Madhya Pradesh High Court
State Of Madhya Pradesh vs Hukumchand Mills Ltd. on 6 August, 2007
Equivalent citations: (2008)1COMPLJ297(MP)
Author: A.M. Sapre
Bench: A.M. Sapre
ORDER A.M. Sapre, J.
1. OLR NO. 33 of 2007 and IA No. 6925 of 2007 along with its reply together with reply to findings of committee's report, dated 31.5.2007 perused.
2. The question that arises for consideration in this OLR and connected application is: whether workers' claim which were adjudicated by official liquidator under the Companies (Court) Rules and further reexamined by the committee appointed by the court should be accepted for giving sanction for making payment to the workers, or not?
3. Hukumchand Mills Ltd. (for short hereinafter called 'company') was to begin with was the venture of Seth Hukumchand--a prominent citizen of Indore. The company though did will for initial years but later suffered huge losses. A reference was accordingly made to BIFR for declaring the company as sick industrial company under the provisions of SICA. It was declared as sick industrial company by BIFR in reference case No. 194 of 1987 by order dated 11.9.1991. As a consequence thereof, the BIFR made a reference to this court (Company Court) under Section 20(2) of SICA for passing final winding up order. It was held by BIFR while making reference to this court that it is not possible to either rehabilitate or revive the company and, hence, the only option left open in such circumstances is to finally wind up the company in accordance with the provisions of Company Act. In these circumstances and after recording such finding, the reference under Section 20(2), ibid., was made to this court. On receipt of the reference, this court (Company Court) registered the reference as Company Petition No. 19 of 2001 and accordingly, passed final winding up order on 22.1.2002. It is in these winding up proceedings, this court vide order 22.1.2002 appointed official liquidator to take possession and control of the assets of the company as per provisions of the Act for its proper disposal and for adjudication of various claims of creditors and workers as provided in Companies (Court) Rules. This court also appointed sale committees, consisting of representatives of secured creditors (financial institution/bank) along with official liquidator for sale of the properties belonging to company.
4. It is in these proceedings ex-workers of the company had submitted their individual claims through Union under Companies (Court) Rules before the official liquidator. During pendency of their adjudication and keeping in view the objective of Section 529A, ibid., and with a view to give some solace to workers for their sustenance, this court on the reports submitted by official liquidator had passed an order on 13.2.2004 directing release of an ad hoc payment of Rs. 3,000 payable to each worker subject to finalization of their claims at a later date by official liquidator as per rules. It is appropriate to quote in verbatim the order, dated 13.2.2004, passed by this court, infra:
13.2.2004 Report of Official Liquidator bearing OLR No. 31 of 2003, dated 25.9.2003, OLR No. 40 of 2003 dated 4.12.2003 and OLR dated 28.11.2003 perused.
2. In paragraph 7 of the report bearing No. 31 of 2003, dated 25.9.2003, coupled with prayer (ii) and (iii) contained therein and later reiterated in subsequent reports referred supra, it is contended by the official liquidator that keeping in view the provisions of Section 529A(l)(a) of the Companies Act and the fact that several workers of the company (in liquidation) have not been paid their legitimate dues towards their claim (gratuity, closure compensation, arrears of salary, etc.) for last more than a decade making their life miserable this court should accord permission/sanction to official liquidator to distribute/release some payment by way of ad hoc for their sustenance. It is contended that consequent upon the sale of the properties, stock in trade and other movables, the official liquidator is possessed of few crores duly deposited in the bank (company's account). Similar prayer is reiterated by the Union of the ex-workers of the company by making an application to official liquidator as also to this court.
3. It cannot be disputed that legislature has given top priority in liquidation proceedings so far as the dues of workers is concerned. Section 529A of the Companies Act has recognized this right in favour of workers along with secured creditors. It is not in dispute that company is closed for more than a decade and workers have rendered jobless, so far as their earning for livelihood from this company is concerned. Equally not in dispute is that thousand of workers despite their rendering services to the company were not so far paid their legitimate dues such as (i) arrears of salaries, (ii) gratuity, (iii) closure compensation etc. by the company for want of funds.
