Bombay High Court
Pravin S.Shah vs Rashtriya Mill Mazdoor Sangh on 18 December, 2008
Equivalent citations: AIR 2009 (NOC) 931 (BOM.), 2009 (2) AIR BOM R 107 2009 CLC 248 (BOM), 2009 CLC 248 (BOM)
Author: S.Radhakrishnan
Bench: S. Radhakrishnan, J.P. Devadhar
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY APPLICATION NO. 739 OF 2005
IN
COMPANY PETITIN NO. 1 OF 1982
Pravin S.Shah ..Petitioner
Sole Proprietor of United Dyes (India)
Vs.
Rashtriya Mill Mazdoor Sangh
a representative and approved Union for
..Applicant
the Cotton Textile Industry in Greater
Bombay, as registered under the
provisions of the Bombay Industrial
Relations Act,1946 and having its office
at Mazdoor Manzil, G.D.Ambekar Marg,
Parel, Bombay - 400 012.
Vs.
The Official Liquidator, High Court, Bombay ..Respondent
Mr. M.A.Choudhari for the Applicants
Mr. S.H.Doctor, Senior Advocate as an Amicus Curiae.
Mr. B.B.Parekh for the Respondents.
CORAM : DR.S.RADHAKRISHNAN AND
J.P.DEVADHAR,JJ.
JUDGMENT RESERVED ON : 10TH APRIL, 2008
JUDGMENT DELIVERED ON :18TH DECEMBER, 2008.
JUDGMENT (PER : DR.S.RADHAKRISHNAN,J.)
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1. The present matter was referred to this Division Bench by the Hon'ble the Chief Justice of the High Court, Bombay in pursuance to an order of referral passed by Dharmadhikari J. There was a conflicting opinion on the issue raised in the present matter hence the aforesaid referral.
2. The issue before us is;
Whether Sections 529, 529A, 530 of Companies Act, 1956 read with Rules 6 and 9 of the Companies (Court) Rules 1959 read with section 35 of the Civil Procedure Code 1908 empower the court to award interest to the workmen/employees from the date of winding up order?
3. The Company Application has been filed to direct the Official Liquidator of the High Court, Bombay to pay interest @ 12% p.a. or such other amount on the entire dividend to the employees from the date of winding up till the actual payment of the entire amount due and payable to the workers. The above company was ordered to be wound up by an order of this Court dated 21st January, 1983.
4. The learned Counsel in support of the company application submitted that the claims of 2872 workers are partially settled. The Official Liquidator realized a sum of Rs. 41.00 crores from sale of immoveable property of the company. The amount of the pre- liquidation period has already been adjudicated upon and the ::: Downloaded on - 09/06/2013 14:09:36 ::: 3 liquidator has sought time to make the payment. The conflict has arisen with regard to the post-liquidation period i.e. after winding up of the company. The Counsel for the Applicant relied on a judgment of this Court dated 31 August 1996 in Company Application No. 246 of 1994 , wherein the learned Single Judge has observed as under:
"A similar controversy arose before the Court. The Court had given the judgment after noticing the statutory provisions as also the Company Court Rules and more particularly Rules 6 and 9. By virtue of sections 529, 529A and 530 substantial rights and benefits are conferred on the workmen of the closed undertaking, the workmen getting rights pari passu with those of the secured creditors over the assets of the company in liquidation. A perusal of section 530 makes it clear that (i) this provision is subject to the provisions of section 529A of the Companies Act and (ii) revenues, taxes, cess and rates must have become due and payable with 12 months before the relevant date whish is the date of appointment of the liquidator or the date of winding up, as the case may be in order that they may be paid in priority to other debts. Rule 6 will be attracted in the present situation. Rule 6 provides that the practice and procedure of the code so far as applicable shall apply to the proceedings under the Act. The workers thus will be clearly entitled to claim interest under section 34 of the Civil Procedure Code in the absence of any specific rule in that behalf under the Companies (Court) Rules."
5. The learned Counsel appearing on behalf of Official Liquidator contended that the reliance placed on Rule 6 is clearly misplaced because Rule 6 only deals with Practice and Procedure of the Code. In his submission, by this process and by referring to Rule 6 read with Rule 9 Section 34 of the Civil Procedure Code cannot be invoked in ::: Downloaded on - 09/06/2013 14:09:36 ::: 4 this case. More so when the Companies Act does not provide for payment of such interest. It was further contended that there is no fund available for making payment of such interest. The Official Liquidator has stated that he does not have sufficient funds to pay all dues of Creditors and workers. The Official Liquidator has categorically stated that he does not have any surplus funds at all to pay any interest. Reliance was placed on the decision of the Hon'ble High Court of Gujarat in Textile Labour Association v Official Liquidator of Jubilee Mills 99 Company Cases (2000) 189, wherein it was held that payment of interest after relevant date would arise only if there is surplus available after paying in full all the creditors of the company. In such event also it would be restricted to 4% from date of winding up order till date of declaration of dividend in terms of Rule 179 of the Companies (Court) Rules, 1959.
6. Companies (Court) Rule 179 reads as under:
179. Payment of subsequent interest:
In the event of there being a surplus after payment in full of all the claims admitted to proof, creditors whose proofs have been admitted shall be paid interest from the date of the winding-up order or of the resolution as the case may be, up to the date of the declaration of the final dividend, at a rate not exceeding 4 per cent per annum, on the admitted amount of the claim, after adjusting against the said amount the dividends declared as on the date of the declaration of each dividend.
7. As far as the claim for interest is concerned it is only if the company is left with surplus funds after distribution of the dues of the ::: Downloaded on - 09/06/2013 14:09:36 ::: 5 secured creditors and the workers dues both pari passu as per the provisions of sections 529 and 529A of the Act and after distribution of preferential dues under section 530 of the Act that the question of awarding any interest on the dues of the secured creditors or the workmen's dues for the further period after the relevant date will arise.
8. The learned Single Judge in his judgment and order dated 31st August, 1996, in Company Application No.246 of 1994 had not noticed the above Rule 179 of Companies (Court) Rules, 1959. The learned Single Judge had erroneously observed that in the absence of specific Companies (Court) Rules, 1959, and proceeded to award interest to the workers. Rule 179 is explicit, award of interest will arise, only if there is a surplus fund.
9. Under the aforesaid facts and circumstances, we answer the above question, to the effect that the Court is empowered to award interest strictly in accordance with Rule 179 of Companies (Court) Rules, 1959.
10. Before we conclude, we must record our deep sense of appreciation to Mr.S.H.Doctor, Senior Advocate, who very ably assisted us.
(J.P.DEVADHAR,J.) (DR.S.RADHAKRISHNAN,J.) ::: Downloaded on - 09/06/2013 14:09:36 :::