Madhya Pradesh High Court
Allwyn, A Unit Of Voltas Ltd. And Ors. vs Deputy Labour Commissioner And Ors. on 3 August, 1998
Equivalent citations: [2000]100COMPCAS694(MP)
Author: Dipak Misra
Bench: Dipak Misra
JUDGMENT Dipak Misra, J.
1. Invoking the extraordinary jurisdiction of this court the petitioner, an industrial concern, has challenged the sustainability of the orders passed by the Deputy Labour Commissioner, Indore, respondent No. 1 herein, on December 7, 1997 (annexure P-l), and order dated August 12, 1997, {annexure P-2), whereby the said authority has directed the Collector, Bhopal to recover a sum of Rs. 4,67,286.95 as land revenue.
2. A brief reference to the factual matrix would suffice. The petitioner, Hyderabad Allwyn Ltd., became sick and had accumulated a loss of Rs. 180 crores as on March 31, 1993. The matter was referred to the Board for Industrial and Financial Reconstruction (in short "BIFR") under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the Act"). The Board in its meeting held in January, 1993, appointed the Industrial Development Bank of India as the operating agency to prepare the rehabilitation scheme. The Government of Andhra Pradesh vide G.O. (RT) No. 384 dated March 31, 1993, accepted the recommendation of the High Power Committee, Cabinet Sub-committee and the operating agency and issued an order subject to the sanction of the BIFR. The recommendations were to amalgamate Hyderabad Allwyn Ltd. with Voltas Ltd. taking due cognisance that Voltas Ltd. would retain only five thousand employees ; the watch division of Hyderabad Allwyn Ltd. be formed as a separate company as an interim measure and to effect placement of employees of the auto division, i.e., 1,486 employees of Hyderabad Allwyn Ltd. in accordance with the recommendation made by the Cabinet Sub-committee.
3. Guidelines were issued to identify the 1,486 employees for placement in various Government Departments of the State of Andhra Pradesh. Voltas Ltd. had agreed to take over the refrigeration and appliance division of the erstwhile Hyderabad Allwyn Ltd. on the conditions that it would be liable to absorb only five thousand employees and the surplus employees would be taken over by the Government. The surplus employees, 1,486 in numbers, were allotted to various Government Departments. According to the petitioner respondent No. 2 was not one among the five thousand employees allotted to Voltas Ltd. As such he was entitled only for being allotted and placed in one of the Departments of Government of Andhra Pradesh, by virtue of the award having been passed in his favour by the Labour Court, Jabalpur. It is also averred in the petition that the Board vide proceeding dated April 4, 1994, sanctioned the scheme of amalgamation of Hyderabad Allwyn Ltd. with Voltas Ltd. and pursuant to the said scheme sanctioned by the Board the refrigeration and appliance division of the erstwhile Hyderabad Allwyn Ltd. merged with Voltas Ltd. in the name and style of "Allwyn, a unit of Voltas Ltd.". The watch division of the erstwhile Hyderabad Allwyn Ltd. was formed as a new company called Allwyn Watches Ltd. and the auto bus body division was formed into a new company called Allwyn Auto Limited. Voltas Limited took over five thousand employees working in the refrigeration and appliance division of erstwhile Hyderabad Allwyn Limited and the surplus 1,486 employees were deployed to the Government Departments and the Corporation. Thus, according to the petitioner as per the approval by the Board, Hyderabad Allwyn Limited ceased to be in existence. As averred in the petition the second respondent was employed by the erstwhile Hyderabad Allwyn Limited and his-order of dismissal was the subject-matter of challenge before the Presiding Officer of the Labour Court at Jabalpur, in Case No. IDR-41 of 1982. The Labour Court passed its award on May 31, 1986, directing reinstatement with full back wages and other consequential benefits. Being aggrieved by the award passed by the Labour Court, Hyderabad, Allwyn Limited preferred Writ Petition No. 164 of 1987. A Division Bench of this court granted stay of the operation of the award with a direction to the management to comply with the provisions of Section 17B of the Industrial Disputes Act, 1947. As the petitioner had attained the age of superannuation by the end of August, 1994, this court dismissed the writ petition to have been rendered infructuous making a further direction to the management to pay all the benefits of back wages and other consequential benefits arising out of the award. An application for review of the aforesaid order by the management did not meet with success. Thereafter, respondent No. 2 filed an application under Section 33C(1) of the Industrial Disputes Act before the Assistant Labour Commissioner, Jabalpur, who