4. In a situation like the one emerging from the facts on record. In my opinion, the prayer made by official liquidator as also by the union of workers for release of part payment by way of ad hoc against their total claim can not be said to be totally unjustified and/or unreasonable. I, therefore, accept this prayer in part.
5. Taking into considerations all facts and circumstances of the case, the nature of claim, the total money lying with the official liquidator, the claims of secured as well as unsecured, a sum of Rs. 3,000 be paid to each worker against his total claim by way of ad hoc payment to meet their lawful demand. However, the claim of each worker will have to be verified by official liquidator before the payment as directed is made/released. In order to verify the genuineness of claim made by every worker, the official liquidator may seek the help of representative of union (if necessary) and/or any other agency (as he may be deemed fit proper). The necessary documentation be also done in the form of indemnity bond, receipt etc. as the case may be for record and valid discharge. Let these formalities be done within a month and compliance report be submitted by next date of hearing. It is made clear that the ad hoc payment will be adjusted against the ultimate final one after determination is done at a later stage.
6. Before concluding, this court is constrained to observe that some workers made attempt to send letters addressed to this court directly requesting therein for release of payment due to their pathetic condition. Those letters were placed by the Registrar before me in chambers for perusal. This court has not taken cognizance of such letters. In fact, this court has taken this action as creating interference and obstruction in administrating the court proceeding. It tantamounts to a clear case of an attempt to influence the court, requiring this court to initiate contempt proceedings against those workers who sent the letters.
7. However, taking into consideration the illiteracy of those workmen and not realizing the intricacy of legal system, this court while withholding the initiation of punitive proceedings against these workers only wishes to observe that in case if any attempt of this nature is repeated in the course of proceedings, the same shall be dealt with strictly in accordance with law and keeping in view the ratio of Supreme Court decision rendered in the case of Vasudevan. This fact has also been brought to the notice of lawyer appearing for union reminding him to apprise the members (workmen) of the union of their responsibilities, rights and the manner of behaviour during the pendency of petition. Learned Counsel appearing for the union has assured to this court that no such event will occur in future. This court, thus, leaves the issue at this stage.
5. On 25.9.2006, this court was pleased to condone the delay in filing the claims of workers before the official liquidator as per provisions of Rule 177, ibid., because it was felt that delay in filing the claim appears to be bona fide and genuine and hence, deserves to be condoned. It is appropriate to quote in verbatim the order, dated 25.9.2006 passed by this court infra for ready reference:
25.9.2006 Parties through their counsel.
Heard IA No. 3879 of 2006. This is an application made by Hukumchand Mills Mazdoor Karmchari Adhikari Samiti and Indore Mills Mazdoor Sangh purporting it to be under Rule 177 of the Companies (Court) Rules seeking condonation of delay in filing the claims of the workers of this company in liquidation before the official liquidator for its examination/verification on their merits. According to the unions though the claim was submitted as required under Rule 148 of the company court rules before the official liquidator on 20.8.2004 yet the same was not filed as per requirement of Rule 148 read with Rule 152 ibid. It is contended that the requirement of filing an affidavit, as contemplated under Rule 152 read with form 67 of the Companies (Court) Rules, was complied with on 5.4.2006 which resulted in some delay on the part of the unions in ensuring compliance. It is, therefore, contended that since there was a lack of knowledge on the part of the workers in submitting the claims in accordance with rules and hence delay occurred. It is thus bona fide, sufficient and hence deserves to be condoned, as required under Rule 177,ibid. It is contended that the claims of the workers have been given priority under Section 529A of the company Act and, therefore, in the larger interest of justice and looking to the claims of the workers on behalf of the workers the delay should be condoned and the official liquidator be directed to examine the claim of the workers strictly in accordance with the law and on their respective merits.
