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TMI Blog2019 (8) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... tacit consent or waiver. The finding recorded by the learned Company Judge that the consent terms do not bind dissenting workmen, in the circumstances, appears to be impeccable. Thus, we are not impelled to take a different view of the matter. Whether the dissenting workmen are entitled to wages up to the date of the winding up order, i.e., 24th October 2008? - HELD THAT:- The date of the appointment of the Provisional Liquidator, i.e., 30th September 2005, after admission of the company petition, pursuant to an opinion rendered by BIFR under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 would be the appropriate date for calculating the claims of the dissenting workmen. The Provisional Liquidator came to be appointed much after the confirmation of the sale of the assets of the company and realization of the proceeds thereof. We make it clear that we have not prescribed the date of appointment of the Provisional Liquidator as the cut off date as the mandate flowing from the provisions of the Companies Act, 1956, but having regard to the fact that, by the said date, the company was rendered a shell and its assets were converted into corpus, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Company Judge in Company Application Nos.593 of 2011 and 620 of 2011 in Company Petition No. 778 of 2005. 2. Though the dispute has a long and chequered history, spanning over two decades, the background facts necessary for the determination of these appeals can be summarized as under : (a) KMA Limited (in liquidation) (hereinafter referred as the company ) was registered under the Companies Act, 1956. It had two plants. One at Mumbai. Another at Banglore. Kamani Employees Union Appellant in Company Appeal No.163 of 2016 is registered trade union of the employees of the company. KMA Workers and Staff Union respondent No.2 is a rival trade union. It claims to represent the employees at Bangalore Plant. Mrs. Triveni Kulkarni appellant in Appeal No. 618 of 2016 is a workman of the company. (b) As the business of the company became unviable, the company was referred to the Board for Industrial and Financial Reconstruction (BIFR) in a suo motu reference. On 16th April 1993, BIFR passed an order approving the scheme of rehabilitation for the company, which provided for the running and management of the company by the workers' cooperative, upon ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Company Court, the consent terms would require concurrence of the Company Judge. (g) Eventually, the Company Court ordered winding up of the company on 24th October 2008. By a further order dated 13th March 2019, the Company Court accepted the consent terms and authorized payments to be made in accordance with the consent terms. An amount of ₹ 11.38 crores was kept aside towards adjudication of claims of dissenting workmen. (h) Several claims were lodged by the dissenting workmen before the official liquidator for adjudication. Resubmitted report, bearing Official Liquidator's Report No. 158 of 2010, was filed by the official liquidator with a prayer that the dissenting workmen be paid their dues in accordance with the consent terms as it was noticed that the amounts payable under the consent terms were higher than the adjudicated amounts. 3. (a) In this backdrop, Mr.Triveni Kulkarni filed Company Application No.593 of 2011 seeking a direction against the Official Liquidator for adjudication of claims of workmen and secured creditors of the company in accordance with section 529 A and 530 of the Companies Act. KMA workers and staff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntant on his panel for the purpose of such adjudication. The costs of such advocate and / or chartered accountant shall be defrayed from the funds of the Company (in liquidation) available with the Official Liquidator; (iii) At any time during the course of such adjudication or after adjudication but before disbursal of payment on the basis thereof, the Official Liquidator shall give an option to each of the Applicants to accept their dues in accordance with and on the principles of the consent terms taken on record in Writ Petition Nos.285 of 2006, 196 of 2006 and 459 of 2007 in full and final settlement of their claims against the Company (in liquidation); (iv) The Official Liquidator shall complete the exercise of adjudication of dues in terms of this order within a period of three months from today and make payment to the Applicants on the basis thereof within four weeks thereafter after adjusting payments,if any, already made to them during the pendency of these Company Applications; 6. In the body of the impugned order, the learned Company Judge, inter alia, spelled out, the principles, as regards the norms in accordance with which the dissenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho became members of the workers' co operative, by fulfilling the terms of the scheme approved by the BIFR, and worked till 1998, were entitled to the wages up to the date of the winding up order. Other workmen were not entitled to any wages with effect form 20th September 1991. 