Karnataka High Court
Indian Plywoodmanufacturing Company ... vs The Commissioner Of Labour In ... on 4 September, 1998
Equivalent citations: [1999(82)FLR186], 1998(6)KARLJ280, (1999)ILLJ411KANT
Author: R.P. Sethi
Bench: R.P. Sethi, K.R. Prasad Rao
JUDGMENT
R.P. Sethi, C.J
1. Aggrieved by the show cause notice dated 8-3-1996 (Annexure-F) directing the appellant to pay the closure compensation totally amounting to Rs. 4,08,43,845/- within a period of 15 days from the date of the receipt of the aforesaid notice and the Certificate (Annexure-H) issued under Section 33-C(1) of the Industrial Disputes Act (hereinafter called 'the Act') dated 27th of July, 1996, authorising the Deputy Commissioner, Dharwad, to recover the aforesaid amount, the appellant herein filed a writ petition praying for quashing of the aforesaid notice and certificate with a further prayer restraining the respondents to initiate any proceedings for attachment and sale of the assets and properties belonging to the appellant till the reference stated to be pending before the Board of Industrial and Financial Reconstruction was disposed of.
2. The main ground urged was that in view of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter called the '1985 Act'), no recovery could be made from the appellant. The learned Single Judge after referring to various provisions of law applicable in the case and relying upon a judgment of Allahabad High Court in Modi Industries Limited v State of Uttar Pradesh and Others, dismissed the writ petition vide the order impugned in this appeal.
3. The facts giving rise to the filing of the present Petition are that the appellant-Company is stated to have set up a factory for the manufacture of plywood at Dharwad in the year 1944. Around the year 1993, the appellant-Company is stated to have started sustaining losses due to the shortage of raw material and thus became a sick industrial Company as defined under Section 3(1)(o) of the 1985 Act. The Board of Directors of the Company are stated to have made a reference to Board of Industrial and Financial Reconstruction (hereinafter called the 'Board'), which was registered as Case No. 53 of 1995. The Board by its Order dated 5-10-1995 declared the appellant-Company to be sick industrial Company and appointed Central Bank of India as the operating agency with a direction to prepare a scheme for rehabilitation of the Company. It was further contended that due to heavy losses sustained by it, the appellant was not able to provide work and pay wages to its workmen. Conciliation meetings are stated to have been held on 15-7- 1995 and 22-7-1995, which were chaired by the Minister of Labour. In the meeting held on 22-7-1995 it was allegedly agreed by and between all the parties including the appellant and the labour represented by the workers union as also the officials of the Labour Department that the factory be closed and the workers be paid the closure compensation. Pursuant to the aforesaid decision, the appellant filed an application to the State Government on 9-8-1995 seeking permission for closure of the factory under Section 25O of the Act. The State Government did not send any reply within two months from the date of the application, which according to the appellant amounted to deemed permission to close the factory with effect from 10-10-1995. On 9-2-1996, the Commissioner of Labour called for certain particulars, which were replied by the appellant. The workers union is stated to have approached the first respondent with a request to grant them closure compensation in response to which the impugned notice-Annexure-F was issued, which is stated to have been appropriately replied vide Annexure-G, but allegedly without looking into the objections, the respondent 1 is stated to have issued impugned certificate-Annexure-H. It is contended that the certificate issued amounted to distress proceedings, which were not permissible in view of the provisions of Section 22 of the Act.
4. It is not disputed that upon closure of the factory, the workmen represented by respondent 3 were entitled to the closure compensation. Sub-section (8) of Section 25O of the Act provides that where an undertaking is permitted to be closed down, every workman who is employed in that undertaking immediately before the date of application for permission, shall be entitled to receive compensation which shall be equivalent to fifteen days average pay for every completed year of continuous service or any part thereof in excess of six months.
Section 33-C(2) of the Act provides:
"Where any workman is entitled to receive from the employer any money or any benefit which is capable of being computed in terms of money and if any question arises as to the amount of money due or to the amount at which such benefit should be computed, then the question may, subject to any rules that may be made under this Act, be decided by such Labour Court as may be specified in this behalf by the appropriate Government within a period not exceeding three months:
Provided that where the presiding officer of a Labour Court considers it necessary or expedient so to do, he may, for reasons to be recorded in writing, extend such period by such further period as he may think fit".
