Rajasthan High Court - Jaipur
Krishi Udyog Karmchari Union vs O L on 25 September, 2019
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. COMPANY APPLICATION NO. 5/2010
IN
S.B. COMPANY PETITION NO. 30/1996
Krishi Udyog Karmachari Union Rajasthan Jaipur having its said
office at Opposite Shalimar Cinema, Near Swami Kumaranand
Hall, Jaipur through its General Secretary Shri Ram Charan
Sharma.
...Applicant
Versus
1. Office Liquidator attached to Rajasthan high Court B-75/A,
Rajendra Marg, Bapu nagar, Jaipur- 302015, Rajasthan.
2. The State of Rajasthan through Secretary to the Department
of Agriculture State Secretariat, Jaipur.
3. The State Agro Industries Corporation Ltd. O. 1 Subhash
Nagar, Jhotwara Road, Jaipur throught its Financial Controller and
Secretary.
....Non-Applicants
For Petitioner(s) : Mr. Suresh Kashyap, Adv.
For Respondent(s) : Mr. M.S. Singhvi, AG with
Mr. Sheetanshu Sharma, Adv.
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Judgment Reserved on 17/09/2019 Pronounced on 25/09/2019
1. The applicant-Krishi Udyog Karmachari Union, Rajasthan, Jaipur has filed the instant Company Application under Section 529 and 529-A of the Companies Act, 1956 and in terms of the order dated 19/05/2009 passed by the Division Bench in DB Civil Special Appeal (Writ) No.671/2000 with the prayer that the benefit of 5th Pay Commission be made applicable to the (Downloaded on 06/06/2021 at 09:53:49 PM) (2 of 9) [COAP-5/2010] employees of the State Agro Industries Corporation and the respondents be directed to give effect to the resolution dated 26/06/1998 whereby the Board took a decision to release the benefit of 5th Pay Commission to its employees.
2. Brief facts which need to be considered are that the State Agro Industries Corporation (hereinafter referred to as the Company in liquidation) was decided to be wound up by the State Government vide its decision dated 29/02/1995 and a winding up petition was also filed before this Court. The winding up order was passed by the Company Court vide order dated 03/09/1997 which was confirmed by the Division bench vide its order dated 17/07/2000.
3. The case of the applicant-union is that the Board of Directors of the Company in liquidation in its 166th meeting held on 26/06/1998 decided vide resolution no.166(1)(8) to grant benefit of Revised Pay Scales and Selection Scale w.e.f. 01/09/1996 as has been granted by the State Government. A writ petition, bearing SB Civil Writ Petition No.4715/1998 was preferred before this Court praying for implementation of the said decision and the learned Single Judge of this Court vide its judgment dated 17/04/2000 allowed the writ petition directing the Board of Directors to implement the decision of the Board of Directors dated 26/06/1998. However, the DB Special Appeals No.670/2000, 671/2000 and 672/2000 were preferred which came to be decided by the Division bench on 19/05/2009 with following observations:-
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(3 of 9) [COAP-5/2010] "Having considered the entire facts and circumstances, since the entire matter is pending before the Company Judge and winding up order has already been passed, the general directions issued by the learned Single Judge cannot be sustained in the eyes of law. More so when all the facts had already been placed on record before the learned Single Judge and the factual aspect have not been considered by the learned Single Judge at all.
Learned counsel for the respondent-Union submitted that this Court may now issued directions to the Bureau of State Enterprises to take a decision in regard to resolution passed by the Board of Directors of the Corporation in the year 1998. However, in view of the pendency of the company petition and winding up order already been confirmed by the Division Bench, no such directions can be issued by this Court under writ jurisdiction now at this stage. It is for the union or the concerned employees to make proper application before the Company Judge for their grievance, if any.
Accordingly, the appeals are allowed, impugned judgment dated 17.4.2000 passed by the learned Single Judge is quashed and set aside."