10. As regards, the entitlement of the workmen to (i) notice pay, (ii) leave wages, (iii) bonus (iv) gratuity and (v) interest on the due amount, as at issue (c) above, the learned Company Judge held that in view of the amended provisions of section 25 O (introduced by the Industrial Disputes Act, i.e., Act No. 46 of 1982), the workmen were not entitled to any notice pay. Construing the provisions of section 79 of the Factories Act, 1948, it was held that the workmen were not entitled for wages in lieu of leave generally but only in the contingencies covered by sub section (3) of section 79 up to the maximum of thirty days at the rate prescribed under Section 80 of the Factories Act. The workmen were held to be not entitled for bonus as it does not get priority under section 529 and and 529 A. The workmen were held to be entitled to gratuity. The claim for interest on the amount of gratuity pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 618 of 2016. 13. At the outset, it is necessary to note that Shri Naidu, the learned counsel for the respondent No.2 KMA Workers' Union, (hereinafter referred to as the rival union ) submitted that the members of the respondent No.2 do not desire to exercise the option to claim under the consent terms, as provided by clause (iii) of the impugned order. Shri Naidu further submitted that the members of the rival union also do not press the challenge to the determination of the entitlement of the workmen under the various items, namely, notice pay, leave wages, bonus, gratuity and interest covered by the issue as at (c), in the impugned order. 14. In this view of the matter, the controversy revolves around the following points : (1) Whether the consent terms are binding upon the dissenting workmen? (2) Whether the dissenting workmen are entitled to wages up to the date of the winding up order, i.e., 24th October 2008? (3) Whether the determination of the entitlement of the dissenting workmen under various items, i.e., notice pay, leave wages, bonus, gratuity and interest by the learned Company Judge is justifiable? (In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s any substance in the claim of these dissenting workers, admittedly, the amounts which would be left with the Official Liquidator even after disbursing the amounts to the workers and the employees under the consent terms, would be sufficient to satisfy the same. The dissenting employees have filed claims before the Official Liquidator. Needless to say, that these claims will be decided by the Official Liquidator after giving notice to the union, and the banks/financial institutions. All the contentions of the parties regarding the effect of the consent terms on all the dissenting employees are kept open . (emphasis supplied) 17. While disposing of the company application, addressing the submissions and grievances raised on behalf of the dissenting workmen, the learned Company Judge directed as under : (i) The consent terms are taken on record and an order in terms thereof is passed without prejudice to the rights of the dissenting employees, if any. (ii) An amount of ₹ 11.38 crores shall be retained by the Official Liquidator to meet the claims of the dissenting employees, if any. 18. In the backdrop of the aforesaid ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n claimed that their employments have not came to an end and they were entitled to claim the dues in accordance with the governing statutory provisions. The learned Company Judge, in the order dated 13th March 2009, whereby the consent terms were accepted and acted upon, made it abundantly clear that the consent terms were accepted without prejudice to the rights of the dissenting workmen. An amount of ₹ 11.36 crores was directed to be kept aside to meet the claims of the dissenting workmen. In the face of these orders, the dissenting workmen cannot be bound to the consent terms unless there is clinching material on record to show that, on the one hand, the appellant union had the competence and authority to execute the consent terms on behalf of the dissenting workmen and/or, on the other hand, the dissenting workmen took an informed and conscious decision to be governed by the consent terms. 22. In the impugned order, the learned Company Judge has recorded that the appellant registered trade union could not show any material in support of its contention that the dissenting workmen had accepted the consent terms by filing affidavit. It was further noted that the aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the date of winding up prescribed under section 445(3) of the Companies Act, 1956 as the deemed date of discharge of employment cannot be said to be the sole determinative factor in ascertaining the entitlement of the dissenting workmen. The learned counsel for the appellant urged that the entitlement of dissenting workmen to wages is required to be restricted upto three events, which were pressed into service, as alternatives. The first is the 20th December 2002, when the minutes of orders were tendered in Writ Petition No. 1512 of 2002 filed by the Company against the order of AAIFR approving the recommendation of BIFR to wound up the company. The second is 15th December 2004, the date on which the sale of the factory premises was confirmed by this Court in Notice of Motion No. 476 of 2004. With the confirmation of the sale, the substratum of the company was lost, submitted Mrs.Doshi. The third is 29th September 2005, the day on which the company petition for winding up was admitted by this Court. It was submitted that in accordance with the provisions contained in section 441(2) of the Companies Act, 1956, the winding up of a company shall be deemed to commence at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Income Tax Officer Vs. Official Liquidator, National Conduits (P) Ltd. (1981) 51 Company Cases 174 and a Division Bench of this Court in the case of Orkay Industries Ltd. Vs. State of Maharashtra Ors. 1998 (2) Mh.L.J., 910. 