5. The mandate of sub-section (8) of Section 25O and sub-section (2) of Section 33-C entitled the workman to claim closure compensation and seek its recovery from the employer. Claim of such compensation is stated to have been barred by virtue of Section 22 of the 1985 Act, which provides:
"Suspension of legal proceedings, contracts, etc.:--
Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.
What is barred under Section 22 of 1985 Act is the execution or distress proceedings or the appointment of the Receiver in respect of the property of the Company. The recovery of money or for enforcement of any security against the Company or any guarantee in respect of any loan or advance guaranteed to the Company cannot be resorted to by way of suit in a Civil Court. The impugned notice and recovery certificate cannot be termed to be the recovery of money by way of suit. Being conscious of this position of law, the learned Counsel for the appellant has tried to impress upon us that the amount sought to be recovered was distress and the recovery being effected in execution proceedings was not permissible. The word 'distress' used in Section 22 of the 1985 Act has to be read ejusdem generis to the words, "no proceeding for winding up, execution, distress or the like against any of the properties of an industrial company. Seen in this context, it transpires that the financial difficulties faced by the Company would not allow the initiation or continuation of proceedings under the Companies Act. 'Distress' is a remedy summary in its nature and extraordinary in its character, whereby moveable property is taken from the possession of one to secure satisfaction for a demand. Distress is one of the most ancient and effectual remedies for the recovery of rent. According to Law Lexicon it is the taking, without legal process, cattle or goods as a pledge to compel the satisfaction for a demand, the performance of a duty or the redress of an injury. Distress, thus, is not intended to be made a basis for depriving the workmen of the recovery of their wages payable to them under the Act. Such an interpretation would defeat the purpose for which the Act was enacted. Section 33-C provides a method by which the workman can claim money which is due to them from the employer. We are therefore of the opinion that application filed under Section 33-C(2) for retrenchment compensation is no bar for the Authorities under the Act to proceed notwithstanding the provisions of Section 22 of the 1985 Act. The provisions of the Act cannot be controlled or intended to have been curtailed by incorporation of Section 22 of the 1985 Act. The provisions of the Act and that of 1985 Act are in no way conflicting, as they are intended to deal with different situations.
6. The learned Single Judge appears to have rightly relied upon the judgment of the Allahabad High Court in Modi Industries Limited case, supra, wherein it has been held:
"Both the Acts have been brought on the Statute Book to carry out independent and important objects though the area for their operation is the same, that is, the industrial area. It can be said that the one looks after the defective lifeline of the body and the other provides for the healing of necessary limbs like hands and legs of the same body. But, both are necessary to keep the whole body moving. The purpose and object of Section 22 cannot be to cover those proceedings or actions which are necessary for running the industry irrespective of the fact whether it is sick or non-sick. If the industry cannot run without workers, the workers also cannot be expected to work without payment of their wages, The timely payment of the wages for which the provisions of the Act of 1978 have been enacted would thus be a step helping rehabilitation and it cannot be said that it created any obstacle in fulfilling the object for which the Act of 1985 has been enacted. Both the Acts are thus complimentary to each other. Section 22 cannot thus effect the proceedings taken under Section 3 of the Act of 1978 for compelling petitioner to make payment of the wages already accrued to the workers. The Parliament while putting Section 22 of the Act of 1985 could never have intended that the industrial unit under the garb of sickness or for any like difficulty may be allowed to shirk its liability to pay the wages to its workers for the work they have done. Thus proceedings under Section 3 of the Uttar Pradesh Act of 1978 will not be affected by Section 22 of the Act of 1985".
The aforesaid judgment is stated to have been affirmed by the Supreme Court vide judgment in Modi Industries Limited v State of Uttar Pradesh and Others. The learned Counsel for the appellant has however submitted that the judgment of the Allahabad High Court was set aside, though on some other point. The mere fact that the aforesaid judgment has been set aside on some other point, has not persuaded us to take a different view, as it is conceded that the Hon'ble Supreme Court did not comment upon this part of the judgment of the Allahabad High Court while setting it aside.
A Division Bench of Bombay High Court in Girni Kamgar Sangharsha Samiti and Others v Khatau Mackanji Spinning and Weaving Company Limited and Others, relying upon a judgment of Gujarat High Court in Textile Labour Association v State of Gujarat concluded:
"Having regard to the aforesaid pronouncement, we prima facie found that, in a case where wages are undisputedly due, financial inability is no defence for non-payment. In the circumstances, we direct the 1st respondent to make payment of workers who have attended and signed the muster for the period March 1997 and onwards".