vide letter dated May 23, 1995, issued notice to Hyderabad Metal Works Limited as the said company was no longer in existence. Petitioner No. 1 submitted in writing that the said company was no longer in existence and that respondent No. 2 was not one among the five thousand employees absorbed by Voltas Limited and in view of the provisions of the Act, the petitioner was immune from any pecuniary liability. The quantum as stated by respondent No. 2, was also incorrect. As alleged in the petition hearing took place before the Assistant Labour Commissioner who by order dated December 7, 1996, directed the Collector, Bhopal to recover a sum of Rs. 4,67,286.95 as land revenue. The petitioner, feeling aggrieved by the aforesaid direction, preferred W. P. No. 5260 of 1996 wherein this court quashed the impugned award on the ground that the objections raised by the petitioner were not adjudicated by the Deputy Labour Commissioner. This court remanded the matter directing" the authority to decide the objections and take a final decision by March 31, 1997. After the matter was remanded the petitioner appeared before respondent No. 1 and filed an additional objection. Thereafter respondent No. 1 negatived the stand of the petitioner and by order dated August 12, 1997, directed for compliance with the directions contained in the award. Feeling aggrieved by the same the petitioner re-agitated his grievance before the said authority who passed a final order on December 7, 1997, specifying the quantum at Rs. 2,28,455.30. The said direction is sought to be assailed in this writ petition.
4. It is averred in the writ petition that the authority concerned has erroneously exercised his jurisdiction under Section 33C(1) of the Industrial Disputes Act as the same was not within the ambit and sweep of the aforesaid provision. It is further averred that the petitioner-company was required to absorb only five thousand employees and the petitioner is not one of the employees of the petitioner-company, and hence is not liable to pay the sum as determined by the authority under the Industrial Disputes Act. It is also put forth that as per clause 20 of the scheme of amalgamation as approved by the Board by its order dated April 4, 1994, Hyderabad Allwyn Limited stands dissolved, and hence it is no more in existence and, therefore, no proceeding can be instituted against it. It is further stated though the petitioner is the successor of Hyderabad Allwyn Limited its liability under the scheme of amalgamation is only in respect of five thousand employees absorbed by it and, therefore, the petitioner would not be liable to satisfy the award. It is 'also averred in the petition that as per the provisions of the Act, which is a special enactment no coercive proceeding can be taken against the petitioner-company during the continuance of the scheme.
5. I have heard S. Paul, learned counsel for the petitioner and R.K. Gupta, learned counsel for respondent No. 2. S. Paul, has submitted that once a scheme is in operation being approved by the Board, the award could not be ,executed against the petitioner-company, more so, when there has been dissolution of the earlier company and petitioner No. 1 had only accepted a limited liability. It is also highlighted by him that Hyderabad Metal Works Limited is no more in existence and the same being a sick industry having merged with petitioner No. 1-company, the question of making good the award by it does not arise. It is further urged by him that in view of the provisions of the Act which has overriding effect over other statutes the present establishment is h6t liable to pay any amount to respondent No. 2.
6. Resisting the aforesaid submissions of learned counsel for the petitioner it is argued by Gupta, learned counsel for respondent No. 2 that the order passed by the competent authority under the Industrial Disputes Act is absolutely invulnerable as it has considered the objections raised by the petitioner in proper perspective and there is no error in the adjudication. It is further submitted by him that the petitioner being the successor as accepted by it in the objection, it is liable to satisfy the award passed against the erstwhile employees and there is no escape from the same. It is further urged by him that the approval of the scheme by the Board does not debar employees like respondent No. 2 to proceed from realising the amount in question from the management, more so, when there is no specific order in that regard by the Board. It is also highlighted by him that the language of Section 22 of the Act does not create a bar for the worker to recover his wages. It is also proposed by him that the consent of the Board to institute a proceeding under Section 33C(1) of the Industrial Disputes Act is not necessary.