I have gone through the application which is duly supported by an affidavit. True it is that there is a delay in filing the claim. Yet in my humble opinion, looking to the nature of the claims made by the workers and the fact that it was filed though not in time, the delay deserves to be condoned, as contemplated under Section 177 of the Companies (Court) Rules. Accordingly, the delay in filing the claims of the workers is hereby condoned. It is accordingly directed that the claims filed by workers through these two unions be treated to have been filed as required under Rule 148 read with 152 in Form 67 of the Companies (Court) Rules. As a consequence, the application made by union under Rule 177 is hereby allowed. The official liquidator is directed to examine the claims of the workers on their respective merits in accordance with law and keeping in view the requirement of the Companies Act and other laws applicable thereto. Since the claims of the workers have got to be given priority it be done on priority basis preferably within a month.
6. Accordingly, the OL (official liquidator) in accordance with the requirement of rules adjudicated the claims of 5895 workers and submitted his report on 8.3.2007 along with OLR No. 9 of 2007. This court on its perusal came to a conclusion that looking to the complexity and voluminous record and also with a view to re-assure that official liquidator has properly adjudicated the individual claims of each worker considered proper and in the interest of all concerned to appoint a committee of experts consisting of two retired judges (one Rt. District Judge and other Member Industrial Court) to adjudicate, verify and examine all claims of workers. Accordingly, by order, dated 26.3.2007 this court passed the following order:
26.3.2007 The official liquidator has appeared in person; Shri S.P. Joshi, learned GA for the State.
OLR No. 9/07 dated 8.3.2007 perused. The official liquidator has submitted his report on the claims of the workers of the company in liquidation.
In my considered view, with a view to verify or/and recheck the claims of the workers verified by the official liquidator, it would be in the interest of all parties concerned as also this court feels proper some Retired Judges, preferably from the Labour Judiciary, having expertise in such matters, be appointed. The learned members will be in a position to examine the case of each worker and will certify it to be genuine before this court is able to pass final orders on their claims. The official liquidator as also the State Counsel Shri S.P. Joshi have suggested the names of two retired member judges of Industrial Court, (1) Mr. P.R. Pendse and (2) Mr. S.N. Upadhyaya.
After hearing the views of the official liquidator as also the State Counsel and also of some Union representative, present in the court today, I hereby appoint Mr. P.R. Pendse and Mr. S.N. Upadhyaya both retired member judge, Industrial Court to examine and verify 5985 approx claims of workers of the company in liquidation submitted by them to official liquidator. The respective members appointed by this court would do the following work individually after diving the claims inter se according to their discretion:
1. Each learned member will examine the case of every worker with a view to find out:
(a) whether he was an ex-employee/workman of the company;
(b) whether his claim, which he claims to have submitted before the Official liquidator is in conformity with the requirement of the labour laws/company laws;
(c) whether he is able to substantiate his claim with reference to period of his service with the company, wages, other claim, such as Gratuity, retrenchment or any other claim legally entitled under the labour laws etc.
(d) whether he has submitted any documents in support of his claim and if so, whether they are adequate and sufficient for acceptance of his claim and if so to what extent? i.e. fully or partly as the case may be;
2. The learned member individually will be free to hold any kind of inquiry as he may deem fit proper or/and necessary so as to enable him to record the aforesaid finding in respect of each claim, which will inter alia, include calling of the applicant, recording of his evidence, giving them an opportunity to prove their claim in case if the learned member is not satisfied with the claim so submitted though approved by the official liquidator, as the case may be and as he may deem fit proper in his discretion.
3. A sum of Rs. 25,000 is sanctioned for payment to each member. In addition any expenses that may be required, such as to and fro journey etc. and any other miscellaneous expenses be incurred by the office of the official liquidator.
Let the report be submitted within a month as an outer limit. In case, if it is not so possible, then appropriate prayer may be made through the Official Liquidator for extension of time.
The official liquidator shall make necessary arrangements for the learned members in his office and will provide all necessary required assistance for doing this work.
7. Accordingly and pursuant to aforesaid order, the committee investigated all claims and submitted the report on 31.5.2007. This court then took the report on record and by order dated 16.7.2007 directed the office to furnish/supply of its copy to the counsel appearing for the workers' union as also to official liquidator or their perusal so that in the event of they or any of them have any grievance he same can be raised by way of filing reply to the report. Accordingly, official liquidator as also the workers' union filed their respective replies, as referred supra.