In Workers of M/s. Rohtas Industries v M/s. Rohtas Industries Limited , the Supreme Court held:
"After the sale proceeds are received by the Official Liquidator, if he finds that sufficient surplus funds remain in his hands after paying the wages as directed, he would pay the taxes -- sales tax and the excise duty. In case there be no surplus, payment of the taxes may be deferred for some time and the Official Liquidator is directed to explore possibilities of tapping other sources for raising funds to meet those liabilities. The workmen have been facing challenge to their lives and his Court on the earlier occasion indicated that in fixing priorities, saving of human lives should be paramount. We endorse that view. That has been the consideration for postponing payment of the public dues, if necessary".
The Bombay High Court in an earlier case, relying upon Modi Industries case, supra, had held:
"Reliance is placed on the observation in the aforesaid case of Modi Industries to the effect that the Parliament could never have intended that the industrial unit under the garb of sickness or for any like difficulty may be allowed to shirk its liability to pay the wages to its workers for the work they have done. If such a position is allowed to prevail the sick company could defeat the legitimate claims of workmen for their wages and other dues by not paying them in the first instance, forcing the workers to resort to their remedies and then pleading the bar in Section 22(1). No construction can be put upon the provisions of Section 22, which could result in a situation of exploitation of human beings, contrary to provisions of our constitutional directives. It is, therefore, not possible to accept the contention that the payment of earned wages to the workmen (it cannot be disputed that payment under settlement would be "wages" within the meaning of Section 2(ii) of I.D. Act) was intended to be defeated by invoking the bar under Section 22(1) or to drive the workmen to run to New Delhi for seeking the consent of the BIFR every time their monthly wages were required to be paid. The bar of Section 22(1) of SICA must be held to apply only to such proceedings which are not required for the day-to-day running of the sick industrial company, even under a sanctioned scheme or otherwise. Any other interpretation would lead to a ludicrous and unintended result" --Girni Kamgar's case, supra.
We also agree with the learned Single Judge that the dictum laid down in Gram Panchayat and Another v Shree Vallabh Glass Works Limited and Others, was not applicable in the instant case. Similarly, the reliance of the appellant on 78 Com. Cas. 803 is also misplaced.
The learned Counsel for the appellant has further relied upon the judgment of the Supreme Court in Tata Davy Limited v State of Orissa and Others , to urge that the interpretation of the words "any other law" would include the Act and debar the respondents herein to initiate recovery from a sick industrial company. In that case, the Apex Court relied upon its earlier judgment in Vallabh Glass Works Limited's case, supra, wherein it had been held "arrears of taxes and the like due from sick industrial company that satisfy the conditions in Section 22 of the Central Act cannot be recovered by coercive process unless the said Board gives its consent thereto".
(emphasis supplied)
7. We have already dealt with the conditions of Section 22 of the 1985 Act and found that no bar was created for recovery of the amounts due to the workman under Section 33-C of the Act. As already noticed, 1985 Act is intended to make efforts for rehabilitation of the sick industrial companies, but it does not mean that such rehabilitation can be made on the heaps of the skeleton of human beings. Pending rehabilitation, the workmen and their families cannot be forced to starvation. If both the Acts deal with different situations, there is no question of imposing any embargo for recovery of such meagre amounts of money, which are necessary to keep the workmen alive.
8. In Real Value Appliances Limited v Canara Bank and Others, the Apex Court had dealt with the scope of the reference, enquiry and scheme and had held that 1985 Act must be treated as having commenced as soon as the registration of the reference is completed after scrutiny and from that date action against company's assets must be remained stayed in terms and with respect to such matters as are covered by Section 22(1) of that Act. The Supreme Court, in that case, did not hold that claims of the workmen under the Act cannot be directed to be satisfied during the pendency of reference before the Board under 1985 Act.
9. In view of what we have noticed herein above, we are of the opinion that recoveries sought from the appellant are not recoveries of any such claim which is barred under Section 22 of 1985 Act and that the provisions of that Act cannot override the admitted and settled claims of the workmen under the Act. The learned Single Judge rightly held that Section 22 of 1985 Act was no bar to initiate recovery proceedings for the amounts payable to the workmen.
10. The appeal, which has no merit, is accordingly dismissed with costs assessed at Rs. 2,000/-.