4. The present Company Application has thereafter been filed.
5. Learned counsel for the applicant-union submits thatthe order of winding up was stayed by the Company Judge vide order dated 31/08/2000. So far as the order of Division Bench dated 17/07/2000 confirming the earlier order of winding up dated 03/09/1997 is concerned, the same was challenged before the Supreme Court and the Board of Directors were held empowered to take all decisions with regard to the Company in liquidation. The decision of the Board of Directors dated 26/06/1998 was in confirmation of its earlier decision dated 21/05/1998 and the decision was taken after approval from the Bureau of Public Enterprises and therefore, it was binding on the respondent-State to implement the same and the claim of the workmen is accordingly made out. Learned counsel for the applicant-union has taken this Court to the order dated 06/03/1998 issued by the (Downloaded on 06/06/2021 at 09:53:49 PM) (4 of 9) [COAP-5/2010] Financial Adviser which mentions that the Company in liquidation, in similar and in accordance with the State Government, had granted interim relief on 16/09/1993, 01/04/1995 and 01/04/1996 to its employees in lieu of 5th Pay Commission benefit and therefore, 5th Pay Commission benefits are expected to be released according to the State Government Revised Pay Scales to the employees of the Company in liquidation w.e.f 01/09/1996. Learned counsel has also relied upon the meeting of the Board dated 29/04/2000 [resolution no.176(7)] and it is prayed that the same ought to be released. Learned counsel has also taken this Court to 38th Annual Report of the Company in liquidation in the year 2006-07 submitted by the Financial Adviser and Secretary to the State Government to submit that the dissolution of the Company in liquidation was closed after August, 2000 and the employees were given voluntary retirement or discharge or absorbed in another Corporations.
6. Per-contra, learned Advocate General, appearing for the respondent-State has submitted that in the meeting held on 29/04/2000, the decision taken earlier on 26/06/1998 was stayed till a decision is rendered by this Court. It is submitted that the Board decision dated 26/06/1998 was not approved by the Bureau of Public Enterprises and it is necessary as per the Circular of the Bureau of Public Enterprises dated 04/03/1998 which provided that prior clearance of the Bureau of Public Enterprises has to be obtained for all categories of PSUs, profit making or otherwise for revision of the Pay Scales w.e.f. 01/09/1996. Merely granting of interim relief in lieu of 5th Pay Commission by the Company in (Downloaded on 06/06/2021 at 09:53:49 PM) (5 of 9) [COAP-5/2010] liquidation on 16/09/1993, 01/04/1995 and 01/04/1996, it cannot be presumed that 5th Pay Commission benefit was required to be implemented. Learned Advocate General also invited attention of this Court to the affidavit and submitted that in the year 1995, the Company in liquidation was running losses and came under the category of Sick Unit and as its revival became impossible, the decision to winding up of the Company in liquidation was taken by the State Government and approved by the Governor on 10/05/1995. Once the Company Court had passed directions to wind up the Company in liquidation on 03/09/1997, no policy decision could have been taken by the Board of Directors with regard to its erstwhile employees. It is submitted that the Company in liquidation has already been dissolved in 2000. In view thereof, the benefit of 5th Pay Commission cannot be extended to the employees who have taken voluntary retirement under the Golden Handshake Scheme or otherwise. He also relied upon judgment rendered by the Supreme Court in A.K. Bindal and anr. Vs. Union of India & ors.: (2003) 5 SCC 163.
7. This Court has considered the submissions made by learned counsel for the parties.
8. As per the facts which have come on record, this Court finds that the decision taken by the Board of Directors on 26/06/1998 with regard to grant of Revised Pay Scale and Selection Scale in terms of 5th Pay Commission Report w.e.f. 01/09/1996 was without seeking sanction from the Company Judge. Once the Company Judge has issued an order of winding up on 03/09/1997, no policy decision could have been taken up by the Board of (Downloaded on 06/06/2021 at 09:53:49 PM) (6 of 9) [COAP-5/2010] Directors in terms of Sections 487 and 531 of the Companies Act which read as under:-
"487. EFFECT OF VOLUNTARY WINDING UP ON STATUS OF COMPANY :- In the case of a voluntary winding up, the company shall, from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up of such business :
Provided that the corporate state and corporate powers of the company shall continue until it is dissolved.
531. FRAUDULENT PREFERENCE (1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly :
Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months.
(2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by 1 [the Tribunal], and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual."
9. In view of the aforesaid provisions and other provisions contained under the Companies Act, 1956 namely; Sections 536 & 537, no additional liability could have been fixed on the Company in liquidation for which resolution had already been passed for voluntary winding up.
10. Further, as per Section 542 of the Companies Act, 1956, any conduct of business which affects and creates additional liability (Downloaded on 06/06/2021 at 09:53:49 PM) (7 of 9) [COAP-5/2010] on the Company in liquidation, would have to be fixed on the concerned Directors, Officers or Members of the Company.