7. To appreciate the rival contentions raised at the Bar, it is appropriate to refer to the preamble to the Sick Industrial Companies (Special Provisions) Act, 1985, which reads as under :
"An Act to make in public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto."
8. With the aforesaid objective the legislation was brought. The relevant provisions for present purposes are Sub-sections 22(1) and (3) of the Act. They read as under :
"22. Suspension of legal proceedings, contracts, etc.--(1) 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 proceeding 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 the 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 ....
(3) Where an inquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or during the period of consideration of any scheme under Section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board :
Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate."
9. Mr. Paul, learned counsel for the petitioner has contended that as enjoined under Section 22(1), "the proceedings for distress or the like" have to be given purposive interpretation so that a sick company is not harassed. Paul, learned counsel for the petitioner, has further contended that the provision enshrined under Section 14 of the Act clearly stipulates that it has overriding effect notwithstanding anything inconsistent therewith contained in any enactment or contract and, therefore, once a scheme has been framed that has to be given due weightage. He has placed heavy reliance on the decision in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. [1993] 78 Comp Cas 803 ; [1993] 2 SCC 144. In the aforesaid case the financial corporation had resorted to the remedies provided under sections 29 and 31 of the State Financial Corporations Act, 1951, though proceedings were pending before the BIFR without consent of the BIFR. The apex court interpreting Section 22 held as under (page 813) :
"The underlying idea is that every such action should be frozen unless expressly permitted by the specified authority until the investigation for the revival of the industrial undertaking is finally determined."
10. In the aforesaid case the apex court was of the view that the word "proceeding" used in Section 22(1)(b) was to be interpreted liberally. Relying on the aforesaid wide interpretation given to the bar in Section 22(1) of the Act, Paul submits that a proceeding as regards recovery of the dues by the workman is also barred. It is next contended by Paul that if consent is not secured recovery is deferred and the period of deferment is excluded for computation of the period of limitation and, therefore, the proceeding under Section 33C(1) of the Industrial Disputes Act is not maintainable. At this juncture, I may refer to the decision in Grant Panchayat v. Shree Vallabh Glass Works, AIR 1990 SC 1017 ; [1991] 71 Comp Cas 169 wherein their Lordships expressed as under (page 173) :
"In the light of the steps taken by the Board under Sections 16 and 17 of the Act, no proceedings for execution, distress or the like proceedings against any of the properties of the company shall lie or be proceeded further except with the consent of the Board. Indeed, there would be automatic suspension of such proceedings against the company's properties. As soon as the inquiry under Section 16 is ordered by the Board, the various proceedings set out under Sub-section (1) of Section 22 would be deemed to have been suspended.
It may be against the principles of equity if the creditors are not allowed to recover their dues from the company, but such creditors may approach the Board for permission to proceed against the company for the recovery of their dues/outstandings/overdues or arrears by whatever name they are called. The Board at its discretion may accord its approval for proceeding against the company. If the approval is not granted, the remedy is not extinguished. It is only postponed. Sub-section (5) of Section 22 provides for exclusion of the period during which remedy is suspended while computing the period of limitation for recovering the dues."
11. In Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association [1992] 75 Comp Cas 440 ; AIR 1992 SC 1439, the apex court while dealing with the bar under Section 22 of the Act in relation to eviction proceedings under the Karnataka Rent Control Act held as follows (page 450) :
"It could not be the intention of Parliament in enacting the said provision to aggravate the financial difficulties of a sick industrial company while the said matters were pending before the Board or the Appellate Authority by enabling a sick industrial company to continue to incur further liabilities during this period. This would be the consequence if subsection (1) of Section 22 is construed to bring about suspension of proceedings for eviction instituted by a landlord against a sick industrial company which has ceased to enjoy the protection of the relevant rent law on account of default in payment of rent. It would also mean that the landlord of such a company must continue to suffer a loss by permitting the tenant (sick industrial company) to occupy the premises even though it is not in a position to pay the rent. Such an intention cannot be imputed to Parliament. We are, therefore, of the view that Section 22(1) does not cover a proceeding instituted by a landlord against a sick industrial company for the eviction of the premises let out to it."
