Delhi High Court
In The Matter Of M/S Weston Electronics ... vs .......... on 9 May, 2018
Author: Jayant Nath
Bench: Jayant Nath
$~CP-17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 09.05.2018
+ CO.PET. 368/2001
IN THE MATTER OF M/S WESTON
ELECTRONICS LTD. ..... Petitioner
Through
versus
..... ..... Respondent
Through Mr.D.Bhattacharya, Adv. for the OL.
Mr.Anil Nauriya & Ms.Sumita
Hazarika, Advs. for the workers/
applicants in CA 1455/2015.
Mr.Sangram Patnaik & Mr.Naresh
Sharma, Advs. for IDBI/secured
creditor.
Ms.Indrani Mukherjee, Adv. for
IARC.
Mr.Avneesh Garg, Adv. for
Mr.Mohan Lal Sharma,
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J.(ORAL)
OLR No.127/2018 & OLR No. /2018
1. This compliance report is filed by the OL to place on record certain facts regarding payment of amounts to the workmen and to the secured creditors.
2. A reply has been filed to the above report by some of the ex-workmen who have opposed the manner of disposal of the surplus by the OL.
3. I have heard learned counsel for the parties.
CO.PET. 368/2001 Page 1 of 74. The bone of the contention is the interpretation of the order of this court dated 14.5.2013. This court on 14.5.2013 had noted the submissions of the learned counsel appearing for the Ex-workmen relying on the case of Jitender Nath Singh v. The Official Liquidator, 2013(1) SCC 462. This court had directed that as to how the balance amount in the company‟s account is to be disbursed will have to be examined by the court in the light of sections 529 and 529A of the Companies Act, 1956.
5. It has been submitted by the learned counsel for the Ex. Workmen that without waiting for the decision on the above issue as culled out by this Court in its order dated 14.5.2013, the OL has gone ahead and disbursed the amount to the secured creditors. Further, the learned counsel for the Workmen has relied upon the aforesaid judgment in the case of Jitender Nath Singh vs. The Official Liquidator (Supra) to submit that the principle of law as laid down in the above judgment has not been followed by the OL.
Learned counsel appearing for the secured creditor and also for OL have refuted the contention of the Ex-workmen stating that the applicable provision in the present case is section 529A of the Companies Act, 1956 inasmuch as the immovable property was sold by the OL and the secured creditor did not opt out of the winding up process.
6. The OL has filed a fresh report though it is not on record. A copy of this report was handed over in court by the OL. Registry may number the said report. As per the said report, the following is the disbursement that has been made to the Ex. Workers and the secured creditors:
CO.PET. 368/2001 Page 2 of 7 Name Claim Ist IInd IIIrd Total Payment
of the admitted Instalment, Instalment, Instalment, Payment in % of
claimant order dt. order dt. order dt. made the
27.03.08 & 27.11.08 & 03.10.2012 Admitted
payment payment & payment Claim
made made made
31.03.08, 31.12.2008 12.11.2013
03.04.08
IFCI 30148346 12924681 1346519 1574874 15846074 53
IDBI 64788375 27733274 3039001 3384262 34156537 53
SCB 80352117 34398266 3777194 4197701 42373161 53
Ex- 12487896 5976065 2220985 226533 8423583 67
workers
Total 18,77,76,734 81032286 10383699 9383370 100799355
7. It has been pointed out that a sum of about Rs. 84 lakh has been paid to Ex. Workermen and a sum of Rs. 9 crore (approx.) has been paid to the secured creditors. Hence, 53% of the admitted claim of the secured creditors has been paid and 67% of the admitted claim of the Ex. Workermen has been paid as per the said chart.
8. The Supreme Court in Jitender Nath Singh v. The Official Liquidator(supra) had noted as follows:
"16. Our conclusions on interpretation of the provisions of Sections 529 and 529-A of the Companies Act, therefore, are as follows:
"16.1. A secured creditor has only a charge over a particular property or asset of the company. The secured creditor has the option to either realise his security or relinquish his security. If the secured creditor relinquishes his security, like any other unsecured creditor, he is entitled to prove the debt due to him and receive dividends out of the assets of the company in the winding-up proceedings. If the secured creditor opts to realise his security, he is entitled to realise his security in a proceeding other than the winding-up proceeding but has to pay to the CO.PET. 368/2001 Page 3 of 7 liquidator the costs of preservation of the security till he realises the security.
16.2. Over the security of every secured creditor, a statutory charge has been created in the first limb of the proviso to clause
(c) of sub-section (1) of Section 529 of the Companies Act in favour of the workmen in respect of their dues from the company and this charge is pari passu with that of the secured creditor and is to the extent of the workmen's portion in relation to the security of any secured creditor of the company as stated in clause (c) of sub-section (3) of Section 529 of the Companies Act.
16.3. Where a secured creditor opts to realise the security then so much of the debt due to such secured creditor as could not be realised by him by virtue of the statutory charge created in favour of the workmen shall to the extent indicated in clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act rank pari passu with the workmen's dues for the purposes of Section 529-A of the Companies Act.