11. That apart, this Court finds that the Bureau of Public Enterprises had issued a Circular on 04/03/1998 which provided prior clearance of the Board of Public Enterprises for all categories of PSUs, profit making or otherwise before implementing the Revised Pay Scales w.e.f. 01/09/1996 but no such prior clearance was obtained by the Board of Directors. This Court further finds that the Company in liquidation was running in great losses and therefore, there was no occasion for the Board of Directors for implementing and releasing the benefit of 5th Pay Commission to the employees as there was no adequate funds available with the Company in liquidation for the purpose.
12. The Supreme Court in A.K. Bindal and anr. Vs. Union of India & ors. (supra), while examining a similar issue relating to claim of the employees who had taken voluntary retirement, has held as under:-
"17. The legal position is that identity of the Government Company remains distinct from the government. The Government Company is not identified with the Union but has been placed under a special system of control and conferred certain privileges by virtue of the provisions contained in Sections 619 and 620 of the Companies Act. Merely because the entire share holding is owned by the Central Government will not make the incorporated company as Central Government. It is also equally well settled that the employees of the Government Company are not civil servants and so are not entitled to the protection afforded by Article 311 of the Constitution (Pyare Lal Sharma v. Managing Director AIR 1989 SC 1854). Since employees of Government Companies are not government servants they have absolutely no legal right to claim that government should pay their salary or that the additional expenditure incurred on account of revision of their (Downloaded on 06/06/2021 at 09:53:49 PM) (8 of 9) [COAP-5/2010] pay scale should be met by the government. Being employees of the companies it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay scale, the petitioners cannot claim any legal right to ask for a direction to the Central Government to meet the additional expenditure which may be incurred on account of revision of pay scales. It appears that prior to issuance of the Office Memorandum dated 12.4.1993 the Government had been providing the necessary funds for the management of Public Sector Enterprises which had been incurring losses. After the change in economic policy introduced in early nineties, Government took a decision that the Public Sector Undertakings will have to generate their own resources to meet the additional expenditure incurred on account of increase in wages and that the government will not provide any funds for the same. Such of the Public Sector Enterprises (Government Companies) which had become sick and had been referred to BIFR, were obviously running on huge losses and did not have their own resources to meet the financial liability which would have been incurred by revision of pay scales. By the Office Memorandum dated 19.7.1995 the Government merely reiterated its earlier stand and issued a caution that till a decision was taken to revive the undertakings no revision in pay scale should be allowed. We, therefore do not find any infirmity legal or constitutional in the two Office Memorandums which have been challenged in the writ petitions.
19. The contention that economic viability of the industrial unit or the financial capacity of the employer cannot be taken into consideration in the matter of revision of pay scales of the employees, does not appeal to us. The question of revision of wages of workmen was examined by a Constitution Bench in Express newspapers Ltd. & Ors. v. Union of India & Ors. AIR 1958 SC 578 having regard to the provisions of Industrial Disputes Act and Minimum Wages Act and the following principles for fixation of rates of wages were laid down :
"(1) that in the fixation of rates of wages which include within its compass the fixation of scales of wages also, the capacity of the industry to pay is one of the essential circumstance to be taken into consideration except in cases of bare subsistence or minimum wage where the employer is bound to pay the same irrespective of such capacity ;(Downloaded on 06/06/2021 at 09:53:49 PM)
(9 of 9) [COAP-5/2010] (2) that the capacity of the industry to pay is to be considered on an industry-cum-
region basis after taking a fair cross section of the industry; and (3) that the proper measure for gauging the capacity of the industry to pay should take into account the elasticity of demand for the product, the possibility of tightening up the organisation so that the industry could pay higher wages without difficulty and the possibility of increase in the efficiency of the lowest paid workers resulting in increase in production considered in conjunction with the elasticity of demand for the product - no doubt against the ultimate back-ground that the burden of the increased rate should not be such as to drive the employer out of business."
13. Thus viewed, claim of the applicant-union for grant of Revised Pay Scale under 5th Pay Commission is not made out.
14. Consequently, the instant Company Application is dismissed.
(SANJEEV PRAKASH SHARMA),J Raghu/ (Downloaded on 06/06/2021 at 09:53:49 PM) Powered by TCPDF (www.tcpdf.org)