12. In Deputy Commercial Tax Officer v. Corromandal Pharmacenticals [1997] 89 Comp Cas 1 ; AIR 1997 SC 2027, their Lordships have registered the view that the sales tax being collected by the sick company after sanction of the scheme under Section 17(1) of the Act and the company in that case having collected the sales tax from the customers, recovery of sales tax by coercive methods would not be covered under Section 22(1) of the Act.
13. The question that falls for consideration is whether in view of the wide interpretation given to Section 22(1) of the Act, the language used in the aforesaid sub-section and the language employed under Section 22(3) of the Act the initiation of proceedings for realisation of the dues is barred or not. At this juncture, I may refer to the decision rendered in Baburao P. Tawade v. HES Limited [1995] Lab IC 2200 wherein it has been held that the recovery proceedings under Section 33C(2) of the Industrial Disputes Act are not covered. The learned judge in paragraph 14 of the decision has expressed thus (page 2205) :
"Having considered the position in law as canvassed at the Bar, on the strength of the judgments referred to by me, I am of the view that, even if the application had been made by the workmen under Section 33C(2) of the Industrial Disputes Act for recovery of the monies due to them, after the reference under SICA made to the BIFR, such application could not have attracted the bar under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act; much less can the writ petition under articles 226 and 227 of the Constitution of India pending before this court to challenge the adverse order in the application under Section 33C(2) of the Industrial Disputes Act, be held to attract the bar under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act. In my view, the bar under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act would not apply to the present writ petition, which cannot be dismissed on the ground that no consent had been obtained from the BIFR for the continuation of the present proceedings."
14. In A.P.S. Star Industries v. Star Textile Engineering Employees' Union [1997] I LLJ 1059 (Bom), a Division Bench of the Bombay High Court approved the principles laid down in Baburao P. Tawade v. HES Limited [1995] Lab IC 2200.
15. In Modi Industries Ltd. v. Additional Labour Commissioner [1994] 1 LLJ 482 repelling" the argument of applicability of the provisions of the Sick Industrial Companies (Special Provisions) Act in relation to payment of wages under the U. P. Industrial Peace (Timely Payment of Wages) Act, 1978, the learned judge registered the view as under (page 486) :
"In my opinion, 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 creates any obstacle in fulfilling the object for which the Act of 1985 has been enacted. Both the Acts are thus complementary to each other. Section 22 cannot thus affect the proceedings taken under Section 3 of the Act of 1978 for compelling the petitioner to make payment of the wages already accrued to the workers."
16. In this context I may refer to the decision rendered in National Textile Corporation Ltd. v. B.N. Jalgaonkar [1997] 6 FLR 577 ; [1997] 1 CLR 1102-3, wherein the learned judge held as under :
"Apart from that, the language of Section 22 in no way would stand in the way of the workers making recovery of wages much in the same way as recovery of tax by the Government as has been laid down by the apex court in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 89 Comp Cas 1 (SC)."