8. Heard Shri Girish Patwardhan, learned Counsel for the union, Mr. Saraswat and Mr. Batta, official liquidators, present in person.
9. Having heard all parties concerned and having perused record of the case, I am inclined to accept the report submitted by committee dated 31.5.2007 to the extent indicated, infra.
10. It cannot be disputed that Section 529A of the Act recognizes the rights of workers on first priority pari passu with that of secured creditors of the company. Indeed, the claim of workers is at No. 1, i.e., in Sub-section (a) of Section 529A, ibid as compared to secured creditors which falls in Sub-section (b). The legislative intent insofar as the claim of workers is concerned, is very clear in terms of their priority and has to be given effect to in letter and spirit by making the payment to them at par with that of claims of secured creditors from the amount realized by the official liquidator by sale of company's property as contemplated under Section 529A, ibid. The workers who are the real force behind running of the company by their hard earned labour are entitled to be paid their legitimate dues once their claims are verified and adjudicated as per law. It is this factor which was kept in consideration by this court while releasing payment of one ad hoc instalment of Rs. 3,000 by order dated 13.2.2004, referred supra, during pendency of adjudication and while passing this order.
11. Having gone through the report of official liquidator dated 8.3.2007 and the report of expert committee dated 31.5.2007,1 am satisfied that the claims of 5,628 workers out of total claims (5,895) deserve to be accepted being genuine and bona fide. Indeed, when two authorities, namely--official liquidator and then a committee of experts appointed by this court have examined the claims of workers individually on the basis of their service records and documents (as detailed in the report) then there is no reason for this court to reject these reports. In other words, perusal of report in clear terms indicate that claims have been scrutinized with care and with full application of mind with reference to documents, service record of each worker and hence it does not call for any interference by this court for its non acceptance. It thus appears that care was taken by committee to ensure that no false or exaggerated claims of any worker is filed and/or allowed. In this view of the matter and under these circumstances the report dated 31.5.2007 insofar as it relates to claims of 5,628 workers as per Annexure-A is concerned, deserves to be, is accepted. It is, accordingly, accepted to the extent mentioned herein.
12. So far as claims of 267 workers are concerned, the same was held as not maintainable as per finding recorded by committee as detailed in schedule I to VI annexed with the report. In my view, the same shall be examined at a later stage in accordance with law. No payment to any of these workers be released.
13. Accordingly, and in view of foregoing discussion, the following direction are issued for compliance:
(i) Each worker whose claim is accepted as indicated above in the report dated 31.5.2007 be paid as an ad hoc payment of Rs. 12,000.
(ii) The amount of Rs. 12,000 shall be credited directly in the bank account of each worker by official liquidator out of the funds of the company lying with the official liquidator in its bank account in relation to company.
(iii) All efforts be made by official liquidator to ensure that law and order is maintained at any cost while making distribution of money to workers and further every effort must be made to ensure that entire money is received by each worker and no kind of any extraction of money by any union leader or any office bearer is done. If necessary, help from collector and/or police administration be taken to avert any untoward incidence. In case, if it is noticed that any kind of extraction of money from any worker or harassment to worker is resorted to by any member of union for obtaining any illegal benefits, then the action against him be taken under criminal law and report to that effect be filed in this court for appropriate action against such person.
(iv) List of workers be prepared indicating therein the name of worker, when the payment was made, i.e., date of release of payment, amount credited/ released, his bank account number and the date on which it was credited in his account. It be then submitted to this court along with compliance report.
(v) It be done within one month and report of compliance be submitted by next date of hearing.
14. The original record submitted by official liquidator be returned to him so as to enable him to distribute the money as indicated above.
15. On oral request being made by the members of committee for making additional remuneration in addition to what is sanctioned by the court to them as per order dated 26.3.2007 on the ground that they were required to under take more labour than what was expected of, I hereby sanction an additional sum of Rs. 10,000 payable to each member, i.e., official liquidator will pay a sum of Rs. 10,000 to each member (total Rs. 20,000) towards their remuneration and expenses for submission of the report.
16. A copy of this order be sent by Registrar to Collector, Indore, for ensuring compliance of Clause (iii) above.
List for further orders on 10.9.2007.