances of the case then, in that case, the date of winding up would be the date on which the relationship of employer-employee would come to an end and from that date workmen would be entitled to get their legal dues. Therefore, there cannot be any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... workers had collected their provident fund dues in 2001 He submitted that having collected their provident fund dues, workers could not claim to be in service. Thirdly, he submitted that, in any case, the Company court Judge appointed a Provisional Liquidator with all powers to sell movable and immovable assets. He submitted that from that date, in any case, there was a complete cessation of work and, therefore, the Official Liquidator had rightly held the said date to be the cut off date. 36. The learned Senior Counsel for the Appellants in response to the submissions made by the learned Counsel for workmen submitted that section 25-O(6) would have no application to the present case. He relied on the judgment of the Division Bench of this Court in Bombay Metropolitan Transport Corporation Ltd. vs. Employees of Bombay Metropolitan Transport Corporation Ltd. CIDCO Ors reported in (1991) 71 Company Cases 473 (Bombay) at pages 478 to 480 and more particularly on paras 17 to 19 of the said judgment and submitted that the Division Bench of this Court has observed that winding up proceedings under section 25-O operate in different fields. 37. Mr. Sen, the learned Senior Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not only the secured creditors but also the majority shareholders. The Appellant No.1 held from earlier 22.70% of the shares and is part of the Shahpoorji Pallonji Group, which is in turn part of the Tata Group which owned the Mill in liquidation. The Appellant No.2 is also a part of the Shahpoorji Palonji Group and engaged in real estate development construction and infrastructure business. It acquired 29.29% of the shares in 2010 after the Order of winding up, thus giving the Appellants together 52% of the equity shares of the Company. Similarly, after the order of winding up, in 2006 and 2007 the debts of the only two secured creditors, IDBI and Bank of Baroda, were assigned to the Appellant No.2, as also the debts of 70 out of the 146 unsecured creditors. Given the extent of the immovable assets yet to be sold, which include 48 acres of prime land in the heart of Mumbai City, after the sale of these assets there will be a surplus even after payment is made from the proceeds to the workmen and creditors. In this situation as per section 475 of the Companies Act, 1956, any surplus shall be distributed amongst the contributors. Once the winding up order is passed the sharehold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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