28. We have perused the aforesaid judgments. We do not find it necessary to note the background facts, in the context of which, the pronouncements in the aforesaid cases were made. It would be suffice to note that the time of commencement of the proceedings for winding up, specifically provided in sub section (2) of section 441, is with the purpose of addressing the events, which transpire during the interval of commencement of the proceedings and the passing of the winding up order, and subject the transactions, which have occurred, without the express leave of the Court, to the winding up order. The utility of the deeming provision as to the commencement of winding up proceedings finds its practical application in the provisions contained in sections 536 and 537 of the Companies Act, 1956. 29. In fact, from the date of the presentation of the petition, the Court's protective arm is thrown on all transactions so that private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackdrop, the learned Single Judge observed, inter alia, as under : 42 Section 445(3) clarifies that unless the business of the Company is continued, the order of winding up shall be deemed to be a notice of discharge. It states that no separate notice for discharge is necessary and order of winding up is good enough and will be deemed to be a notice. The fiction that section 445(3) creates is that 'order' of winding up will be treated as 'notice' of discharge. What the Section says is that the order of winding up is cessation of service unless the business is continued. Thus the workers are put to notice that unless business is continued their services will be treated as coming to an end from the date of winding up and no separate notice is necessary. It is in this context the deeming fiction is to be read. .... 65 .........To conclude, the relevant date for computing workman's dues will be the date of winding up as per Section 445(3) and not the appointment of Provisional Liquidator. The Official Liquidator will have to recalculate the dues of the workmen accordingly. (emphasis supplied) 34. On a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at an anterior point of time, could be considered the cut off date for calculating the workmen's dues. To the said extent, the Appeal Bench did not approve the view of the learned Single Judge that the date of winding up would be the only date for the purpose of calculation of the workmens' dues. 37. It is true that in the case of Grand View Estates Private Ltd. (Supra), in the backdrop of its peculiar facts and circumstances, the Court held that the workmens' dues shall be computed up to the date of the winding up order. The prime factor which weighed with the Court was that, in the said case, the assets of the company included 48 Acres of prime land in the heart of Mumbai City and it was noticed that upon sale of those assets there would be surplus even after the payment was made from the proceeds thereof to the workmen and creditors. Thus, adopting beneficial interpretation, which would favour the workmen, the date of winding up order was taken as the cut off date. However, the legal principle was enunciated in clear and unequivocal terms that the date of winding up under section 445(3) cannot be the only date for the purpose of calculating the workmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds, cannot be said to be totally unfounded. 42. Thirdly, in the case at hand, in view of the consent terms, the share of the employees as a whole, in the sale proceeds, has been crystallized at ₹ 3759.14 lakhs. Moreover, in terms of the order dated 13th March 2009, the claim of the dissenting workmen was stated to be, in any event, not more than 11.38 crores, which amount was, thus, directed to be kept aside to meet their claims. Evidently, there is no question of the workmen laying any competing claim with the secured creditors pari pasu as the entitlement of the workmen, as a class, has been frozen. The dispute in the instant case is between the workmen inter se. 43. The entitlement of the workmen to wages, who have lodged their claims in accordance with the consent terms, is frozen till December 2002. It is true that there are contentious issues regarding entitlement as provided under the consent terms, including the eligibility of the workmen to get the wages thereunder. It is also true that all these questions have been kept open. However, the fact remains that the real dispute among the workmen is about the surplus which would remain after satisfying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng workmen, in view of the law laid down by this Court in the case of Grand View Estates Private Ltd. (Supra). In our view, the date of the appointment of the Provisional Liquidator, i.e., 30th September 2005, after admission of the company petition, pursuant to an opinion rendered by BIFR under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 would be the appropriate date for calculating the claims of the dissenting workmen. The Provisional Liquidator came to be appointed much after the confirmation of the sale of the assets of the company and realization of the proceeds thereof. We make it clear that we have not prescribed the date of appointment of the Provisional Liquidator as the cut off date as the mandate flowing from the provisions of the Companies Act, 1956, but having regard to the fact that, by the said date, the company was rendered a shell and its assets were converted into corpus, for the purpose of liquidation. 47. In view of the above, we are inclined to modify the impugned order only to the extent of the date upto which the dissenting workmen are entitled to the wages. Point No.2 is thus answered partly in the affirmative. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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