16.4. The workmen's dues and where the secured creditor opts to realise his security, the debt to the secured creditor to the extent it ranks pari passu with the workmen's dues under clause
(c) of the proviso to sub-section (1) of Section 529 of the Companies Act shall be paid in priority over all other dues of the company.
.................
19. In the present case, the learned Company Judge and the Division Bench of the High Court have held that all secured creditors along with the workmen have pari passu charge over all the properties or assets of the Company and would be entitled to the dues as secured creditors along with the workmen's dues by way of overriding preferential payments over all other dues under Section 529-A of the Companies Act. The learned Company Judge of the High Court has also relied CO.PET. 368/2001 Page 4 of 7 on some observations of this Court in Andhra Bank v. Official Liquidator [(2005) 5 SCC 75] in support of his order. These observations of this Court in Andhra Bank v. Official Liquidator [(2005) 5 SCC 75] were in the context of the observations of this Court in Allahabad Bank v. Canara Bank [(2000) 4 SCC 406] and are quoted as under: (Andhra Bank case [(2005) 5 SCC 75], SCC pp. 87-88, paras 25-26) "25. While determining Point (6), however, a stray observation was made to the effect that the „workmen's dues‟ have priority over all other creditors, secured and unsecured because of Section 529-A(1)(a). Such a question did not arise in the case as Allahabad Bank was indisputably an unsecured creditor.
26. Such an observation was, thus, neither required to be made keeping in view the fact situation obtaining therein nor does it find support from the clear and unambiguous language contained in Section 529-A(1)(a). We have, therefore, no hesitation in holding that finding of this Court in Allahabad Bank[(2000) 4 SCC 406] to the aforementioned extent does not lay down the correct law."
The aforesaid observations of this Court in Andhra Bank v. Official Liquidator[(2005) 5 SCC 75] are, thus, to the effect that workmen will not have priority over the dues of the secured creditor and this is because of the unambiguous language of Section 529-A(1) that the workmen's dues and the dues of the secured creditor to the extent such debts rank under clause (c) of sub-section (1) of Section 529 pari passu with such dues will have to be paid in priority to all other debts. But as we have held, only where under the second limb of the proviso to clause (c) of sub-section (1) of Section 529 the secured creditor opts to realise the security and is unable to realise a portion of his dues because of the pari passu charge created in favour of the workmen under the first limb of the proviso, he has pari passu charge to the extent indicated in clause (c) of the proviso to sub-section (1) of Section 529 and only such debts due to the CO.PET. 368/2001 Page 5 of 7 secured creditor which rank pari passu with dues of the workmen under clause (c) of the proviso to sub-section (1) of Section 529 have to be paid in priority over all other debts of the company. The High Court has clearly fallen in error by holding that all debts due to secured creditors will rank pari passu with the workmen's dues and have to be paid along with the workmen's dues in priority to all other debts of the Company."
9. There is an illustration at the end of section 529 of the Companies Act which illustrates the method as to how the debts of secured creditor and the workmen are to be paid. The illustration reads as follows:-
"The value of the security of a secured creditor of a company is Rs.1,00,000/-. The total amount of the workmen‟s dues is Rs.1,00,000/-. The amount of the debts due from the company to its secured creditors is Rs.3,00,000. The aggregate of the amount of workmen‟s dues and of the amounts of debts due to secured creditors is Rs.4,00,000/-. The workmen‟s portion of the security is, therefore, one- fourth of the value of the security, that is Rs.25,000."
10. In this case, learned counsel appearing for some of the Ex. Workmen have not been able to explain as to why the calculation given by the OL is erroneous and contrary to provisions of Section 529 and 529A of the Companies Act. He has not suggested any other rates of distribution. Clearly the provisions of section 529 and 529A have been complied with.
11. That apart I may also note that on 03.10.2012 this court had passed a direction to the OL to make payment to the workmen and the secured creditor pari passu in terms of section 529-A and as per tabulation in Annexure „A‟ in Report No.541/2012. The payments hence have been released pursuant to directions by this court. There are no reasons why on CO.PET. 368/2001 Page 6 of 7 the basis of which it can be said that the disbursement is erroneous.
12. Hence, keeping in view the above fact, in my opinion, the OL has complied with the provision of section 529A of the Companies Act, 1956. The above report is taken on record and disposed off.
13. As per the report, about 9 workmen have not been paid dues as their details are not available. As and when the workmen file necessary details with the OL, the OL will look into the same.
14. List on 10.9.2018.
CA No.1455/201515. This application is filed for seeking permission to continue the proceedings pending before Industrial Tribunal, Karkardooma Courts and for disposal of the same on merit.
16. After some submissions, on the request of the learned counsel for the applicant, the applicant is permitted to make a claim before the OL within two weeks from today in the prescribed format along with all supporting documents.
17. The delay in filing the claim is condoned and OL may look into the same and take steps as per law.
18. The application is disposed of.
JAYANT NATH, J.
MAY 09, 2018/v Corrected & released on 07.07.2018 CO.PET. 368/2001 Page 7 of 7