17. Recently this court while dealing with a case under the Payment of Gratuity Act, 1972, had the occasion to consider the bar under Section 22(3) of the Act in W. P. No. 354 of 1997. After elaborate discussion S. C. Pandey J. in a succinct arid lucid manner expressed the view as under :
"In the opinion of this court, the object of the statute of 1985 was to give a helping hand to sick or near-sick industrial companies with a view to sustain them if possible or to wind them up, if it is not possible to sustain them. The object is to hold the sick companies so that industrial peace is maintained and employment is generated. There can be hardly any doubt that this exercise was taken upon by the Legislature with due concern for workmen. An industry does not run on its own. Apart from machines, the workmen also contribute their bit for running of an industry. It would be anathema to hold that the Act of 1985 which is designed to keep a tottering industry on its legs,, required a worker of the same industry, who did not desert it during its fallen days, to run from pillar to post to get his legitimate dues sanctioned merely because the sick company refused to perform its statutory. duty compelling him to take recourse to law. If the view suggested by the petitioner is accepted then there is likelihood of great mischief. No .worker will be paid wages when they become due, and he shall be deprived of his wages even if he obtains an order executable against the employer because the proceedings for 'distress recovery' shall be deemed to be, stayed automatically unless the BIFR grants consent. The workers will be driven to the BIFR which is a body with technical bias for restoring the economy of the sick industrial company and is unlikely to take up the case of a worker with the necessary welfare angle. It is true that in given cases the workmen themselves may be responsible for the sickness, of industrial companies but in that case there are sufficient safeguards in our labour laws. It is the firm opinion of this court that Section 22(1) of the Act of 1985 was not meant to be applied to such cases which are being agitated before this court. We must apply the rule of harmonious construction to cut down the wide sweep of the language of Section 22(1) of the Act of 1985 so that it does not militate against Section 14 of the Act Section 22(1) of the Act of 1985 read with Section 22(3) thereof is a part of the scheme under Section 22. The provisions of Section 22(3) of the Act of 1985 give plenary powers to suspend contracts, assurances of properties, agreements, settlements, awards and standing orders, suo motu. The sub-section would not have been inserted if proceedings of recovery of dues like gratuity were automatically suspended pending inquiry or preparation of scheme under Sections 16 and 17 of the Act respectively or when the sanctioned scheme was under consideration or implementation. The court cannot interpret Section 22(1) in a manner that Section 22(3) would appear mostly redundant. It is clear from going through Sub-section (3) of Section 22 of the Act of 1985 that there is no mention in it of terminal benefits. Gratuity in its essence, is a terminal benefit as per Section 4 of the Act. It accrues on superannuation, death or disability, or when the employee quits his job under the circumstances mentioned in Section 4 of the Act. The order of the controlling authority or the appellate authority cannot be said to be an award technically. In view of this matter it is manifest that the language of Section 22(1) of the Act of 1985 though apparently wide, was not designed to override Section 14 of the Act. Therefore, recovery certificates issued under Section 8 of the Act are not hit by Section 22(1) of the Act of 1985. Section 22(1) of the Act of 1985 is purposely addressed to those proceedings of 'distress and the like' which are likely to affect and aggravate the sickness of the industrial company. It could not have been within the contemplation of the Legislature to stay the legitimate dues to the workers who remained with the sick company in its bad days and tried to help it out of the mess all around. It may be noted that in such matters capital and management are more responsible because the ultimate decision lies in their hands."
18. The aforesaid view has been affirmed by the Division Bench in L. P. A. No. 200 of 1998. I may quote with profit :
"Learned single judge has taken the view that under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, there is no automatic stay of recovery of payment of wages and gratuity. The learned single judge has followed decisions given by three High Courts namely. Allahabad, Bombay and Madras. We are in respectful agreement with the view taken by the learned single judge."
19. In view of the foregoing discussion, I am of the considered view that the contention canvassed by Paul in this regard does not merit consideration.
20. As the main contention of Paul has no substance the other contentions relating to limited liability of the present petitioner are of no consequence inasmuch as the petitioner is bound to satisfy the award having taken the past liability of the company. The process of amalgamation would not dis-entitle the workman to receive his dues and he cannot suffer for no fault of his. It is to be noted that the petitioner-company, after dissolution of the earlier company, is under obligation to make good the award as has been determined by the competent authority of the Labour Court.
21. I may hasten to add here that the petitioner has not obtained any order from the BIFR under Section 22(3) of the Act staying the execution of the award. This fact was fairly admitted by S. Paul. There being no stay, the question of the award being kept in automatic abeyance does not arise.
22. Consequently, the writ petition, being devoid of merit, stands dismissed without any order as to costs.